The Seattle Mariners as a media corporation

I had to write an essay on a media corporation for my media economics class at the University of Oregon. Because I like sports (and I don't care who knows), I decided to do my research on the Seattle Mariners and how the organization functions as a media corporation. The ensuing essay is identical to what I turned in for the class, but I thought it would be an interesting item to share. (Also, I want to brag because I got an A on the paper.)


The Seattle Mariners as a media corporation

“Take me out to the ball game, take me out with the crowd; buy me some peanuts and Cracker Jack, I don’t care if I never get back. Let me root, root, root for the media corporation, if they don’t make bank it’s a shame. For it’s one, two, three mil’ per week, at the old ball game.”

Major League Baseball’s Seattle Mariners appears to be an entertainment company at first glance. For much of baseball’s initial existence, the only revenue teams had was from gate receipts, while radio and television revenues came later. The Mariners are owned by Nintendo of America, one of the country’s three notable video game console companies [1]. Now, the Mariners make almost exactly as much money through their local broadcasting contracts alone as they do through their regular season ticket sales, according to 2008 financial documents leaked on the Internet in August 2010 [2]. When national broadcasting contracts, international broadcasting contracts, advertising, sponsorships and merchandising are added into the equation, the Mariners took in $118,812,000 in media revenue alone for the 2008 season [2]. The tens of millions of dollars the Seattle Mariners take in from broadcasting makes the team a legitimate media corporation.

The Mariners are the second Major League Baseball team to call Seattle home. The Seattle Pilots were in the city in 1969, but a terrible baseball stadium and lack of revenue drove the team’s owners to sell to Milwaukee, Wisc., businessman Bud Selig, who moved the team to his hometown [3]. When the Pilots left Seattle just days before the 1970 season, the city sued the American League for breach of contract. The suit lasted until 1976, before the city was granted the rights to a new expansion team, which became the Mariners.

The Mariners were purchased on July 1, 1992, by the Baseball Club of Seattle, a limited partnership led by Nintendo of America chairman Hiroshi Yamauchi, who held a 54 percent ownership stake in the club [1]. Yamauchi sold his interest in the club to Nintendo of America in 2004 for the same amount of money he had initially purchased his stake in the team with: $67 million [4]. However, Yamauchi, who purchased the Mariners to keep the team in Seattle amid then-current ownership’s threats of moving the team to Tampa Bay, never visited the city or attended any Mariners games during his 13-year tenure as owner. He was not allowed to take the position as chairman of the board of directors for the team because he was not an American citizen [1, 5]. Instead, former Nintendo of America chairman and chief executive officer Howard Lincoln is the CEO and chair of the team's board of directors, which has not changed since the current ownership took power [6, 7, 8]. The Mariners are one of three teams to be corporately owned. The Toronto Blue Jays are owned by Rogers Communications, and the Atlanta Braves are owned by Liberty Media [9].

In terms of broadcasting the baseball games and programming, there is a two-tiered system for how the money from broadcasting rights works in Major League Baseball. The revenue from the league's national contracts with Fox, ESPN and TBS are divvied up equally between all 30 teams, as well as the league's international broadcasting rights [2]. The revenue from MLB ventures such as MLB.com and league-wide revenue sharing are also distributed from the league equally to all teams. The Mariners took in a net $28,132,000 in national and international revenues in 2008, and took in $2 million from MLB Advanced Media, which administers digital content for the league, including the MLB.com website [2].

The league's national television contracts give it hundreds of millions of dollars annually. The main contract, with Fox, gives the league $257 million per year in exchange for a weekly Saturday game, the All-Star Game, one of the two league championship series and the World Series [10]. TBS pays $145 million per year for a weekly Sunday afternoon game and for the four division series and the league championship series not taken by Fox. ESPN pays $296 million per year for the rights to an exclusive Sunday night game, a Wednesday night game, the Home Run Derby and replay rights for its Baseball Tonight highlight show.

However, local and regional radio and television contracts are up to individual teams to negotiate. The Mariners produce all of their broadcasts in-house, and all on-air personalities are employees of the club, including Hall of Fame announcer Dave Niehaus, who was the last original employee of the team when he died November 10 [11, 12]. The team has a television contract with FSN Northwest, negotiated in 2007, that pays the team $500 million over 12 years [13]. The Mariners' radio contract with KIRO-AM in Seattle runs from 2009 to 2011 and pays $5.5 million per year [14]. Its former contract with KOMO-AM of Seattle was a six-year deal worth $10 million per year.

