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Thursday, August 17, 2017

Disney's $1.5B MLBAM Purchase Foretells Grim Tidings For ESPN

Al Yellon a couple days ago posted a piece about MLBAM being sold to Disney in a $1.5 billion deal. The upshot of this is that every MLB team will get $50 million in cash off the bat, but it also suggests something else: MLBAM, which has been a cash cow for the league, is going away at the exact moment cord-cutting continues to be a problem for cable TV. There's something about this deal that reminds me of the Yankees getting out from YES Network, which now seems prescient: better to let someone else figure out how to sell those ad dollars, and take whatever they want off the top.

Along those lines, ESPN is now launching its own streaming service, which looks from the outside like a Pyrrhic victory. As Techcrunch explains,
"A streaming service, while it might attract sports fans who have cut the cord, won’t solve ESPN’s profit problems. Instead it will exacerbate them. Why? Because ESPN will continue to lose the millions upon millions of cable subscribers who pay for it but never watch it. Losing $7.21 from each non-watcher is going to be a revenue killer. There is no possible way the universe of sports fans who want ESPN can make up that revenue, even if they’re charged more for a streaming service."
(The above was quoted in the story text, but it's unclear from context who was being quoted. Edit: it's an excerpt of this Bloomberg News story.) This is a problem of long-standing I first noticed with the Dodgers and their cable TV deal; there's simply no way the insane TV rights deals stand up without mandatory bundling. Things are going to get tighter for everyone in this space, and soon.

Update 2017-08-23: One aspect of this that has bothered me from the beginning is the same sense I got when the Guggenheim Group bought the Dodgers for $2.1 billion, and that is that this is predicated on revenue streams that simply cannot exist in the real world. (Even my rough contemporaneous pencil test showed the Dodgers couldn't milk that stream for the kind of dough they were getting out of bundled cable deals.) I'll spend some time digging and see if I can get MLBAM subscriber numbers somewhere. Also, it's important to know for return-on-investment figures that Disney earlier bought 33% of BAMTech for $1 billion, so their total investment appears to be $2.5 billion for (effectively) the whole magilla, or at least a majority stake.

It appears that MLBAM as of two years ago had 3.5 million subscribers, though this LA Times article doesn't mention how many are MLB.TV subscribers. But assume that 90% of them are paying for MLB.TV at $112.99/year. That means revenues are
3.5M subscribers * .9 * $112.99 subscriber-1*year-1 = $356M/year
It's not implausible that they might be able to make money under this scenario, but it omits the costs of carriage for MLB, MiLB, PGA, and other content.

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Thursday, April 20, 2017

A Diffident Anniversary: Six Years Ago, MLB Ousted The McCourts

Six years ago today, MLB ousted the contentious and rapacious McCourts as the owners of the Dodgers. Their tenure as owners would be marred by problems with parking lots, and in particular, the problem Bryan Stow had. This would be a happy anniversary if not for the years-long fight over cable TV revenues that have thus far failed to materialize. The price of ousting the McCourts, apparently, was $2.1 billion, a figure largely hoisted on the now-obviously dim prospects of extracting absurdly generous concessions from a new cable TV network that thus far remains off the cable boxes of most Southern California fans. The math is so absurd, and so large are Dodger salaries, it is impossible to imagine this stalemate going on much longer, but the Guggenheim group seems set on their course. The one advantage of being out of market now is that at least I get to see the Dodgers. It is more than outweighed by being two timezones east, so the Blue finish most of their games after my bedtime. I can only hope my in-market friends get to see their team on the TV some year soon.

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Wednesday, April 19, 2017

The Collapse Of Starting Pitcher Wins

It's been a while since anything really caught my attention about baseball — the Cubs won the World Series last year, an event that passed without note in these all but abandoned pages; the team will never need to buy another round anywhere in Chicago, and Theo Epstein et al. probably punched their own ticket to Cooperstown. Reversing the curse in two cursed towns is some sort of witch doctory! But with both my native teams two time zones past my now Central Daylight Time bedtime, I find keeping up with the Angels or Dodgers difficult, save on weekends or during day getaway games.

