Last December, ESPN (NYSE: DIS) exercised an opt-out clause in its seven-year digital rights contract with Major League Baseball Advanced Media. Today, the two announced a new deal that runs through 2013and, in a first for Major League Baseball, allows live streaming of games. ESPN now has matching digital rights to most of its TV events with one notable exception: the National Football League. I spoke by phone separately with ESPN's John Skipper (pictured, left) and MLBAM's Bob Bowman (pictured, right) about the agreement, how it came about and what it means for both.
Why change?: Skipper explained that a lot of the earlier deal was structured around Mobile ESPN because "we needed extensive rights to do our own phone." Without the MVNO, it made sense to reexamine the rights. "When we opted out, we told major league baseball it was not a negotiating tactic. We need a new deal." They kept the previous deal in place. (Unlike most leagues, the digital rights are held by MLBAM and so separate deals are needed for digital and TV.) "Baseball is really, really important digital content because of the volume of games and the time of year they play." Bowman: "If they have the rights in a country, they have the rights to stream." The deal does not include Korea, Japan, China and other countries covered under a different agreement with ESPN Star.
A first for baseball: Bowman: "This is the first time we've allowed someone to stream live games and we do it with a lot of thought. They understand rights and they treat rights appropriately. While I think it's a value-for-value exchange and it's fair for both sides, we wouldn't have done that with many other potential partners." None of MLBAM's other partnersFox Sports, for instancehave a clause (usually known as most favored nation or an MFN) that automatically grants them the same rights ESPN has so it would be case by case. If Fox asked? Bowman: "ESPN and Fox are such large national partners, we're duty bound to negotiate with them. ... They're so vital to the industry that ... if they wanted to do something we'd have to work with them very hard."
Skipper: "Putting this stuff online doesn't really keep people from watching your television. ... Bowman, I must give him creditalso understands he can build his online business and work with me on building our online business." Bowman: "It seemed to make sense to us. In some ways, it's helpful to promote MLB.TV." In fact, ESPN has to promote MLB.TV.
Strictly cash: Skipper acknowledged that there was some revenue sharing in the last deal. "This deal we're paying cash for valuable rights." Bowman wasn't talking financial details either, saying only, "we believe in our content and we're grateful that ESPN does, too." The previous deal was on track to produce $140 million overall.
Multi-platform math: Skipper and Bowman are fairly evolved on the concept of making games available simultaneously on multiple platforms. As Skipper puts it: "It's not cannibalistic if all of it is ours. .. It's hard to resist things that are good for your customers. If you keep trying to keep people from TiVo-ing things or not get games, ultimately you're going to make your customers mad."
Local live streaming: Earlier this week, the NBA, which held back local rights when it made its recent deal with Turner Sports, said it wants to have local market streaming of live games. Bowman says this deal is subject to all blackouts local and national. "We understand the importance of local rights economically, philosophically and baseball was wise to set up the system they have. When the time is right and in the manner that is right, it wil occur. Maybe in five years but no one knows. There are so many important stakeholders her the fans, the rights holders, the affiliates, there's just a lot of stakeholders here. maybe the NBA will start down a good path and we'll see." At ESPN, says Skipper, "if we have exclusive rights, we expect to be the only way to get there."
By Staci D. Kramer