This week in “Last Week in BizBall”, Major League Baseball Advanced Media comes under criticism, reaction to Cubs request for public investment in Wrigley Field, plus tidbits.
MLBAM COMES UNDER CRITICISM
Major League Baseball Advanced Media (MLBAM, aka BAM), the digital arm of MLB, is widely acknowledged as the “best in class” amongst the “big 4” in distributing online video. Both MLB.com’s “out of market” offering of live games, MLB.tv, and the “At Bat“ mobile app have proven enormously popular with baseball fans. BAM’s status as the industry leader in streaming video is evidenced by their providing of back end technology to the likes of MMOD (March Madness on Demand) and ESPN3. But for all BAM’s success, there are those in MLB who believe BAM is too powerful. Those critics question if BAM plays too large a role in areas that would be better exploited by either individual clubs or third party rights holders. Specifically, team and league wireless rights, in-stadium wireless, in-market streaming of live games, control of online video “highlights” (ie. ESPN.com broadcasts highlights of MLB games but RSNs - many owned, at least in part, by clubs, don’t have access to online video) and ticketing (both primary and secondary). (see more here) BAM has also antagonized some fans by restricting use of video on blogs. (see MLB Doesn’t Seem to Understand the Internet and follow the links within)
More recently, concerns about the omnipotence of BAM have been expressed by MLB rights holders. Some of these rights holders have expressed frustration at having to negotiate separate rights deals with MLB and MLBAM. These same agencies and rights holders prefer the model of the other “big 4” where TV, broadband and mobile rights are bundled together in one package. LWIB, a report in SportsBusiness Journal titled MLB's Split Squad described a growing rift between MLB and MLBAM. According to SBJ, there are some within MLB who describe a “feud” between two of the league’s most important executives, Tim Brosnan, MLB executive vice president of business, and Bob Bowman, MLBAM president and CEO. Changes to BAM’s role within MLB could be soon forthcoming. The departure of MLB President and COO Bob DuPuy has resulted in both Brosnan and Bowman now reporting directly to Commissioner Selig. Dynamics at the top of the MLB hierarchy have also been impacted by the recent departure of sponsorship chief John Brody and the appointment of Royals owner David Glass as BAM chairman (succeeding DuPuy). More pragmatically, MLB’s national TV contracts expire in 2013. Presently, TV rights are sold by MLB, digital rights (broadband and mobile) are sold by BAM. According to the SBJ report, media companies are already telling MLB that they must bundle together the rights to all platforms in future negotiations.
As the SBJ report describes, the recent carriage dispute between Cablevision and Fox, which resulted in Games 1 and 2 of the World Series being unavailable to 3 million NYC area Cablevision subscribers, exemplifies the sometimes bizarre relationship between BAM and MLB.
After Fox went dark on the MSO’s New York-area systems, Cablevision told subscribers that it would reimburse them if they bought a subscription to MLB.TV, which would allow its customers access to MLB’s postseason.
For Fox, which pays MLB $257 million in annual rights fees, it was a move that damaged its leverage during the messy carriage dispute.
Angry Fox executives complained to MLB brass over e-mail and at AT&T Park, during the first two games of the World Series, according to sources with knowledge of the talks. Little could be done. Brosnan, Fox’s main MLB contact, had no direct power to address the concerns of one of his biggest rights holders, since he does not control MLB’s digital programming. Bowman told Fox that he couldn’t control Cablevison’s marketing but promised not to market the service directly to affected communities.
BAM is now 10 years old and it’s role within MLB is evolving along with the broader changes in the digital world. Previous debates between the league, owners and BAM over control of broadband video, web sites and ticketing might now be secondary to control of ever more important wireless rights. As I wrote earlier this year, the $720 million dollar rights fee that the NFL negotiated with Verizon led many to question BAM’s approach to wireless.
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.
