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Thursday, August 14, 2014

King of Blackouts: Why one candidate for MLB commissioner keeps fans from watching games

When the lords of baseball take to a Baltimore boardroom today to vote on a new commissioner, the least-heralded candidate will carry into the election a most unbecoming title: King of the Blackouts. Much of Tim Brosnan’s candidacy, in fact, rests on his turning baseball into a $9 billion-a-year monolith as executive VP of business on the back of fat television contracts that leave fans all over the country unable to watch the very sport he’s in charge of selling to the public.

The fact that baseball owners revere this – that a sport hemorrhaging young fans actively chooses to black out local television games across the country in order to protect the supposed sanctity of the local TV deals that go into the billions – speaks to a certain tone-deafness. Consider the hilarity of the rogue candidate for commissioner, Boston Red Sox chairman Tom Werner, selling himself as the person who will spread the game best. The impetus behind Werner’s candidacy is the Red Sox want to tilt the revenue sharing of their huge TV deal even more in their favor….

Surely, of course, baseball could find a way to package all of its games to all of its fans in the sort of fashion that eventually brings back whatever business it might lose in the short-term. The league’s gravy train chugs along too well for MLB to actively derail it.

So it’s going to take some fans and a judge who believes the current rules are anticompetitive and that “clubs in each League have entered an express agreement to limit competition between the clubs – and their broadcaster affiliates – based on geographic territories. There is also evidence of a negative impact on the output, price, and perhaps even quality of sports programming.”

RoyalsRetro (AG#1F) Posted: August 14, 2014 at 10:59 AM | 33 comment(s) Login to Bookmark
  Tags: commissioner, media, television, tim brosnan

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   1. Moeball Posted: August 14, 2014 at 02:09 PM (#4771115)
Surely, of course, baseball could find a way to package all of its games to all of its fans in the sort of fashion that eventually brings back whatever business it might lose in the short-term. The league’s gravy train chugs along too well for MLB to actively derail it.


Only if baseball owners are even remotely concerned about growing their fan base or considering the sport's long term future...which they clearly aren't.

$$$$$$$$$$$$$$$$$ i$ what thi$ i$ all about, a$ alway$ - how much can I get right now?

There is no Commissioner, there hasn't been one at least since Fay Vincent was booted out. Hell, maybe the last real Commissioner was Happy Chandler, who told the owners they were going to have to get used to the idea of integrating the game, which was a message they certainly did not want to hear. He was rewarded for this by being a one-term Commissioner.
   2. Der-K and the statistical werewolves. Posted: August 14, 2014 at 02:15 PM (#4771119)
Brosnan dropped out, by the way.
   3. Cargo Cultist Posted: August 14, 2014 at 02:39 PM (#4771144)
The MLB blackout rules are ridiculous and offend fans
   4. David Nieporent (now, with children) Posted: August 14, 2014 at 02:52 PM (#4771154)
What I love is when people like Jeff Passan, with their deep expertise in economics (generally) and baseball finances (specifically) challenge decisions on grounds that they clearly know nothing about. It's a perfectly legitimate argument to say that the blackout system sucks. But to argue that it's bad for baseball's finances, with a pure handwave ("Yeah, well, this costs money, but surely MLB can make it up."), is garden variety mediocy.
   5. valuearbitrageur Posted: August 14, 2014 at 03:41 PM (#4771190)
Refusing to take money from people would pay to see your event clearly costs you revenues. It's a pure hand wave to assume that enough of those people would actually attend the event if it's blacked out to make up for the loss in TV revenues.
   6. Mr2bits Posted: August 14, 2014 at 08:03 PM (#4771393)
Refusing to take money from people would pay to see your event clearly costs you revenues. It's a pure hand wave to assume that enough of those people would actually attend the event if it's blacked out to make up for the loss in TV revenues.


Baseball blackouts aren't done to encourage attendance, but rather to ensure that fans watch the game on their local regional sports network. Its about saving the value of advertising dollars on those networks, not strong-arming fans into attending. That said, I'm not sure that in the DVR era, these blackouts really do much to ensure people watch commercials.
   7. The Yankee Clapper Posted: August 14, 2014 at 09:15 PM (#4771439)
Refusing to take money from people would pay to see your event clearly costs you revenues. It's a pure hand wave to assume that enough of those people would actually attend the event if it's blacked out to make up for the loss in TV revenues.

