Not anymore. The excitement around Major League Baseball these days is how technology–specifically the league’s Internet portal, MLB.com–can reposition this stodgiest of sports into a pioneer in personalized video and wireless content delivery. The Web site’s lineup? Searchable highlights on demand. Live Webcasts of out-of-town games. Minute-by-minute updates through a Web-enabled Palm device or AT&T cell phone, complete with a custom “Charge!” ring when your team begins to rally. As for this tech company’s neatest trick–making money by charging monthly subscription fees for content, a revenue model that used to be considered blasphemous to the Web–well, that rally is underway, with usage and revenue up dramatically. The numbers remain small compared with baseball’s long-term expectations, but they’re a good start. “To be successful economically, subscription services have to be the engine,” says Bob Bowman, who oversees MLB.com as CEO of Major League Baseball Advanced Media (MLBAM). “It’s happening, and will continue to happen.”
MLBAM is a wholly owned subsidiary of baseball’s 30 teams, founded in June 2000 as their centralized official Web presence. The interactive media company also represents one model for revenue-sharing for baseball that could help improve the sport’s competitive balance. Unlike most money that individual teams take in–local TV, tickets, hot dogs–MLBAM profits will be shared equally among all 30 clubs. “Obviously not all clubs’ Internet rights were the same,” says MLBAM chairman Bob DuPuy, who is the overall No. 2 man to Commissioner Bud Selig. “For them to vote unanimously to share it was a significant step as we go forward.” MLBAM is not a public company, so its numbers and optimism need to be viewed somewhat warily. But MLB.com is getting newfound respect from outside experts. Says Patrick Keane, the lead sports analyst for Jupiter Research, “Major League Baseball is quite innovative right now. I’ve always thought baseball was so far behind the other sports and sat on its hands. Now it’s the polar opposite.”
Baseball fans following the current playoffs and World Series can hit sites belonging to ESPN, CBS SportsLine, CNNSI and others for the standard fare of real-time scores, game reports and pitch-by-pitch simulations–all provided free to help attract traffic and build brand loyalty. Major League Baseball, meanwhile, is leveraging its exclusive ownership of game audio and video, both live and repackaged as highlights, by offering that content to its 2 million visitors a day, occasionally free as a promotion but primarily on a subscription basis. MLB expects to clear $7 million in revenues this year from its 800,000 subscribers (the rest of its users can still get access to free data like feature articles and roster updates) but sees the service evolving in three years to a $50 million annual business. Add that to its current $46 million (which is forecast to grow to $110 million) in revenues from game tickets, memorabilia, merchandise and advertising–up 89 percent from last year–and you have an Internet company that can swing from its heels.
Of course, it doesn’t hurt that baseball’s owners have kicked in more than $70 million over the past three years to launch MLB.com and, their tales of financial woe during recent labor talks notwithstanding, have more at the ready. And the audio and video content arrives free because the league already owns it. But Bowman claims the operation will be profitable by the end of 2003. Baseball is already a $4 billion business, so even a hundred million here and there in profits means only so much, but beyond that baseball can serve as a test case for the evolving Internet. That test is important: will enough people pay to watch Web video to make it a viable business?
High-speed broadband connections, which Jupiter estimates are in 15.5 million homes now and will double by 2005, generally afford viewers three-by-three-inch screens of somewhat jagged quality. Continued improvement will help satisfy more picky older users. (Hey, television antennas weren’t perfect in the ’40s, either.) Moreover, many baseball fans have no choice if they want to see comprehensive video of their favorite team. Because studies show that up to 50 percent of fans live away from their favorite team’s home city and local TV feed–baseball’s appeal in the Caribbean and Asia means millions have few television avenues at all–many will miss games. In theory, many will want to see them either live or in highlights form. MLB this season Webcast 10 pennant-race games live in their entirety, the first of which attracted 30,000 viewers in 64 countries. Click-and-play highlights are perfect for fans everywhere who don’t want to wait through 40 minutes of ESPN’s “SportsCenter” to see top plays from a particular game, and MLB.com wants a visit to its video section to become as regular for fans as the morning box scores. “We have to be that habit,” says the 47-year-old Bowman, who came to Major League Baseball in late 2000 after running the Internet retailer Outpost.com.
Baseball’s grand online plans rely on fundamentally different economics than the old advertising-revenue model for the Web, which largely hasn’t worked despite all the dot-com hoopla. MLB is attempting to wean Web users off the idea of free, mediocre content in favor of paying for premium, exclusive and personalized services. Baseball’s Web site offers a bamboozling array of mix-and-match choices: live radio of all 2,430 games ($14.95 a year), video of each game’s roughly 80 meaningful pitches boiled down to a 20-minute package ($4.95 a month), customizable highlights ($4.95 a month) and several others, or the whole shebang for $9.95 a month. So far, radio has turned out to be MLB.com’s big seller–750,000 subscribers, compared with video’s 27,000–but MLB believes that the mix of broadband adoption, improved streaming video and fans’ eroding aversion to paying for such content will by 2005 bring up to 1 million subscribers at $10 to $15 a month, and an additional 1 million to 2 million for a lower tier of services, not unlike the way cable companies package their offerings. Jupiter’s Keane is skeptical but acknowledges the power of exclusive content: “If people told you in 1975 you’d be paying around $60 a month for TV,” he says, referring to cable’s early days, “you’d have said they were nuts.”
MLB gained a certain legitimacy last year by partnering with RealNetworks to stream and sell the baseball content. The fastest-growing Internet subscription service, Real currently has 750,000 customers paying $9.95 a month for access to CNN newscasts, expanded E! network coverage, NBA highlights and a dozen other channels; Real sees baseball as instrumental in not just future growth but also getting users to realize the Net’s value as media provider. Football, for instance, is “appointment viewing,” something done every Sunday through regular broadcast television or satellite-TV feeds, leaving relatively few fans unable to catch a specific game. Baseball, by contrast, has 15 games almost every day, with enough viewers wanting either live feeds or highlights to let the Internet ride in as hero. “If you look at the history of technology–even teletext and radio–sports, and more specifically baseball, has been leading the charge of every delivery system, satellite and cable included,” says Larry Jacobson, president and COO of RealNetworks. “This is the next logical step in giving people more choice and control of their experience.”
Control is a matter about which MLB’s longtime partners have concern. Fox (whose former president happens to be one Larry Jacobson) pays more than $100 million for the exclusive local broadcast rights to 25 teams, and is bristling at how MLB’s live Webcasts might intrude on that domain. “Baseball believes its gating systems have been successful,” says Tracy Dolgin, president of Fox Sports Net, referring to the method by which MLB determines a Web user’s ZIP code and locks out any game involving a local team. “The bigger it gets, the more challenging it gets.” In addition, technical difficulties have dogged MLB.com, though the procedure of charging people’s credit cards works just fine. Outsiders also wonder if the site is too cluttered with memorabilia-hawking ads and confusing multimedia smorgasbords to fully catch on.
Still, baseball’s strategy of keeping its online audio and video exclusive to its site–the NBA and NFL have licensed theirs to various outlets such as AOL and CBS SportsLine–has positioned it to reap whatever windfall comes of its Web subscription experiment, with all clubs sharing equally in the profits. Enough to put the lowly Kansas City Royals in the playoffs? Perhaps not. But after decades of being laughably behind other industries and sports in embracing new technologies, baseball might have found a way to score big.
