NEW YORK — “Here’s a scary number for you,” commissioner Rob Manfred told the room in late March. “St. Louis … great baseball market. You know what percentage of homes in St. Louis have access to baseball right now? Anybody want to guess?”
One of the attendees at a luncheon hosted by the Paley Media Council in New York took a stab: 98 percent?
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“Yeah, 15’s the answer,” Manfred said. “Fifteen. It’s because of cord cutting and the fact that operators like Diamond have not even gotten full distribution within the traditional cable bundle.”
Now, that percentage refers not to the city of St. Louis alone, but to the Cardinals’ overall television territory, which stretches beyond Missouri into Arkansas, Illinois, Iowa, Kentucky, Oklahoma, Mississippi and Tennessee. But it’s still surprisingly low.
“We’re gonna put the word ‘reach’ right over the entrance to the commissioner’s office,” Manfred said. “It’s kind of our No. 1 thing.”
Sinclair’s Diamond Sports Group, the parent company of 19 Bally RSNs that broadcast 14 different MLB teams — including the Cardinals — filed for bankruptcy on March 14, and the process is rightfully driving a lot of attention. Diamond has said in court it plans to cut rights fees to three teams: the Arizona Diamondbacks, Cleveland Guardians and Minnesota Twins. MLB and the teams have filed emergency motions to intervene.
But as Manfred pointed out, the issues go beyond bankruptcy. Even in the absence of Chapter 11 proceedings, it’s not ideal when a team like the Cardinals isn’t distributed widely across a team’s territory.
“The problem is we granted exclusivity in places where the cable distributors never actually distributed the product,” Manfred said. “Those people are just out of luck right now.”
All along, the Bally drama has been an entrée to a larger discussion that’s been brewing for years: what should baseball’s telecast distribution look like? Manfred said he first really started thinking about an altered future when he received a warning from a media mogul.
Sinclair bought the RSNs in 2019 from Disney. Some time before that purchase, Manfred was in a green room for a FOX event, and the only other person in the room was Rupert Murdoch. The two had met just a couple times previously, so Manfred thought he might as well strike up a conversation.
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“I go over, I introduce myself, we shake hands and we talk about the business for a few minutes,” Manfred said. “He says, ‘You’re gonna have a problem with these RSNs.’ And you know, that really stuck in my head. I’m thinking, ‘He’s in the RSN business, this is Rupert Murdoch, I don’t know nothing about nothing — maybe I ought to pay attention to this.’”
Manfred and MLB actually bid on the same RSNs that Sinclair wound up buying. Whether MLB’s bid represents a missed opportunity or a bullet dodged is debatable. Maybe if the league had bought the RSNs, they would have been structured better financially. The league, at least, would have had more immediate control over those teams’ broadcast rights. But the league also could have been saddled with the same woes Sinclair has now.
Fast forward to this year, and Manfred has publicly shared his hope for the future.
“I hope we get to the point where on the digital side, when you go to MLB.tv, you can buy whatever the heck you want,” Manfred said in February. That means a world where blackouts wouldn’t be nearly the problem they are today.
The commissioner wants to see baseball become a more “national” game, and a leaguewide bundle of in-market games, whether distributed directly by MLB or a partner like Apple, would certainly serve that goal. In a way, the new balanced schedule for 2023 was introduced to further the possibility: the game’s best players now play against every team every season.
“Largely, the economics of that is related to the media business,” Manfred said at Paley. “If you think about where media is going, the (RSNs) have their struggles, and the replacement — or the most obvious replacement — are the new media companies. And trust me, Apple, Amazon, they don’t want to buy the state of Wisconsin and two counties in Michigan, right? They want to buy the United States.”
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Every game, in one package?
So long as it is priced affordably, an all-30 subscription service for both in-market and out-of-market games is a tantalizing idea. Ideally, the offering would be flexible, with single-game, month-to-month, or yearly options available, for example. But even if fans’ only choice were a longer and therefore more expensive commitment, it’d still be an improvement.
Whether MLB will actually get there is a question no one can answer right now, but there are two major hang-ups.
Legally, MLB is years away from being able to have any shot of making such a service happen. That’s because of the existing contracts teams have with RSNs, and the contracts that RSNs have with distributors. The exclusivity built into those deals is the first major hurdle.
An RSN pays a team for the right to broadcast games. A distributor, like Time Warner Cable or Spectrum, then pays the RSN for the right to distribute the RSN on its service. The business model is predicated on the idea that if you want to watch your team’s games in-market, then you have to sign up for the distributor’s service.
