MLB going deep with their Extra Innings DirecTV Deal
With the imminent announcement the Extra Innings package that had been available to more than 75 million potential homes will now be accessible only to estimated 15 million homes that currently have DirecTV satellite systems.
Major League Baseball’s decision has upset baseball fans everywhere. What began in Internet chatrooms filled with baseball fans with too much time on their hands early in the New Year when reports first surfaced in Multichannel News relating to MLB’s imminent move to DirecTV, blossomed two weeks ago when Senator John Kerry, Democrat of Massachusetts (and the Democrat Party’s 2004 Presidential candidate) spoke with The New York Times.
''Here's what bothers me,'' Kerry told The New York Times on February 9. ''You get M.L.B. and DirecTV marshaling their forces to go out and make money while cutting out fans. In my judgment, more fans watching games strengthens baseball.''
He added, ''There's a whole movement toward fans being screwed by consolidation which raises prices and reduces options.''
And if that doesn’t have Bud Selig and company shaking in their boots, Kerry is ready to bring the full weight of his ‘considerable’ political clout to the debate.
''The F.C.C. doesn't have the right to say, 'You can't do this,' but they have levers that affect this business,'' said Kerry, who sits on the Senate Commerce Committee, which oversees communications.
Late Thursday night The Hollywood Reporter reported that FCC chairman Kevin Martin sent Sen. Kerry a letter concerning Kerry’s concerns about DirecTV MLB Extra Innings agreement.
"Once we have this information, we will report to you on the deal's implications for consumers and any recommended changes to the law to ameliorate any harm to consumers," Martin wrote.
Kerry told The Hollywood Reporter he is pleased that the commission is looking into the proposed agreement.
"It's good to know that (Martin) also has concerns about a deal that has the potential to deny choice to so many consumers -- all apparently in the interest of a short-term profit for Major League Baseball," Kerry said. "I look forward to hearing a full response from the league and from DirecTV, and I remain open to working with them and other colleagues on any and all plans that furthers options for consumers and makes it easier for all of us to enjoy our national pastime."
DirecTV’s rationale was easy to understand. MLB’s Extra Innings package would become the perfect compliment to DirecTV NFL Sunday Ticket package of NFL games. MLB’s interest wasn’t necessarily the $700 million, but the commitment DirecTV is prepared to make in agreeing to carry MLB’s plans to launch their own cable channel. MLB is expected to join the NFL Network and NBA TV in time for the start of the 2010 season. The NHL Network is currently only available in Canada.
In January, Multichannel News reported that: video-on-demand supplier In Demand was in talks to renew cable’s deal to distribute the “MLB Extra Innings” package, even as the league is discussing an exclusive distribution arrangement with DirecTV Inc., similar to the direct-broadcast satellite service’s deal with the National Football League for its “NFL Sunday Ticket.”
Cable operators had been offering the $170 MLB Extra Innings package — which offers as many as 900 games a year — since 2001. Initially, DBS leader DirecTV held the exclusive rights to that content. All one needs to consider is the following: MLB had an exclusive agreement to air the DirecTV Extra Innings package and then for five years shared that package with DirecTV and cable operators. It’s easy to appreciate why MLB’s decision to move back to an exclusive DirecTV package. Baseball fans don’t want to be treated like football fans, being forced to purchase a DirecTV system if they still want to enjoy Extra Innings. In Demand reportedly had offered $70 million a year to retain Extra Innings.
What is really interesting, when you take the time to crunch the numbers, MLB fans clearly are making other choices when it comes to viewing out of market games and those options to not include the Extra Innings package.
Kagan Associates estimates that Extra Innings generated 280,000 subscribers across both cable and satellite services in 2005. That pales by comparison to the 600,000 subscribers netted by the National Basketball Association’s “NBA League Pass” package and the nearly 2 million scored by Sunday Ticket during the same time period, according to Kagan.
