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Pete Toms Article Archive
Written by Pete Toms   
Sunday, 21 March 2010 23:32

Last Week in Bizball by Pete Toms

This week in “Last Week in BizBall”, follow-ups on MLB Advanced Media, live in-market streaming, Wrigley renos, MLB Network plus weekly tidbits.

MLB ADVANCED MEDIA FOLLOW-UP

The previous instalment of LWIB featured a report on the state of MLB Advanced Media. Amongst the spate of recently announced new initiatives at BAM was their partnership with the soon to be re-branded broadband channel ESPN3. LWIB noted that this partnership perhaps signalled a change in BAM strategy, given reports last year that they were moving away from providing technology to other parties to focus more on serving MLB.

LWIB, Eric Fisher confirmed in the SportsBusiness Journal that the ESPN3 deal is part of a significant change in strategy at BAM. Evidently BAM plans to shift its focus toward “back-end hosting of live online and mobile video,” from a new “4,000-square-foot data center” in Manhattan.

The move by baseball’s digital arm to grow its business-to-business activities to supplement its core business-to-consumer initiatives marks another step in its ever-evolving operating strategy.

MLBAM in 2008 began to lessen its non-baseball activities, parting ways with the World Championship Sports Network and AVP Pro Beach Volleyball, starting its gradual separation from Major League Soccer, and declining most other outside work. The group’s significant advances since then in the distribution of live digital video — both on the wired side, with a sharply upgraded MLB.TV, and on the mobile side, with its award-winning MLB.com At Bat application — have prompted company executives to further leverage their expertise and investments in this area.

AND

MLBAM’s agreement with ESPN for now is a services contract, and with CBS Sports, it is participating in a revenue-sharing agreement for the paid MMOD mobile application. Such deals, Bowman said, by themselves do not represent major changes to MLBAM’s balance sheet. The potentially bigger prize and intended next step is a series of cross-selling and cross-marketing alignments in which advertising sales for different products such as ESPN3 and MLB.TV can be bundled together and users can be marketed to for additional content subscriptions.

“That’s the ultimate goal,” Bowman said. “The first step is to get these things up and running, but we see a lot of benefits to leverage across the engagement we’re seeing with these products.” (LWIB note: Bowman is BAM CEO Bob Bowman)

As they move further away from being a media company (MLB.com) to a technology provider, does the likelihood of the long rumoured sale of BAM increase?

SELECT READ MORE TO SEE DETAILS ON LIVE IN-MARKET STREAMING, RENOVATION NEWS FOR WRIGLEY FIELD, MLB NETWORK MUSING, AND THIS WEEK'S TIDBITS

LIVE IN-MARKET STREAMING OVER-HYPED?

Over the past handful of years one of the most hotly debated sports biz subjects has been who (franchises, leagues, RSNs, cable operators) should control the digital rights to live in-market streaming of games and how to divide those revenues. (See LWIB here, here and here.) The debate has not been restricted to the sports biz pundits, all of the “big 4” have grappled with how best to exploit these rights while protecting the value of local TV rights. Many both inside and outside the pro sports industry view (viewed?) local digital rights as a potential source of untapped riches. In September 08 the SportsBusiness Journal quoted an anonymous MLB club official, “…it’s no doubt the single biggest economic issue our industry is facing.” And as recently as July 09 the SportsBusiness Journal reported that MLB executives believed, “…in-market game streaming has the economic potential to rival the more than $40 million in annual revenue brought in by the established MLB.TV out-of-market service”

But with Opening Day less than two weeks away, only two MLB franchises are offering live in-market streaming of their games. (more clubs may follow as the season unfolds). More importantly, has MLB and their “big 4” peers grossly over-estimated fan demand for live in-market games over the internet? LWIB John Ourand wrote for the SportsBusiness Journal:

…Broadband video is wildly popular right now. It’s the fastest-growing business on the Internet. But live local sports, which are seeing TV ratings increases across the board, have been an online dud. So far, broadband has proved to be the mirror opposite of television — a place where entertainment programs are far more popular than sports.

Live sports has found success online, but with a different business model than the ones being explored by the RSNs, where games are available simultaneously on television.

