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How Television Could Launch a Rangers Dynasty

Forget about packing the ballpark. If you want to make serious money, look no further than your TV contract.

For the first 49 years of their history, the Texas Rangers and their predecessors in Washington, D.C., ranked among the worst franchises in all of sports. They went 35 years without sniffing the postseason. They won three division titles in four years in the ’90s … and won exactly one playoff game.

Finally, after a half-century in the wilderness, the Rangers broke through in 2010, knocking off the two best teams in the American League and making their first World Series. Now the major league roster is loaded with young talent, there’s plenty left on the farm, they’re well stocked with bright coaches, scouts, and talent evaluators, and they have a shot to get back to the World Series again this year.

That’s just the beginning. The Rangers are primed to become a baseball superpower. The biggest reason why has little to do with anything happening on the field.

♦♦♦

From the start of baseball’s existence, the way to make money owning a baseball team was to pack the ballpark. Still, for the first 100-plus years, the revenue streams derived from attendance, parking, and concessions were relatively modest.

That all started to change in 1992. That year, the Baltimore Orioles opened Oriole Park at Camden Yards. The roster that year included Randy Milligan at first base, Billy Ripken at second, Leo Gomez at third, Mike Devereaux and Joe Orsulak in the outfield, plus one of the worst seasons of Cal Ripken’s career. Yet the O’s drew 3.6 million fans to watch that third-place team, the second-highest attendance total in the league. Camden Yards was the pioneer in stadium retro chic, incorporating an old warehouse into the background, setting up a money-minting pedestrian plaza beyond the outfield walls, and lining the upper reaches of the ballpark with the swankiest in cash-cow luxury boxes. The success of Baltimore’s new stadium (following the unveiling of new parks for the Jays and White Sox) set off a baseball building boom, with every team clamoring for a new park in a desperate attempt to keep up with the Joneses and stay financially viable.

Blackmailing taxpayers into spending hundreds of millions of dollars for a new stadium remains en vogue for opportunistic owners, just as ramming rotten deals through remains a favorite pastime of elected officials. But the new way to break the bank is less politically charged: Sign a monster TV deal.

Which is just what the Rangers have done. The Rangers’ broadcast deal with Fox Sports Southwest takes effect after the 2014 season. Total value of the contract: $1.6 billion.1 If that sounds like a lot of dough, it should. Teams are notoriously secretive about their revenue streams, and the particulars of TV deals are no exception. But based on the reports that have surfaced on other clubs, the Rangers’ $80 million annual take from the Fox deal could top every other team’s local contract, save for the Yankees and Red Sox. And while the Yankees and Red Sox own huge stakes in their own regional sports networks,2 the Rangers’ deal is by far the largest ever inked with an independent RSN.

“On this scale, yes, it blows everything else out of the water,” said Vince Gennaro, author of Diamond Dollars: The Economics of Winning in Baseball. “When you’re talking those kinds of dollars, it makes you appreciate how teams can not be tethered to their physical market and their live gate. It fundamentally changes the Rangers’ economics.”

That the deal happened at all seems both inevitable and impossible.

Dallas-Fort Worth-Arlington counts nearly 6.4 million residents, making it the fourth-largest metro market in the country, and one of the fastest-growing. Of the top six franchise values cited in Forbes‘ 2011 baseball valuations package, five hail from the five largest metro areas in America; the sixth franchise is the Red Sox, who pull from all of New England while building a nation of fans, and feature one of baseball’s most celebrated histories. The biggest cities, predictably, draw from the biggest population bases in filling the stadium and building TV and radio audiences.

