MLB Advanced Media (MLBAM), the digital rights arm of Major League Baseball and includes MLB.com, has increasingly been a cash cow for the league. The group headed by President and CEO Bob Bowman (read The Biz of Baseball interview with Bowman from 2008), has been one of the most surprising money makers for MLB over the years.

Launched in 2000, MLB.com was funded by the clubs in an agreement that had them each investing $1 million a year over four years. The cost was targeted at $120 million. To the joy of the owners and MLB, the site started generating excess revenue in only the second year of its existence, allowing them to invest only $70-$75 million before beginning to see a return on their investment.

As early as 2005, the league looked to see just how much money MLBAM might be worth (see my article MLBAM: The Stealthy Money Machine on The Hardball Times). From “Stealthy Money Machine”):

What really makes this arm of MLB stealthy and an absolute moneymaking machine came to light somewhat quietly in October [of 2005] when the major league owners decided to scrap plans for an initial public offer for MLBAM. Bank of America, Goldman Sachs, First Boston and J.P. Morgan tried in vain to get the owners to go forward with the IPO. After all, they had good reason to want to see it happen, as these analysts predicted the value of the IPO to be $2-2.5 billion.

MLB decided not to go public then, so, it shouldn’t be terribly surprising to hear today’s news, although how much of a stake in BAM these investors are looking for isn't known.

The San Francisco Chronicle reports on MLBAM and how private equity firms are constantly looking to try and get a cut of the lucrative digital arm of baseball. MLB.com, through BAM is seen as the industry leader in its video streaming infrastructure, and is why other sports outlets, such as ESPN and CBS, have used MLBAM to host their video streaming. The offers reportedly have been in the $1 billion range, half the value of the IPO value garnered in 2005. As reported by the SF Chronicle:

A source close to the talks tells us the company gets "call a day" from private equity firms, but that the company isn't looking to sell a stake for a few reasons:

• It's already loaded with cash.
• Owners are already getting a huge dividend.
• Selling a billion dollar stake in MLBAM any time soon would make it very hard for owners to argue that they're broke in upcoming labor negotiations with players.
• Selling a stake could further complicate the ownership stake and perhaps even force a dreaded shotgun IPO.

Who's calling MLBAM? A source close to PE circles speculates that it's most of the biggies: TPG, Blackstone, Bain Capital, Elevation, Spectrum, and Quadrangle.

Initially, many, including this author, concluded that MLBAM could be used as a trump card – a holding that could be leveraged in an IPO should economic headwinds every tear at MLB’s bottom line. Given than baseball increased revenues through the worst economic downturn since The Great Depression, that seems unlikely. After all, MLBAM is now pulling in in excess of a half-a-billion dollars annually. Given that the revenues is centralized revenue shared across all 30 owners in MLB, don’t look for a them to cave to the investor’s fawning to get a cut of the action…. At least not for the foreseeable future.

Maury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey, as well as a contributor to FanGraphs and Forbes SportsMoney. He is available for hire or freelance. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network.

Follow Maury Brown on Twitter

Follow The Biz of Baseball on Twitter

Follow the Business of Sports Network on Facebook

Comments (18)

Subscribe to this comment's feed

Who Owns MLBAM?
written by Larry@IIATMS, January 20, 2011

Maury, this might be a good point to explain how MLBAM is owned and how MLBAM revenues are divided among clubs. If you did so, it would save me a ton of research! My recollection is that the teams don't split these revenues evenly, but I may be confusing these revenues with something else. If I'm right and these revenues are not divided equally, then would the proceeds of a sale of MLBAM also be divided unequally?

• 
• +1
• 
• 

BAM dividend
written by Pete Toms, January 20, 2011

Didn't the "leaked financial docs" of last year reveal that clubs were receiving an annual dividend of $2 million per yr? Does ea. club receive that same amount or some get more?

Anyway, I think most of BAM revenue is ploughed back into BAM. I don't recall the context or the details but I think Bowman was quoted last year that there is always debate amongst the owners over dispersing or re-investing BAM profits.

