January 28, 2007

Something Doesn't Add Up

Bob Raissman of the New York Daily News wants us to look at MLB's pending deal with DirecTV solely as a business proposition. Yet when you do, it makes absolutely no sense.
Spies say the cable industry, bidding on the package as a consortium represented by a company called InDemand, has offered to pay $70 million per and is not demanding exclusivity.

This means that in addition to the cable operators, MLB could sell "Extra Innings" to DirecTV, Dish Network as well as AT&T and Verizon's TV services.

The combined value of a non-exclusive deal, which would make "Extra Innings" available to the widest possible audience, would likely exceed MLB's proposed exclusive deal with DirecTV by at least $40 million per year, according to industry sources.
Raismann offers a possible reason why MLB wants to go it alone with DirecTV:
[I]n its negotiation with the cable consortium, MLB suits tried linking an "Extra Innings" deal to the cable operators agreeing to eventually put "TBC" [The Baseball Channel, which will not exist until at least 2009] on a "basic" tier. Being placed on a "basic" tier means MLB would be paid per subscriber based on an entire cable system's universe of subscribers.

The cable industry balked, saying when "TBC" becomes a reality, it belongs on a "sports tier," which means MLB would be paid based only on how many subscribers purchased that individual tier. Apparently, that's when MLB took its "Extra Innings" deal over to DirecTV, which guaranteed it would make "TBC" available to about 85% of its subscriber base.

If the NFL Network, which actually exists, could not convince companies such as Time Warner and Cablevision to place it on a "basic" tier, what makes MLB suits think the industry would roll over and put "TBC" on "basic?"
So ... while MLB would pocket more money by offering Extra Innings to both cable and satellite providers, they are ready and willing to accept less money and have The Baseball Channel be available to fewer total customers.

Something doesn't add up.

4 comments:

L-girl said...

Bob Raissman of the New York Daily News wants us to look at MLB's pending deal with DirecTV solely as a business proposition. Yet when you do, it makes absolutely no sense.

Hence my observation that it smells dirty.

When business people make blantatly bad business decisions, and those decisions appear to be anti-competitive (that is, they are exclusive), we should all be suspicious.

L-girl said...

> blantatly =

blatantly

9casey said...

Cable had 750,000 subcribers for MLB last year at about 80-100 a pop

TO make the same money they did last year they would have to double or triple the price .. This would piss off enough people were subscribers would be down...Then cable to recoop the money in turn would raise cable rates across the board...It would be a huge risk for them with just 750,000 customers.

redsock said...

EI was more like $150.

MLB could have a broadcasting deal with InDemand *and* DirecTV *and* whoever else wanted to show baseball. They would presumably get more customers than threy would with an exclusive deal with one of them. But increasing its audience apparently makes too much sense for MLB.

I'd pay more for EI if they raised the rates. And I don't think I'd moan about it either. Even at the full season price, it's less than $1 per Red Sox game.

And you get all the other games too. It's a hell of a deal.

Now if they would allow us to choose which team's announcers we get (like you can do with MLB audio) we'd be cooking.