More on Extra innings and DirectTV

The Wisconsin Sports Bar, where the guys are counting down the days to Spring Training and obsessing over the Badger Basketball team, has an interesting post, viewpoint, and link to another story on the pending MLB deal with DirectTV to move their Extra Innings package exclusively to the sattellite provider.

Why MLB Ditched Cable

The setup from E.S.K., one of the bartenders at The Wisconsin Sports Bar:

While everyone, including myself, has lamented the impending move by MLB to DirecTV, it looks like the deal is about more than simple greed. $100 million divided by 30 teams? Not exactly something to jump for joy over. I stumbled over some better reasoning at Yahoo Finance of all places this morning.

The Yahoo Finance Article:

There's a lot of talk these days about Major League Baseball striking a seven-year, $100 million per year deal to sell exclusive rights to its Extra Innings package of out-of-market games to DirecTV (NYSE: DTV - News). No deal has actually been announced, and DirecTV's chief executive officer, Chase Carey, told analysts earlier this week that reports about such a transaction have been "mostly speculation."
...
[T]he big question that baseball fans are asking is why would MLB move Extra Innings from cable, where it has the ability to reach 65.5 million homes, to DirecTV, where it could reach just 16 million homes?

While "greed" is an easy answer, I think it's more complicated than that ($100 million split among 30 teams gets each a utility infielder or serviceable middle reliever every season). I think the answer can be found in two places: online and on Wall Street.

Major League Baseball Advanced Media ("MLBAM"), the online arm of MLB, has been wildly successful. The unit has built the most compelling online offering of any professional sports league; integrating video, audio, blogs, real-time scores, stats, and reams of other content.

MLB.TV, which offers a more robust package of games than Extra Innings, is a hit (1.3 million subscribers in 2005, according to New York Magazine), and last year, over 20 million tickets to baseball games were sold via MLB.com and team websites. It's not just baseball that MLBAM is involved with.

MLBAM also provides technology to Major League Soccer and many other distinctly non-baseball ventures.

Full disclosure:
The Timber Rattlers have an agreement with MLBAM regarding the internet home page. MLBAM also runs the statistics for all of the minor leagues.

The Payoff:

By shifting the Extra Innings package to DirecTV, MLB has now vastly expanded the market for its own offering. Fans like myself who have cable and no interest in switching to satellite television, are left with only one alternative to watch out-of-market games: MLB.TV.

Thus, by contracting the market for Extra Innings, MLB would be expanding the market for its MLB.TV. It's addition by subtraction.

It should be noted that MLB only has about 300,000 Extra Innings subscribers who get the service through cable or Dish Network, compared to about 270,000 already on DirecTV. If MLB can win these customers back, they'll do so at a higher margin (one reason Extra Innings costs more than MLB.TV is that the cable companies had to pay rights, something MLB obviously doesn't have to worry about).

To MLB's credit as a business organization, they know that fans like myself are suckers. I complain to no end about how MLB treats its customers, but every year I'm buying the Extra Innings package, going to games at two or three stadiums, buying merchandise, and renewing my subscription to XM Satellite Radio (Nasdaq: XMSR - News), the exclusive carrier of every MLB game. I'm a baseball fan, what else can I do?

If MLB does indeed grant DirecTV exclusive rights to Extra Innings, I won't be switching to satellite television. I'll listen to the games on XM and watch them online, via MLB.TV, of course.

More importantly, I'll be keeping an eye out for MLB Advanced Media's IPO, because that's where I think this is heading.

IPO = Initial Public Offering. A stock term that means a lot of money is at stake.

Reaction:
I said this earlier and admitted that I used someone else's words (I still can't find who said it): If I worked at an office for 8 hours working on a computer, I don't want to come home and watch a baseball game on computer for another three hours.

The deal makes sense from a business standpoint, but still it seems to leave the PR side lacking.

Since he found the article, I'll give E.S.K. the final word:

Suddenly this whole deal makes much much more sense. This will be yet another in the long line of brilliant moves by Bud Selig that will go unrecognized.