Attack of the Finesse ... (02/19)
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February 19, 2009 Riding HighBaseball's Place Under the New Media Sun
The mainstream media really seems to think that the sports business is in trouble. Check out this piece of doom-casting from the Wall Street Journal: During the Great Depression, baseball did take a significant hit: Attendance dropped 40 percent from 1930 to 1933 and didn't return to pre-Depression levels until 1945. Player salaries declined 25 percent. But no teams went belly-up. That's a pretty bold statement, considering how healthy the major sports leagues (and MLB in particular) have been over the past few years. BusinessWeek got into the act as well, calling pro sports a "lousy business" that big corporations (i.e. News Corp, Disney, Time Warner) were foolish to enter, and smart to exit. But is all this negativity really warranted? MLB has averaged 11 percent annual revenue growth over the last decade, a pretty solid number for a 130-year-old business with the same core product that it had in the 1870s. Part of the logic goes something like this: big media companies are falling apart; sports leagues are now big media companies; therefore sports leagues should be falling apart as well. The first part of that syllogism is certainly true, as the internet is killing many of the old business models, along with the companies that rely on them. Run a local television station? Your ad revenues could drop as much as 50 percent this year. A radio network? Good luck with that. Operate a newspaper? Not for long. The downturn is only accelerating the process, as advertisers are drastically cutting their spending almost across the board. Since sports leagues rely on these channels for a rather sizable chunk of their revenues (especially television), it stands to reason that they could be affected by the fallout. No doubt these are real concerns, and Bud Selig, more than anyone, has preached caution. But Bud should actually feel good about MLB's current situation, since the ongoing shifts in the media business actually favor sports. In fact, there may not be another media company better positioned to withstand this recession than Major League Baseball, and few will be as strong coming out of it. TiVo-Proof Television
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Not that I'm going to argue against your main thesis that sports and MLB are in a great place with regards to new media, but I would caution about hopping on the IPTV and live broadcasts over the Internet bandwagons just yet.
For the same reasons that Tivo and DVRs are ruining advertisements on pre-produced television,Web sites like Hulu are thriving: you don't really need to watch that content live. Hulu can exist and continue to function because it doesn't need to serve it's content to everyone at the same exact instant. You'll watch a show from the Internet at one time, and I'll watch it at another. That evens out the bandwidth.
Live internet broadcasts are a whole other matter because everyone is watching at once and you need bandwidth and servers to support every single one of those viewers.
Each additional viewer to cable or broadcast television ads nothing to their monetary or technological costs. The cost to broadcast something on cable and broadcast television is more or less fixed and independent of number of viewers. However, on the internet the cost to broadcast something live is very much dependent on each viewer. Each additional viewer requires new bandwidth, and costs money for that bandwidth.
That's all true, but that's the short term view. Streaming costs are only going to go down, and by the time IPTV is really prominent (5-10 years, at least), it could actually be cheaper than the fixed costs association with cable.
Also keep in mind, MLB.com already streams an incredible amount of video through MLB.tv. I can't imagine that they would be upgrading their video quality every year (as they consistently have) if the streaming costs were out of control. And this is right now, 2009. By 2015, it will be exponentially cheaper, at least on a per-user basis.