Friday, March 09, 2007

MLB and DirecTV get their deal done (finally)


It may have taken a few weeks longer than expected at long last Major League Baseball and DirecTV as expected signed their seven-year (terms to be finalized in the coming weeks) agreement. While the exclusivity of the agreement (what had baseball fans on pins and needles and up in arms in recent weeks) hasn’t been resolved, but clearly at the end of the day MLB’s out of market game package will be available through DirecTV or at MLB.com.

“We are very excited and pleased to announce an extension of our agreement with DIRECTV for the telecasts of all of our out-of-market games for seven years and for coverage of the Baseball Channel beginning with its launch in 2009.

“As I mentioned, there are two basic elements to this agreement. The first is that a subscription product that you're all familiar with for our out-of-market games, DIRECTV is going to provide significant major enhancements to that production and the delivery of those games, including a multi-game channel, including a Strike Zone with features that I'm sure are a work in progress and that Chase will describe, but will provide additional substantial content for all of our fans and the subscribers.

“The second is coverage on a basic tier of the Baseball Channel upon its launch in 2009. We have been talking about this for a number of years and are extraordinarily excited about bringing baseball 24/7 to upwards of 15 million homes, enriching the fans' experience, consistent with our desire to bring baseball content to as many fans as possible,” Major League Baseball Deputy commissioner Bob DuPuy offered at Thursday afternoon’s media announcement.

The good news (if it is in fact good news) InDemand and the Dish Network who both carried Extra Innings last year have an opportunity to negotiate (well there will be little if any actual negotiations) whether they’ll agree to the same terms DirecTV has with MLB for the next seven years.

“The second point that the commissioner alluded to is that there have been some things written about this being an exclusive deal with DIRECTV and that fans might be unable to get the Extra Innings package in some locations because of the non-availability of DIRECTV or for other reasons.

“In response to those concerns of our fans, baseball has negotiated with DIRECTV to offer the package to the incumbents, In Demand and DISH, through the end of this month, till the start of the season on April 1 essentially, at the same rates and carriage requirements. If they sign up at the same rates and carriage requirements, they will get our out-of-market package and they will get the Baseball Channel.” DuPuy added.

Reaction was swift from officials at InDemand, who clearly where not happy with the take it or leave it deal they’re being offered by MLB.

“Major League Baseball has chosen to cut a de facto exclusive deal –- including conditions for carriage that MLB and DirecTV designed to be impossible for cable and DISH to meet -- with one satellite operator, and disenfranchise baseball fans in the 75 million multi-channel households who do not subscribe to DirecTV.

“This decision represents the height of disrespect and disregard for their loyal Baseball fans.

“Thankfully, these fans will continue to have access to hundreds of games per year, including all of their in-market games and many out-of-market games on broadcast and various cable networks.” Robert D. Jacobson, President & CEO, iN DEMAND Networks reacted to Thursday’s announcement.

EchoStar Satellite, which operates DISH Network, did not officially decline the offer according to CNET.com, but didn’t seem very happy one of the requirements that operators have to agree to include is the MLB Channel if they want to offer the package. "Our concern is that an offer for Extra Innings that's tied to the MLB Channel as well will force more sports on people who might not want to pay for it," said Kathie Gonzalez, an EchoStar spokeswoman.

Dish added late Thursday night: "We have been asking Major League Baseball to make the package available a-la-carte so only those who choose to get the games today can continue to do so. We hope they will act in the best interest of consumers and provide that option. DirecTV and MLB, as owners of the package, should not be able to line their pockets at the expense of consumers who don't want and won't watch the content."

DirecTV made it clear, they couldn’t be happier with Thursday’s announcement.

“Sports has been not just a leading force in development of DIRECTV, but in really many ways it's a signature of what DIRECTV has achieved in the marketplace. Clearly you look at what we've done with Extra Innings, Super Fan, Sunday Ticket, Hot Pass, March Madness. We really think we have proven our ability to really invigorate, excite and bring -- continually build upon and deliver exciting features to our customers out there, bringing the best experience in sports to our customers.