But it took far longer for the Rangers to strike gold than it should have. For most of the franchise’s existence, it’s been a big-market ballclub with a small-market mindset. It was more than just the losing. After running up bigger payrolls in the late ’90s (and not coincidentally, three division titles in four years from 1996 to 1999), the Rangers took the biggest plunge in their history, as well as the game’s history,3 signing Alex Rodriguez to a 10-year, $252 million contract. Texas carried that contract through three fantastically productive seasons. When the team failed to win, A-Rod got the blame, with critics conveniently ignoring awful concurrent deals doled out to the likes of Chan Ho Park, as well as a spending environment that roiled several other teams’ payrolls, too, including the Rockies’ $172 million duo of Mike Hampton and Denny Neagle. Rather than gradually pull back, the Rangers cut their payroll nearly in half for the 2004 season, shipping A-Rod to the Yankees and chopping as many other high-priced vets as they could. They wallowed in the lower half of MLB payrolls through the rest of the decade, with Tom Hicks’ financial troubles and disappointing revenue streams suppressing salaries.

Hicks’ money woes crested in 2009. Overleveraged with holdings ranging from the Dallas Stars to a half-stake in Liverpool F.C. to numerous real estate holdings in a terrible market for real estate, the Rangers owner announced he was putting the team up for sale. By January 2010, Hicks thought he had a deal to sell the team to a group headed by Nolan Ryan and sports attorney Chuck Greenberg. But the deal fell through when one of the main lenders to Hicks Sports Group objected to the sale, saying there wouldn’t be enough money to pay back HSG’s debts. The sale was finally pushed to bankruptcy court, where Greenberg and Ryan bid against Mark Cuban in a public auction, and won.

When the Greenberg/Ryan group first approached Hicks about a sale, it considered starting a regional sports network that would include the Rangers as its star attraction. But as Gennaro notes, it can take years to successfully set up and launch an RSN.

“You look at all options that you have,” said Ryan, who took over as owner, president, and CEO of the Rangers this year with Greenberg’s departure. “But because we were going through the bankruptcy and sale process, we weren’t in position to explore [building an RSN] at that time. Even though obviously there was always that potential.”

Even if the goal of an RSN fell short, Plan B happened in a hurry. Ryan and Greenberg won the auction on August 4 of last year. Seven weeks later, the Rangers had a deal with Fox. A month after that, they were in the World Series.

The deal doesn’t kick in for 3½ more years, and Ryan says the team doesn’t want to spend future money. “We’re operating in a prudent way, in the best interests of the organization,” he said.

But the team’s actions suggest more aggressive measures. The Rangers received an undisclosed up-front bonus for inking the deal, which they applied toward making a run at re-signing Cliff Lee. Though that gambit failed, they still hiked their Opening Day payroll by 42 percent compared to 2010 levels, to $92.1 million. Then, when several other contenders stayed relatively quiet at this year’s trade deadline, the Rangers nabbed two of the best relievers on the market in Mike Adams and Koji Uehara.

The more distant future looks even brighter. Building an optimal 25-man roster has become such a sexy topic of conversation that we get to see Brad Pitt act it out in a couple weeks’ time on the big screen. Every article, blog post, and talk-radio hit fixates on how to fix the bullpen, how to structure the lineup, which player to sign, which player to trade. The Rangers have done a masterful job on those fronts, to be sure. Plenty of teams pay lip service to building a strong farm system, but Texas made it happen. By trading Mark Teixeira to Atlanta for five premium prospects in 2007, Jon Daniels announced to the baseball world that the Rangers were shifting gears; four years later, ex-Braves prospects Elvis Andrus, Neftali Feliz, and Matt Harrison are all key Rangers contributors. Five months later, Daniels made a challenge trade of sorts, dealing talented young pitcher Edinson Volquez and a prospect to the Reds for Josh Hamilton, a move that netted a future MVP. They groomed homegrown prospects Derek Holland and Alexi Ogando into valuable starters; converted C.J. Wilson from very good reliever into a near-Cy Young caliber ace; signed Colby Lewis dirt-cheap from Japan and got a no. 2 starter out of it; outfoxed the Yankees at last year’s deadline to land Cliff Lee, who propelled them to the World Series; and got Mike Napoli and his light-tower power out of a Vernon Wells trade that initially had nothing to do with them. If any GM would like to take a trade back, it might be Daniels and his giveaway of Adrian Gonzalez to the Padres for Adam Eaton, Akinori Otsuka, a prospect, and some magic beans. But by and large, the Rangers are riding a five-year winning streak of player acquisition and player development.

