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Home Pete Toms LWIB: An In Depth Look At MLB Advanced Media

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Pete Toms Article Archive
Written by Pete Toms   
Monday, 15 March 2010 00:00

MLB.com
MLB Advanced Media is the umbrella for
MLB.com, but their reach moves well
beyond that.

This week in “Last Week in BizBall”, the state of affairs at Major League Baseball Advanced Media (BAM) plus the weekly tidbits.

MLBAM UPDATE

LWIB brought reports of a handful of new developments at MLBAM. BAM and ESPN announced a deal that will result in the former providing streaming technology to broadband channel ESPN360.com (soon to be re-branded ESPN3). In addition, BAM and Yahoo! Sports announced they are partners in a new fantasy baseball offering. Also last week, with the Red Sox now on board, all 30 franchises are part of BAM’s league-wide secondary ticketing deal with StubHub. The NFL’s windfall from Verizon last week focuses attention on BAM’s unique approach to wireless. And a look forward and back to the contentious role of BAM in MLB.

LWIB, there were plenty of reports detailing BAM’s new partnership with ESPN3. (Fang’s Bites has the press release here) Brad Stone reported for The New York Times, “…Major League Baseball Advanced Media, or MLBAM, will handle the technology infrastructure and customer support for the nearly 3,500 live events that ESPN streams each year, including N.B.A. games, World Cup soccer matches, Grand Slam tennis tournaments and college football games.” Jason Dachman reported for the Sports Video Group blog, “ MLBAM will also offer operations support and play a substantial day-to-day role for ESPN3.com, taking care of everything from stream encoding and distribution to authentication and anti-piracy efforts.”

BAM has long been recognized as the leader in streaming live video, making the marriage of the two on-line sports media giants a natural outcome. BAM CEO Bob Bowman said, “Collectively, we’re probably No. 1 and No. 2 in distributing live sports video. So collectively, I think both of us will be able to offer an even better product than we offer today.” BAM has an extensive history of outsourcing and operating their technology for a wide variety of other entities. But more recently BAM had appeared to be focusing more of their efforts on MLB and less on “outside” work, perhaps suggesting that the ESPN3 deal was just too big to pass up. Last fall MLS announced that after six years they were leaving BAM to bring their web operations in house. At the time, Tripp Mickle reported for the SportsBusiness Journal:

MLS is just the latest in a series of properties to leave MLBAM over the last two years. After years of powering a variety of non-baseball sites from AVP and WCSN to IceNetwork.com and Tiger Woods’ official mobile site, the company has shifted its focus away from that business to concentrate on MLB content and larger, more lucrative partnerships.

In his aforementioned report Jason Dachman pointed out both parties also anticipate benefiting from future content sharing arrangements.

While the partnership is purely technical at this point, the most fruitful aspect of the deal could end up being the infinite cross-platform–content opportunities that it presents.

“The technology has to work, the backend has to work, it has to be best in class — all those things. But the upside — the real ice cream, if you will — is if we can figure out some way to make someone who’s watching a FIFA World Cup soccer match be eligible to see a live baseball game, or vice versa.” (LWIB note, the quote is from Bob Bowman)

SELECT READ MORE TO SEE MORE DETAILS ON THIS UPDATE ON MLBAM, ALONG WITH THIS WEEK'S "TIDBITS"

 

ESPN was not the only sports media giant to announce a new partnership with BAM. Yahoo Sports! and BAM (already partners) announced the launch of a new fantasy baseball game. Mark Newman reported for MLB.com that the key to the offering from the BAM side is the fantasy player’s option to purchase a customized “Fantasy Highlights” product from MLB.com.

 

By signing up, you will have the ability to purchase MLB.com's new Fantasy Highlights package -- allowing you to watch customized, in-game and post-game video clips tracking your fantasy roster directly from your fantasy homepage. That package will be available to all Yahoo Sports Fantasy Baseball '10 users as a free trial for the first two weeks of the regular season. The full season will be available for a one-time fee of $9.95.

