Inside the Phillies: One advantage this elite team lacks

While the Phillies lead the National League in average attendance, a regional sports network can provide significant new revenue.
While the Phillies lead the National League in average attendance, a regional sports network can provide significant new revenue.

Phils not likely to start own TV network.

Posted: September 19, 2010

The Phillies are all grown up at last.

Long an awkward and indecisive baseball juvenile, the franchise's notoriously pimply complexion has cleared up and, thanks to consistent on-field success, it's playing with the big boys.

After the expensive late-July deal that landed Roy Oswalt, Sports Illustrated noted that the Phillies had now joined the Red Sox and Yankees as the only teams whose annual business model must be "World Series or Bust."

And why not? Philadelphia's off-the-field statistics these last few seasons are as impressive as those they have rung up on it.

The 2010 Phils lead the National League in average attendance (45,000). According to Sports Business Journal, they also have the third-largest average TV audience (212,774, behind only the Yankees and Mets), the third-highest TV rating (7.2, behind only the Cardinals and Twins), and even the sixth-biggest radio audience (159,500).

As a result, they also have baseball's fourth-highest payroll, $143 million.

But there's at least one advantage the Yankees, Red Sox, and Mets still possess. They each own large chunks of their own regional sports networks.

A regional sports network can translate into a sizable financial edge. While general manager Ruben Amaro Jr. insisted again last week that free-agent outfielder Jayson Werth could still return in 2011, that almost certainly won't happen unless the Phils discover a new pot of gold.

And with their attendance maxed out and most of the Philadelphia area's eyeballs already glued to their televised games, where can the Phils turn for new revenue?

Perhaps by abandoning their partnership with Comcast Sports Network Philadelphia and starting their own RSN?

Not likely.

Actually, when CSN came on in 1997, the Phillies were a minority owner, holding an estimated 10 percent to 15 percent of the venture.

"But after maybe five, six years, it turned out we were more used to running a baseball team and they were more used to running a TV station," said Dave Buck, the Phillies' senior vice president of marketing and advertising. "So we said, 'Why don't you buy us out? You can keep the rights and we'll keep the advertising revenue.' "

While the considerable revenue the Phillies generate from telecasts on CSN and MYPHIL17 remains a secret, it's not believed to approach what those other clubs earn by, in effect, televising their own games.

In 2009, for example, according to SNL Kagan Media Research, the Yankees' YES Network, which technically is a subsidiary of the holding company that owns the team, brought in $417 million in revenue. That was considerably more than the Yanks made that year from all other sources combined - attendance, licensing, concessions, etc.

The Mets, meanwhile, added $339 million with their SportsNet New York, and the Red Sox garnered $163 million through their New England Sports Network.

In an era when every game is televised, the value of those networks is enormous. They are a big reason the 2010 Phillies are, according to Forbes magazine, worth less than half as much as the Yankees ($537 million to $1.6 billion).

At the time the Phillies got out of their joint-RSN venture with Comcast, they signed a 15-year deal with CSN, one that still has six seasons remaining.

By making the deal when they were a last-place team and still a few seasons removed from the move to Citizens Bank Park, the Phillies guessed correctly that they would improve in the standings and create more interest.

Around that same time, driven by decreasing audiences, the Phillies' radio broadcasts had become cluttered with ads and commercial gimmicks. Club executives didn't want the same thing to happen on TV. They wanted to control the quality of their telecasts from start to finish.

And since they would soon sign lucrative in-ballpark deals with companies such as Citizens Bank, Toyota, and Coke, they didn't want their games to include commercials from, say, PNC, Nissan, and Pepsi.

"We feel like we're doing it the right way," Buck said.

Comcast, in turn, makes its money in the deal from subscribers who are willing to pay more for Phils telecasts.

"What happened was a lot of teams saw what these networks carrying their games were making," said Derek Baine, a senior analyst with SNL Kagan. "So some of them started saying, 'Wait a minute, why shouldn't I be making that?'

"The only problem is, if you start your own network, you don't want to alienate the cable operator. Look at the war that broke out between YES and the New York providers," which resulted in Yankees games being unavailable in a big part of the city for a full season.

In 2004, the Minnesota Twins launched their own network, Victory Sports One. But, unable to reach a deal with any local cable operator, it folded after just three months. Three years later, the Kansas City Royals shut down their RSN. Both clubs now show their games on two of Fox's regional sports networks.

That's a particular risk for the Phillies, who play in a city where Comcast's presence looms as large as the cable-company's skyscraper headquarters.

"Comcast is so big in Philly," said Buck. "We'd need to program our own station 24 hours a day, seven days a week. Phillies games themselves would be one part of it, but then you'd need to be in the business of being a TV station.

"And since Comcast already has that in Philly, what would our Sports Night look like? Our other programs? To go head-to-head with them on the 6 o'clock news, the 10 o'clock news, the wake-up news, I'm not sure it would work."

The cable giant, which allows access to its other RSNs to all TV providers, has used a legal wrinkle to prevent Phillies games from being televised via local satellite providers. After negotiations between the two companies broke down, the Dish Network threatened to file a complaint with the Federal Communications Commission.

While several other clubs follow their TV model, the Phillies are unusual in one respect: They continue to show 45 games on over-the-air outlets. (The rest of baseball averages just 15 a season.)

Assuming the Phillies follow the trend and more of those games in the future go to cable, could the reduced over-the-air schedule, where audiences and ad rates traditionally have been higher, negatively impact their bottom line?

"Not really," said Buck. "Cable is so prevalent now that [which station televises the Phils] doesn't matter to our advertisers anymore. They say, 'Well, everybody has cable and it's just a number on the box. You don't need anything special to get the games.'

"We keep the advertising for over-the-air games as well," said Buck. "I don't know if 45 will always be the number. It might go down to 25 some day. But right now 45 works well."

The gap between cable and over-the-air ratings keeps narrowing. In 2009, the Phils had an 8.2 rating for over-the-air (up 11 percent from '08) and a 7 on cable (up 23 percent).

"A 7 in a Philadelphia summer is awesome," Buck said. "In summer, we like to call ourselves the ultimate reality show. We're live every night going up against reruns."

But no matter what kind of tricks the Phils try to increase broadcast revenue, they aren't likely ever to match the New York teams.

"Their TV market is bigger and it's going to be that way, no matter if we own our own RSN or not," said Buck. "I agree that you want to get as much as you can and you'd be remiss if you didn't investigate.

"But I think we did that and we realized we could do just as well not being a part-owner of a TV station by selling rights and keeping the ad revenue at the same time."

So the Phillies' task is simple. Keep winning, and the money will keep pouring in. Lose at your own peril.

"When a team starts losing," said Baine, "those ad sales can disappear quickly."


Contact staff writer Frank Fitzpatrick at 215-854-5068

or ffitzpatrick@phillynews.com.

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