The cable rights would be worth a lot less if they had to compete with people able to watch on their computers, tablets & phones. People may not like the blackouts, particularly those who aren't really in a team's prime attendance zone, but MLB is probably coming close to maximizing its revenue under the current set-up.
   8. Bunny Vincennes Posted: August 14, 2014 at 09:15 PM (#4771442)
What's even more stupid as an mlb internet package subscriber who watches three games a day............ put commercials in between innings! How easy is that, there are some here and there but hard sell that #### and package with other advertising! I'M paying for an entire season of baseball when the Cubs are in Milwaukee why can I not view the game? MLB gets none of the bar revenue when I have to go out and watch it. Somebody in the lounge tried to describe to me why this made sense but it really made no sense, and I'm vaguely smarter than the average bear. I'm paying for content, why the #### does it make a difference where I live?
   9. Walt Davis Posted: August 14, 2014 at 09:22 PM (#4771449)
Surely, of course, baseball could find a way to package all of its games to all of its fans in the sort of fashion that eventually brings back whatever business it might lose in the short-term.

"Surely" and "of course" while offering up a claim that hardly seems "sure" and providing no evidence that it's true.

Even I almost always limit myself to only one of "surely" and "of course".

I am a bit unclear on which "blackouts" we're talking about here. I'm probably out of date on how the whole system works now but here's how I thought it still worked:

Some local games are sold to local broadcast TV although I assume this is becoming increasingly uncommon. Those games aren't "blacked out" to anybody in the local area as I would use the term.

Most of the rest are sold to local cable/RSN (which might be owned by the team). Those games aren't blacked out to anybody who subscribes to that service. I understand there are lots of issues where the rights are owned by the Time Warner outfit and they want Comcast to pay more than Comcast wants to pay so Comcast customers can't see the games but how is MLB supposed to fix that? That's not a blackout, that's two corporations (unsuccessfully) negotiating a contract.

National TV contracts are signed and those often don't allow the local broadcast of other games -- then your team's not on TV. MLB could do something about that by insisting such restrictive rights not be included in national TV contracts which will cost baseball money. It's only a handful of regular season games and teams tend to schedule around those for this reason.

Now, I know that Extra Innings can't carry your local 9 ... but that game is almost always available to you through some local outlet. That's not a blackout. (see below)

And your local 9 isn't on MLBtv. That's plenty annoying but that game is available to you through some local outlet. Buy a TV and a cable package you bum.

There aren't (often) radio simulcasts of concerts from Madison Square Garden either but nobody ever ####### about those "blackouts." (I'm sure these days there's some loser holding up his iphone and streaming it all online.)

Anyway, I'm legitimately not clear which is being ####### about. That RSN games aren't available on some cable providers? That no local game is available on Extra Innings or mlbtv?

Note, I do know that MLB has some f'd up "market areas." If I recall, Las Vegas is a particular mess. If I recall, in Durham we were "local" to the O's and the Braves (and I suppose the Nats). That #### was/is really dumb because there was no cable/local outlet for the O's or Nats ... Braves were still TBS then I think. If that's the sort of blackout we're talking about -- i.e. genuine local blackouts might be OK but blacking out people 4-6 hours drive away who have no local option to view the game is dumb -- that I can understand.
   10. RoyalsRetro (AG#1F) Posted: August 14, 2014 at 09:53 PM (#4771466)
That said, I'm not sure that in the DVR era, these blackouts really do much to ensure people watch commercials.


I believe studies have found, or at least the CW is, that live sports are the only Tivo-proof programming left, which is why sports TV contracts are so outrageous.
   11. Bunny Vincennes Posted: August 14, 2014 at 09:55 PM (#4771467)
And your local 9 isn't on MLBtv. That's plenty annoying but that game is available to you through some local outletBuy a TV and a cable package you bum


Walt, you aren't that much older than I am and I'm pretty old school, but I haven't had a land line or a tv in almost 15 years. There are multiple millions of people who view media solely online. Why does it matter if I want to watch the Cubs via my internet subscription in Madison, Peoria, or Oakland? Why does MLB care where I view via my subscription to something I'm paying for? If I'm some guy who can access allanal.com wherever there is an internet feed as long as he's paying they don't care, they already have the dollars.
   12. greenback calls it soccer Posted: August 14, 2014 at 10:03 PM (#4771477)
Most of the rest are sold to local cable/RSN (which might be owned by the team). Those games aren't blacked out to anybody who subscribes to that service.