"This partnership with MLB.com will provide fans with the most relevant and engaging fantasy baseball experience on the Web," said Kyle Laughlin, head of Yahoo Sports. "The combination of Yahoo's unmatched sports news and MLB.com's in-game and post-game video highlights makes Yahoo Sports Fantasy Baseball '10 the biggest and best fantasy game for passionate fantasy baseball fans."

"Integrating this new highlights package with Yahoo's industry-leading fantasy baseball game will take fans beyond the box score to watch the performance of their fantasy roster as it unfolds on the field," said Kenny Gersh, senior vice president, business development, MLB.com. "We believe this product will exceed fantasy baseball players' growing appetites for deeper engagement by delivering an immediate, high quality experience."

Eric Fisher reported for the SportsBusiness Journal that the deal is a continuation of BAM’s efforts to rebuild their fantasy offerings since losing a legal battle over their licensing of player statistics to fantasy game providers.

The deal also continues a resurgence in fantasy baseball for MLBAM after a prior operating strategy, which focused on licensing deals with fantasy game providers, fizzled in the wake of the CDM Fantasy Sports legal case. In the last year, baseball’s digital arm has created several prominent, differentiated fantasy experiences, including a mobile version of its popular Beat The Streak casual game and an alliance with Bloomberg Sports for an array of analytical fantasy products.

The deal is also notable on a strategic level, another example of BAM’s eagerness to partner with media companies in their fantasy baseball offerings. In a December piece in The New York Times on BAM’s new fantasy baseball deal with Bloomberg, Richard Sandomir wrote that Bob Bowman “…said that he wanted Bloomberg’s fantasy software to lure users to MLB.com from competitors like Yahoo and ESPN.com.”

LWIB BAM brought no attention to the announcement that the Red Sox are no longer the only franchise NOT participating in the BAM/StubHub secondary ticketing partnership. (Media reports included comments from both StubHub and Red Sox officials but none from BAM) The Red Sox absence from the “league-wide” partnership has raised eyebrows since the BAM/StubHub partnership was announced in 07. The announcement follows quickly the February 24 press release detailing the extension of the Red Sox deal with local ticket re-seller Ace Tickets. Alfred Branch Jr. reported for TicketNews.com:

The Boston Red Sox, the last holdout from the secondary ticketing deal Major League Baseball (MLB) signed with StubHub in 2007, has finally agreed to let the ticket exchange giant be its authorized online ticketing partner.

Financial terms of the one-year deal have not been disclosed, but StubHub reportedly pays the league under its current five-year deal so the Red Sox will likely begin receiving a cut of that money, if the team is not already. While the Red Sox stayed out, the other 29 MLB teams were all part of the original deal with StubHub, and they split the estimated $20 million per year that the exchange pays the league.

Eric Fisher reported for SportsBusiness Daily that the deal covers, “…for now, just for the '10 season.” Mr. Fisher’s report includes remarks from Red Sox COO Sam Kennedy clearly indicating that the Red Sox have not committed to the full length of the BAM/Stub Hub “league-wide” partnership.

"We continued to take a wait-and-see attitude with regard to secondary ticket and wanted to be very cautious. But it seems like this [StubHub] platform offers a great convenience, and we're going to see how this goes," said Red Sox COO Sam Kennedy. "So we've broken up the category in which Ace is strictly offline and StubHub is strictly online, which we think is rather unique. But Boston is also very unique market for secondary tickets."

Going forward, one of the most important challenges facing BAM is how they navigate the rapidly expanding wireless market. Last month, Bill King wrote in The SportsBusiness Journal that, “… within five years, more users will connect to the Internet via mobile than do on desktop computers. And that, eventually, wireless Internet will grow to twice the size of wired,….” Mr. King cites “Demand for video”, the core of BAM’s business, as one of the key factors driving the expansion of wireless. All of the “big 4” employ different wireless strategies but last week the NFL announced a dramatic change in their approach to wireless. Carolyn Braff wrote at the Sports Video Group blog, “When it comes to new media, the NFL has traditionally been more protective of its content than other leagues. Through a new partnership with Verizon, however, the league is letting its guard down, allowing mobile access to its Sunday games for the first time.” Matthew Futterman of the WSJ valued the NFL/Verizon 4 year deal at $720 million. Including the rights to broadcast live game content (including the league’s red hot “look in” RedZone channel) was the key factor in increasing the value of the rights approximately 50% over the previous wireless deal with Sprint.

