This Chronicle story reports on the summary judgment that a joint venture comprised of the Astros and the NBA’s Houston Rockets obtained yesterday in their lawsuit seeking a declaratory judgment that the Astros’ television contract with Fox Sports Network allowed the Astros to opt out of the contract in favor of a better deal. The summary judgment removes a major obstacle for the team-owned Houston Regional Sports Network, which would carry Rockets games in 2005 and Astros games beginning in 2006. The network would end a two-decade relationship between the Astros and FSN’s predecessors (Home Sports Entertainment), one of the nation’s first regional sports networks.
This litigation highlights two important considerations regarding sports media contracts. First, in the quickly changing environment of media broadcasting, long term contracts are risky for both sides. In this particular contract, the Astros were the ones who were losing out, but it is at least as common for the media party to lose big on these contracts, as CBS has discovered in regard to its NCAA Basketball Tournament contract.
Secondly, following the lead of the New York Yankees, baseball clubs are increasingly inclined to own their own media outlets to maximize their ability to generate revenue. Major League Baseball is the only major professional sport without a salary cap on players’ salaries and its teams also do not share any meaningful media revenue. Consequently, baseball clubs are constantly under pressure to increase their sources of revenue. That is the bet that the Astros are making in establishing the Houston Regional Sports Network.