The aforementioned SBJ report questions not only BAM’s league-wide wireless strategy but also their role in individual club’s wireless sponsorships:
“The size of the Verizon NFL deal [a reported four-year, $720 million agreement] makes you wonder if there isn’t a joint rights deal they could be cashing in on,” said Kern Egan, principal at Richards Sports & Entertainment, which has cut BAM deals for Fruit of the Loom and MLB deals for Firestone.
At the club level, BAM’s rights also make wireless activation a challenge. Wireless is one of sports’ richest sponsorship categories, and a team’s wireless partner is severely restricted without signing an additional deal with BAM.
“If we want to do anything wireless in my ballpark, BAM’s got to be involved,” sighed a big-city MLB team marketer.
In June, I blogged about BAM’s “At the Ballpark” “check in app”. I’m not interested in geolocation technologies per se, but I did, and do, wonder if this is another example of a BAM solution being imposed on clubs who would prefer implementing their own. At the time, I asked one franchise CIO his opinion of BAM’s involvement in “in-stadium wireless” and although he would not comment on-the-record, he made it clear that he would prefer to innovate in that area independently of BAM.
SELECT READ MORE TO SEE MORE ON MLBAM, THE RESPONSE TO CUBS REQUEST FOR PUBLIC FUNDS IS MOSTLY NEGATIVE, PLUS THIS WEEK'S TIDBITS
After years of negotiations between BAM, MLB, individual clubs, RSNs and cable operators over how best to exploit the rights to “live in-market” streaming of games over the internet, the industry consensus appears to be that the whole initiative has been a flop. The NFL has never pursued this strategy but the other of the “big 4” have failed in their attempts to popularize “live in-market streaming.” The 10 MLB season ended with only two franchises (Yankees and Padres) offering “live in-market streaming” and in both instances the response from fans has been practically nil. But more recently, there has been renewed optimism amongst the leagues that there is a healthy market for “live in-market” games delivered digitally, but not over broadband but via wireless. The NFL’s aforementioned deal with Verizon allows the wireless provider to distribute live games. This marks a seismic change in the NFL’s approach to wireless. Previously the NFL had more closely controlled access to their live games than any of the “big 4”, fearing cannibalization of their enormous rights deals with over the air, cable and sat broadcasters. The NHL, the most digitally innovative of the “big 4”, are working hard with Fox Sports Net (which has rights to 13 NHL teams) to “unlock mobile rights” to live games. Along with the aforementioned “MLB’s Split Squad”, SBJ published a companion piece titled Live local streaming dries up. Within the piece, BAM President and CEO Bob Bowman acknowledges that the future of “in-market live streaming” is likely a wireless one:
“We may not have realized this initially, but it’s definitely more likely to be a wireless product in the future, something utilized on mobile,” he said. “Reaching that consumer on the go, on the train, with their local game, we believe, could be a powerful proposition. But the question of how we sell it, how we monetize it, whether we even think about selling this by the day, is something not yet fully determined. But I do think we’ll get more teams in the future. And I still think that MLB.TV, which really didn’t begin to take off until its third and fourth years and is now exceeding expectations, is an instructive lesson here.”
The role of BAM within MLB always has been contentious and likely will remain so. The reason behind that is not technological but rather evolves from BAM’s mandate to centralize digital revenues. As rights holders and fans expect MLB to be available over an increasing number of platforms unimaginable when BAM was formed 10 years ago, BAM’s role in driving and controlling those digital revenue streams will remain the source of much debate.
