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Tuesday, November 24, 2015

The biggest Reds news of 2016: their TV deal is about to expire

Photo Credit: Lynn Friedman
It's a challenging time for the Cincinnati Reds.  Coming off back-to-back losing seasons, there doesn't seem to be much reason for immediate optimism.  Even the front office is no longer bothering to predict great things.  In a recent interview, Reds President Walt Jocketty called 2016 a "transition year."  The front office is usually the last to admit they're not bound for contention, so we shouldn't expect much from the team next year.  All signs point to a fire sale this winter, and the question is more "how much" than "whether" in terms of the Reds converting their higher-priced veteran talent into cheaper and controllable prospects.  I'm hopeful that the next year will bring some exciting trades, at least.  I do worry that the Reds waited too long to sell off some of their top guys.  Chapman has only 1 year of control left and thus won't command the return the Padres just got for Craig Kimbrel.  Frazier probably peaked last summer.  Et cetera.  But there's still value to be had (and dealt).

There is one acquisition sitting on the horizon, however, that seems guaranteed to bring a nice boost to the Reds' bottom line: their television contract expires after next season.  Baseball's TV bonanza started, more or less, when the Dodgers received their other-worldly TV contract a few years back.  Ever since, we've seen team after team secure outstanding contracts that substantially boost revenues.  While there has been some cause for concern that this bubble might someday burst, there hasn't been any indication of that so far as I've seen.

Currently, the Reds' TV contract with FSN Ohio is reportedly for about $30 million per year.  That figure stands to increase with the new deal, but not to the tune of anything approaching the $8+ billion contract (total) the Dodgers received.  In fact, it might be laughably smaller: Cincinnati is the smallest TV market in all of baseball, according to Nielson's 2014-2015 Local Television Market Universe estimates:

Designated Market
Area (DMA)
TV Homes
% of US
1. New York
2. Los Angeles
3. Chicago
21. St. Louis
22. Pittsburgh
35. Milwaukee
36. Cincinnati

This improves, of course, if one adds Indianapolis (#27 with 1,082,690 homes) and Louisville (#49 with 656,900 homes) into the Reds' territory.  I'm not positive whether those packages would be part of the same deal or not.  Probably?

In any case, it remains to be seen how much extra money this new deal might provide the team.  An estimate a year and a half ago had the deal at $75 million.  I don't have any way to judge how accurate that is, but if true it would provide the Reds an extra $45 million to play with per season.  One has to expect that not all of that will make it to the team payroll, but it should still pay for most of Joey Votto's and Homer Bailey's contracts, which collectively range from $41 million in 2017 to $48 million in 2019. Effectively wiping those deals off the books, while still permitting the Reds to (hopefully?) benefit from their contributions on the field, would be huge.  The Reds have seemed pretty much at maximum budget from the moment that Homer Bailey signed his extension.

My hope is that they at least see an increase of $20-$25 million in their TV deal, which would be enough to cover Joey Votto.  Getting that money back to play with the rest of the roster could net them 6-7 wins per year in free agent salaries, and even more value if invested in young, extendable talent.  Time will tell.

...of course, the problem is that it's unclear who those young, extendable talents might be.  Anthony DeSclafani?  Eugenio Suarez?  Jesse Winker?  Robert Stephenson?  Some soon-to-be-acquired talent?  It remains to be seen.  But the Reds clearly will need a major infusion of talent to get back to being competitive with the likes of the Cardinals, Cubs, and Pirates.

Hat tip to a commenter on this article at fangraphs, who pointed out the Nielson DMA ratings.

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