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July 29, 2009

The Biz Beat

Seeing Everything?

by Shawn Hoffman

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In a lot of ways, MLB Advanced Media really gets it. Their marketing strategy needs a major overhaul-they're trying to be a portal in a post-portal world, and it's grossly limiting their earning potential-but their technology is best-in-breed, and they really seem to understand that sports games will eventually be broadcast and distributed by the leagues themselves, not third-party networks. And why not? Once internet-enabled televisions and super-high-speed broadband become commonplace, cable networks will start being phased out, and MLB Extra Innings will become unnecessary. MLB can just cut out the middle man and make MLB.tv its primary method of distributing baseball games-on your television, computer, or mobile phone.

But while MLB rushes toward that inevitable future, the other leagues-and especially the NFL-don't seem to be in such a hurry. Like it or not, the world is still dominated by old media; less so than it was five or ten or fifty years ago, but far more so than most tech pundits give it credit for. The NFL generates well over half of its revenue from its television partners (MLB is closer to 33 percent), including $700 million from DirecTV (that will rise to $1 billion in 2011). Those companies have an enormous impact on every decision the league makes, and the NFL has gone out of its way not to make sure they're not even the least bit uncomfortable.

So the question is this: Will MLB face any repercussions in the short-term for its aggressive strategy, and is the NFL right to play it safe?

In case there still were any doubts that MLB was headed in this direction, MLBAM drew a massive line in the sand last month when it announced its partnership with a little-known company called Boxee. Boxee offers a web browser that is optimized for your television, making it ridiculously easy to watch web video on your big screen. That's great for consumers, but not so great for cable operators and TV networks-why would you pay $150 a month for cable, or watch a half-hour show with eight minutes of commercials, when you can watch that same show with two minutes of commercials, for free? Leaving nothing to chance, Fox, NBC, and Disney have gone out of their way to make sure Hulu isn't available on Boxee, disabling several workarounds and playing an incessant game of cat-and-mouse over the last several months. They want you to use the site, of course, just not if it's on a television. And thus the deck chairs on the Titanic have been properly rearranged.

MLB, meanwhile, is essentially toeing the line with cable operators, who also happen to be their partners on MLB Extra Innings and MLB Network. MLB.tv is now featured on Boxee, making it dead simple to watch on your television once you have the browser installed (this, unfortunately, isn't such a simple process yet). Eventually, that should make it easy to bypass Extra Innings, which is such an important property to the cable providers that they (in)famously put MLB Network on their basic tiers just to keep it.

It doesn't seem like this should be such a tough decision for MLB-after all, it has to share profits on Extra Innings, whereas it keeps every cent from MLB.tv. But the NFL clearly sees things differently, as they've only streamed NBC's Sunday night games thus far. (I'm purposely not counting the incredibly annoying half-game/half-talking-heads approach they take with their Thursday night NFL Network games, which are technically streamed on NFL.com). MLB has even beaten the NFL to in-market streaming, despite the fact that almost all of the NFL's games are on broadcast networks.

Think about that for a second. In order for baseball games to be streamed inside a team's local market, MLB has to cut deals with each team's local RSN, as well as the local cable operators, all of whom are terrified of losing subscription fees. The NFL, on the other hand, has deals with just four networks: Fox, NBC, CBS, and ESPN. Three out of the four rely solely on advertising, meaning that their objective should be to simply put the games in front of as many people as possible. (ESPN, the lone cable station in the group, is the exception.) If anything, the NFL should have had in-market streaming years ago.

Given that stance, it's no surprise that the league has consistently (and justifiably, to some extent) refused to create its own out-of-market games streaming package, which would effectively compete with DirecTV's NFL Sunday Ticket. Instead, they only make games available online to those that are already DirecTV subscribers, have purchased Sunday Ticket for $280, and then were willing to plunk down another $100 for the "Superfan" package.

The same goes for the league's brand new iPhone offering, just unveiled a couple of weeks ago. If you're one of the seventeen people in the United States that is both a Sunday Ticket Superfan and an iPhone owner, you'll now be able to take the games with you anywhere you go. Needless to say, that's a very different approach than the one MLB has taken, considering every baseball game is now available live on the iPhone to MLB.tv subscribers, along with one or two free games per day for non-subscribers.

