As digital technology and internet speeds have improved, there has been an increasing realization that consumers do not — or should not, given the incredibly powerful cable providers — need to subscribe to massive cable bundles with hundreds of channels. Netflix has shown people the amount of programming they could have for under $10 per month, and iTunes and Amazon have allowed people to purchase individual shows while Hulu has provided a combination of both options. HBO Now has lent optimism to the idea that consumers will soon be able to purchase their desired channels a la carte.
For years, MLB.tv has provided both the best and worst aspects of meeting consumer needs, providing an incredible amount of games to fans at a generally acceptable price, but accepting big cash outlays to blackout local games and help keep the current cable bundling model alive. While the St. Louis Cardinals’ new television contract, the latest in a line of local billion-dollar deals, is another example of increasing awareness in Major League Baseball that the current cable model will not last forever. How long it will last is still a matter of great debate.
In many ways, the Cardinals new deal is similar to the deal signed by other teams over the past few years. Despite a market that ranks behind Orlando, Cleveland, and Sacramento, and just ahead of Portland, Charlotte, and Pittsburgh in terms of households, the Cardinals were able to sign a lucrative deal due to incredibly high local ratings and generally high interest in the ballclub. According to Derrick Goold of the St. Louis Post-Dispatch, the deal is set to pay the Cardinals more than a billion dollars over 15 years, an amount that does not include a signing bonus or a 30% stake in FoxSports Midwest, with any revenue received from station ownership not subject MLB’s revenue sharing.
The Cardinals, in the last three seasons of their current deal, are receiving between $25 million and $35 million with the new deal starting close to $55 million in 2018 when the new contract begins. Over the life of the contract, the yearly payout will increase to around $85 million, according to Forbes, who estimated that the new deal increased the value of the Cardinals’ franchise to $1.6 billion, a $200 million increase over their estimate at the start of the season. Read the rest of this entry »