The Mariners are in a slightly smaller-than-average media market compared to their 29 competitors, but the team often punches above its weight in terms of media contracts [15]. The Mariners' broadcasting deal with FSN is comparable to that of the Los Angeles Dodgers, and the Dodgers play in the second-largest media market in the United States [13]. However, other teams have even larger contracts than the Mariners do. For instance, the Texas Rangers' contract with FSN Southwest averages approximately $80 million per year and runs until 2035 [16]. Another thing the Mariners do not capitalize on is running their own channel. The parent companies of the New York Yankees, Boston Red Sox and Baltimore Orioles each own or partially own the channels on which they are broadcast. These channels are ungoverned by the rules regarding revenue sharing for the league because they are technically owned by a separate party. This ownership structure gives a significant revenue boost to the teams with their own channels [17]. The Mariners also miss an opportunity in integrating most of its minor-league teams, instead making player development contracts with its domestic minor-league affiliates [18]. In comparison, the Atlanta Braves own all but one of the franchise's minor-league affiliates.

Despite being its own independent business, the Seattle Mariners participate within the economic framework of Major League Baseball. Baseball was ruled not to be interstate commerce by the United States in 1922, exempting the American and National leagues, which had operated in concert under the National Commission, from the Sherman Antitrust Act [19, 20]. The antitrust exemption was ruled to be in Congress's hands, and the exemption was written into law for commercial acts in the Curt Flood Act of 1998. (The Flood Act did, however, force Major League Baseball to surrender its antitrust exemption in regards to labor grievances.) The ruling gives MLB the authority to make national media contracts without the interference of the federal government. All four of the major professional sports leagues in the United States (MLB, the National Football League, the National Basketball Association and the National Hockey League) are allowed to have their own national media contracts, and the NFL operates exclusively in this manner, with no teams controlling their broadcast rights at all [19]. The antitrust exemption allows MLB to control where teams move and when teams are added to the league or removed from it [20]. It also allows for major league teams to hold minor league players' rights in a manner otherwise untenable in a more free market [21]. Without the antitrust exemption, the system of minor-league affiliates would not be possible because teams would not be able to hold prospects' rights over a long period of time.

Labor-related issues such as bargaining with the Major League Baseball Players' Association and the umpires' union are undertaken by the league as a whole instead of on a team-by-team basis. As such, individual teams, such as the Seattle Mariners, have little influence on labor relations. However, the league and the unions have had contentious relationships for a long time. The players' union has organized five different strikes after the league's first collective bargaining agreement was made in 1970, and the owners have had three lockouts [22]. The most notable of these strikes was the 1994-95 strike that wiped out the World Series for the first time since 1904.

Major League Baseball has also had issues with the umpires' unions. In 1999, the Major League Umpires Association attempted a mass resignation to force MLB to the bargaining table over pension benefits, but failed when the league accepted 22 of the 54 tendered resignations [23]. This fractured the MLUA and eventually led to the formation of the World Umpires Association. The league has been relatively untroubled by labor disputes since this incident more than 10 years ago.

The Mariners suffer from Major League Baseball's policy of equal distribution for international revenues. Although the Mariners are owned by Nintendo of America and their star player, Ichiro Suzuki, is from Japan, the internationalization of the team as a business is held in check by Major League Baseball’s policy of distributing international broadcasting contracts to the entire league instead of to individual teams [24]. All international broadcasting is handled by Major League Baseball International, a subsidiary of Major League Baseball [25]. MLB's vested interest in Japan is evident in that 60 percent of the league's non-American revenue comes from the island nation. The team's only direct impact from its strong international appeal is through merchandising and increased Japanese tourism to Seattle, which has one of the highest populations of Asian-Americans in the United States.

For a business seemingly structured as an entertainment company marketing America's national pastime, the media arm of the Seattle Mariners is a significant part of the profitability of the team. Between its own individual contracts and the contracts managed by Major League Baseball, the team brings in tens of millions of dollars in media revenue per year, offsetting the costs of paying a team to play on the field. The Mariners, and sports teams in general, should be considered media corporations above all else because of the amount of money they take in from the dissemination of their games.

