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Friday, January 08, 2021

Latest Report of MLB’s Reduced ESPN Deal May Not Tell Whole Story

A Friday report from Ken Rosenthal of The Athletic stated rather ominously that Major League Baseball is “bracing for a reduction in TV rights fees in pending ESPN deal,” but I think the rest of the story might be missing. Let’s first take a look at what Rosenthal wrote.

MLB’s previous deal with ESPN was an eight-year, $5.6 billion contract worth $700 million per year. The agreement under discussion would be for seven years and approximately $3.85 billion, reducing the average annual value to about $550 million per year, sources said.

Seems like a lot when you consider the $1.75 billion drop, though that figure loses some of its bite when you realize it’s just $150 million annually or $5 million per team per season. The decreased revenue becomes even less substantial when you understand that it a result of ESPN decreasing the number of games it carries, games that could then be sold to other broadcasters.

RoyalsRetro (AG#1F) Posted: January 08, 2021 at 03:32 PM | 23 comment(s) Login to Bookmark
  Tags: tv deals

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   1. Walt Davis Posted: January 08, 2021 at 04:13 PM (#5998408)
a result of ESPN decreasing the number of games it carries

But this isn't a good sign.

Somewhat related ... does MLBtv blackout nationally broadcast games (out of market) ... to be 100% clear, if you live in LA and the ESPN game is Cubs-Mets, can you watch that on your MLBtv subscription or do you need ESPN?
   2. The Yankee Clapper Posted: January 08, 2021 at 05:03 PM (#5998422)
Seems like the question is whether ESPN wants to pay less because MLB is less popular, or because folks are actually watching more MLB games through Extra Innings & MLB.TV, as well as various non-cable cord-cutting options that don’t involve ESPN. I suspect it’s mostly the latter. If so, MLB will probably end up with about the same total broadcast revenue (or more), just shifted around a bit among the providers.
   3. Lowry Seasoning Salt Posted: January 08, 2021 at 05:40 PM (#5998434)
Somewhat related ... does MLBtv blackout nationally broadcast games (out of market) ... to be 100% clear, if you live in LA and the ESPN game is Cubs-Mets, can you watch that on your MLBtv subscription or do you need ESPN?


For a number of years now I've gotten a free MLB.tv subscription as a T-Mobile subscribe so I know you need ESPN to see the game. Ditto Fox.
   4. Starring Bradley Scotchman as RMc Posted: January 08, 2021 at 06:02 PM (#5998442)
And so it begins.

Like so many other things, the pandemic has accelerated the Great Sports Rights Money Collapse.
   5. McCoy Posted: January 08, 2021 at 06:17 PM (#5998445)
Isn't the NFL signing a monster deal?
   6. JRVJ Posted: January 08, 2021 at 06:38 PM (#5998450)
2, that's what this guy is guesstimating.

I don't particularly like articles where somebody guesstimates and then treats the guesstimate as fact.
   7. Zach Posted: January 08, 2021 at 07:52 PM (#5998465)
It may not be the whole story, but is the whole story likely to be any happier?

According to that earlier report, ESPN would move from around 90 regular-season games to just 30-40 higher-profile contests. Of those remaining games, 25 would be their exclusive Sunday Night Baseball broadcasts with Alex Rodriguez remaining as the key voice. The Post also noted, though, that the AAV of the new deal would be less than what is currently in place.

No need to panic, folks! Just a 50-60% reduction in the number of games they carry.
   8. Zach Posted: January 08, 2021 at 07:58 PM (#5998467)
The long and short of it is that, while the world of sports programming is changing and perhaps becoming less lucrative in the long run, the immediate reality appears to be that MLB is doing just fine.

Well, the immediate immediate reality is that every team hemorrhaging money for a different reason.
   9. McCoy Posted: January 08, 2021 at 08:00 PM (#5998468)
Who watches ESPN anymore?
   10. Walt Davis Posted: January 08, 2021 at 08:11 PM (#5998472)
Seems like the question is whether ESPN wants to pay less because MLB is less popular, or because folks are actually watching more MLB games through Extra Innings & MLB.TV, as well as various non-cable cord-cutting options that don’t involve ESPN.