I also wonder what percentage of BAM revenues are "non baseball related". I.E. providing streaming and authentication for MMOD and ESPN3.

• 
• +0
• 
• 

BAM and leaked financials
written by Larry@IIATMS, January 20, 2011

Tom, it's not easy to determine much about BAM from the leaked financial statements. The Mariners DO show $2 million in income from "MLBAM distribution of earnings", but no other team appears to report MLBAM separately.

For example: the Pirates 2008 statement of cash flows shows about $2 million in to the club from "Major League Central Fund receivable", but the notes to these financials show that this is an amount net of certain expenses. I don't think this is a statement of the gross amount that the Pirates received from MLBAM. For the same year, the Rays financials show about $19.8 million received from "Major League Baseball Central Fund" and another $8.5 million from "Major League Baseball Properties". The Marlins show 2008 income from the central fund of over $31 million, but close to the same Major League Baseball Properties income (about $8.6 million) disclosed in the Rays' statements. The Marlins also show a $3 million "equity gain" in BAM as 2008 income (not sure why). I cannot get anything even this good out of a quick read of the Angels and Pirates financial statements.

• 
• +0
• 
• 

BAM Dividends Are "Central Funds"
written by Larry@IIATMS, January 20, 2011

Maury and Tom, I jumped into the CBA, and MLBAM distributions fall within the definition of "Central Funds" under the CBA. See Article XXIV(A)(4).

I freely admit, I've never completely understood the so-called "Central Fund Component" of the CBA revenue sharing provisions. If I DO understand it correctly, it means that central funds are NOT distributed evenly to all 30 teams. Instead, these funds are distributed unevenly, so that the "Net Transfer Value" (defined as the total of revenue sharing plus central fund payments) received by each team is the amount that would have been received under "a 48% straight pool plan." Since revenue sharing is computed based on a 31% straight pool plan (at least I think it is), the only way to get from that 31% to 48% is to distribute central funds unevenly.

Right?

• 
• +0
• 
• 

Simple answers on all this....
written by Maury Brown, January 20, 2011

Pete's right on everything here... But, first off, BAM has always been centralized revenue sharing. As noted in the article, it was collectively started by investment from ea of the 30 clubs and they collectively earn an equal share in it.

Pete's also correct about the leaked financials showing dividend checks going to each of the owners. No, it is not shown directly in every leaked doc, but then the dividend checks had been reported by Fisher at the SBJ years before the leak.

Peter also mentions that the revenues that come in are being poured back into BAM, which is also correct.

By the way, BAM is a key selling point when clubs are put up for purchase. The equity adds value.

• 
• +0
• 
• 

Simple misunderstanding
written by Larry@IIATMS, January 20, 2011

Maury, OK. If you say so. I don't see how you get from 31% to 48% if central funds are shared equally, but OK. Maybe someday you'll give me a more complicated answer and I'll figure it out.

• 
• +0
• 
• 

...
written by Maury Brown, January 20, 2011

Where are you getting 31% from? I'm a*suming that you're looking at the "Base Plan"

• 
• +0
• 
• 

Trying Not To Annoy While Asking Annoying Questions
written by Larry@IIATMS, January 20, 2011

I love how your site censors words like "a*suming"!

The 31% is from Kristi Dosh's article here last year. Yes, it's also from the CBA definition of "Base Plan".

I'm an old finance lawyer by background, so I understand that money is fungible. We can say truthfully that MLB splits central funds evenly, but then the 31% figure goes by the boards. At least I think it does.

Please understand that I am not challenging you or Peter. I know that you and he "get it". I'm just trying to join the club.

Leading to another question: when MLB reports the aggregate revenue sharing total, is it based on the 31% figure or the 48% figure?

Sorry for asking all of these questions. But as my favorite writer on this subject once wrote: "Heaven knows between now and the end of 2011, when the current collective-bargaining agreement expires, we’re going to be hearing more and more talk about revenue-sharing and the Luxury Tax in baseball. Between now and then, here’s to getting it right."