Still, each of these decisions pales compared to the impact that $80 million a year in revenue will have on the Rangers’ chances. As any Mets or Dodgers fan of recent vintage can tell you, money doesn’t guarantee success. But it sure as hell helps. If the Rangers are still being run by Daniels and his staff of bright lieutenants, if their coaches and instructors are still ballsy and creative enough to try new things such as rethinking how we train pitchers, if Jurickson Profar and a next wave of blue-chippers crashes the big league roster in style … and they have an extra $80 million a year to play with? We might have to pencil the Rangers into the playoffs nearly every season, the same way we do for the Yankees and Red Sox.

Except … there’s a catch. In much the same way the Indians, Rockies, Tigers, Phillies, and scores of other teams landed lucrative stadium deals after the Orioles got theirs, other teams will surely be on the hunt for big, new TV deals. Before the shit totally hit the fan in L.A., Frank McCourt explored launching not one, but two regional sports networks that would run Dodgers games, one in English, one in Spanish. Under his projections, the Dodgers would have gone from $41 million in 2013, the final year of the team’s current pact with Fox, to a staggering $158 million in 2014, and $235 million in 2018 — for the hypothetical English-language RSN alone. If McCourt opted not to build, he informed us he could also sell the TV rights, supposedly to Fox, supposedly for $3 billion over 17 years.

Those numbers might seem hard to believe coming from McCourt at a time when he’s fighting the whole world to keep his grip on the Dodgers. But that doesn’t mean there isn’t a grain of truth in there somewhere. As onerous as it can be for a team to set up its own regional sports network, the Yankees and Red Sox have shown the immense profits waiting to be had. For teams like Pittsburgh and Tampa Bay, it might be a case of the poor getting poorer, while the rich gain a chance to get richer. But where six or seven years ago maybe 10 teams could have realistically built their own RSNs, Gennaro estimates that 20 or more could do it today.

The Fox and Comcast regional networks know this all too well. In the same way that hinting of a move to another city secured huge government payouts for new stadiums in the past, a team that makes the slightest peep about building its own RSN could trigger a bidding war between competing cable networks.

“It’s not just the ballclub’s rights that are at stake, but rather the entire list of key programming properties for the independent network,” Gennaro said. “Fox Sports Southwest was not only in jeopardy of losing the Rangers, but also their other sports programming, as a Rangers-based RSN would have been a full-fledged competitor with Fox Sports Southwest for the Mavericks and Stars. Keeping the Rangers from having their own network is a major strategic play that gives Fox Sports Southwest the upper hand against both Comcast SportsNet Dallas and the emergence of any future competitor for years to come.”

The same goes for other teams and other regional TV networks. Which means that the Rangers hold an advantage, but they won’t have it forever. For all of Ryan’s emphasis on prudence, his team could lose some of its edge before Year 1 of its new deal even begins.

The 2011 season has yet to be decided. But if the Rangers fall short again, that’ll make 50 years without a championship. When Albert Pujols, Prince Fielder, and possibly CC Sabathia become available this offseason, you could hardly blame the Rangers if they tapped into that $80 million a year a little early, and punched prudence in the face.

An earlier version of this story included a footnote stating that Alex Rodriguez had signed the two largest contracts in all of sports. It has been amended to recognize Samuel Eto’o’s recent contract with Russian soccer club Anzhi Makhachkala that eclipsed these numbers.

Filed Under: MLB, Television, Celebrities, Jonah Keri, Nas, People, Teams, TV, UNC, Texas Rangers

jonah_keri

Jonah Keri is a staff writer for Grantland. His book The Extra 2%: How Wall Street Strategies Took a Major League Baseball Team From Worst to First is a national best seller. His new book Up, Up, and Away, on the history of the Montreal Expos, is now available.

Archive @ jonahkeri

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