Dreaming Up a Super Premium MLB.tv Package by Paul Swydan February 6, 2015 Blackouts suck. We don’t like them. This isn’t news. What is news is that Major League Baseball is driving hard to get the ball rolling on lifting blackouts, potentially for good. Yesterday, Maury Brown laid out an idea for this over at Forbes. And as it turns out, the league is trying to execute just such a plan. The plan, in case you don’t feel like clicking both links, involve the league getting its biggest media partner, FOX, on board with streaming games. Brown notes that 37 percent of all games last year were shown via FOX regional sports networks (or RSNs). That’s a pretty huge chunk. Comcast checks in next at 17 percent. That gets you up to 54 percent, and then it is drips and drabs from there. While a big network like FOX might be able to unilaterally make these moves, there is going to be a couple of sticking points. The first, as Brown notes, is who exactly gets to stream these games? Obviously MLB wants the exclusive rights, since they have a decade-old product that people know and love. FOX doesn’t appear to see it that way, and it’s hard to blame them. That really rolls up into a second sticking point, which is cost. In thinking about this the other day, I postulated on Twitter about the creation of a Super Premium MLB.tv package. The theory goes, essentially, that you would add to the normal $130 cost of an MLB.tv Premium account in order to get a service that would solve your blackout problems. The Plan Each cable company charges a carriage fee for carrying it. We know that last year, NESN — which is owned jointly by the owners of the Boston Red Sox and Bruins (though mostly by the Red Sox) — charged as much as $4.22 for its carriage fee. As a long-running RSN, with a very dedicated fan base, that is probably close to the top of the food chain. ESPN, which charges the largest carriage fee, charges less than two dollars more than that. Continuing to use NESN as the example, when we multiply that over 12 months — 12 rather than six since NESN charges the carriage fee every month and not just during baseball season — that comes out to a high end of $50.64. Let’s call it $50 for simplicity sake. So, the plan would be to say to MLB.tv subscribers who live in the Red Sox territory, and can presumably get NESN as part of their basic cable package, that if you want a version of MLB.tv with no Red Sox games blacked out, you can get that for $180. During commercials, instead of the six or seven MLB.tv ads you normally get ’til you have them memorized, you would get the normal NESN ads, with the MLB.tv ads spliced in every now and then in place of a NESN house ad (which, as any Red Sox fan will tell you, are plentiful). Doing it this way satisfies a number of things. First, NESN doesn’t need to lose money on carriage fees. That’s huge, since carriage fees are essentially the way these networks stay in business. Second, it wouldn’t hurt ad rates during games — the customer base would be the same, they’d just be watching on different mediums. Theoretically, that shouldn’t change much, except maybe ads with small words in them would need to be rethought if they want to impact customers watching on smaller mobile devices. Not a huge deal, as advertisers should already be taking this sort of scale into account. It would also allow MLB.tv to recover a modicum of revenue from the few ads that they sell each season (not that they need that money, or can’t find a way to get it in some other fashion). The best-case scenario for the RSNs, of course, would be to have that loyal consumer who not only buys the super-premium MLB.tv package, but also doesn’t cancel their cable package. Going back to NESN, they show a lot more than Red Sox games. In fact, the actual Red Sox games only make up a tiny portion of their programming each year. Less than half, certainly. They also show Bruins games, Hockey East college hockey games, and a number of other live sporting events, as well as long-running shows like Charlie Moore Outdoors. So, there is a chance that a lot of consumers, even if given the option to purchase this super premium MLB.tv package and get rid of cable, wouldn’t actually get rid of cable. That’d be sweet, because then the RSN would be double dipping the carriage fee, and could maintain their customer base for ads that run during all the non-Red Sox game-times. And if the NHL or NBA worked out similar deals, RSNs could be triple or even quadruple dipping, depending on the teams that play on that particular RSN. Drawbacks There are a number of drawbacks. The first is the aforementioned ad rates. In talking to Nathaniel Grow, our resident sports business expert, he mentioned that the RSNs probably aren’t keen on being able to say that their customer base has shrunken dramatically for all those times when a live baseball game isn’t being played. So that’d be an issue, and the number one reason why the cable companies or RSNs might force you to keep your cable package as a part of any agreement between MLB and FOX. That would not alleviate the problem for people who are blacked out of a specific team without having the opportunity to watch them on their local cable package. Another drawback is that this plan is, as Homer Simpson would say, needlessly complicated from MLB and MLB Advanced Media’s perspective. While it might be peachy keen for the RSNs to sit back and collect stacks on stacks on stacks on stacks, MLB would be put in the position of expending energy on a product that sees the revenue split between it and its partners. And what of the total cost? Sure, Red Sox fans could justifiable have to pay an extra $50, but what about Astros fans, whose RSN hasn’t been able to get on the air and whose viewership is going to be much lower given all the tanking the Astros have done the last few years. In other words, should the package cost a different amount for each team? Or should they set a price based on the most expensive market and go from there? There’s no easy answer, and there would undoubtedly be some headache-inducing accounting issues, at the very least. For RSNs that are owned by a team, it wouldn’t be as big of an issue, since the league already has relationships with the teams, but it would still require a lot of logistical thinking. Still another issue is for the fans with overlap, be it geographic or otherwise. A couple of examples. Say you live in New York, and are accustomed to watching the Mets and Yankees on TV. Now under this plan, if you want stream both blackout free, you can, but you would be in the position of having to buy a super-super-premium package, where you pay to eliminate blackout restirctions for both teams. Is that fair? Or, say you live in the Chicago area, and you as a Cubs fan married a White Sox fan. Do you want to pay for the privilege to stream both teams blackout free? Perhaps there is a compromise, but that seems unlikely. The extreme version of this, of course, is areas such as Las Vegas and Iowa, where as many as six teams are blacked out. Do you pay to alleviate all six blackout restrictions, in a package that could end up being close to $400, or do you simply pick the one team you want to see and live with the blackouts in other areas? That is, of course, if MLB allows such options. Which, as we mentioned above, just might not be in the cards. … Baseball fans don’t like blackouts, or anything else that restricts their access to the game, and these sometimes artificial restrictions are as old as the game itself. That is unfortunate. What is encouraging though is that the league is working on the problem, and has generally been at the forefront of digital streaming in sports — so much so that their technology is used as the “backbone” when companies and leagues make streaming products. So while we may have to pay for the privilege, hopefully the blackout restrictions will be solved soon, say the next five-10 years. Whether it’s a super premium package like what I have suggested here or something else, the initial solution probably will be messy. There are a lot of cable companies involved and a lot of money at stake, and so a clean solution seems unlikely right from the jump. And of course, none of this addresses what is the ultimate problem — the territory rights and how they can be resolved. But that is for another day. This reported agreement between MLB and FOX is a nice first step. Hopefully we’ll see more steps soon.