Last week’s wireless windfall for the NFL brought attention to BAM’s wireless strategy, some of it critical in nature. BAM‘s approach to wireless is unique amongst the “big 4” in that they are the only league that does not have an “exclusive” wireless deal. Instead BAM has focused on building apps for a broad range of wireless providers and devices, believing that the broadest possible distribution of their wireless content was more beneficial to MLB than an “exclusive” partnership. Bob Bowman was quoted in the aforementioned piece by Bill King:

“I don’t get it,” said Bowman, who has answered challenges from some MLB owners who wonder why they aren’t getting a larger share of the wireless sponsorship pie. “To the extent you did a network deal with any of those three [Verizon, Sprint or T-Mobile], you’re giving up a lot of folks. And there is no evidence anyone has switched to any of those carriers for content. They’ve switched for a device, called iPhone, but not for content.

“There’s no right or wrong strategy. Just different. But, for us, we would hear from a lot of fans if we said in order to hear the game you have to be on this network. Maybe we could’ve made more money, but it’s not in the global interest of baseball to not give people the best content on whatever device they have, in our view.”

In reaction to the NFL/Verizon announcement, Shawn Hoffman questioned BAM’s wireless strategy at his Squawking Baseball blog:

Last week, I tweeted about MLBAM’s $15 price tag for At Bat 2010, saying that even if they sold 5 million copies, that would only result in about $50 million after Apple takes its cut. As it turns out, BAM only sold about 1.2 million last year, when the price was $10. If you do the math, that’s about $8.4 million in revenue.

AND

….But if MLB offered mobile MLB.tv and Gameday Audio exclusively to one carrier, you’d have to think they’d do better than the $10-$20 million they’ll probably take in this year.

The conjecture around BAM’s wireless strategy is the most recent in a long list of controversies surrounding BAM since its inception in 2000. One of MLB’s principal motivations in creating BAM was their desire to “centralize” digital revenues. BAM instantly became part of the ongoing debate over the centralizing/sharing of revenues in MLB, always a source of friction between small/mid revenue and large revenue franchises. In addition to the debate amongst owners over the role of BAM, there have also been questions around whether the MLBPA (I.e the players) share equitably in BAM’s successes. BAM is owned by the MLB owners but is an entity separate from MLB. While income from BAM is included in MLB’s “central fund” re-distribution, how much that amount is (or should be) is difficult to know. In January 09 Maury Brown, the founder of the BizofBaseball, estimated BAM revenues at “…approx. $450 million annually,.” The accounting behind how much of that figure eventually is re-distributed to the clubs (and on down to the players) is a bit of a guessing game. Some back-of-the-envelope math suggests the amount of BAM revenue “trickling” down might not be as great as often thought. MLB re-distributes approximately $900 million annually via their “central fund”. (based on reports that each of the 30 teams receives approximately $30 million per year). The central fund is comprised of revenues from national TV and radio deals, BAM, MLB Network and merchandise sales. The national TV deals account for upwards of $650 million of the $900 million total. How much of the remaining < $250 million is BAM responsible for and is it an “equitable” share for the players?

The reluctance of the Red Sox to participate in the BAM/StubHub partnership is not the only example of clubs being at odds with BAM over control of revenue streams. BAM remains at the centre of an unresolved and years long dispute in MLB over control of the rights to stream live in-market games online. BAM controls the rights despite much opposition from a constituency of owners with investments in RSNs that control the local TV rights of their teams. After years of negotiations between BAM, owners and the RSNs, still only two franchises (Yankees and Padres) are set to stream live in-market games with opening day less than 3 weeks away.

