SBJ/January 29 - February 4, 2007/This Weeks News

DirecTV talks hinge on MLB net

DirecTV’s willingness to place Major League Baseball’s long-planned 24-hour TV network on an expanded basic tier has topped cable’s offer of placement on a digital sports tier and, in the process, redefined how the sport will distribute its out-of-market game broadcasts.

The Los Angeles-based satellite carrier and MLB last week were seeking to put the final touches on a seven-year, $700 million pact to give DirecTV exclusive carriage of both MLB’s Extra Innings out-of-market package as well as the league’s dedicated 24-hour network. A formal announcement of the deal, first reported last month by SportsBusiness Journal, is anticipated within the next two weeks.

Cable executives confirmed it was indeed the MLB network, provisionally titled in the past The Baseball Channel, that tilted the entire course of negotiations for the out-of-market package.

Through In Demand, cable operators told MLB they would increase their offer to $70 million per year for Extra Innings — more than three times the $20 million per year previously paid — and up to $85 million per year for exclusive rights to the property. But they would not budge on the carriage issue for the network, and MLB executives were loath to engage in the type of fight that has befallen other property-driven networks.

NBA TV has been placed on dedicated sports tiers in most cable and satellite systems. As a result, it has seen its actual reach remain a fraction of availability. The NFL Network, The mtn. and the Big Ten Network, similarly, have struggled to gain desired distribution.

DirecTV, conversely, will expand its base Total Choice package, which has close to 15 million subscribers, to include the MLB network, an outlet that has been contemplated for years and first designated with targeted funding in a 2004 owners meeting.

Cable executives last week said MLB was being short-sighted regarding the future growth of the network.

“If Major League Baseball thinks that the best way to get widespread distribution for the Major League Baseball channel is to give an exclusive to DirecTV on the Extra Innings package, they have sorely miscalculated the reaction of the rest of the world,” said one well-placed cable source.

The MLB network is not scheduled to debut until at least 2009. Programming will include some regular-season games, in particular some nonexclusive Saturday night contests that were not sold last year in the national broadcast deals with Fox and Turner. Other plans include nightly highlight shows and coverage of the Arizona Fall League, spring training and minor league games not currently covered by regional sports networks. MLB retained the right to operate its own nightly highlight show in its 2005 broadcast rights negotiations with ESPN.

Operational details such as staffing and executive leadership remain weeks, if not months, away. What’s certain is that the channel will lean heavily on the resources of MLB Advanced Media, which already operates state-of-the-art production studios from its Manhattan headquarters and generates dozens of hours per week of feature and analysis programming.

Under the DirecTV umbrella, Extra Innings would be co-marketed with MLBAM’s online out-of-market product, MLB.TV. The two offerings historically have operated separately, and perhaps in a competitive state. Starting this season, a subscription to one will enable a discount to the other.

Pricing has not been set for this season for either product, but last year, Extra Innings cost $179 and brought viewers about 60 games per week; MLB.TV cost $79 and provided every available out-of-market game. Extra Innings last year drew about 750,000 subscribers, while MLB.TV had 300,000.

Reports of MLB’s plans with DirecTV has led to the league being slammed by columnists and bloggers, decrying the sport for its apparent greed and shutting out cable customers who have subscribed to Extra Innings. MLB executives, speaking on the condition of anonymity since the deal has not been announced, said they were aware of the negative feelings but predicted that the sentiments would be short-lived.

“There will be some people unhappy at the outset, but this is exactly what the NFL, the alleged market leader, and the NCAA have already done,” said an MLB executive, referring to their DirecTV-only deals for out-of-market game packages. “This is a chance to reinvigorate the product and, with the channel, get to some underserved areas of the sport.”

MLB executives were uncertain what kind of bump MLB.TV will get this year from displaced cable subscribers of Extra Innings. The internal expectations for 2007 are for DirecTV to hold on to its base of Extra Innings subscribers — about 300,000 last year — and then pick up about half of the former cable subscribers to the offering. From there, the goal is to sharply build up interest in Extra Innings through extensive promotion and DirecTV’s increased presence as a leading outlet for sports programming.

For DirecTV, a deal with MLB would follow last week’s announcement of an extension with CBS for NCAA men’s basketball tournament coverage. Those offerings add to DirecTV’s NFL Sunday Ticket powerhouse and its NASCAR HotPass service that is scheduled to debut next month.

MLBAM plans to distribute MLB.TV this season at a much higher rate of resolution in a long-planned upgrade to the service. Game video will be streamed at a rate of 700 Kbps instead of the 350 Kbps to 400 Kbps rate of last year.

“This is something we’ve been working on for the better part of two years,” said Bob Bowman, MLBAM chief executive. “The difference in quality, particularly on larger monitors, is going to be huge.”

MLBAM also will tweak its Mosiac product, an add-on functionality to MLB.TV. Mosiac allows for viewing of up to six games simultaneously, and for the first time, fans will be able to make their own choices of which six games to place in Mosiac. Another change will enable variable screen sizes within the multigame viewing platform.

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