It’s no secret that live video works best with games that can’t be seen on TV. March Madness On Demand is most popular on the NCAA tournament’s opening Thursday and Friday afternoons, when people are at work and not near TVs. ESPN360 has found success with events that can’t be seen on television.

But what’s the market for people who would pay extra for online access to local games that typically are on during prime-time hours?

It’s not big.

After years of negotiations amongst industry stakeholders and reams of opinion from pundits, will live in-market streaming eventually be remembered as an over-hyped, irrelevant, misguided initiative?

WRIGLEY RENOVATIONS UPDATE

Last month LWIB reported on new Cubs owner Thomas Ricketts plans to renovate Wrigley Field. Increasing revenues at Wrigley is obviously essential to Mr. Ricketts in his efforts to service the debt on the $850 million acquisition of the franchise, ballpark and minority share in CSN Chicago. LWIB saw the Cubs reveal the particulars of the rumoured installation of signage in the left field bleachers. The Chicago Tribune (includes a rendering of the sign) reported on the plans to erect an illuminated Toyota ad in time for Opening Day. Reaction to the ad will be closely scrutinized as the Cubs plot the specifics of revamping Wrigley (speculation has included installation of a Jumbotron at some point) while preserving the unique (and very lucrative) character of the ballpark. Ed Sherman blogged that the Toyota deal is likely worth $2 - $2.5 million annually. Complicating the deal is the required approval of local pols due to Wrigley Field’s “landmark status”. As well, the Cubs share in the revenues of some of the “rooftop” operators who need assurance that the Toyota sign will not obstruct the views of their patrons. More graphics here.

THE ROLE OF MLB NETWORK

In December LWIB reported on the role of league owned channels and in particular MLB Network. While MLBN has received much praise for both their programming and their successful launch last year in an unprecedented 50 million homes, their existence does pose problems. MLB and their “big 4” peers have become competitors with their TV broadcast partners. For example, MLBN’s flagship program MLB Tonight is a direct competitor to partner ESPN’s Baseball Tonight. MLB’s rights deals with national TV partners TBS, Fox and ESPN (worth upwards of $650 million annually) expire in 2013. At the same time, the most effective way for MLBN to increase their carriage (boosting revenue from both subscriber fees and ad rates) is to broadcast more live games. LWIB, the inherent conflict between leagues and TV partners over league owned channels was on display. Michael Hiestand reported for USA Today:

….in today's increasingly complicated media landscape, leagues and their networks might not always have the same goals, and such differences rarely air publicly.

But they bubbled up with Fox Sports President Ed Goren and MLB executive vice president Tim Brosnan at this week's IMG World Congress of Sports in Los Angeles in a hint of how networks aren't thrilled about leagues starting channels and expanding online video efforts.

Said Goren, as reported by Sports Business Daily: "You're going to water down the value of your major television deal. At some point, (networks are) going to say, 'Enough! We're not going to pay you what we pay you. Find other ways to get that revenue.' "

AND

Brosnan suggested the MLB Network is a year-round "infomercial" for baseball that might spur interest in Fox's baseball coverage. Said Goren, "(Whether) it's great for Fox, I'm not so sure."

WEEKLY TIDBITS

  • Neil deMause blogged at Baseball Prospectus about MLB’s pending A’s relocation report. Of particular interest to Mr. deMause is what the report ..“says about the Giants' territorial rights to San Jose..” He reminds us that the Orioles/Nationals dispute was not over territorial rights but “…only over cable rights..” With an eye towards NYC, Mr. deMause notes that an indemnification amount awarded the Giants ..“would for the first time establish a price tag for incursions into existing territories,…” A January LWIB report on the same subject included this quote from sports economist Roger Noll, “The status of franchise location antitrust in MLB is uncertain – there has never been a case that was litigated to completion.”
  • Again from Neil deMause, but in this instance from his Field of Schemes blog. Mr. deMause reports that the city of St. Petersburg is threatening to sue to keep the Tampa Bay Rays at Tropicana Field.
  • TicketNews.com reported that due to record demand, the Phillies are on the verge of capping season ticket sales for the 10 season.


OTHER NEWS FROM THE BUSINESS OF SPORTS NETWORK

(BIZ OF FOOTBALL)

(SPORTS BASH)


Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.

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