Case Study: Can Major League Baseball's Network Score?
Professional sports leagues have prospered from the media for a long time, collecting buckets of revenue from broadcast, cable, satellite, and lately Internet companies for rights to show their games. But when it comes to getting into the business directly by launching their own TV channels, their record has been anything but stellar. Major League Baseball, the last of the big four leagues to create its own network, hopes to show the others how it should be done.
MLB has an obvious advantage since it can learn from its forerunners' mistakes. At the same time, though, the league faces a huge challenge by being the laggard: The Web is siphoning viewers and ad dollars away from television like never before. If the chief of the MLB Network is worried, he doesn't show it. "I look at this like I am an entrepreneur starting a business," says Tony Petitti, the former No. 2 executive at CBS Sports recruited to set up and run the new channel, which is slated to appear in January. "It comes down to creating and putting on compelling programming. That's why people will tune in."
As the other leagues can attest, compelling programming isn't enough. Without a full schedule of live games and year-round action, league channels have struggled. A fully distributed channel typically reaches 97 million homes in the U.S. The pro leagues don't even come close. Launched in 1999, the National Basketball Assn. channel is in just 15 million cable and satellite homes, while the National Hockey League's network can be seen in 12 million. The National Football League, which has waged a bitter war on cable companies that it even took to Congress, does better; The NFL reaches 40 million, though mostly via satellite.
Baseball has played the distribution game better than its rivals. Rather than launching the network first and then sweating over how to get into more homes, league executives negotiated a far-reaching pact with cable and satellite outfits last year, giving the MLB Network access to 50 million homes from the get-go. Baseball managed this by shrewdly threatening to give its Extra Innings TV package, which allows fans to see 80 out-of-market games a week, exclusively to satellite service DirecTV. To keep that from happening, many cable operators agreed to include the MLB Network to their digital packages.
And the price was right. MLB asked distributors for a licensing fee of 10¢ to 15¢ per subscriber, say cable executives. By contrast, the NFL Network demanded 70¢. Tim Brosnan, an MLB executive vice-president who negotiated the deals, says he's confident baseball will come out ahead by being on friendly terms with the cable guys. "I suspect in three to five years we will be a fully distributed digital channel," says Brosnan.
Live Shows, but Few Games
Once he nailed down TV access, Brosnan went out and hired Petitti earlier this year. Since June, the 47-year-old Petitti has been building a state-of-the-art digital-TV studio and production facility in a former factory in Secaucus, N.J., scrambling to meet the league goal of getting on the air before pitchers and catchers report for spring training in February.
Another chore is hiring. Petitti wants to have a full-time staff of about 100 in place soon, including on-air talent. He aims to bring in a further 500 for the season. The network will air only 26 games during the year, to avoid violating existing broadcast contracts. But it plans to feature a live studio show every day and produce its own programs, from historical shows to extensive spring-training coverage. Filling airtime, even in the off-season, will be no problem, Petitti says, with opportunities to broadcast Caribbean league games, youth leagues, documentaries, and even list shows, like one featuring the 25 greatest comebacks.
The MLB Network's biggest edge may be the game's long history and the passion of its fans. "Everything in baseball is tied to the past, so its fans live in the past as much as the present," says Neal Pilson, a sports media consultant. "As a programmer, that allows you to mine every aspect of the sport."