David Montgomery Doesn’t Know How to Haggle

"You're fired."
“You’re fired.”

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.

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17 Responses

  1. Correct me if I’m wrong, Philadelphia is still the largest single team market in MLB, right? Isn’t that leverage? Waiting to negotiate with all parties is what free agents do, right?

    This management astounds me in its apparent ineptiude, both baeball-wise and business-wise.

    1. you’re not wrong but how difficult would Comcast make it on a hypothetical Fox Sports Philly to get distribution into your house? Comcast could charge “Fox Sports Philly” out the ass to get that distribution, thus reducing the value to Fox Sports and consequently how much the Phillies could have received in that hypothetical deal.

  2. Kyle –

    You couldn’t be more far-off in your assessment. If you think the Phils have even remotely the type of leverage Comcast has you are fooling yourself.

    1. I don’t see that. I said they have a chip in that they’re the only baseball team in the city. Comcast isn’t going to walk away from them. Negotiating with FOX would’ve given them more.

  3. Kyle, you’re kind of off base here. Comcast has a near monopoly on distribution around here and could have made it extremely difficult on the Phillies and whomever they signed with to get distribution. In fact, I’d say that Comcast had more leverage than the Phillies.

  4. What about $100 million a year is bad and why exactly can’t they spend some of that on better players?

  5. FOX was never going to make the Phillies a “national” team. Why would they? WGN and TBS became superstations after originally existing as local stations in Chicago and Atlanta.

    All Comcast had to say to Montgomery was remember when the NHL went to Sportschannel for more money and he would have signed for less than he did.

    Comcast has more sway in Philadelphia than ANYONE. Montgomery would say “I’ll go to FOX” and Comcast would say, “how are you going to explain to your fans that they won’t be able to see the games because we won’t carry that second rate channel.” Or better still, “we’ll charge FOX out the wazoo to be a part of Comcast’s package.”

    Comcast and the Phillies in a negotiation is no negotiation. First of all, the Phillies entire way of business since the franchise began in 1883 has been a disaster. With all due respect to the great run the Phillies just had, simple math says that in 130 years or so things will eventually fall into place simply because the odds say so. It happened in the late70s-early 80s and it happened in the late oughts through 2011.

    Every team with a history as long as the Phillies, wins eventually. The Cubs haven’t won in a hundred years and they still have the same amount of World Series titles as the Phillies and almost twice the amount of World Series appearances. Cleveland is the same thing. Their run in the 90s was just like the Phillies except Jose Mesa spit the bit. Then they went back to being the Cleveland Indians.

    My point? The Phillies are a “shittily” run franchise and always have been. I’m a Phillies fan but this is a pretty obvious fact. It was the second team in Philly until the A’s left, and the owners then and now knew they had/have the only game in town.

    Comcast on the other hand is a brilliantly run company and their interns could convince the Phillies to sign a worse deal than they did.

  6. The Phillies brain-trust might be the biggest conglomeration of misfits in sports. They took a blowtorch to this team with a Multi -Billion dollar TV deal waiting to be negotiated. Their TV audience in 2011 was 300,000 people per game. After butchering the roster for 2 years viewership plummeted to 100,000.

    The Dodgers TV deal is reportedly close to $8 B . If the Phillies want a top tier free agent ? Mike Trout? Harper?Harvey? Strasburg? They have absolutely no shot with the deal LAD signed.

    The Phillies are a top 3 baseball market . A marquee franchise and the Phils owners signed the same TV deal as the friggin Houston Astros who had a couple games last year that drew a 0.00 rating. These guys are friggin morons.

  7. This has been a problem with the Phillies since forever. They have small-market ownership mentality. They like to play it safe and as an investment I can understand that.

    But baseball in Philly has always been a sleeping giant. They are the largest one-team market in the sport, with a reach as far west as central PA, as far south as Southern DE, and south of Trenton in NJ. This is a team who should be spending like the Yankees and Dodgers. Obviously they increased their payroll a ton from say 2003 to 2011, but there’s no reason why it shouldn’t be $200M instead of $160-170M.

    We’re about 5-7 yrs away from the ownership whining we need to build them another new stadium to keep up with the Joneses. They can already. They just choose not to.

    1. My favorite is having arguments with the people who claim the Phillies are not in fact cheap, as evidenced by their payroll during the last era. Nevermind the fact that the owners were given a stadium for practically nothing, it was the 3 million people a year and the playoff revenue that allowed for the high payroll. We are very quickly seeing the “small market” mindset come back and it spells a dark future ahead. They are not the losingest organization in all of sports by chance…

  8. Is anyone really surprised? This from an organization that hands out vesting options to 33+ year olds like they’re candy.

    As much as I despise Ruben Amaro and am quite sure there isn’t a GM in baseball who comes close to matching him for the title of worst GM in baseball, it is Monty who is at the heart of the problem with this organization. I am embarrassed by the fact that he’s a Penn guy.

  9. My favorite part is when the Full (of shit) Monty says the Phillies are in direct competition with the Flyers and 76ers.

    Hey Montford: The Phillies season is always over before those 2 teams start up, so where’s the competition? (Maybe he meant in April and May, which is the only time the Phillies are still within striking distance of 1st place.)

    .

  10. There are a couple factors which were not discussed very much about the new Phillies-Comcast deal. Yes, on the surface the Phillies did not negotiate with other parties and they received less cash than other recent deals. However, this quick and negatively slanted summary ignores the input of the largest owner of the Phillies, the uber successful John Middleton. I’d be willing to venture a guess that he wanted equity in the deal. Let’s face it cash does not appreciate while the right equity investment does many fold. Middleton has made fortunes in business through ownership and this reader thinks he will do it again. No, I’m not in any way affiliated with Middleton or his family just simply someone who appreciates the business beauty of the deal the Phillies cut with Comcast.

  11. That photo at the top is great: 3 putzes that know nothing about what the fanbase wants!

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