But if the latter, they would (try to) reduce the amount they were paying per game rather than the number of games (and they may have tried). And as #3 notes, ESPN had an exclusive on these games so unless most MLBtv subscribers are going through foreign VPNs and MLB isn't shutting down those portals, or other forms of "pirating," there's no reason for them to be overly concerned about this.

Possibly you meant that ESPN's general revenues are down due to streaming competition and would like to broadcast as many MLB games as they used to but simply can't afford to buy that many. That could be the case. Still I got with Occam's Razor -- they have signed up for fewer games because they see insufficient return on broadcasting those additional games which would be a bad sign.

The excerpt is of course correct that if MLB can sell these onto another broadcaster at the same or better price then this is pretty immaterial as far as MLB is concerned.

I have to say I'm generally surprised how much national MLB broadcast rights sell for, outside of the playoffs. Baseball is such a local, daily game and has never pulled off the "nationalization" that the NFL has nor does it have the national/international superstars that the NBA has. As a Cub fan, it was always at best a minor annoyance when they were on ESPN rather than WGN; and as a Cub fan, I wasn't ever going to go out of my way to watch even Yanks-Sox no matter what channel it was on. Living in Australia, the only reason I have a MLBtv sub is because that's the only way I can ever watch a Cubs game. (To be clear, I watched plenty of ESPN baseball because I am a baseball fan and a lazy bastard who's usually on the couch watching TV most evenings and it was substantially more entertaining for me than a summer rerun. Maybe there are more such baseball fans than I realize but the ratings suggest not.)

I've never understood why MLBtv didn't just charge $120 (or whatever the price is) for access to a single team's games then, for an extra $30, you can have all the rest. The only thing that makes sense to me is that they know the marginal value of those extra games is very, very low ... e.g. that it is close to $0 and they figure $120 is what most folks will pay for their team. But maybe that's just me.
   11. Zach Posted: January 08, 2021 at 08:26 PM (#5998476)
ESPN is a little bit of a special case, because their revenues come from a fee that every cable subscriber pays, whether or not they watch sports. So in that sense, they're more exposed to cord-cutting and less exposed to ratings than a traditional network, which makes money by selling commercials.

So it could be that ESPN is uniquely caught short because they can't afford broadcast rights due to excessive cord cutting. But that's still bad news for baseball, because the huge expansion in broadcasting fees over the last couple of decades came from networks hoping to pull the same trick that ESPN was pulling.

TLDR: #4 is right.
   12. cookiedabookie Posted: January 08, 2021 at 08:39 PM (#5998482)
According to that earlier report, ESPN would move from around 90 regular-season games to just 30-40 higher-profile contests.


Sounds like ESPN is paying more per game. Not sure the sky is falling exactly
   13. Mayor Blomberg Posted: January 08, 2021 at 09:47 PM (#5998501)
Sounds like ESPN is paying more per game.


Are they? Or are they really paying for postseason games?
   14. Walt Davis Posted: January 09, 2021 at 12:32 AM (#5998555)
Sounds like ESPN is paying more per game.

I was just going off the last sentence of the excerpt which sounds like they are paying about the same amount per game. But yeah, if it's a drop from 90 games to 40 that's clearly not the case. But agree with #13 ... a substantial chunk of the fee is and always has been about the playoff games. I note also 30-40 "higher-profile" games. So it sounds like "we'll give you X for 30-40 Yanks-Sox, Cubs-Cards, Dodgers-Giants/Cubs/Yanks, etc. and the playoffs but the other 50 games are not worth a marginal cost of $150 M per year." If they can't sell a random night game for what Hunter Renfroe just signed for ... that can't be good.