Further, the package is dwarfed by the 1.3 million subscribers that baseball generated in 2005 for its $79.95 MLB.TV subscription broadband service (the price for the 2005 season), according to New York Magazine. The package includes live games, as well as extensive highlights and classic contests. Sports-programming consultant Lee Berke told Multichannel News the emergence of the broadband package could allow MLB to take DirecTV’s exclusive package without alienating cable subscribers.
“[MLB.TV] has become so widely distributed in its own right that it’s become a balancing act — the leagues are looking at various platform and the dollars they get, and trying to figure out whether exclusivity or multiple distributors makes sense,” he said in the Multichannel News report. “My guess is that if DirecTV comes up with enough money, then baseball may say, 'We’re doing so well with MLB.TV maybe it’s worth it to explore being exclusive with DirecTV.’ ”
Clearly the message MLB fans are sending to the marketplace, ‘our buying habits more and more are tied directly to MLB’s live video streaming of games at MLB.com. MLB.TV is fast becoming an economic engine for MLB. Head to MLB.com;’s home page and conveniently located in the upper left hand corner of the home page is a countdown clock to opening of spring training. Click on countdown clock you’re directed to MLB.com’s spring training page. Head to that page and you can’t help but notice the banner ad dominating the right hand side of the page promoting the MLB.TV and voila you’re now where you want to be if you’re ready to see 150 spring training games. If you’re a baseball fan and you can’t make it to Florida or Arizona for the Grapefruit and Cactus League, MLB.TV has you covered.
That hasn’t stopped baseball fans from venting their rage on the Internet and to any sports media pundits willing to give them the time of day.
Dan Asnis, a Mets fan from South Brunswick, N.J., who started an online petition to keep Extra Innings on cable spoke with the New York Times
''I felt frustrated that this was happening, and that fans like me had no say in it,'' he said in a telephone interview. When asked if he’d head to the Internet for the options offered at MLB.TV Asnis said he wasn’t interested.
How angry are baseball fans? Several media reports hint disgruntled fans are getting ready to file a class action suit against Major League Baseball. And indeed if baseball fans file a lawsuit they won’t be the first to challenge the sports lords justifying their right to offer an exclusive agreement to a cable or satellite provider for season long, multi-game packages.
“I will be more the effected by this monopoly type move. I live right next to Wrigley Field and will not be able to watch baseball. This move is literally insane and does nothing but make fans want to move away from the sport” read one of the latest of 4,065 (as of 10:17 PM EST Thursday night) responses on a petition opposing the deal, at www.petitiononline.com/MLBCABLE/petition.html.
According to a New York Times report: in 1997, a group of DirecTV subscribers filed a class-action suit against the N.F.L. in Federal District Court in Philadelphia saying that the Sunday Ticket package violated antitrust laws partly because it was sold exclusively. The plaintiffs settled for an undisclosed sum before a definitive judgment. But the United States Court of Appeals for the Third Circuit upheld the lower court's ruling that the 1961 law applied to broadcast deals, not those made with a satellite service.
Are baseball fans being slow to adapt to the choices MLB would certainly site if a lawsuit was filed, and the proof lies in the numbers, more baseball fans are choosing to buy the season long multi games packages being offered at MLB.TV than those purchasing the Extra Innings package.
''Baseball might say there is a process under way that is merging Internet streaming with TV, and anyone who wants the package can go to mlb.com,'' said Andrew Zimbalist, an economics professor at Smith College.
Its interesting most of the anger seems to be coming from Red Sox Nation. While most believe the Evil Empire (New York Yankees) are baseball’s most popular team, Red Sox Nation has been very vocal in the Extra Innings debate (and no its not because Red Sox fans haven’t figured out how to operate a computer or have yet to realize what the Internet is).