While the role of BAM in MLB has always generated dispute, their success in digital media is unrivalled in the other “big 4” leagues. Initially launched to manage the web sites of the 30 franchises, MLB has expanded into a multi million dollar media company with many initiatives outside MLB. In fact, BAM’s tremendous successes have led to persistent speculation that the owners will eventually sell all, or part, of it. In 2005 there were many reports that a BAM IPO was being planned with Goldman Sachs valuing BAM in excess of $2 billion. The aforementioned report by Brad Stone on the BAM/ESPN deal included speculation about a possible sale of BAM:

Winning the contract to handle ESPN’s online video business further diversifies the company, and raises the possibility that its owners will one day seek to sell a portion of it to other investors and perhaps change its name, to further distance it from baseball and make its services more appealing to other professional sports leagues.

Fantasy, in and out of market live game streaming, primary and secondary ticketing, wireless rights, BAM is in the middle of so many increasingly important revenue streams that they are certain to remain the subject of much debate in the near and long term.

WEEKLY TIDBITS

  • Sarah Talalay of the Sun-Sentinel blogged about MLBPA ED Michael Weiner’s visit to Marlins spring training. Not surprisingly, the recent agreement amongst the PA, MLB and the Marlins that Florida would more closely adhere to the rules governing the use of revenue sharing receipts by increasing spending on big league payroll was a subject of interest.

Weiner said, of course, the union has concerns about other teams, which he wouldn’t name. He also wouldn’t say if he expects similar settlement agreements could be forged with other teams.

“I can’t predict that, I can’t say there is the level of attention that we’re paying is the same with respect to other teams as with the Marlins, and if it reaches the stage where we think that kind of agreement is appropriate, we’ll push for it.”

Weiner said it wasn't the objective of the settlement with the Marlins to serve as an example to other MLB clubs.

“It may have that effect. That wasn’t what we set out to do,” he said. “What we set out to do was say we think we have a potential problem with the contract and how can we deal with that? If it has precedential impact, it has that, but what motivated us was we have a problem, we think, how can we resolve that. And the Marlins and the Commissioner worked with us and we think we got a good resolution.”

  • After reporting a loss for the '08 season, the Mariners reported a profit for '09. The change was largely due to a year over year player payroll reduction of 16%. Greg Lamm reported for the Puget Sound Business Journal:

The Seattle Mariners had a net income of $3.18 million in 2009, according to the team’s annual report released Monday.

The net profit was a turnaround from 2008, when the Seattle Mariners lost $4.53 million after posting the second-worst record in Major League Baseball and attendance slide 13 percent. The 2008 losses mark the first time the Mariners finished in the red since moving to Safeco Field in 1999.

The Mariners drew 2,195,284 fans to Safeco Field in 2009, according to the Baseball Almanac. The per-game average was 27,102. Attendance in 2009 was down 6 percent from 2008, and 2009 was the third consecutive year the Mariners’ home attendance slipped.

The Mariners home attendance was 5 percent below the American League average.

  • Don Muret confirmed in the SportsBusiness Journal that the Giants will become the first team to dynamically price every seat at their facility this season at AT&T Park. As previously reported, the Giants used Qcue’s dynamic pricing software last season to manage roughly 2,000 seats of inventory.
  • Paul Sullivan of the Chicago Tribune asks, Will the Cubs eventually become the last team to add a Jumbotron?
  • Ballpark Digest provides updates here and here on the competing interests wanting to bring professional baseball to the Houston suburbs. Evidently the Astros have softened their previously stated opposition to an affiliated minor league team entering the market.
  • Steve Henson reported for Yahoo! Sports on the disastrous effects of game fixing scandals on Taiwanese professional baseball. Mr. Henson informs us that the most recent scandal resulted in the February indictments of 24 people, including nine players from the four-team league. We also learn that this scandal is but the latest in a series of five game fixing scandals in recent years. As a result, the number of Taiwanese professional baseball teams has dwindled to 4 from 11.


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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