Sometimes the rights aren't sold to anybody. Back when I had cable, Reds games were unavailable, even though I lived in a Reds region. So I was unable to watch Reds games either on cable or on the Internet. These days I probably could get Reds games on one of the fancier packages, but as a Cardinals fan, I'm not paying $500 per year to watch 15 or so regular season baseball games.
   13. pthomas Posted: August 14, 2014 at 10:26 PM (#4771497)
I've had a DVR for 10 years now, and I'm so good at flipping the remote from pitch to pitch and from inning to inning its not funny. No commercials, no announcers. And I know plenty of people who do pretty much the same. The "TIVO" proof programming myth, is, of course, a myth.
   14. RoyalsRetro (AG#1F) Posted: August 14, 2014 at 10:46 PM (#4771513)
Sometimes the rights aren't sold to anybody. Back when I had cable, Reds games were unavailable, even though I lived in a Reds region. So I was unable to watch Reds games either on cable or on the Internet. These days I probably could get Reds games on one of the fancier packages, but as a Cardinals fan, I'm not paying $500 per year to watch 15 or so regular season baseball games.


The blackout rules for Las Vegas are particularly bizarre. I believe they are blacked out from watching any of the California teams, the Diamondbacks, the Mariners, or the Rockies.
   15. puck Posted: August 14, 2014 at 11:08 PM (#4771528)
Walt, you aren't that much older than I am and I'm pretty old school, but I haven't had a land line or a tv in almost 15 years. There are multiple millions of people who view media solely online. Why does it matter if I want to watch the Cubs via my internet subscription in Madison, Peoria, or Oakland? Why does MLB care where I view via my subscription to something I'm paying for?


Isn't the answer this: MLB cares where you view your subscription because broadcasters pay them a ridiculously enormous amount of money to care?
   16. boteman is not here 'til October Posted: August 14, 2014 at 11:12 PM (#4771530)
Would this be considered collusion between each MLB team and the exclusive network that airs their games?
   17. BDC Posted: August 14, 2014 at 11:13 PM (#4771531)
I am a very odd customer, because aside from the World Series, I haven't watched a baseball game either on TV or online in about three years. I only see games at the park (uncoincidentally, I work 10 minutes' drive from an MLB park). All these wrangles over delivery media are lost on me.
   18. Bunny Vincennes Posted: August 14, 2014 at 11:33 PM (#4771541)
Isn't the answer this: MLB cares where you view your subscription because broadcasters pay them a ridiculously enormous amount of money to care?


This is irrelevant, now. Explain how MLB doesn't care about my ex-wife and I share an mlb.tv account and watch the same games from different locations at the same time but they DO care about me not watching the Cubs play in Milwaukee because I'm all of a sudden in market.
   19. Bunny Vincennes Posted: August 14, 2014 at 11:35 PM (#4771545)
Isn't the answer this: MLB cares where you view your subscription because broadcasters pay them a ridiculously enormous amount of money to care?


Its like saying, if Sports Illustrated prints a story about the Cubs I can't read it in Chicago even though I subscribe.
   20. Random Transaction Generator Posted: August 15, 2014 at 12:02 AM (#4771557)
I've had a DVR for 10 years now, and I'm so good at flipping the remote from pitch to pitch and from inning to inning its not funny. No commercials, no announcers. And I know plenty of people who do pretty much the same. The "TIVO" proof programming myth, is, of course, a myth.


But people rarely watch an actual live sporting event on any sort of delay (via DVR).
A lot of that is because they are worried the result will be spoiled for them if they watch it at a later time.
During the World Cup, I was watching most of the games on delay (because I was at work), and I pretty much had to avoid almost all internet/TV/radio communications from the moment the game started until I got home and started up the DVR. Even then, I had the Brazil/Germany game ruined for me when I was at a gas station and someone shouted to his buddy that "Brazil is getting pounded by Germany, 5-0!"

