The Uncertain Timetable for Cord-Cutting in Baseball’s Future

Major League Baseball has taken a number of small steps designed to make it easier for consumers to watch baseball, even for consumers in local markets. MLB.TV has been around for years, but for fans wanting to watch local games on mobile devices or through non-cable set-top boxes and devices like Apple TV, Roku, or Chromecast, there had been few advancements. This offseason, however, MLB announced that the Fox-owned Regional Sports Networks (RSNs) would finally provide local games on something other than cable to cable subscribers.

This small step was accompanied by a somewhat forced step in the Garber settlement to offer out-of-town fans the opportunity to purchase single-team packages at a reduced rate. A lesser publicized part of the settlement prevents MLB.TV from raising prices (capped at 3% per year) unless the non-Fox RSNs also offer streaming for local games by the 2017 season, which Commissioner Rob Manfred expects to happen.

These steps, along with burgeoning MLBAM technology and reports that ESPN is losing billions to cord-cutting viewers, have begun to raise more questions about when the sports right bubble might finally burst — when the current cable model might finally be unsustainable — and MLB fans will finally be able to purchase directly the rights to see the games of their local team (or in Iowa and Las Vegas, their six local teams) free from cable and the onerous blackout rules that accompany it. Unfortunately, nobody has an answer.

The incremental changes made by MLB, and the advancements in technology which have accompanied them, indicate MLB is technically ready to satiate consumers, but cable and satellite providers are not ready, and they will do whatever they can to ensure the current cable model remains strong. That includes paying networks like ESPN and the RSNs incredibly high fees to ignore the technological advances which could make traditional cable obsolete.

For now, MLB likes the cable model as it is, because it brings in tons of money to teams and the game as a whole; however, Commissioner Rob Manfred, in an interview with Yahoo’s Jeff Passaan, discussed the power of the current cable model:

The cable model has served this industry really well. Anything that interrupts that model is something we have to worry about. Having said that, I do think our over-the-top capacity at BAM (MLB Advanced Media) and BAM Tech gives us downside protection that is a little more robust than other businesses.

The Commissioner also discussed this problem, albeit from a different angle, with Jerry Crasnick at ESPN.

You have to let people consume the game the way they want to consume the game. It’s not a baseball change. It’s a media landscape change. People are consuming content — sports and other content — very differently than they did 10 years ago. One of the biggest challenges for us going forward is to make sure we can find ways to distribute our games not only in ways that are attuned with the desires of our older, avid fan base, but also attuned to the needs of younger people.

Manfred understands the problems are twofold, with competing interests. Cable pays, but as it loses strength, there are long-term risks associated with staying tied to an industry losing its appeal to the next generation of fans. Manfred and MLB are ready, or at least prepared, for the solution.

We have a very robust and effective distribution platform. We think if, in addition to becoming a distribution platform, we can become an aggregator of content maybe with the right partner it could be a really fantastic business development for us.

But that leads to the question driving most fans: when? The answer is not a satisfactory one.

Once again, Manfred on the subject:

Cord-cutting is a concern for us. The biggest concern with it is we don’t know exactly – nobody knows – how big and persistent this phenomenon is going to be.

Asked on Twitter the other night about the same subject, Maury Brown, who has been covering sports business for years, provided an understandably vague answer.

Maybe 5 years? https://t.co/SC68xgcRzZ

— Maury Brown (@BizballMaury) February 3, 2016

The most recent discussions about a sports-rights bubble surfaced three years ago when the Los Angeles Dodgers signed their $8 billion television deal with Time Warner. While those in the industry had been hearing about a bubble for two decades and dismissed its existence, recent developments have provided ammunition for both sides. The Dodgers deal has proved to be a disaster up to this point, but teams like the Arizona Diamondbacks, Philadelphia Phillies, and St. Louis Cardinals have all signed billion-dollar deals of their own to broadcast games on cable locally. While cord-cutting might be “costing” ESPN billions in potential revenue, the company is still as profitable as ever due to higher pricing that make up for fewer subscribers. The concerns around ESPN deal with stagnant growth when it comes to profits, not with the actual profits, which are still enormous.

In discussing the fantastic television ratings for baseball a year ago, I wrote about the current dynamic between MLB and cable, and for the most part, this dynamic remains.

While cord-cutting is occurring across the country, it has not been widespread enough to cause a change of course in the current cable model. The recently discussed merger of Time Warner and Comcast that eventually fell apart would have actually further strengthened the current system. That cable companies also provide internet service, a much more necessary service than cable, only helps them keep subscribers. Change is inevitable, however, and better technology (including services provided by baseball’s own MLBAM) and internet service will eventually cause the current model to fall apart, as those with content will eventually be able to provide that content to their entire audience without the assistance of a cable provider.

If you are looking for a rooting interest when it comes to having the ability to pay directly for your local team’s broadcast, do not root for advances in technology. They’re already present. Don’t root for MLB to step in and provide your local team’s broadcast through MLB.TV. They don’t currently have an incentive to do so. Don’t root for your local RSN to start providing a stand-alone streaming service, because they are being paid by providers way too much not to. You might want to root for Congress or the FCC to eliminate bundling practiced by both providers and broadcasters. Ultimately, though, if you want to get your local team’s broadcasts at home without paying for cable, you need to root for cable to fail. As it stands, cable providers are big, they are strong, and they are counting on inertia. How long they remain so is anybody’s guess, but it is just that: a guess.