Here’s something I hadn’t thought about (from Maury’s interview with MLBN chief Tony Petitti):
Bizball: … As President and CEO of MLB Network, how have you approached programming that could influence negotiations when these broadcast agreements come up for renewal?
Petitti: Well, the first thing important in programming is that people are going to want to watch… In terms of the future and in terms of negotiations, the bottom line for the network is we want the network to grow and we want it eventually to grow beyond 50 million homes. So whatever content is out there we would be like to be perceived as a viable place for that content to be, whether it’s additional games or other packages. But having said that we are building it around studio programming and the kind of great tape programming that we have on but I think the key is that we’re prepared to take on anything that could come our way in a few years, in terms of more content…
Bizball: Could that include playoff games?
Petitti: … Now whether that means that baseball wants to move more content here, that’ll be up to you know the Commissioner’s Office and we’ll sit there like any other bidder hoping we can come up with some more. (emphasis mine)
Really? MLB Network is going to be like any other bidder? Does the NFL Network have to pay a lump sum for its Thursday night games?
Here’s the difference, from what I can gather: the NFL wholly owns its network, while MLB only owns a controlling interest in theirs. The NFL wouldn’t give games to NFLN unless it thought it could make more from doing so than by licensing out the rights. The same is true for MLB, but the standard is much higher, since MLB only owns 2/3 of the resulting profits. Therefore, MLB Network may have to bid like any other distributor.
But it’s not quite that simple. MLB does own a controlling interest in the network. Therefore, it has final say over how the company’s funds are allocated. This means they could use the network to bid up rights fees for some of their smaller TV packages (i.e. Sunday afternoon games, midweek night games, or even divisional playoff games).
Thinking even more creatively, MLB could essentially funnel cash from the network to the 30 teams, and completely bypass the network’s other equity holders (i.e. the cable providers). Say MLBN is projected to make $50 million in profits. MLB then decides to do a new Tuesday night package, which they value at $50 million. As a partly-owned subsidiary, MLBN would have to bid, and pay, for the rights, like anyone else. MLB awards the games to MLBN, taking $50 million from the company they partly own and distributing it among the 30 teams.
Sound crazy? It’s not. It might not be the smartest long-term strategy either, given that MLB is relying on the cable providers for the great majority of the network’s revenue. But it’s definitely something to watch out for.
Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com
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