Major League Baseball's Latest Home Run: MLB.TV

Major League Baseball’s Latest Home Run: MLB.TV 

How it began

In September 2013, Johnathan Mahler, a writer for the New York Times, wrote an article titled “Is the Game Over?” asking the question, “Why does [baseball] feel so irrelevant?” The irrelevance Mahler refers to is Major League Baseball’s (MLB) poor television ratings, as compared to the NFL. In 2013, the joke of all professional football games, the Pro Bowl, had more viewers than the MLB playoff division series (Treadway, 2014). However, what the dismal television ratings have failed to include is a different kind of player “warming up in the bullpen,” MLB.TV.

MLB.TV, the premium online live streaming service offered by the MLB, is a pioneer in the professional sports industry due to the success the service has had in entering the online distribution realm. MLB.TV has proved to the professional sports industry that television distribution is not the only successful outlet for users to watch live sporting events. As Anita Elberse, professor of Business Administration at Harvard Business School, says, “Major League Baseball's digital arm stands out: MLB's executives have embraced the opportunities that digital channels afford the league to interact directly with its fans, scoring with products for a host of different platforms and operating systems” (Elberse, 2013).

On August 26, 2002, Major League Baseball took its first step toward becoming a digital distribution leader in the professional sports realm. The MLB streamed the Texas Rangers play the New York Yankees for the first ever live, full length MLB game via the internet. To put in perspective, Mike Trout, the 2014 American League MVP, had turned eleven-years-old three weeks prior to the historic event. From this event, the MLB never looked back. “Ten years, more than 25,000 live games and millions of subscribers later, MLB.TV is the most widely distributed – accessible on thousands of computers, mobile phones, tablets and connected devices with one subscription – and successful live video subscription product in digital media” (MLB Press Release, 2012).

The origination of MLB.TV began in June, 2000, “about three months after the Internet stock bubble burst and no one was sure if any teams would ever make money on their Web sites, the Major League owners agreed to combine all their Internet operations in one unit and split expenses -- and any eventual profits -- evenly” (Isidore, 2005). The combination of all the teams created what is known today as Major League Baseball Advanced Media (MLBAM). Popularly known to have no salary cap and an incredibly wide gap in revenues between teams, the MLB took a turn away from the capitalistic label in order to advance the technology across every MLB clubhouse.

MLBTV Today

       Today, MLB.TV is a premium subscription service to the MLB At Bat service the MLB provides. MLB At Bat is an application to entertain and inform users on news and updates around the professional baseball league. At the beginning of the 2015 regular season, the premium service, MLB.TV, was priced at a fixed cost of $129.99, paid directly to the MLB. New users must register for an account through the MLB’s website to receive MLB.TV’s premium service. MLBAM owns and operates the MLB At Bat service, which includes MLB.TV. On the next page is a diagram illustrating how all of the different products and services work with one another, specifically with MLB content distribution­:

MLB.TV’s premium service provides fans with live-streaming games across the entire league throughout the season, in addition to news updates, live radio broadcasts, statistics, video archives searchable by player or key words, and a customizable home page designated by a favorite team. The application’s search engine is connected to a database that tags every video and article with important players, teams or topics related to the source. Due to this, it is easy to search for specific videos of homeruns from your favorite baseball player or game winning plays from around the league. This technique, sometimes called “folksonomy” is “a style of collaborative categorization of sites using freely chosen keywords, often referred to as tags. Tagging allows for the kind of multiple, overlapping associations that the brain itself uses, rather than rigid categories” (O’Reilly, 2007). MLB.TV has different categories of tags that can overlap to help users find specific content. Whether it is by player, team, date, type of play, or dozens of different specifications, MLB.TV attempts to filter its collection of media through the tags placed on each piece of content.