• 
• +0
• 
• 

...
written by Maury Brown, January 21, 2011

Larry, the underlying structure of the Central Revenue streams -- BAM, national television, MLBP, et all, is that after expenses, all clubs receive the revenue equally. What you are looking at is an obligation after the fact as it pertains to the Central Fund (notice the difference in Central Revenue and Central Fund).

In some senses, we are both correct. But, when it comes to saying how the following comes in as revenues, they are shared equally:

“Central Revenue” shall mean all of the centrally-generated operating revenues of the Major League Clubs that are administered by the Office of the Commissioner or central baseball including, but not limited to, revenues from national and international broadcasting agreements (television, cable, radio and Internet), Major League Baseball Properties Inc., Baseball Television, Inc., Major League Baseball Enterprises, Major League Baseball Advanced Media, Inc., the Copyright Arbitration Royalty Panel, superstation agreements between the Commissioner’s Office and the Clubs whose games are transmitted on a distant signal (“Superstation Agreements”), the All- Star Game and national marketing and licensing.

• 
• +0
• 
• 

changing the subject
written by Pete Toms, January 21, 2011

Let's move on from how BAM revenues are divvied up, I don't think any of us outsiders know for certain.

How about the future role of BAM? BAM is indisputably the industry leader in streaming and authentication technologies for live games. (MMOD, ESPN3, MLB.tv etc.) But over the years there have been reports of discontent amongst teams over the extent of BAM's control over their business. Ticketing, access to online video for club owned RSNs, web site design and more recently mobile rights. A former club VP of Ticketing told me once, in person, that he wished BAM would get out of his business (paraphrasing) but, of course, wouldn't comment "on the record". Last year I spoke with a club CIO about the "check in app" that BAM was rolling out and he told me, again in so many words, that he would prefer that he be able to develop his own. (Again, "off the record"). There have been anonymous reports that some clubs resent the amount of space devoted on their web sites to promoting BAM products, instead of promoting the club. Boiled down, one of the reasons BAM is so successful is the monopoly they have in MLB over a lot of lucrative revenue sources. But BAM has always been about centralizing digital revenues.

2013 will be an important year for BAM. Network TV contracts expire and if SBJ is correct there is no way the big media companies will again cut separate deals for TV and broadband/mobile. So what will happen to the BAM model then? Leauge sponsors are already kvetching about having to cut separate deals with BAM and MLB. As for the personalities, Bowman and Brosnan now report directly to Bud. This is a big change, Bowman formerly reported to DuPuy. To invoke a clumsy metaphor, I think the "separation of state" between BAM and MLB might be ending in the next few years and if it does BAM might end up with a much smaller role.

And back to how the loot is divided, I think any money that clubs receive from MLB Properties has NOTHING to do with BAM. Completely separate. One is Brosnan, one is Bowman.

• 
• +0
• 
• 

Before we move on...
written by Maury Brown, January 21, 2011

I don't think any of us outsiders know for certain.

Before we get on to anything else, this is incorrect. Not being directly at the table doesn't mean I haven't spent many hours talking with those that were, and will. Certainly don't profess to know it all, but am industrious in getting to the correct answer to most any question around the CBA

• 
• +0
• 
• 

how but not how much
written by Pete Toms, January 21, 2011

Maury, I submitted my last comment before I saw your explanation of Central Revenue.

You're right, I'm wrong, we do know how the loot is divvied up. I still don't think we know "how much" BAM is pouring int the coffers though. I think we know what BAM's revenues are, but how much of that is going to the owners and how much is being re-invested in BAM...I don't think we know.

For several years now I have seen many pundits attribute, in large part, MLB's growing revenues to the success of BAM. Yes, BAM is a huge success, it is evidently worth billions of dollars but...maybe it has played a large role in the growing industry revenues...and maybe it hasn't been a big factor....how much money have the owners been pulling out of it?

• 
• +0
• 
• 

...
written by Maury Brown, January 21, 2011

Moving on...