"Ever since the package was available to my cable company [Time Warner], I bought it and I love it," said John Tierney a Red Sox fan from Syracuse in a Boston Globe report. "My wife and I center our lives around it in the summer. Football was always on DirecTV, but that's just once a week. Baseball was on cable, and now they're taking it away. Then they tell me I can watch it on the computer; well, that's no good, I sit in front of a computer enough all day.
"This is heartbreaking, really."
"I am opposed to anything that deprives people of reasonable choices," Sen. Kerry wrote to The Boston Globe. "In this day and age, consumers should have more choices -- not fewer. A Red Sox fan ought to be able to watch their team without having to switch to DirecTV."
Kerry, continued, "In the case of my hometown team, Red Sox Nation stretches all across our country from coast to coast. I am concerned that this deal … will separate fans from their favorite teams."
The FCC has allowed NFL Sunday Ticket to be offered exclusively on DirecTV since 1994. However, News Corp. has filed a request for permission from the FCC to transfer its controlling 38.5% stake in DirecTV to Liberty Media Corp in a swap of assets, and any complaints about baseball's Extra Innings deal could come up in that review.
Michael Abramowicz, 34, of Arlington, Va., is a law professor at George Washington University offered this analysis on his blog ten days ago: "My reaction to this has been genuine sadness," he wrote. "Watching baseball games is my No. 1 hobby, and my house can't get DirecTV because of nearby trees. It did occur to me that if I chopped down my neighbors' trees, I would probably do a year in jail, which would leave me six years to enjoy the games."
The bottom line and this deal is all about just that the bottom line:
Baseball fans have a choice. More than 1.3 million fans headed to MLB.TV when the last statistical data was available for the 2005 season as opposed to the 280,000 who decided on the Extra Innings package.
What exactly is DirecTV thinking if the numbers skew so strongly towards fans choosing the MLB.TV option?
A MLB cable channel is long overdue. The suggestion MLB will launch the channel in time for the 2010 season suggests MLB is taking all the time they need to get it right.
If the period of DirecTV exclusivity is only for three years as some media reports suggest baseball fans need to be patient and think about the MLB.TV option as a short-term solution.
One continuing complaint fans have had about the MLB.TV option is the poor streaming at times. Historically people who have purchased the service have at times had serious trouble accessing games. There’s an easy solution to that problem, purchase the monthly option and if you’re not happy cancel the service.
MLB.com is the Mercedes-Benz of sport league websites. Managed by Bob Bowman, MLB.com began in 2000 when each MLB team agreed to invest $1 million each in creating a presence on the Internet. 2007 will be the sixth consecutive season MLB has offered live video streaming of their games at MLB.com, a program that began with the 2002 season. Arguably, MLB.com’s biggest success to date was the streaming of the 2006 NCAA men’s basketball tournament last March.
At least for Major League Baseball, MLB.com has evolved from an interesting concept, to a loss leader, to a profitable venture. A March Wall Street Journal report on the dollars and cents of the MLB.com said about 15% of the site's total revenue of $195 million last year came from managing Web sites and other partnerships like the one with CBS. An additional $68 million came from subscriptions to watch live video content on MLB.com, including the 2,400 baseball games it streamed in the 2005 season. The rest of its revenue comes from ticket sales and advertising. How good has MLB interactive become at what they do, good enough that they’ve been able to market their services to other sports leagues, properties and events.
Under the leadership of Bob Bowman, MLB’s interactive division has already signed up 25 clients, including CBS, Major League Soccer and the World Championship Sports Network. Entertainers Jimmy Buffett and LL Cool J, too, have hired MLB.com to promote albums and concerts by streaming video of interviews and live performances.
Baseball is as American as the free market system and the free enterprise system by all appearances will offer baseball fans two choices when it comes to buying the out-of-market baseball package, DirecTV or MLB.TV for 2007. Baseball fans may not like the choices they’re being offered but at least they’re being offered the right to make that choice.
For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: The New York Times, Mutlichannel News, Boston Globe and Los Angeles Times