And that I can believe. Makes it pretty impossible for us to assess whether this is less or more on a per-game basis since presumably ESPN was always smart enough to (try to) value the package based on the eyeballs they get for playoffs, big games, Sun vs Thurs, etc. I'm still curious what they consider that marginal value is ... were they willing to pay $50-100 M per year for those but MLB thinks they can get that or more elsewhere or were they uninterested at almost any price? In line with my earlier speculation, presumably the number of Cubs and Mets fans eyeballs plus their "regular" viewership works more than fine for them but Cards-DBacks not really and Detroit-Texas not at all. (I'm assuming Rays-Royals is a no-go under pretty much any circumstances.)
   15. The Duke Posted: January 09, 2021 at 09:31 AM (#5998565)
I would think mlb.tv is becoming the prime source of revenue for the teams. Now they are doing adverts which means they are making even more. The ESPN deals are just gravy - double-dipping as it were. So the loss of the double-dip is huge. If someone else comes in and buys up some of the slack, that helps but how many ESPNs are there that want to do this?
   16. bfan Posted: January 09, 2021 at 10:31 AM (#5998575)
Buying less product is bad news, even if the unit price is the same. You can be pretty confident that ESPN’s games will keep Red Sox Yankees and Dodgers anyone, while dropping games like Twins-Royals, so what mlb has left to sell may not have much appeal on the national markets.

I understand that everyone has the right to an opinion, but in what universe is your major customer buying less of your product not a bad sign?
   17. Walt Davis Posted: January 09, 2021 at 04:26 PM (#5998677)
I would think mlb.tv is becoming the prime source of revenue for the teams.

No, MLBTV doesn't carry local games. Or do you mean mlbtv is the main source of national broadcast revenue? I doubt it but that's possible.

in what universe is your major customer buying less of your product not a bad sign?

I don't think any of these apply but:

1. If somebody else has stepped up to be your #1 customer
2. If you are able to make more money selling the product directly (mlbtv)

But our question here seems more "is this an ESPN problem or a MLB problem?" Obviously if ESPN simply can't afford as many games that's not good for MLB but it's not necessarily a sign that MLB is in decline.

There's also the possibility that this is more like a car dealer where the $60,000 full-option SUVs (playoffs) and $40,000 big sedans (Yanks-Sox) are still going out the door but the $15,000 compacts aren't as popular as they used to be. Still not good but not necessarily panic time.
   18. RoyalsRetro (AG#1F) Posted: January 10, 2021 at 11:02 AM (#5998809)

I would think mlb.tv is becoming the prime source of revenue for the teams.


MLB TV is niche (as most streaming services are), with around 3.5 million subscribers. OTOH, RSNs get carriage fees from EVERYONE that has cable (as Zach points out in #11), whether they watch baseball or not, and MLB negotiates with RSNs for those revenues. Those revenues are inflated, in part, because of exclusivity. If they allow their product to be on MLB TV locally, the RSN value is much less, and the guaranteed money from them is much less.
   19. Lowry Seasoning Salt Posted: January 10, 2021 at 04:49 PM (#5998848)
MLB TV is niche (as most streaming services are), with around 3.5 million subscribers. OTOH, RSNs get carriage fees from EVERYONE that has cable (as Zach points out in #11), whether they watch baseball or not, and MLB negotiates with RSNs for those revenues. Those revenues are inflated, in part, because of exclusivity. If they allow their product to be on MLB TV locally, the RSN value is much less, and the guaranteed money from them is much less.


All true. However, MLB is already bringing digital-media rights back to the teams. Manfred, in November 2019: “The biggest single change was the return of certain in-market digital rights — the rights that have essentially become substitutional with broadcast rights — those rights will return to the clubs.”

MLB Owners’ Vote Could Be Big News for Baseball Fans Cutting the Cord

I think teams will be able to partner with the RSNs to sell digital broadcasts, and teams and RSNs will probably come out ahead compared to the MLB.tv setup they currently have. The Yankees' YES Network, last I saw in 2019, charges a carriage fee of $6.74. So if the MLB.tv cost of $120 shifts to pay RSNs, the RSNs are doing better. They do lose Nielsen-type data, but I don't know how much that actually hurts their bottom line.
   20. Walt Davis Posted: January 10, 2021 at 04:53 PM (#5998850)
Assuming Retro's numbers are correct, that would put MLBtv generating somewhere between $400 M to $450 M in revenue via subscriptions plus whatever their ads generate (I have no idea) but minus whatever the costs of MLBtv are. (I assume that includes those getting it free via T Mobile or whoever -- T Mobile probably aren't paying full subscription price.) Compare this with $550 M in revenue from this reduced ESPN deal which has minimal costs for MLB (the lawyers, etc. need to be paid). And that's just one deal. The Fox and Turner deals (both increases, signed in 2020) total about $1.2 B. All told, MLB is seeing national TV rights fees increase from about $1.55 to $1.75 B. Let's call that 4 times the revenue MLBtv generates.

