There’s a thing called leverage in negotiations. You have something I want. I have something you want. But my something is worth more than your something, so you better up your offer.
That’s how it works. The world spins on this axis. Unless you’re the Flyers, who just throw piles of Comcast’s money around as if they’re operating inside a vacuum. But never mind them.
In an article in the Philadelphia Business Journal [behind a paywall], Phils President and resident good guy, David Montgomery, spoke about his team’s new 25-year, $2.5 billion TV deal with Comcast and its corporate overlords. I’ve written at length about why the deal seemed smaller than expected (and, consequently, won’t mean much for on-field spending): The Phils, who apparently suck at negotiating, likely wanted to get something done now before regional sports networks, perhaps wary of handing out guaranteed money in the face of an uncertain future for the cable industry, become less likely to throw huge sums of cash at sports teams. Those factors certainly contributed to a smaller guaranteed, but more skin-in-the-game deal for the Phillies. What wasn’t really (much of) a factor was interest from FOX, and the leverage that would’ve come with it. The Phillies signed their deal with Comcast before they were even allowed to negotiate with other networks:
As part of the arrangement with Comcast in our 15-year deal from 2001 to 2015, we had the opportunity for continue a dialogue with Comcast about renewing the deal. That [exclusive negotiating period] would have expired this coming March. Last February, we started to talk to Comcast to decide if continuing on this path made the most sense for both parties. We think we got a good result, I hope Comcast feels the same way. It means that in this market, at least for the foreseeable future, one regional sports network is going to carry the major sports that are available.
Did you ever talk to anybody else, or were you not allowed to because of that agreement?
Under the contract we couldn’t talk to anybody else until March. Comcast had this window of opportunity to hang on to us, and eventually they succeeded.
So you could have waited until March, rolled the dice and gone with somebody new?
We considered that. In our case we knew Comcast owned one franchise (the Flyers) and had a long- term deal with another (the 76ers). We, the Phillies, would have been going head-to-head with them. They have a significant portion of the distribution in this market. We felt if we could negotiate a fair deal with Comcast, it would be the right thing to do. Is it possible that, come 2016, somebody new could have come in and used the Phillies as the linchpin for a new sports network, and perhaps the only element on that station? What would be the first thing they would have to do? They’d have to sell it to Comcast to be the distributor.
So when some people say you could have gotten more?
We weren’t convinced we could have gotten more, maybe we could have. The reality is we felt our timing was pretty good. The marketplace had moved favorably for us with some of the recent deals ($320 million a year for the Los Angeles Dodgers, $150 million a year for the Los Angeles Angels and Texas Rangers). We felt knowing with certainty what we could get from Comcast was better than the risk associated with being out there trying to fly alone.
What Montgomery is saying is: We are idiots and had no leverage because Comcast had us under contract for another year and we weren’t yet allowed to negotiate with anybody else… hear their offers, you know?
OK, maybe that’s unfair. Montgomery obviously wanted to get a deal done now because the offer out there today might not be there tomorrow. If the Phils waited a year and more regional sports networks had trouble getting carriers to pay carriage fees – like in Houston – or there’s another radical shift towards cord-cutting, they may have gotten less than $2.5 billion… which is still a lot of money, relative or otherwise. But it’s maddening that the Phillies, who, being the only baseball team in the city(!), have inherent leverage to being with, didn’t hear offers from FOX, who surely would’ve put some pressure on Comcast. And it’s crazy to think that Comcast, the city’s largest cable provider by far, wouldn’t carry the network that airs Phillies games. It’d be suicide for them, especially when cable subscriptions are becoming increasingly dependent on live sports (similar to how Verizon had to carry CSN on FiOS).
It makes sense the Phillies chose to stay with Comcast. All the reasons Montgomery listed are good ones. There exists a longtime partnership between the two parties, the Phils stay lumped in with all the other local teams, and the channel is guaranteed to be carried. But the fear of flying alone? YOU’RE THE PHILLIES. You’re not going to be stranded without a network. This is something the Yankees or Red Sox would never do. Flex some muscle, dammit.