So the game moves on without me, in many ways; the deep detailed looks at various sabermetric aspects (and more, the impressive roster of solid writers) I got at Baseball Prospectus, watering holes like Baseball Think Factory (now enervated thanks to a squabble between founder Jim Furtado and Darren Viola), Jon Weisman's on-again, off-again blogs (Dodger Thoughts, now largely defunct) — all have lost my attention, and that predated my 2015 move to Arkansas. So it's kind of a surprise to see a post that really grabs me, and this one comes from ESPN: "State of the Stat: MLB numbers taking yet another crazy turn" offers some interesting changes lately in baseball. Particularly, home runs:
What pops out is the names of the decade home run leaders for the 1990's and 2000's, Mark McGwire and Alex Rodriguez's, respectively. Neither will make it into Cooperstown as a consequence of steroid use, and more's the pity, especially in A-Rod's case. As with Roger Clemens and Barry bonds, a legitimate first-ballot inductee is being kept out of the Hall largely because of political pressure rather than his actual record.

In some ways, though, the most interesting thing in here is the steady decline in wins by starters:

The piece continues:
The traditional standard of 20 wins remains a high bar, with just a few pitchers getting there each season. There were three 20-game winners in 2016, two in 2015, three in 2014 and one in 2013. The peak for 20-win seasons came in the late '60s and early '70s, when many starters threw a huge number of innings. There were 15 20-game winners in 1969, 14 in 1971, 13 in 1973 (and 1951) and 11 in 1970 and 1974. As the five-man rotation became standard by the 1980s, the 40-game starter became obsolete. Then the complete game neared extinction.

Maybe the 20-game winner is next on the endangered species list.
What would be especially ironic is if Bert Blyleven, who famously was kept out of the Hall for so long because he did not have 300 wins, might instead be an early forebear of ending the win as a pitching stat with any actual value.

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Wednesday, January 18, 2017

Bagwell, Raines, Pudge Enter Cooperstown

While only Jeff Bagwell, Tim Raines, and Ivan "Pudge" Rodriguez entered the Hall of Fame as players, both Bud Selig and John Schuerholz do so as executives, Selig the commissioner who held baseball labor peace for over two decades. Schuerholz was the general manager of the Braves during the 1990's when they virtually owned the NL East (actually from 1990 to 2007),  and of the Kansas City Royals before that in 1982-1990.

Jeff Bagwell's credentials should have made him an easy first ballot candidate, but steroids rumors delayed his entry by six years. Unlike Jay Jaffe, I'm unconvinced that Tim Raines should be in the Hall, but as with everything, will take his word for it. Finally, Pudge actually did get in on the first ballot, Jay's questions notwithstanding. I take this as a positive sign for other players of the era who may have been tarnished by allegations or actual proof of steroid use. Congratulations to all.

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Friday, March 25, 2016

The Dodgers' Cynical 30% Manipulation

Bill Plaschke, improbably, has managed to write a column on the Dodgers' first flirtation with actual negotiations, which appears to be more cynical than real:
That Time Warner Cable has offered to cut the price of SportsNet LA by 30% is admirable, but that the offer is good for only one year is ridiculous.

Would you make that deal? Buy somebody's car for one year at a deeply discounted price, then take your hands off the wheel and agree to renegotiate?
As expected, Plaschke misunderstands the nature of the contract to justify his dudgeon— its more like renting an apartment than buying a car — but his admonition to "[m]ake the discount permanent" is entirely sound, and likely, doesn't go far enough. The reality is the Dodgers are not going to get that $5/head, now nor at any point in the future; bankruptcy looms. That the team uses Vin Scully's last season as a chit is unconscionable manipulation. I did not think it possible that the new ownership would be materially worse than the McCourts, but at least in this one dimension, they are: at least Frank never took the Dodgers off the air.

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Wednesday, February 24, 2016

The Bleeding Continues As SportsNet LA Halves Dodgers' Spring Training Coverage

Bill Plaschke brings the sad yet predictable news that SportsNet LA plans on halving its coverage of spring training games from 31 to 16.
No, this is not about the importance of watching spring exhibitions, which become awfully boring when all the good players hit the golf courses by the fifth inning. No, SportsNet LA is not alone in taking a spring break, as most teams televise only a smattering of games — and even KLAC radio is broadcasting only 14 games from Arizona. And yes, it makes sense when Time Warner Cable officials say they are cutting back because of lousy midweek afternoon ratings.

But when the Dodgers and Time Warner Cable continue to deny 60% of Southern California households a chance to watch their team because of ego and greed, then each misstep becomes more galling than the previous one, and every stumble becomes emblematic of a legendary fall.