 The true value of the premium service comes from the ability to stream games on a wide range of devices, extending from mobile phones, tablets, laptops, video game consoles, and the relatively new TV plugins (Apple TV, Chromecast, etc.). Most content consumed today comes from the list of devices MLB.TV is compatible with, as “the average American household now has five or more connected devices, from laptops and tablets to mobile phones and gaming consoles.” (Holt, 2014). From MLB.TV’s ability to be accessible on dozens of platforms, baseball has continued to make its presence be felt, where other live professional sports continue to be caged behind the bars of a cable box.

While the devices MLB.TV is compatible with may seem diverse and assorted, the application itself keeps a consistent, professional interface throughout all the platforms. Due to the similar theme throughout platforms, it is easy for users to navigate from device-to-device. The user-friendly interface “is still reckoned to be superior to the online products offered by rival American sports leagues in terms of the content it offers, the quality of the streaming, and the special features it provides” (McDuling, 2014). For example, the summary button shows important plays throughout the game and “provides unedited video of the play from the television broadcast, including the buildup, the announcer’s call, and replays straight from the actual broadcast — not mere Sportscenter-style highlights” (Bishop, 2015). Through the user-friendly interface, MLB.TV provides users a one-stop-shop for fans to catch live games, read articles and snag statistics on his/her team. Also, the MLB has an online store that is easily accessible from the MLB.TV Premium webpage; this provides another outlet for fans to stay within the organization’s website and buy MLB products.

MLB.TV’s software and design success is only one part of the equation. Due to the large geographic footprint Major League Baseball teams construct, in order to allow a Seattle Mariners fan living in Orlando, Florida watch his/her team play, “all 30 MLB ballparks are linked up to a fiber optic network, and BAM has multiple data centers around the country (in New York, north Texas, Omaha, Nebraska and, soon, San Francisco)” (Bishop, 2015). The digital infrastructure has been an expensive investment for the MLB, but the organization has found new ways to sell its technology to other content providers. The MLB’s strategy to leverage its technology branch will be discussed in more detail later in the paper.

MLBAM’s digital infrastructure comes at a perfect time, as “cord-cutting consumers demand that premium content be made accessible online and all at once, also known as ‘television everywhere’” (Mann, 2014). Subscribers of MLB.TV have the capability to watch any out-of-market games during the regular season, except for ESPN’s weeknight games and Sunday Night Baseball. ESPN agreed to pay the MLB $5.6 billion to have the exclusive broadcasting rights for Sunday Night Baseball up until 2021 (Newman, 2012). By allowing a minimal amount of games to be exclusively broadcasted by ESPN, the MLB still has plenty of content to manage.

With a 162 game season and 30 different MLB teams to choose from, there are plenty of opportunities to watch baseball through MLB.TV, but who does this service particularly appeal to? Baseball viewing has traditionally been a regional appeal, with television broadcast stations paying millions, even billions, to have the broadcasting rights for a baseball team and broadcast only within a geographic footprint around the team’s region. This means most fans have the ability to watch their team only if they are in the broadcasting region of their favorite team. Even if the fan is lucky enough to be in his favorite team’s opponent’s viewing region, it will be broadcasted in the favored announcing of the opposing team. So, from this, MLB.TV appeals to fans who travel and who live outside of their favorite team’s town. After the first ever MLB game was distributed online, Derek Jeter was quoted, “We may get into a situation where you don't have to have a specific channel to see a game. It will reach more people, because fans that follow teams but can't see them because they live on the other coast will now have a way to see their team play” (MLB Press Release, 2012). The out-of-market games become the selling point for MLB.TV subscribers, and, unlike cable subscriptions, the MLB.TV subscribers get to experience a subscription that follows them.

The Dark Side

But, there is a “dark side” to the MLB.TV: blackout restrictions. Blackout restrictions occur on MLB.TV whenever a user is in the regional network of a team. Whichever regional network(s) the user is in, they do not have the ability to live stream the team’s game on any device; rather, broadcast television of the region is the only legal source for watching live. Television distribution and Internet distribution have been legally determined to be two different mediums, and are regulated differently. Due to this, the MLB has had to work with their feet on both sides of the line: making deals with TV broadcasts and also laying out the digital distribution platform. The MLB would have the ability to stream the games solely from a digital channel, but “television money is driving the sport’s top line growth. In 2014, broadcasting and cable money accounted for $2.88 billion, or 37% of baseball’s $7.86 billion of revenue. Just five years earlier, television proceeds were $1.73 billion, or 29% of the sport’s $5.91 billion of revenue” (Brown, 2015). The local stations pay hefty premiums for the broadcasting rights to help keep the viewers tied to the local stations. Not only are the companies forking over millions of dollars, they are making long-term deals, extending out to decades long.