When it comes time to watch the baseball playoffs, the most delay I'll have is about 2-3 minutes, and that's when I've paused a game at the commercial break to go down and get a drink/snack, and that will only happen two or three times the entire game.
   21. The Yankee Clapper Posted: August 15, 2014 at 12:45 AM (#4771567)
The blackout rules for Las Vegas are particularly bizarre. I believe they are blacked out from watching any of the California teams, the Diamondbacks, the Mariners, or the Rockies.

This should be fixed, and I believe MLB has even indicated that they would do something for areas that had overlapping blackouts from teams that weren't even available on local cable and were well out of the normal attendance zone. IIRC, Iowa has a similar overlap with the Chicago teams, Cardinals & Royals. But even if MLB fixes this, I wouldn't expect them to torpedo the Regional Sports Networks that are paying such big bucks by allowing people to get the local MLB team online. That will only change when MLB can make more money by doing so.
   22. villageidiom Posted: August 15, 2014 at 10:11 AM (#4771636)
Walt, you aren't that much older than I am and I'm pretty old school, but I haven't had a land line or a tv in almost 15 years. There are multiple millions of people who view media solely online. Why does it matter if I want to watch the Cubs via my internet subscription in Madison, Peoria, or Oakland? Why does MLB care where I view via my subscription to something I'm paying for?
Why do you care that MLB stands by the policy you knew was in place when you subscribed? You clearly want to subscribe to MLB.tv even if you can't watch the Cubs on it, else you wouldn't still subscribe.

I'm going to use the World Champion Red Sox and NESN as an example*. A few years ago NESN was getting arouynd $3.50 per month in carriage fees from cable and satellite providers. Let's say that's up to around $4.20 now. A few years ago they had 4 million subscribers through cable and satellite; let's say that's unchanged. So, NESN is pulling in north of $200 million a year on carriage fees alone. That doesn't include ad revenue.

According to Nielsen via Maury Brown, NESN broadcasts of Red Sox games - which has to be their most popular broadcast - have average viewership of 110,000 households. That means they are pulling in most of that $200 million from people who subscribe but aren't watching. Well, technically, they are pulling in that money from cable and satellite providers, who in turn are willing to pay the carriage fees because they have enough subscribers who will leave if the network isn't carried, and enough people who will switch from cable to satellite over this one network. Those companies, in turn, rely on these networks to be subsidized by all the people who don't care about NESN but are willing to pay a high price to watch a bunch of channels that don't cost much.

So, NESN is able to bring in $200 million largely on the backs of people who don't watch NESN. Let's say they instead cater to the core fans. They put Red Sox games on MLB.tv in addition to NESN. The 110k people who watch on NESN now, let's say 100k switch. Let's say another 200k who are core fans but aren't watching on a given night (and thus aren't part of the 110k) also switch. MLB gets 300k extra subscribers, at $30/month, or $1/month/team. On the cable side, all the people who would have flipped out over NESN being dropped, the people who raised demand and allowed NESN to push the carriage fee higher, are gone. Like you they've decided to give up the land line. Some cable or satellite providers drop NESN, while others keep it on but negotiate a lower carriage fee. In the aftermath, NESN has 1.5 million subscribers, at a $1 carriage fee (which is still high relative to most networks). The Red Sox own something like 80% of NESN, so now they see $14 million in carriage fees per year (1.5 million, times $12 per year, times 80%), plus $3.6 million through MLB.tv. Prior to this, they were getting $160 million (the $200 million, times 80%).

For this to make sense for the Red Sox, they would need you to make up for the subsidization you had when other people were willing to pay the carriage fees for a network they didn't watch. Those additional 300k MLB.tv viewers would need to cover $142 million per year. That works out to another $40 per month per viewer.

Would you pay for MLB.tv, if you could get the Cubs, but the per-month cost was $70 instead of $30? Maybe you would, since you already have MLB.tv and know how awesome it is. Would a potential new subscriber shell out $400-500 a year for this? No.

