Yesterday, the National Hockey League and Major League Baseball Advanced Media announced a multi-faceted 6-year deal in which MLBAM will pay $600 million to take over distribution and operations of NHL’s GameCenter LIVE and Center Ice online subscription services (including via pay-TV operators), manage all of NHL’s web sites, manage all of NHL Network’s operations (including taking over ad sales) and jointly develop new digital products. As part of the deal, NHL is reportedly getting a 7%-10% stake
in MLBAM, which is also reportedly going to be spun off (finally) from Major League Baseball. (clarification, per MLBAM spokesman, NHL's stake is in BAM Tech, the technology arm of MLBAM)
That’s a mouthful, but what it amounts to is a major expansion in MLBAM’s scope of business, instantly morphing the company from being primarily a provider of technology services supporting rights-holders to being a multi-platform distribution company in its own right. As such, MLBAM may have just become the most disruptive force in sports TV, signaling to every broadcast and cable TV network which has an interest in sports TV - from CBS, ABC, NBC, ESPN and on down the line - that the ground just shifted underneath them. Here’s why.
MLBAM’s major appeal is that everything about the company - its technology, operations, culture - were built to help sports (specifically, Baseball) succeed in the worlds of digital and online video, at scale. Although MLBAM also supports entertainment networks online (with HBO Now being the most prominent example), it has a hand-in-glove fit for other leagues and sports rights-holders.
The best analogy I can think of is how Amazon has productized its own technology infrastructure into Amazon Web Services, the cloud-computing goliath that is now widely used by third-parties for the same kinds of things Amazon itself uses the technology for. Similarly, MLBAM’s infrastructure, built for Baseball, and already implemented for WWE and recently for PGA, will now be deployed for the NHL and no doubt others down the road.
That potentially upends the basis on which future sports TV rights deals are done. Historically these deals have been primarily about money, namely which network would pay the leagues and rights-holders the most, and secondarily about new broadcast and digital features they’d introduce. In a world where ALL pay-TV subscribers received sports networks, resulting in billions of dollars of annual subsidies by non-sports fans, sports networks could engage in intense bidding wars, spending outrageously to secure multiyear exclusives.
But with the proliferation of inexpensive OTT options and cord-nevering/cord-cutting on the rise, the days of profligate spending on sports are almost certainly coming to an end, despite sports’ much-ballyhooed role as live TV and advertising’s “firewall.” ESPN’s widely-reported loss of millions of subscribers in the past year, recent cost-cutting moves and a downgrade of its profit expectations just yesterday and even talk of ESPN going OTT all illustrate the network's changing fortunes. Every broadcast and cable TV network has to be re-thinking how much to spend on sports if their subscriber counts and monthly fees are being squeezed down.
In this changing environment, it’s going to be more important than ever for sports leagues’ long-term success that they deliver the most outstanding, immersive experience to their fans - the people who actually care about the product and have a high willingness-to-pay.
And that’s where MLBAM comes in, with its best-of-breed technology, operations and culture, all specifically focused on sports. It can offer leagues and rights-holders capabilities that no other TV network can, way beyond core streaming services. MLBAM also offers many advantages over big tech providers like Apple and Google that have no sports DNA. The NHL deal shows that there are many potential gives-and-takes MLBAM is open to in order to win business, including having the leagues themselves become stakeholders in MLBAM, thereby nicely aligning their long-term objectives.
With the NHL deal, there’s little doubt that every league and sports rights-holder around the world will at least want to take time to visit with MLBAM and understand their capabilities before renewing their existing TV deals. Once these leagues and rights-holders get a glimpse of what MLBAM could do for them, they’re going to look at TV network deals in a very different light. To be sure, money is still paramount, but digital capabilities are going to rise in importance. And the more deals MLBAM secures, the better positioned it is to cross-sell and offer packages of sports to fans as well.
Of course, a lot of the above unfolding depends on both how well MLBAM executes the NHL deal and how expansive its ambitions are. As an independent company, no doubt with an eye on a public offering somewhere down the road, MLBAM will be well-positioned and well-funded to pursue growth (just take a look at Netflix’s stock as a gauge of what Wall Street is willing to pay for a global streaming growth story).
All of this means MLBAM may have just become the most disruptive force in sports TV. It could be an entirely new kind of partner for sports leagues and rights-holders, ushering in a major shift from multichannel bundling of sports to laser-targeted, high-value, multi-platform OTT fan experiences.