Maury Brown Contributor
Sports Money 7/07/2014
If you have your finger on the pulse of media companies, you’ve surely followed Google GOOGL +0.7%, orNetFlix NFLX -1.43%. As the world inches further away from cable and satcasters for television, and more and more toward content streamed via the internet, the term “cutting the cord” has moved into the media industry lexicon.
But what if I told you there was a company nestled in New York’s Chelsea Market near the Apple AAPL -1.84%Store and across the street from Google’s offices that will see revenues of $800 million in 2014; with targeted revenues of $1 billion by 2016. That this company engaged in streaming live video of 18,000 hours in 2009 and is expected to hit 400,000 this year. That not only are they providing that, they’re a key company for online ticket sales, but isn’t StubHub. That key brands in corporate America hire them for content infrastructure, and not only that, are a data analytics firm that rivals Bloomberg . The company has mobile technology that makes them one of Apple’s key partners and has been used at keynotes for their product launches.
This company is one that you know, right? It’s got to be someone whose logo is plastered across tech publications and a place in the forefront of the business section.
The reason you may never have heard of this company is because when you think of it, you think baseball. Yes, that game that your dad or grandfather likes, the sport whose commissioner doesn’t even use a computer at the office, is the place where the biggest media company you’ve never heard of was started.
MLB Advanced Media, the digital tech company of Major League Baseball, is not just about baseball any longer. The brilliance of Bud Selig and the owners to have a business arm that has been free to go not only linear but horizontal with product offerings is something that is now viewed as the benchmark by which not only other sports leagues do digital media, they’re seen as more media company than baseball.
Launched in 2000 and the original piece of MLB Advanced Media, MLB.com was funded by the 30 clubs in an agreement that had them each investing $1 million a year over four years. The cost was targeted at $120 million. To the joy of the owners and MLB, the web presence for baseball started generating excess revenue in 2003, allowing them to invest only $70-$75 million before beginning to see a return on their investment. The 30 owners in baseball now get dividends annually based on direction of their board of directors and is reportedly expected to be $7-8 million per club for 2014.
The King of Live Streaming Media
While other leagues are just now getting on the streaming media bandwagon, President and CEO Bob Bowman and the team TISI -0.4% at MLBAM saw that given the massive inventory of games in MLB (162 game season for each of the 30 teams), streaming video that was in-house could be tapped as a critical revenue stream for baseball.
Thus, MLB.TV was kicked off in August of 2002 with the first game pulling in 30,000 viewers for the first game. The service provided a nine-game package of September pennant race match ups after that. It wasn’t till 2003 that there was a full season of games, and only for one device, PCs. In 2009, MLB.com released an update to the “At Bat” mobile application to iPhone, and streaming video took off. Consider this: by the end of the 2014 season, MLB.TV, the streaming service for out-of-market games, now on over 400 devices, will pass 2 billion live games streamed in 720p live HD. Not counting the partial season in 2002, that’s an average of 125 million streaming live games a year.
Empirical evidence shows that MLBAM is at the center of a movement towards big media strategies that include OTT/Direct to Consumer. It’s not all about TV Everywhere.
In April MLBAM enabled nearly a 100 million streams to unique viewers on top of MLB.TV (that alone accounts for 125 million live streams of baseball per day) of the following services to third-parties that are all part of a big media strategy that includes, among other things, a sizable direct to consumer offering:
- March Madness Basketball for Turner (available for 3-hours of live viewing without authentication);
- Wrestlemania as part of the WWE Network;
- The Blaze 24/7 linear news stream;
- Pacquiao – Bradley 2 pay-per-view event.
Along the way, MLBAM supplies the backend infrastructure for WatchESPN, the Walt Disney owned network’s mobile app for streaming live sporting events, including this year’s FIFA World Cup. MLBAM’s infrastructure was able to keep ticking during the last two Team USA World Cup matches that saw live streaming well north of 1 million concurrent viewers for the entirety of each match. With all the video feeds readily disposable through MLBAM, a Replay Operations Center was built inside their headquarters where all the instant replay challenges in Major League Baseball are reviewed and relayed back to umpires on the field.
On top of this, MLBAM is looking to change the way that content is created streaming mobile. In June, they launched 120 Sports, a first-of-its-kind partnership involving multiple leagues and content properties, that has MLB.com as part of it. In addition to MLB.com, those content partners also include Time Inc. (owner of Sports Illustrated), the NHL, the PGA Tour, NBA, NASCAR and leading collegiate conferences via Campus Insiders, a joint venture between IMG College and Chicago-based digital sports-media company Silver Chalice.