That brings me to my second point. Back in the days when games were broadcast over the air, and anyone nearby with a TV and antenna could watch for no additional charge, MLB could pick up another generation of fans. There was no cost to watch the game, so people could tune in and see what it's about, and eventually grow their fandom. Today, the vast majority of households are getting cable or satellite whether or not baseball is part of the package. If they're willing to pay $X with indifference to NESN being carried, and NESN is carried, to them NESN is "free", just as much as antenna signals were back in the day. OTOH, nobody but a current fan is subscribing to MLB.tv. If they go down the path of an alternate broadcast on MLB.tv**, they are going down the path of cutting off future generations from baseball, to a far greater degree than they are today.

Final note: the numbers I give above that estimate the impact to NESN or the Red Sox from fleeing cable/satellite subscribers (starting with "let's say 110k switch") are obviously made up. I don't mean to suggest they have any degree of accuracy; they are illustrative of the concept of why the blackouts exist. If you think the numbers should be different, feel free to play around with it and draw your own conclusions. The point is that MLB teams are getting a ton of revenue from people who don't actually watch, and for every dollar they lose from them there will be several dollars more they would demand from you.

* It's clear I won't be able to say "World Champion Red Sox" for much longer. Gotta get it in while I can.

** What they could do is what they did for the Olympics or the World Cup. When you connect with MLB.tv, they can have you sign in through your cable or satellite provider, who then can verify that your RSN is part of your subscription and thus are already paying for the broadcast, and then they can lift the blackout for you. Well, not you specifically, because you're not paying for an RSN. But it would be a way to allow someone who is paying for the broadcast to be able to watch it anywhere.
   23. RoyalsRetro (AG#1F) Posted: August 15, 2014 at 10:19 AM (#4771641)
I really can't believe so many people don't understand this. RSNs pay inflated prices because of the captive market they have. Kansas Citians watch Royals games. RSNs can get more money for advertising because Royals games (even when they were kinda crummy) get pretty good ratings in the KC market, and for most people not named "pthomas", live sports are relatively TIVO-proof, even for younger fans (if you need evidence, check Twitter for mocking of local ads that run during games). RSNs pay a premium for this captive market. If MLBtv is essentially competing with them, that drives the price of the contract down. MLB obviously gets way, way more money from RSNs than from MLBtv.

It matters a TON where you watch the Cubs online. If you're in Denver no big deal, Cubs games aren't carried there anyway for the most part. If you're in Chicago though, watching the Cubs on MLBtv is potentially taking money away from the Chicago RSN. MLB didn't get rich by biting the hands that feed them.

I agree with Nieroporent in #4. There are plenty of reasons to hate blackout restrictions, they're bad for fans. But to try to argue that they don't make economic sense for MLB is silly.
   24. dave h Posted: August 15, 2014 at 12:40 PM (#4771796)
I like the thought process in [22], but this still doesn't totally make sense. MLB.tv could charge a premium to be able to see local games, and that premium could go (largely) to the RSN. This should expand the reach of the RSN, and therefore should be valuable to them. There's no reason that you can't show the RSN ads on MLB.tv, too (and they could target them much better to the viewer).

The reason the math doesn't work out, at least according to [22], is that a small fraction of NESN subscribers actually watch NESN. I think some of the estimates are incredibly pessimistic - for instance that 1/3 of all Sox fans are watching any given game, but even more importantly, ignoring the Bruins telecasts which rate just a little lower than the Sox. If the math is right though it's clear that someone's getting screwed, but it's not fans of local sports teams, it's people who aren't fans of the local sports teams.
   25. McCoy Posted: August 15, 2014 at 01:14 PM (#4771836)
Let's say MLB pulls all teams off TV and sets up new contracts in which for 30 dollars a month you get the MLB network plus access to all games. They also then sell MLB.tv/radio as well as national TV contracts for the playoffs and any game of the week a network might want to show. How many people would need to buy the TV package for the typical MLB team to make more money this route?