The divide between television distribution and online distribution has not blended seamlessly in the genre of sports. With the topic of blackout restrictions, “two groups of people are upset over this wrinkle. There are people who subscribe to cable or satellite TV, but want to watch their favorite team’s games when they’re at work or on the go. And then there are the cord cutters, who want to use MLB.TV as a way to watch their favorite team without subscribing to cable or satellite TV” (Snell, 2014). For those cord cutters who want to watch their favorite team in the team’s region on MLB.TV, you are out of luck, for now. In 2016, “in-market streaming will come to the 15 clubs that have FOX Sports support their regional sports networks” (Brown, 2015). With the recent news of the agreement between FOX Sports and MLBAM, some of the weight placed on blackout restrictions will be lifted.

As explained, the MLB has locked in solid cash flows year-after-year with the long-term regional broadcast station deals, and has generated additional revenues from the exponentially growing MLB.TV Premium service, but the MLB also has found other forms of income through its technology department. MLBAM has been, and is still considered, the technology branch of the organization.

“This business, whose products and services touch the lives of countless Americans each day, employs more than 700 people. It is on track to generate about $800 million in revenue this year. It has been profitable for about a decade, paying its owners a rising dividend for most of that time. It counts some of the world’s most important media companies, like the Disney-controlled sports behemoth ESPN, among its growing client list” (McDuling, 2014).

MLBAM was created from the birth of MLB.TV and continues to run the MLB.TV Premium service, as well as all 30 of the MLB team websites and the league’s social media account. The quick success of MLB.TV gained the attention of content providers and others within the distribution industry. Through MLB.TV, MLBAM showed it had what was needed to distribute content effectively in the digital space. “MLB Advanced Media is arguably the market leader in providing the infrastructure that supports live online video streaming, a market still in its infancy that could grow enormously” (McDuling, 2014). Today, there is a lack of competition against MLBAM, which has provided the technology department deals with WWE, the NCAA, and the World Cup in soccer.

Most recently, on August 4, 2015, MLBAM struck a deal with the NHL where “NHL Commissioner Gary Bettman, along with MLB Commissioner Rob Manfred announced that the NHL had sold media rights to another sports league’s media company. Along with the deal, the NHL would have equity in what is now called BAM Tech, a wholly new digital company that will be spun-off of MLB Advanced Media” (Brown, 2015). With the potential spinoff, the MLB would still be the majority owner of MLBAM, but the announcement showed the direction the MLB wants to take with its digital distribution experience and infrastructure.

MLBAM purchased the rights, for $100 million annually, to distribute NHL out-of-market games through NHL GameCenter LIVE and NHL Center Ice subscription services in the United States and certain international markets (Brown, 2015). By purchasing the content of another sport, MLBAM demonstrates its presence within the sports media industry as a whole, and its confidence to successfully distribute out-of-market games to a larger audience. Through this deal, MLBAM will create revenue from paid subscribers to NHL GameCenter Live and NHL Center Ice subscriptions. In short, MLBAM wagered $100 million in its ability to attract, gain, and retain the audience of professional hockey through MLBAM’s digital platforms.

To conclude, remember that in 2002, the MLB did what no other professional sports organization had done, it took a swing for the fences. The way we watch sports is changing due to the new digital infrastructure. MLB.TV and MLBAM have penetrated the live sports viewing market and have not looked back. As mentioned, in the short run, the interweaving of internet and digital distributors with television broadcast distributors will continue for live sports, but MLB.TV has made the entire sports media industry think again about the direction of live sports streaming. 

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