Folks may not recall but a big chunk of MLBAM's worth was in the tecnoology they developed. They broke that bit off into a separate company which they sold (Disney?) at a huge profit ... and was not considered part of baseball-generated revenue. The actual MLBtv bit is not that huge. We could add in Extra Innings (basically MLBtv for your tv) and I suppose MLB network into a bundle of "MLB-owned national TV/stream revenue." Anybody have any idea what that adds up to.

These new contracts seem to run for 2022 through 2028.
   21. Lowry Seasoning Salt Posted: January 10, 2021 at 04:57 PM (#5998855)
If T-Mobile is paying anything, figuring out the number is likely impossible because it's probably tied up with their broader marketing deal with MLB.
   22. Walt Davis Posted: January 10, 2021 at 10:49 PM (#5998908)
I think teams will be able to partner with the RSNs to sell digital broadcasts

I'm far from certain but, from complaints around here, it sounds to me like these have already been cooked into the RSN contracts. Isn't it the case for most teams that you can stream the game through the cable company's app as long as you have a subscription that includes the RSN? (Or maybe it's RSN apps but you still need the cable subscription login.) I've never understood how this worked with MLBtv owning those streaming rights but basically just assumed that everybody decided not to worry about it. Having these rights formally revert to the teams suggests to me that it is now possible to split the broadcast and streaming rights next time a RSN contract expires.

Anyway, if we ever get to the point when the Cubs (or whoever they sell the rights to) offers a $X subscription to stream all the regular season Cub games in Chicago (minus any excluded due to national TV contracts) without all this bundling, then we'll find out what this stuff is really worth.

I'm telling y'all, just move out of the US/Canada (Mexico?) -- one MLBtv subscription, every game including playoffs and (to this point) very few ads.

On this topic, something interesting has developed down here. Our major sports betting company [EDIT} SportsBet (I originally said TAB), which is also now a major US sports betting company, has deals with the NBA, NFL and I think MLB where they are the "official Australian gaming partner" but also includes streaming. I don't know if they offer a streaming only subscription or if it's something where you get to watch for free as long as you have a bet on the game or how it works. (The commercials certainly imply that it's "free" but obviously it's not "free free.") I assume TAB will look to do this in the US as well. So gambling and streaming are now bundled.

We also have a free-to-air NBA game of the week. I don't know if that will include the playoffs.

EDIT2: I looked it up: To be eligible to watch our live sports streams you must have a positive balance or placed a bet in the last 24 hours. I assume that is any bet, not just a bet on that game. So get lucky enough to get a positive balance, then stop betting, and you can stream sports for free forever! :-)
   23. Lowry Seasoning Salt Posted: January 11, 2021 at 12:10 AM (#5998920)
Isn't it the case for most teams that you can stream the game through the cable company's app as long as you have a subscription that includes the RSN? (Or maybe it's RSN apps but you still need the cable subscription login.)


Last I knew, that pay-twice option (cable and MLB.tv for your local team) was only with some teams, like somehow there was something different in some markets compared to others. But that may have changed and maybe it's a available in all markets (though I wonder what happens if you're in one those places where you're assigned to the market of a team but don't actually get the RSN. I mean, if you live in eastern Montana do you get Mariners games?).

Having these rights formally revert to the teams suggests to me that it is now possible to split the broadcast and streaming rights next time a RSN contract expires.


I've made the same assumption that this is about the next RSN contracts. And maybe that's why only some teams initially had the local-team MLB.tv option—newer/different arrangements in the contracts.

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