Major League Baseball Looks At The Small Picture

Tom Van Riper,

In the face of recession, MLB.com upgrades its video service to hang on to customers.

As the sour economy whacks the sports world, Major League Baseball's Internet arm is scrambling to make sure subscription-paying fans stick around.

Coming for the 2009 season: Live game streams in high definition and a $10 price break for subscribers. A season package of live games will cost fans $109.95 this year, down from $119.95 in 2008. Other goodies being added this year: DVR functionality, multi-game viewing (up to four at a time) and a fantasy league-driven player tracker service.

"If there was ever a time to make sure we're on the side of the fan, this is it," says Bob Bowman, chief executive of MLB Advanced Media, which runs the league's Web operation. Of the 1 million-plus audio and video subscribers the site has signed up since 2002, roughly 100,000 will opt for the premium service of online games in HD this year, he estimates. The company's non-premium video product, with fewer bells and whistles, costs $79.95 for the season. The HD capability, three years in the making, costs about 15 times what standard picture does to produce, he says.

MLB.com is jointly owned by the league's 30 clubs, though it essentially operates as a separate entity. The company's $450 million revenue in 2007 was nearly double what it was in 2005, and accounted for some 10% of overall MLB revenue, according to Shawn McBride, a VP with Ketchum Sports Marketing. "The Web site should continue to be a significant revenue driver for MLB," says McBride.

From his modest office in a onetime Nabisco factory on New York City's west side, Bowman says business is the toughest it has been since 2001, MLB.com's inaugural year. Then he was trying to ramp up an online business in the wake of a busted Internet bubble. Now, it's keeping subscribers on board without skimping on the technology investments necessary to keep the site moving into a future dominated by mobile devices. He plans to plow some $20 million annually--roughly 4% to 5% of the company's revenues--into technology.

Bowman was one of the sports industry's early believers in the subscription model on the Web, one that the NFL, NHL and NBA are now employing in one form or another. Free content built around advertising alone just doesn't hold up, as newspaper executives have learned the hard way. His plan is a mix of ad-supported content and paid subscriptions A cable TV model, as opposed to the broadcast TV model. "You've got two revenue sources, with one supporting the other," he says.

The next hurdle: offering live games in fans' home markets. With lucrative local cable deals driving so much team revenue, MLB has restricted web viewing to out-of-market games, targeting the displaced fan looking to see his favorite team from another city. But Bowman figures fans are just about at the point of expecting content on the web and television alike. The plan is to make in-market games available only to area cable subscribers. For example, only the Yankee fan subscribing to the YES Network would be able to see a game from his laptop on MLB.com while commuting or traveling. He hopes to unveil the service in some cities before the 2009 season ends.

The biggest potential beneficiaries of MLB's growing reliance on Web dollars: Baseball's small market clubs. Unlike local cable television, which creates revenue disparities as each club makes its own deal, all online revenue is shared equally. So far, the dollars aren't big enough to teams like Pittsburgh and Kansas City. But if continued growth brings it to 20% or more of total league revenue, which sports business experts think is possible, those small market clubs will be rejoicing.