Bally Sports is going through bankruptcy.  This is causing consternation among many major league teams including the Brewers.  There are fourteen teams that generate revenue by selling telecasting rights to the local Bally affiliate.  In a number of markets Bally has already delayed or flat out refused to pay teams.  This hasn’t happened, or at least we aren’t aware of this happening yet, in Milwaukee. But it could. 

Short Term Impact:  Throughout Baseball, local media contracts comprise 23% of total team revenue.  Of that 85% comes from regional sports networks.  The Brewers had the lowest rights fees at $33M in all of MLB.  Also, the Brewers are the second greatest value for Bally with a low cost per viewer at $.076 per viewer.  There are many other items that influence media contracts; but, at least in cost per viewer value measurement the Brewers are one of the better deals for the regional provider.  This may be one reason why we have heard about Bally cutting payments to other teams; but not to the Brewers. (Financial information from Forbes.com.)

The immediate implication of the Bally bankruptcy is that teams that contract with Bally may be more wary to enter into longer player contracts.  There is significant uncertainty about a team’s ability to generate similar revenue from telecasting rights in the post Bally bankruptcy era.  Teams which have contracts with Bally have already expressed being skittish and may look to cut payroll.  The Brewers haven’t expressed a desire to slash payroll or used the Bally bankruptcy as a reason…yet.  But, it is likely that this uncertainty is impacting some short-term decision making within the Brewers organization.    

Long Term Impact:  Long term the Bally bankruptcy and underlying market factors may be a boon for the Brewers.  The team generated $294M in total revenue last year, of which $33M were from local media revenue.  In comparison with the league average of 23% of total revenue, The Brewers local media revenue is only 11% of their total revenue.  Any reduction in regional media partnership will negatively impact the other Bally contract teams more than the Brewers. 

And Bally isn’t going broke just because they were badly managed.  They are also going broke as revenue from traditional media sponsorship is going down. This means that media revenue will also decrease for those teams that don’t contract with Bally.  This will again help to even the playing field. 

In addition, it seems as if MLB may look to pick up the slack by providing central management of cable and streaming contracting.  MLB will more likely move to a more equitable distribution of revenue for purchasing regional TV rights which could help a team like the Brewers which generates higher viewership rates per dollar than most other teams.     

Yes, revenue for the Brewers may diminish; but not as much as it will decrease for teams with a heavier reliance on this regional tv rights revenue.  And in the battle to be able to sign players, the Brewers should gain ground over many opponents as their budget will suffer less restriction. 

Long term the Bally bankruptcy could help the Brewers.  Short term there may be some rocky financial waters to navigate.  Long term, Bally’s demise likely will create a more equitable field of competition for the Brewers.