If 5 million people buy the package that is 60 million per team. Would you get a majority of teams saying yes to 60 million a year plus splitting all the advertising money?
   26. DKDC Posted: August 15, 2014 at 01:54 PM (#4771881)
Let's say MLB pulls all teams off TV and sets up new contracts in which for 30 dollars a month you get the MLB network plus access to all games. They also then sell MLB.tv/radio as well as national TV contracts for the playoffs and any game of the week a network might want to show. How many people would need to buy the TV package for the typical MLB team to make more money this route?


How do casual fans or potential new fans who don't want to spend that much money stay engaged in the team?

The current model may not be fan-friendly for transplants or people without pay TV, but it's not clear to me they would make more money if they went a la carte and they would reduce the percentage of households who can watch a baseball game on any given night from 80-90% to probably a single digit percentage.
   27. RoyalsRetro (AG#1F) Posted: August 15, 2014 at 02:19 PM (#4771909)
MLB.tv could charge a premium to be able to see local games, and that premium could go (largely) to the RSN.


I would guess it would have to be a lot of money. The RSNs want eyeballs to sell to advertisers, and you'd be hurting that. Don't know that the math would add up.


Let's say MLB pulls all teams off TV and sets up new contracts in which for 30 dollars a month you get the MLB network plus access to all games. They also then sell MLB.tv/radio as well as national TV contracts for the playoffs and any game of the week a network might want to show. How many people would need to buy the TV package for the typical MLB team to make more money this route?

If 5 million people buy the package that is 60 million per team. Would you get a majority of teams saying yes to 60 million a year plus splitting all the advertising money?


So, upthread the argument was blackout restrictions are bad, because you're closing baseball off from a potential audience. Your alternative is to shrink the total possible people that can watch MLB at all nationwide to 5 million people? Okay.
   28. McCoy Posted: August 15, 2014 at 03:08 PM (#4771933)
How many people actually watch regular season baseball?
   29. puck Posted: August 15, 2014 at 03:28 PM (#4771956)
Its like saying, if Sports Illustrated prints a story about the Cubs I can't read it in Chicago even though I subscribe.


It's pretty hard to stretch the analogy to a magazine since subscription by mail has been a thing for a long time, but if we tried, it would be as if a newsstand chain in Chicago paid SI huge amounts of money to be the exclusive distributor in Chicago to the point where even mail subscribers were affected.

I think everyone agrees there's an absurdity to MLB.tv blackouts in the local market, and that the weird blackouts such as where parts of Iowa can't watch a number of teams because they all claim the territory are even more absurd.

But it seems pretty clear why the general local MLB.tv blackouts are happening. The exclusivity is worth huge money right now.
   30. Dr. Vaux Posted: August 16, 2014 at 04:58 AM (#4772286)
Yes, it's perfectly clear why the Cardinals, for example, are blacked out in St. Louis and the eastern half to two-thirds of Missouri. What's not clear is why they have to be blacked out in places where their games are not available on cable anyway.

That goes for all teams with such wide blackout footprints. You can't make the local RSN the only way to watch the game when it's not a way to watch the game at all.
   31. Jose Can Still Seabiscuit Posted: August 16, 2014 at 08:59 AM (#4772302)
What's not clear is why they have to be blacked out in places where their games are not available on cable anyway.


This is the part I don't understand.

It is perfectly logical to me that for business reasons if I want to watch the Boston Red Sox in Massachusetts I need to purchase it through NESN. That is entirely reasonable. What makes absolutely zero sense is that I would have absolutely no way to watch certain teams in Des Moines because teams claim that area but then don't make their RSN regularly available.
   32. Jose Can Still Seabiscuit Posted: August 16, 2014 at 09:05 AM (#4772306)
If the math is right though it's clear that someone's getting screwed, but it's not fans of local sports teams, it's people who aren't fans of the local sports teams.


This is generally true of the cable model. I have several hundred channels and I watch...oh maybe 40. I'm paying for all those channels in some way though. Yeah, I get NESN and NBC Sports cheaper than I should because someone who hates sports has to pay for them as part of the package. At the same time that person gets to watch HGTV or Lifetime because in order to get NESN I need the package that has those channels.

How many people actually watch regular season baseball?


Quite a few.
   33. McCoy Posted: August 16, 2014 at 09:21 AM (#4772311)
So what do those numbers add up to? 2 million? 3 million? 5 million?

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