In 2006, the Indians launched Sports Time Ohio, as a venue to broadcast Indians games. Owned by Larry Dolan, the new network meant that games would no longer be broadcast on Fox Sports Ohio, the network that previously held the rights. There are reports that Dolan is close to selling STO, to none other than Fox Sports Ohio, the network that used to televise Indians games prior to the 2007 season. The deal could be for around $200 million to $250 million and would raise the amount of money the team receives for broadcast rights by about $10 million per year.
Television deals have been netting big bucks for teams in the past couple of years. It’s one of the reasons that the Los Angeles Dodgers have been going through money like it’s water, and also one of the reasons that the Cincinnati Reds felt confident handing out so much money to Joey Votto. Even though the Indians are in a smaller television market than Los Angeles or New York, there’s still a chance they could cash in on television rights. At Fangraphs, Wendy Thurm had a great post that looked at the television deals for all 30 major league teams. The Indians are grouped with the Blue Jays, Twins, and Tigers in the “Mid-Markets” category; teams that had good television deals under previous market conditions but that are far outstripped by these mega-deals of the past couple of years.
Earlier this year, Deadspin had a great explanation of how sports and television work together:
As a refresher, this is how sports works on cable and satellite: The cable company negotiates a monthly fee with the channel that carries the games. Every channel has a fee, and so your cable bill includes the $4.69 a month you pay for ESPN and the 33 cents a month you pay for MTV and the 58 cents a month you pay for Fox News. Unless the channel is on a special programming tier, like HBO or IFC, every subscriber has to pay those fees regardless of whether he watches the channels in question. Regional sports channels are not on special tiers, which means that everyone in the San Diego area with a cable box or a satellite dish—even those who don’t care about the Padres, which is probably to say, 95 percent of the people in the San Diego area—pays approximately $20 a year for Padres games.
There are warnings though, that these inflated television rights deals may be a bubble that could burst, much like the U.S. housing market did a few years ago.
Back to our situation in Cleveland – so what does the sale of STO mean, for the budget of the Indians and for the future of the network itself? In these early stages, that’s not entirely clear. While the team reportedly hopes the deal will be complete by the end of December, fans (and STO employees) will have to wait and see what exactly happens. The report in the Plain Dealer theorizes that the network must exist in some form, at least through the 2013 season, since there wouldn’t be enough time between the merger and the season to iron out all of the details. Plus since Fox Sports Ohio also shows Cincinnati Reds games, it may help to have a second network to assist with coverage. The television broadcasters are paid by STO, while the radio broadcasters are paid by the team itself.
As for what this may mean for the Indians, the Dolans have run the team and STO as two separate entities. It’s unclear if it will make any visible difference in the way the Indians operate, or what they maintain as a budget. The team budget was around $65 million last year, and team officials say they expect it to be around the same amount for 2013. As this sale unfolds, it may be very interesting to watch what will happen to STO, the broadcasters, and the team budget. Once the deal becomes finalized, it will hopefully become clear what we can expect from the sale to Fox Sports.
As an aside, I highly recommend checking out the articles I linked to in this post if you’re interested in more information about the television deals, particularly Thurm’s piece in Fangraphs. I could have summarized everything here, but I felt kind of like I was trying to reinvent the wheel. Everything is explained really well in these links and should help provide some additional detail.
If you add up what the Indians get from national TV, local TV, revenue sharing and stadium revenue and compare with what they spend on major league payroll, amateur draft signings, international free agents and player development programs, you can see why Forbes thinks the team is making a profit. And that doesn’t even take into account the profitability of the network itself, which until now also went directly to the owners. It must be pretty good if they can sell the network 5 years after creation for over $200M.
While to the normal person $200M is a lot, it is a fraction of what the Angels, Dodgers and the Yankees received for their broadcast rights. Are the national Tv, Local Tv, revenue sharing and stadium revenue available to the public? I have yet to see those numbers, so unless Forbes has some kind of insight to the Tribes’ business then it’s hard to know how accurate those claims are.
It really is just a fraction of some of the larger markets. I think most of the financials are kept private; the only team I know of where the info was released was the Montreal Expos, since they were owned by MLB. I know that some of the Pirates finances were leaked to the public a few years ago, and it was a huge deal.