RESPONSE TO CUBS REQUEST FOR PUBLIC FUNDS MOSTLY NEGATIVE
Last week I brought attention to the Cubs proposal that the Illinois Sports Facilities Authority issue up to $300 million in tax-exempt bonds to finance renovations to privately owned Wrigley Field. The bonds would be repaid over 35 years from the growth in amusement tax revenues generated at Wrigley from annual increases in ticket and concession prices. Illinois General Assembly. Senate President John Cullerton has agreed to sponsor the bill during the fall veto session. LWIB, local and state politicians weighed in on the proposal as did many pundits. Save for one high profile writer, Phil Rogers of the Chicago Tribune, the reaction was uniformly negative. Illinois Governor Pat Quinn was quoted:
“I’m skeptical of the whole proposal,” Quinn told reporters today at the McCormick Place Convention Center in Chicago. “They haven’t shown it to me. Apparently they don’t think I’m as important as some others, and I am important in this matter because I’m a goalie for the people of Illinois to make sure they get their priorities addressed.”
“These are private owners of a baseball team,” Quinn said. “They spent almost a billion dollars buying it. They knew what they were buying. And then to be coming to the people of Illinois for assistance now, after an election, I think it isn’t a top priority.”
In the same report, Chicago Mayor Richard Daley was quoted as saying the proposal is “well intentioned” but it has “some serious problems”. Mayor Daley announced in September that he will not see re-election.
The editorial in the Chicago Tribune (Tribune Co. maintains a 5% stake in the Cubs) was resoundingly opposed to the Cubs proposal. “Ricketts sees his plan as a win-win partnership; we see a lopsided arrangement under which taxpayers assume the costs and risks to upgrade a privately owned stadium for one of baseball's most profitable franchises — at a time when the city, county and state are worse than broke.” Three days later the Tribune published a piece from editorial board member Steve Chapman titled, Is it time to tear down Wrigley Field? The piece was subtitled, Proposed financing deal would be a waste. The Chicago Sun-Times editorial on the proposal was titled Let the Cubs pay for their own fixer-upper.
Cubs owner Tom Ricketts was widely quoted as saying that if this proposal is rejected he has no “Plan B” to fund renovations to Wrigley Field. Ed Sherman of Crain’s Chicago Business reacted by suggesting a number of alternatives, including selling naming rights to the ballpark and personal seat licenses. Neil deMause wrote that while the proposal has little chance of passing, perhaps the Cubs have succeeded in their real goal of framing the future debate around renovating Wrigley Field. “…for running-stuff-up-the-flagpole purposes, it seems to have worked fine: State Senate President John Cullerton said he's open to other funding ideas, and Ricketts said the same thing, so expect a discussion to follow not of whether to fund Wrigley renovations, but how. And amidst all the hoopla, everyone seems to have forgotten that Ricketts promised last year that he wouldn't seek public money for Wrigley, so on that count, it's all working according to plan.
- The Oakland A’s and Tampa Bay Rays want new ballparks, we all know that. Like most of you, I’ve tired of the drawn out politics surrounding efforts in both markets. However, LWIB a few reports caught my eye. Ballpark Digest reported on a new proposal from the city of Oakland for a new waterfront ballpark. BD astutely observes that the new Oakland mayor is strongly onside with keeping the A’s in Oakland. More interesting is the observation that A’s owner Lew Wolff donated $25,000 to the campaign of a failed mayoral candidate who said he would not attempt to block the A’s planned move. Also from BD, Pinellas County commissioners might soon authorize using bed tax revenues to help fund construction of a new ballpark for the Rays.
- I’ve been following here the off season struggles of the independent Northern, Golden and United Leagues. LWIB the speculation that the three leagues would merge into one became a reality. The new league is the North American League. (press release here) The plan is that the NA League will field 16-20 teams next season. Independent baseball watcher Bob Wirz questioned if that plan is realistic. J.J. Cooper wrote in Baseball America:
The new league will have what has to be the largest geographic footprint in minor league baseball history. It will stretch from Maui, Hawaii, up to Canada (Edmonton and Calgary), across to the Chicago area (where the remaining Northern League teams were located) and down to Texas (where the United League's teams play).
Under the new league's plan, each of the three groups of teams will play 75 percent of their games against teams in their old league, with the other 25 percent of the roughly 90-100 game schedule to be played against teams from other areas.
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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