MLB still not Sirius

There's a lot of wrangling that goes on in negotiating media contracts, and that's become the case between MLB and Sirius satellite radio. Despite the fact that Sirius merged with XM, baseball's satellite carrier last year, Sirius does not not have the right to broadcast MLB games. They're trying to negotiate a multi-million dollar deal with baseball for those rights even as they stare bankruptcy squarely in the eye.

MLB already has the richest satellite radio contract of any sports league, getting, on average, $59 million a year. By comparison, the NFL’s deal with Sirius averages to $31 million a year and NASCAR’s Sirius deal averages $21 million a year. The NBA’s rights fee is not known.

But baseball is taking a hard stance, believing that the volume of its game programming and its traditional appeal make it more valuable to satellite radio. Industry analysts also believe that this could be baseball’s last chance to have leverage with Sirius XM. Baseball’s deal ends in 2015.

“There definitely won’t be any bidding wars for these sports rights next time,” said David Kestenbaum, an analyst with Morgan Joseph & Co. who covers satellite radio.

Part of the reason is the lack of satellite radio competition. In July, federal regulators approved the merger after a 17-month review period, cutting the number of satellite radio companies from two to one. The merger takes away a rival bidder that could have driven up prices.

Then there’s the precarious financial position of the satellite radio company, whose shares were trading at less than 15 cents last week. Last month, Liberty Media Corp. helped the company avoid bankruptcy when it agreed to pay $530 million in loans in return for a 40 percent stake.

Kestenbaum said that the Sirius XM does not have the money to keep paying so much in rights fees.

“I thought the original MLB deal was a foolish one for XM,” Kestenbaum said. “I don’t think enough new subscribers signed up to justify paying $60 million per year.”

Despite the issues over financing, league partners still have gotten paid. As part of its MLB deal signed in 2004, XM put two years’ worth of rights fee payments — $120 million — into an escrow account to guard against pending bankruptcy, sources said.

The NFL made a similar deal with Sirius, demanding that money be set aside in an escrow account.

For its part, Sirius XM Satellite Radio remains optimistic that a deal can be worked out by Opening Day.

“Discussions are ongoing with Major League Baseball and we remain hopeful that we will be able to reach an agreement that will allow Sirius subscribers to hear the games,” a Sirius XM spokesman said.

A Sirius subscriber, I must admit I'd like the ability to hear baseball games. I'd expect a deal to be worked out, but how can Sirius continue to operate in this manner -- doling out millions while their shares plummet? Maybe they hope dragging in a baseball audience that will maintain a loyal following for six months out of the year can be their financial savior. I wouldn't bet on that being enough.