No doubt, the leagues have different business models, and the NFL has more incentive not to ruffle any feathers. But looking forward, the NFL is probably shooting itself in the foot. The league would have to sell five million streaming subscriptions at $200 a piece to fully replace its DirecTV deal-certainly ambitious, considering MLB is only selling a half-million subs at about $100 per. But those numbers could look conservative by the time the DirecTV deal expires in 2014. And here's the real key: even if the NFL offered a full streaming package on the web, DirecTV wouldn't just disappear; having NFL Sunday Ticket would still give it a major leg up on cable in the short run, and the company should still be willing to pay a pretty decent chunk of change for that package.

It's probably too late, though. The league's new contract with DirecTV, signed this past March, almost certainly gives the satellite provider exclusive rights to stream the NFL's out-of-market games. In five years from now, you can bet the NFL execs will be staring at their watches waiting for the deal to run out.

MLB, meanwhile, will be free to take advantage of what should continue to be a rapidly-growing market. It may piss off some cable executives, but it doesn't really matter, because MLB-and all of the other sports leagues, for that matter-controls incredibly valuable content, which most people will watch the same way ten years from now as they did ten years ago: live, and with commercials. With all of their other shows are being DVR'd and Hulu'd and pirated, the operators and the networks will have no choice but to play by the leagues' rules.

MLB realizes this and is jumping on the opportunity, building a massive customer base in the process. The NFL apparently still needs time to figure it out.

Shawn Hoffman is an author of Baseball Prospectus. 
Click here to see Shawn's other articles. You can contact Shawn by clicking here

Related Content:  MLB,  MLB Network,  Mlb The Show,  NFL,  Streaming,  Mlb.tv

16 comments have been left for this article. (Click to hide comments)

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Mountainhawk

I always enjoy your articles, but you seem to have an inferiority complex involving the NFL. The NFL is obviously doing lots of things right, they are by far and away the most popular and profitable sport in the country.

Granted, a lot of that is from the fact that they have the weakest players union of the 4 major sports, but they have to be making better decisions on these type of issues than the other lagues most of the time, or they wouldn't be where they are.

Jul 29, 2009 09:38 AM
rating: -2
 
dalbano

The NFL may be the most popular and profitable sport, but in terms of future-proofing their content, they are lagging, which is the point of the article.

At some point, I think the owners of the internet pipeline delivering streaming content will have to change their tune regarding classic television, and thus gameplan for losing that traditional TV line of business. It will become obsolete sooner rather than later. I think one of the end games is that customers will wind up paying twice as much for internet service.

Jul 29, 2009 09:58 AM
rating: 3
 
Mountainhawk

I think you greatly underestimate the force of cultural inertia. It might change in the 25-50 year timeframe as there are no longer generations that didn't grow up with computers, but there are 40-50 year old people right now that have NO interest in being 'online', and will want their games on TV the old fashioned way.

Jul 29, 2009 10:03 AM
rating: -2
 
baserip4

Go to your local Best Buy and see what's the most expensive TV: it's the internet enabled one. You will watch all your shows on your big tv; they'll just be delivered over a web browser instead of through your cable provider. It's the best of both worlds.

Jul 29, 2009 10:49 AM
rating: 3
 
Shawn Hoffman

Technology tends to be the most pervasive when it cuts costs. Music sales keep crashing, even though most people don't know how to file share. Most people don't have DVRs, but ad rates are dropping (and were before the recession too). The same will eventually happen to cable. You'll still watch games on your TV, it'll just be streamed over the internet instead of through your cable box.

Jul 29, 2009 10:58 AM
rating: 0
 
Shawn Hoffman

MLB has had its eye on the ball the past few years. The NFL hasn't. Digital is just one aspect. The salary cap has really started to hurt the NFL's bottom line, which is why the owners unanimously voted to opt out of the current CBA... maybe MLB should pay attention to that.

Jul 29, 2009 11:25 AM
rating: 0
 
Mountainhawk
Other readers have rated this comment below the viewing threshold. Click here to view anyway.

Ah, more of the anti-salary cap rhetoric.