I agree, Pete. The separation has created having to negotiate digital deals separate from TV, which is at best, inefficient and rife with the potential for miscommunication with single partners. At worst, it has the potential for those approaching the league to look for other digital solutions.

The expirations you mention are huge. How the network partners approach the situation with broadband and mobile will be tricky.

On the power play between BAM and clubs... Always someone looking to say they want control (secondary ticketing is much the same). My sense is the whole believes in what's been working. Look how lucrative and successful BAM has been

• 
• +0
• 
• 

Amount in new deals
written by Maury Brown, January 21, 2011

Might be fun to try and determine what the new network deals might come in at. FOX will be interesting.

• 
• +0
• 
• 

Amount in new deals
written by Pete Toms, January 21, 2011

I think we all foresee good times ahead for national media deals. Cable will drive up rights fees, a post-Comcast Versus, Turner Sports and Fox's cable channels. Plus, MLB can use the option of broadcasting playoff games on MLB Network to drive up fees.

• 
• +0
• 
• 

woops
written by Pete Toms, January 21, 2011

woops, shouldn't comment while distracted. I meant a post-NBCU Versus.

• 
• +0
• 
• 

Central Confusion
written by Larry@IIATMS, January 21, 2011

Right, Maury. The CBA refers to a "Central Fund" and also to "Central Revenue." The funds required to boost revenue sharing to a 48% straight pool plan are supposed to come from the "Central Fund". Moreover, as you pointed out, there is a clear definition of what's counted as "Central Revenues".

Unfortunately, there is no similarly clear definition of "Central Fund". CBA Article XXIII(B)(4)(b) defines "Central Fund" as "Major League Central Fund." Not helpful.

However, we DO know that there is some overlap between the "Central Fund" and "Central Revenues". Per the definition you cited, "Central Revenues" include moneys derived from MLB Properties. Per CBA Article XXIII(B)(4)(b), we ALSO know that MLB Properties royalties are ALSO "Central Fund" moneys for all purposes EXCEPT the one described in that paragraph (recouping luxury tax moneys from a deadbeat team).

We should also consider CBA Article XXIB(B)(2)(b), which states that nothing in the CBA is intended to alter current agreements among the clubs pertaining to Central Revenue, EXCEPT FOR the rules governing allocation of the Central Fund Component and the Commissioner's Discretionary Fund. There MUST be Central Revenue in the Central Fund, or else there would have been no reason to include this provision in the CBA.

If "Central Fund" and "Central Revenue" are two distinct pots of money, what sources remain to fill the Central Fund? The definition of "Central Revenue" is so broad that I cannot imagine any other way to understand this contract except the one I've described, that the money in the Central Fund IS Central Revenue.

The way I read the CBA is that the "Central Fund" is the place where "Central Revenue" is deposited. The CBA does not say this, of course, but I can't make sense of the CBA any other way.

Again, I'm not trying to say that I'm right and you're wrong. I'm reading this contract "cold". I was a lawyer long enough to know that what the parties DO under a particular contract ("custom and usage") can be more important than what the contract might seem to say. But if I'm wrong and MLBAM and other Central Revenue is being distributed evenly, then what money is being distributed UNEVENLY to get to the 48% straight pool plan?

• 
• +0
• 
• 

Amounts from BAM
written by Maury Brown, January 21, 2011

I still don't think we know "how much" BAM is pouring int the coffers though. I think we know what BAM's revenues are, but how much of that is going to the owners and how much is being re-invested in BAM...I don't think we know.

Exact numbers? No. Not unless you're working with a club or 245 Park.

You mentioned it prior, Pete, but there is enough to get a general understanding of what actually is making it into club coffers.

BAM revenue is reportedly in excess of $500M. Dividend checks are at, or flirting with $3M annually. The rest is being held as investing back into BAM.

The question I would love answered is how the BAM equity plays into club sales. This is a subjective matter, but I can't imagine BAM isn't a big selling point.

• 
• +0
• 
• 

Title

Comment

smaller | bigger

Subscribe via email (registered users only)

I have read and agree to the Terms of Usage.

Write the displayed characters

Add Comment