“We do look forward to this year, as we really, across the board, continue to build on the Extra Innings package. We'll have more games than we've had in the past in it. We're clearly going to add more features. Many of the features, for those of you who watch the Super Fan package on the NFL, many of the features you see there, interactive features, HD, mosaic channel that shows multiple channels, a Strike Zone channel, really starts to give you a sense -- updated sense of what's going on across the breadth of baseball.

“Fans that would like to have an up-to-date sense of what's going on across the breadth of baseball. We'll obviously continue to develop all of these who really create a great mix, exciting mix, of baseball for our customers.

“We also are really excited about working with baseball to develop the MLB Channel. We think this is really going to be something unique that gives baseball fans and MLB fans a way to really get a unique insight and the excitement of baseball in a way they never have before. That is something we really truly look forward to as we head to 2009 with the launch of that.

“We clearly have to work through March in this agreement, short-term uncertainty, as Bob said. This agreement has a period where it's not clear how these rights end up in terms of exclusive versus non-exclusive rights. We will have to probably create some degree of short-term issues for us as to how we develop the properties around it, but we'll work through that.

“But we were able to reach an agreement, exclusive or non-exclusive, that works for us, and we can go forward and develop this property as something that is a great part of the DIRECTV experience for our customers.” a jubilant Chase Carey, President and CEO of DIRECTV said.

Carey did his best to sidestep a number of issues Thursday, first and foremost relating to the actual talks MLB will in the coming days attempt to initiate with InDemand and the Dish Network.

"We are quite pleased with the commitment DIRECTV has made to MLB and our fans, and in the coming weeks will continue our efforts to secure corresponding commitments from our incumbent distributors," said Tim Brosnan, Executive Vice President/Business, Major League Baseball.

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.

That was then, how did Senator Kerry react to Thursday’s announcement?

"I will review this deal to ensure it benefits consumers. I'm encouraged that Major League Baseball may be willing to provide broader access to their games than what was initially proposed. I will be watching closely to ensure the league works in good faith so that America's pastime is available to all fans. My concern all along has been that fans continue to have the ability to enjoy baseball on television." Kerry offered through his offices Thursday evening.

"Without the benefit of knowing all of the details, it's hard to know if this deal represents a curve ball to consumers or a solid base hit for fans across the country,” said Rep. Ed Markey (D-Mass.), chairman of the House Telecommunications and the Internet Subcommittee, in a prepared statement. “I am eager to review the agreement in order to weigh its effect on baseball fans -- particularly displaced citizens of Red Sox Nation -- as well as on competition in the video-programming marketplace.”

The bottom line – last year the MLB Extra Innings package was available to the 75 million homes that had access to either DirecTV, the Dish Network and InDemand. Clearly what took place, DirecTV stood and delivered (offered $100 million a year if the agreement as expected becomes exclusive to DirecTV). 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, the Dish Network and InDemand. 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 in February 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.’ ”

“Baseball occupies a somewhat different status with the American public than does any other sport,'” said Neal Pilson, a former president of CBS Sports who runs Pilson Communications in a Bloomberg News report. “The political scene is frankly different for baseball.'”

That isn’t the issue; what’s at the heart of this ‘debate’ the free market system. Capitalism is a pretty simple principal, you make the best deal you can, take a few risks and hope at the end of the day you’ll make a dollar or two.

DirecTV has an exclusive agreement with the National Football League. If InDemand’s President and CEO Robert D. Jacobson is so enraged by MLB’s decision Thursday to move forward with their agreement with DirecTV why hasn’t he expressed the same outrage with the NFL’s DirecTV deal? If anything its DirecTV who should be upset they couldn’t get an exclusive agreement with MLB immediately and they’ll have to wait the remaining 16 business days of the month to move their marketing and sales pitch forward for the 2007 DirecTV Extra Innings package!

For SportsBusinessNews.com this is Howard Bloom

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