The salary cap is the reason the NFL is where it is today. It's the reason the NFL became the powerhouse sport on the American landscape.

Jul 29, 2009 11:31 AM
rating: -8
 
Shawn Hoffman

The salary cap didn't exist until 1992... You'd have a pretty tough time arguing that the NFL wasn't the powerhouse sport in the US before then. In fact I'm pretty certain that the NFL was further ahead of MLB in terms of revenue (on a % basis) before '92 than it is now.

Jul 29, 2009 11:44 AM
rating: 5
 
ElAngelo
(942)

I wonder if the packages are that comparable. My observations have been that most people get the MLB package because they're transplanted fans who want to watch most of their team's games, while Sunday Ticket is for people who want to flip around from game to game, often with a bunch of others around.

Jul 29, 2009 10:37 AM
rating: 1
 
Tim Lowell

I think gambling has a lot to do with both packages, but especially Sunday Ticket.

I used to have Sunday Ticket when I had DirecTV, and I strictly bought it to watch Patriots games (I was living in Houston at the time), but I may be the exception and not the rule.

Jul 29, 2009 11:06 AM
rating: 0
 
Tim Lowell

I just wanted to second your statement on how MLBAM has the best of breed technology. I'd been subscribing to MLB.tv for a couple of years using a cheap old PC attached to my HDTV via the VGA connection. It sucked pretty hard, and I knew the PC was the culprit. For about $600, I bought a relatively modern dual-core desktop machine that has an HDMI output from the video card, and man, is MLB.tv sweet! It's nearly indistinguishable from an HD channel on cable. Now, if only the Mets weren't such a galloping disaster, I'd really be enjoying it.

I'm looking forward to the day (2014!!!) when the NFL gets off their keisters and delivers this kind of access and performance for all 16 Patriots games. Until then, I'm praying that Sirius doesn't go out of business. At least I still get the great Gil Santos on WBCN whenever I want him.

Jul 29, 2009 10:52 AM
rating: 1
 
SC

Do you think mlb.tv will at some point sell the ad space between innings? Perhaps they give that space to the teams to sell as 'compensation' for destroying the RSN model? Seems like video ads during a baseball game could actually generate a serious amount of revenue, and wouldn't even be intrusive.

To go a bit farther, they could even speed games up by shortening the breaks between innings, now a bit longer than they need to be because of TV breaks. Give up :30 every half inning and you've shortened a ballgame 10-15 minutes.

Jul 29, 2009 12:07 PM
rating: 1
 
Shawn Hoffman

They actually do sell some video spots on MLB.tv, usually one per inning break. Not sure how much revenue they're seeing from it though, given the somewhat limited audience, and the fact that it's actually Yahoo selling most (or all?) of the ads.

Jul 29, 2009 12:13 PM
rating: 0
 
Brian Cartwright

I watch every Pirates game a day or two later from the mlb.tv archives. Some games have commercials between innings, some do not (lots of Geico geckoes). There is a 'Jump to Inning' button that can be used to skip over the break, but that is disabled during a commercial. They even cut the broadcast a second or two short to avoid quick-handed people jumping to the next half inning before the commercial comes on.

Jul 29, 2009 13:06 PM
rating: 0
 
jtreadway

As far as I know though, they don't disable the ability to switch between games that you're watching as PIP or side by side, so you're still allowed to "flip channels" even if you're not allowed to DVR forward a half inning, which is probably another (albeit small) reason why you're not seeing many ads in that space.

I do enjoy the MLB ump school spots though; they kinda, sorta, a little bit remind me of the Tom Emanski video ads, except without a powder blue mesh hat wearing Crime Dog. That's why I've given MLB.tv my full endorsement.

Jul 29, 2009 15:11 PM
rating: 0
 
Fruitland Generic

Does MLB.tv allow in-market TV streaming? I was always under the impression you couldn't get the games from the team in your market. Even with the iPhone MLB At-Bat app, you can't get the free game on video if it's in-market. Does that change if you fork over the hefty fee for the year? I didn't think there was a way to access an in-market game through video streaming on any platform, at least not legally.

Jul 30, 2009 07:04 AM
rating: 0
 
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