March 25, 2010
How the NFL is Destroying MLB Mobile
I started touching on this a bit a couple weeks ago in my MLB At Bat review, and at my blog: as good as MLBAM's technology is, and as amazing as At Bat is in a number of ways, MLB is, by all appearances, getting its butt kicked in mobile by the NFL. Yes, the stodgy old NFL, with almost no official presence on the iPhone, is killing MLB—makers of one of the most popular and celebrated mobile apps in the world right now—in the mobile content business.
Let's run through MLBAM's numbers once more for good measure. Last year, they sold about 1.2 million copies of At Bat for the iPhone at around $10 apiece. After Apple takes its 30-percent cut, MLB should have been left with about $8.4 million in mobile revenue, or about $3 million less than Carlos Silva made. I'm sure they also did a token amount of advertising and e-commerce revenue from MLB.com, but I highly doubt it was more than a couple million, incrementally speaking.
Now, on to this year: BAM has raised the price of At Bat to $15, and they should see a nice boost from having two major platforms to sell it on, as Android has finally seen some decent penetration in the last six months. Let's go really wild and assume they sell five million copies this year, despite the price hike; after Apple takes its share, it would result in a little over $50 million in revenue. Now we're talking about real money.
Well, even in that insanely optimistic scenario, MLB would still trail the NFL by $130 million in mobile revenue. Or, put another way, MLB would have to grow by two thousand percent this year in order to catch up.
How is the NFL doing this? They've hardly built any mobile technology; there are no tech blogs gushing over their products; they're not even on the iPhone, aside from a lame DirecTV app for NFL Sunday Ticket subscribers.
Turns out, it's actually pretty simple: the NFL auctioned off the rights to its mobile content to the highest-bidding carrier. In the past, that was Sprint. Now, it's Verizon; the nation's largest network just signed a four-year, $720-million deal with the league to be the exclusive provider of official NFL content on mobile phones. That $180 million per year figure is a fifty percent boost over the league's deal with Sprint, and it’s nearly as much as MLB Network brought in last year.
With this new arrangement, the NFL will also be offering users a lot more access—if you've had a Sprint phone in the past few years, you know how limited the old package was. But even with that given, it's still hard to say, pound for pound, whether the NFL or MLB is actually offering more value with their mobile packages. With At Bat, you get live pitch-by-pitch, Gameday Audio, box scores, and mobile access to MLB.tv (if you are a subscriber). That's pretty good, albeit with a few notable drawbacks—the player cards are terrible, MLB.tv is pretty useless on a device that small, and, something I should have mentioned in my review, there's no minor-league data to speak of. If you want to learn more about Alberto Alburquerque (great porn name, or greatest porn name?), you'll have to look elsewhere.
The NFL's offering certainly won't be perfect either, but based on reports, it'll finally be worth its while. For the first time, the RedZone channel, which covers every game and features lots of live look-ins (not unlike MLB Tonight), will be available on mobile, as will the full broadcasts of Thursday and Sunday night games. There will also be on-demand highlights, live radio broadcasts of every game, plus some fantasy stuff, ringtones, and the like. There's been no word on pricing yet, but based on what Verizon is paying for the rights, they'll have to charge a lot more than $15 to break even. (Although they could also make it relatively cheap and just focus on subscriber growth.) Regardless, this is something I would probably buy if I had Verizon, as long as it wasn't too outlandishly expensive.
Without the benefit of actually seeing the NFL's app, those two packages sound pretty even to me, with MLB probably getting slight an edge for technology and platform. (At Bat is available on the iPhone, Android, and Blackberry, whereas the NFL will only be on Verizon phones. Hopefully, the iPhone will be a Verizon phone at some point before I die, but I'm not holding my breath.) It all has to be really frustrating for MLB, considering they're offering more value with better core technology, and yet the actual money going to the leagues is mind-blowingly different.
If nothing else, they can take solace in the fact that the option will almost certainly be there for them in the future if they choose to switch strategies—Verizon has made content a huge focus, as they figure that the more exclusive rights they have, the wider a net they can cast in terms of luring new subscribers. It stands to reason that if MLB decided to sell exclusive mobile rights to their videos and Gameday Audio, Verizon (or some other carrier, for that matter) would be willing to pay far more than $8.4 million per year for it.
Is that the best approach? I'm not sure, honestly, but I'm pretty certain it's better than what they're doing now. As I've said before, charging $15 for your app is pure no man's land—it's far too cheap to generate maximum revenue (i.e. as compared to what they could get by auctioning off rights), but way too expensive to maximize reach. So what you're left with is a pretty damn good app and a very confused business model.
I hate to say it, but this is nothing new for BAM; they've consistently made incredible, best-in-class technology, and then under-monetized it. I think their long-term vision is spot-on, but their short-term business decisions (at least on the media side) continue to be puzzling.