Works cited:

[1] Baker, Dr. James V. "Who Is Buying Nintendo Stock? " Seeking Alpha, 2 Aug. 2007. Web. 17 Nov. 2010.

[2] Baseball Club of Seattle, LP. "Seattle Mariners Financial Documents." Deadspin. 23 Aug. 2010. Web. 18 Nov. 2010.

[3] Stein, Allen J. "Seattle Pilots Baseball Team." HistoryLink.org. 8 Apr. 1999. Web. 18 Nov. 2010.

[4] Cole, Michael. "NOA Buys Yamauchi's Mariners Stake." Nintendo World Report. 29 Nov. 2004. Web. 18 Nov. 2010. .

[5] Zumsteg, Derek. "Baseball in Seattle." Baseball Prospectus. 28 Mar. 2002. Web. 18 Nov. 2010.

[6] Seattle Mariners. "Front Office."MLB.com. Web. 18 Nov. 2010.

[7] Seattle Mariners. "Mariners All-Time Owners." MLB.com. Web. 18 Nov. 2010.

[8] Johns, Greg. "Lincoln Reflects on past and Present as Mariners CEO." Seattle Post-Intelligencer. 29 Mar. 2007. Web. 18 Nov. 2010.

[9] Brown, Maury. "Sale of the Braves Fuels the Corporate vs. Family Ownership Debate." The Hardball Times. 22 May 2006. Web. 18 Nov. 2010.

[10] Ourand, John. "ESPN, MLB Spar Again." SportsBusiness Journal. 24 Sept. 2007. Web. 18 Nov. 2010.

[11] Sims, Dave. "DSpxp -- Twitter." Twitter. 31 Oct. 2010. Web. 18 Nov. 2010.

[12] Seattle Mariners. "Broadcasters." MLB.com. Web. 18 Nov. 2010.

[13] LeBreton, Gil. "Rangers, as Texas' Team, worth Billions to FSSW." Star-Telegram.com. 28 Sept. 2010. Web. 18 Nov. 2010.

[14] Hickey, John. "Mariners to Move Back down Radio Dial to KIRO-AM in 2009." Seattle Post-Intelligencer. 22 July 2008. Web. 18 Nov. 2010.

[15] Streit, Al. "Baseball Markets by Al Streit." Baseball Almanac. Web. 18 Nov. 2010.

[16] Barron, David. "Rangers, Fox Sports Southwest Agree to $1.6 Billion Deal."Houston Chronicle. 27 Sept. 2010. Web. 18 Nov. 2010.

[17] "Yankee Global Enterprises LLC." New York Daily News. Web. 18 Nov. 2010.

[18] Yencich, Jay. "Minor League Wrap (8/30-9/6/10)." U.S.S. Mariner. 9 Sept. 2010. Web. 18 Nov. 2010.

[19] Belth, Alex. "Ending Baseball's Antitrust Exemption." Courses.cit.cornell.edu. Baseball Prospectus, 26 Nov. 2001. Web. 18 Nov. 2010.

[20] Greenberg, David. "Why Does Baseball Have an Antitrust Exemption?" Slate Magazine. 19 July 2002. Web. 18 Nov. 2010.

[21] Rovell, Darren. "Baseball's Antitrust Exemption: Q & A." ESPN. 5 Dec. 2001. Web. 18 Nov. 2010.

[22] Major League Baseball Players Association. "Major League Baseball Players Association: Frequently Asked Questions." Web. 18 Nov. 2010.

[23] Associated Press. "Umpires Vote to Oust Phillips, Form New Union." SI.com. 1 Dec. 1999. Web. 18 Nov. 2010.

[24] Rovell, Darren. "Rovell: Land of the Rising Revenue Stream." ESPN. 12 May 2002. Web. 18 Nov. 2010.

[25] "Major League Baseball International Inks Three New Broadcast Deals in Advance of the 81st MLB All-Star Game in Anaheim." MLB.com. 9 July 2010. Web. 18 Nov. 2010.

[26] The Economist. "Baseball in Japan: The Old Ball Game." The Economist. 27 Mar. 2008. Web. 18 Nov. 2010.

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