Inside sports business
NEW YORK – Baseball commissioner Rob Manfred looked like a hitter already down two strikes to Felix Hernandez with a changeup headed his way.
Manfred had just been asked about a regional sports network (RSN) carriage dispute preventing 60 percent of viewers in Los Angeles from watching the Dodgers on local television this final season of legendary broadcaster Vin Scully’s career. Answering such a question is usually a no-win situation, but Manfred’s protective-swing response produced an uglier-than-usual strikeout.
“I’d like to see more self-help by Dodger fans on that issue,’’ he told a boardroom full of media members Thursday at the annual Associated Press Sports Editors commissioners meetings. “The way to get everybody’s attention is to move to the provider — if you can — that actually will let you watch Dodger games.’’
If only the world was that simple.
Unfortunately for Manfred and Major League Baseball, most Dodgers fans outside the city’s downtown can’t find a cable-TV provider — such as Cox or DirecTV — willing to carry the games produced by team-owned SportsNet LA.
And that problem is sending chills through sports and broadcast-industry insiders because there is no easy solution.
Many younger TV viewers and older ones fed up with high bills are “cutting the cord” on cable and switching to streaming devices.
This hurts distribution networks used by RSN entities broadcasting the games of sports teams. Teams will charge an RSN enormous amounts — frequently surpassing a billion dollars — to carry games for a specified number of years.
About a third of MLB teams — including the Mariners, who partnered with DirecTV on ROOT Sports — have cut out the middleman and formed their own RSN. They produce the game feeds and get to sell all the ads and keep all the profits.
For any RSN, survival means gaining distribution of game broadcasts over as big a territory as possible. That means selling game broadcasts to other cable-provider networks. Think of Comcast paying to pick up ROOT Sports broadcasts of Mariners games in Seattle.
The cable providers cover that fee by charging their subscribers higher monthly bill amounts.
But those subscribers are threatening to leave cable TV if monthly fees keep rising. As a result, providers are no longer paying the RSN asking price to carry games, meaning teams can’t gain any distribution.
SportsNet LA was formed two years ago between the Dodgers and Time Warner Cable. The Dodgers promptly signed a string of long-term player contracts — figuring TV money was coming. But cable providers balked at SportsNet LA’s price to pick up game feeds, meaning the majority of people around Los Angeles can’t watch the team.
The same thing happened with Astros/Rockets-owned Comcast SportsNet Houston. It went bankrupt after one year in 2014 because it couldn’t get Astros distribution deals beyond Houston’s downtown.
And this “cord-cutting’’ phenomenon isn’t going away. MLB has been inoculated somewhat because of older fan demographics.
But MLB is also more vulnerable, given how many teams own an RSN. MLB has benefited more than any league from RSN money, largely because of the 162 games of live-TV content each team offers.
A further sign baseball’s RSN gravy train could end is found by walking a few Manhattan blocks to Major League Soccer headquarters. Over there, MLS commissioner Don Garber discusses video-streaming inroads with “millennial” soccer fans ages 18-35 as well as the younger generation after that.
The league hopes to soon offer a live-streamed game on a public social-media channel.
Garber talks of internal studies showing most millennials use laptops as their primary “television” device. For the under-18 set, he said, TV is mostly watched on smartphones.
If that isn’t a wake-up call for big-screen dominated MLB, then Mariners ace Hernandez needs to drill it in the head with a fastball.
Sure, MLS lacks the huge TV deals MLB has. But soccer doesn’t have nearly the salary burden; money leveraged well into the future based off expected TV revenue that might not come.
Manfred insists there is no reason to panic.
“We believe that there will continue to be erosion, but the cable model is going to survive,’’ said Manfred, adding, “I think that the challenge for us … is to find complementary modes of distribution that fit into the desires of those largely younger individuals that are cutting the cord.’’
In other words, baseball needs its own streaming solutions.
MLB Advanced Media has worked wonders in a short time, unveiling a range of digital products. Manfred says the MLB.com “At Bat” streaming application draws about 8 million users per day.
He correctly notes his sport remains popular and has lured younger fans via a new generation of star players and the popularity of statistical analysis.
But monetizing digital products to where they’ll pay off another seven years of Robinson Cano’s salary is key. For the Mariners, ROOT Sports uses DirecTV’s satellite-based distribution system — which makes it easier for the RSN to blanket a six-state territory — and is better positioned to avert disaster.
Still, the ongoing L.A. fiasco is something making all MLB teams nervous. MLB isn’t MLS and has much higher bills to pay for far longer.
There’s a price for everything in this world. And the bill is about to come due for MLB teams that have spent this decade bathing in RSN money from a tap that’s slowly being shut off.
