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From SBD (hat tip: Maury Brown):

SNL Kagan estimated that MLB Net is “likely to be profitable in its first year,” as the net is “expected to generate $150[M] from subscriber fees and an additional $50[M] in ad revenue, having lined up advertisers such as Chevrolet, Pepsi and Anheuser-Busch.” SNL Kagan forecasts that the net “will have 67 million subscribers by 2012, when it’s expected to generate $306[M] in licensing fees and advertising” (MEDIALIFEMAGAZINE.com, 1/6).

So three years out, the subscription fee / advertising breakdown will be somewhere around $193M / $113M. Total revenue will have grown about 50%, or ~16% per year.

Those are pretty solid numbers across the board, given the starting point. But here’s the thing: both revenue streams are largely dependent on the state of the cable industry. MLB could make deals with more distributors (especially in Canada), but most of the network’s growth will come from their existing partners’ subscribers.

Does anyone really want to bet that cable will continue to grow in the next three years, as more and more content moves online and broadband becomes faster and more accessible? Cable is very expensive, and the providers are going to have a lot of trouble maintaining those prices once the internet becomes a truly viable alternative. In that case, they’ll either have to renegotiate distribution deals, axe channels entirely, or see a mass defection to IPTV.

This may not happen in the next three years, but it will eventually. Cable is, to a certain extent, the last great business from the old-world media sector. But cheaper technology is quickly catching up, and eventually our televisions will just be another PC that connects to the internet. Cable may stick around for a while as a niche for high-def channels, but even that will eventually run its course.

Hats off to MLB for getting in on time, and presumably locking in long-term distribution deals. If run correctly, the network should be a cash cow for at least the next few years. But it may end up being a more ephemeral business proposition than Bud and company seem to be hoping for.

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com


2 Existing Comments

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  1. on January 11th at 01:45 am
    Barry said:

    You assume a whole lot.

  2. on January 12th at 08:24 pm
    Fake Teams said:

    With cable companies stopping the downloading of video at peak times, where do you expect the added broadband to enter the house?

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