And because distributors pay a lot of money for those rights from the RSN, the RSN has historically been limited in its ability to sell its games direct-to-consumer. (There are exceptions: the Red Sox offer a monthly in-market subscription through NESN, for example, and the Yankees plan to launch one soon through the YES Network.)
But going forward, as those contracts expire, MLB and the teams have the opportunity to loosen the language to allow for streaming options.
“To the extent that we’re smart and end up with flexibility on the digital side, we’re going to massively increase the number of people who have access to those games, that’s really important,” Manfred said. “There will be this kind of hybrid model out there for a few years. I think that what will happen on the cable side is, what they pay for baseball will go down. It will be cheaper for the cable provider. In return, we’ll get digital flexibility so that we can reach fans that are outside the bundle. And I think, all in all, it will result in fans being more able to watch the game, and watch the game on platforms that they want to be on.”
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In the case of the Bally RSNs, the process could be sped up. If MLB ends up taking over the rights that Bally once had through bankruptcy, then the league will have more immediate freedom and flexibility to distribute those games how it wants — maybe even inside of this season.
But hypothetically, say MLB and the 30 teams do someday reach the point where all these contracts have been worked out favorably, and each team legally could pool together their in-market games into a new streaming service. MLB would start the all-30 service the next day, right?
Not so fast.
MLB already sells out-of-market games for every team, through the present MLB.tv offering. So if you live in New York, you can subscribe to Cardinals games, because you’re outside the Cardinals’ territory. But the individual teams control their digital rights inside their market. Presumably, then, to create a streaming service that lets you watch every team’s games no matter where you are in the country, without territorial blackouts, all 30 teams would have to be in agreement.
“Major League Baseball has zero chance of putting all 30 teams together in a national package,” said one lawyer in the sport familiar with the contracts who was not authorized to speak publicly.
The reason, the lawyer said, is that the large-market teams will not want to put their digital rights into an all-30 pot unless it makes financial sense. The most prominent teams draw the most money for their broadcast rights. The likes of Amazon or Peacock might pony up big dollars to broadcast one of the premier teams, and baseball’s central office might not be able to match that offer.
As an alternative, could MLB force the clubs — say, through a three-quarters vote among the 30 owners — to pool their in-market digital rights together? Manfred declined to answer that question when approached by The Athletic, but suggested that any pooling would likely be done voluntarily, rather than by force.
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“Look, that’s a legal question and I don’t really feel comfortable answering,” Manfred said. “The reality is, I think any significant reform of the economics happens in some sort of consensual — if it were to happen, it would happen in a consensual process. But I’m not answering the legal question as to what’s possible.”
Lee Berke, an outside consultant and president of LHB Sports, Entertainment & Media, believes that “teams have to agree to it.”
“The owner has paid for those rights,” Berke said. “And any change in those would result in the league having to deal with some form of compensation to that club for taking more games.”
… Or a mix-and-match future?
Even if MLB can’t put together a single all-you-can-watch, 30-team streaming service, fans could still benefit in coming years.
Manfred doesn’t believe the traditional cable offerings will entirely disappear, nor does he want MLB to accelerate their disappearance. But he said he is “absolutely convinced that we are past any argument about cannibalization.”
The future, then, could well be “mix and match,” as he put it. Every team could eventually be available digitally in-market, just through different services. Maybe one streaming service carries a bundle of teams, or another sells a different team’s games à la carte, and maybe MLB.tv can move to in-market streaming for at least some teams.
While less convenient than a centralized, uniform option, this would still count as an improvement from the status quo. The goal is to be able to reach people who have moved on from traditional TV.
Financially, though, the league and teams could take a hit. Sorting through the mess is one of the tasks of MLB’s economic reform committee. The cable model forces people to pay for baseball broadcasts whether they want them or not.
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“The tougher challenge is the replication of the revenue,” Manfred said. “It’s a great business model when a whole bunch of people pay for something they don’t really care if they have or not, which is what the cable bundle did for us. It’s hard to replicate that.”
But Manfred and the head of the Players Association, Tony Clark, appear to agree on one point: the financial ding wouldn’t last long.
“There will be a downward tick on the revenue side. I think it’s going to be a trough,” Manfred said. “I firmly believe in the value of the content. And I really believe that we’re smart enough to figure out a combination of distribution mechanisms that keeps that revenue stream as a growing stream. If I’m wrong — and you know, I can be wrong — if I’m wrong, yeah, the relationship between revenue and player salaries in sports is pretty clear. Even if it’s not fixed in a salary cap system, our number is 48 percent (of revenue goes to players) kind of every year. … If revenue goes down, it’s bad for everybody involved.”
(Photo of Rob Manfred: Daniel Shirey / MLB Photos via Getty Images)