At this point in the three-year debacle, it is worth wondering whether this might be the worst team-TV partnership in modern sports history. If the Dodgers keep Vin Scully from Los Angeles during his final season, that seals it.
The reason I say this is predictable is due to the fact that the channel is hemorrhaging money, and so they have to cut costs somewhere. Spring training games, broadcast in the afternoons with poor viewership, are an obvious place to trim.

It's rare that I can endorse a Plaschke column in its entirety (or even majority); it seems to happen about twice a year now. But here it is.

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Tuesday, January 12, 2016

Television Rights, Baseball's Tsunami

I unfortunately don't have enough time to properly treat this story, but a couple related pieces turned up on Techdirt and Fangraphs on the always-interesting subject of television rights that are required reading for anyone concerned about the future of baseball. First, Fangraphs draws us up-to-date with a case I can't believe I had missed, Garber v. Office Of The Commissioner Of Baseball.
Long-time Fangraphs readers are probably already familiar with the Garber suit, as we’ve previously covered the case on a number of different occasions. By way of a brief recap, though, the lawsuit essentially alleges that MLB violates federal antitrust law by assigning its teams exclusive local broadcast territories (the same rules that also give rise to MLB’s infamous blackout policy).

Not only do the plaintiffs allege that the creation of these exclusive territories illegally prevents MLB teams from competing for television revenue in each others’ home markets, but they also contend the rules restrict teams from competing with the league itself in the national broadcast marketplace (preventing teams from signing their own national television contracts, for instance, or offering their own out-of-market pay-per-view services in competition with MLB Extra Innings and MLB.TV).
The plaintiffs want to entirely do away with regional broadcast restrictions, which would possibly pave the way for MLB Advanced Media (MLB.TV) to take over that entirely. It could also allow the Indians to sell games in the New York market, or vice versa (much more likely), opening the prospect for both internecine warfare and additional revenue streams. MLB will argue that fans benefit from the current situation by keeping smaller market teams in higher revenue local TV deals. There is something to that argument, particularly with respect to casual fans, who are mightily subsidized by cable viewers who don't care about baseball.

Such subsidies are unfortunately not part of Techdirt's analysis, which fails to grapple with the fact that the overall revenue picture is much bigger with cable than without, for the simple reason that the average fan can only shell out so much:
It's an argument that essentially claims that MLB must limit the number of broadcast options customers have to choose from because not limiting them will eventually lead to even less options when teams fold. This argument rests on MLB's revenue sharing practice, where teams negotiate their local broadcast rights and leave the national rights entirely up to the league, which then doles out national broadcast (and streaming) revenue democratically through the league, meaning the popularity of the Yankees and other large market clubs is resulting in income for small market teams (like the Tampa Bay Rays).

Here's the thing: everyone knows this argument's time was twenty years ago. Fans know it, because they use the internet and streaming services and they embody the desire of customers to watch more teams in more ways without blackout restrictions. MLB knows this as well, as you simply can't make sense of all the work the league has done to expand its streaming options without that knowledge. What they are trying to save in all of this is a bit of the right to still handle national streaming rights the way they handle national broadcast rights. It's about retaining control. But the league itself is what allowed for the expansion of the league into small market areas. For them now to rest the argument for their antitrust exemption on the un-viability of those markets, resulting in harming consumer choice, doesn't make any sense. It's essentially asking for a kind of bailout for some teams via the exemption. Put another way, MLB's argument amounts to: some of our teams don't have enough fans to sustain themselves, so we need an antitrust exemption to keep them afloat, just because. How is that in the public's interest, even if MLB's assessment is correct?
A fine question. The assumption hitherto is that team valuations can only ever go up, at least over a long enough time frame; but much of that in turn is built on a foundation of cable TV rights deals, deals that now look not only long in the tooth but primed for extinction.

Addendum: An interesting David Lazarus column from a few days back in the Times about cord-cutting; the author details the calculations by which he reckoned it would save him money. Time-Warner had an uptick in video subscribers, about which they made a booming press report, but in reality 32,000 is a tiny drop in the bucket compared to their overall subscriber base.
A recent report by the New York research firm EMarketer estimated that about 17% of U.S. households will have cut the cord by the end of this year, rising to nearly a quarter of households by 2019.

"Cord cutting is unambiguously accelerating," Moffett said.

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