Mobile Apps, Ticket Sales, and Upgrading Your Seat At the Ballpark
By now, many purchase tickets to ballgames online. The league has a partnership with StubHub, among others, and is looking to have users directly purchase, not only online, but increase the percentage that purchase via mobile. But, the key moment for MLBAM was the 2005 purchase of Tickets.com. By owning an online ticket company it is allowing MLBAM to build out next-gen ticketing technology.
Currently, ticket sales via mobile through MLB.com account for just 5% of the total. But, according to Bowman, within 2 years they will see 50% of fans purchasing baseball tickets on smartphones.
And it’s not just before the game that targeted sales will occur.
In March MLBAM partnered Experience, the fan experience mobile technology company, to allow fans to upgrade their seats after they’re inside attending a game. The Arizona Diamondbacks, Atlanta Braves, Minnesota Twins and Oakland Athletics were the first clubs to launch the service in April when the season started.
The service is tied to new features available with the update to the At The Ballpark mobile app at the beginning of the season. At The Ballpark is a free app for iPhone, iPod touch and Android smartphones developed by MLBAM allowing fans to check-in and manage their personal experiences at all 30 Major League Baseball ballparks. It also joins expanded use of Passbook delivery for online ticket purchases.
The partnership between the two companies uses technology to deliver functionality through At The Ballpark, including accurately identifying the most desirable seat and experience for each fan, visualizing up-to-the-moment available inventory and completing the upgrade purchase.
A scenario might work like this: a fan has gone to X-number of games at a ballpark, and checks in with At The Ballpark. The fan might be notified that they not only can upgrade, but potential perks. This highly targeted marketing works to build repeat customers at the ballpark.
Big Data, Analytics, and the Ability to Track Insane Plays
Baseball is already known as a game immersed in statistical analysis of player performance to gauge value (see the book and movie Moneyball, if you haven’t been following this already). Think tanks like Baseball Prospectus, Fangraphs, Baseball Reference and more look into data that comes from MLBAM daily.
The last frontier for baseball analytics has been defensive metrics. The difficulty has been tracking the chaotic nature of them. How fast does a player break to a ball hit in the gap? How fast was the ball coming off the bat and at what trajectory? How fast does a runner break from first base to second base? All of this requires intense culling of data.
This year MLBAM blew the sports analytics world mind by introducing a system that features optical tracking, measuring every play on field. It’s not easily presented (terabytes of data are generated with each play) but tests are being conducted with the system at Miller Park, Citi Field, Target TGT +0.58% Field with a full rollout for 2015 across all ballparks. MLBAM has plans to ultimately have the technology make it’s way into their digital products and television broadcasts in real-time.
Could MLBAM Break Off, And Is There IPO In Its Future?
Major League Baseball has been cognizant of the power of the internet way before it became what it is today. Industry analysts bemoaned that every time a national television broadcast deal was done, it required a second set of negotiations for digital media rights. By sticking to this idea that digital rights were more than just some “line item” buried within a larger contract for television rights, MLBAM has positioned itself perfectly in a world surrounded by the likes of Netflix and Hulu. MLB Advanced Media is not baseball, it is a company that is owned by baseball that has bigger plans.
At the outset of this article it was mentioned that revenues could soon hit $1 billion for MLBAM. It’s possible that figure could be much higher.
Word is that MLBAM could break away as its own company, with Major League Baseball being a majority partner. The break-off could include industry partners, with the possibility of a partial IPO in play.
In October of 2005, a trial balloon of sorts was floated by MLBAM to see what its value would be if it went IPO. Bank of America BAC -0.03%, Goldman Sachs, First Boston and J.P. Morgan tried in vain to get the owners to go forward with the initial public offer, which they set then at a value of $2-$2.5 billion.
That looks like chump change today. It does not seem out of the realm of possibility for that the valuation to far exceed double that figure in the nearly 9 years since the trial balloon.
What seems certain is with the rush of diversification around MLBAM’s product and service offerings they are set to become larger still. They’ve quietly positioned themselves to become a monster player in the midst of the media market. It’s not a question whether they’ve hit a home run, it’s simply a question of how far out of the ballpark they’ll hit it.