SBJ/March 12 - 18, 2007/This Weeks News

Cable operators may use MLB.TV in new offensive

Cable operators will likely look to the Internet rather than accept Major League Baseball’s offer to carry both the Extra Innings out-of-market package and the planned MLB Channel on the exact financial and distribution terms as DirecTV.

Executives for the major operators were caught off guard last week by MLB’s offer to cable and Dish Network to match DirecTV’s terms for the channel and out-of-market games. Cable executives are loath to give wide distribution to a channel with few, if any, solidified details beyond a planned 2009 launch, though. As a result, cable instead will likely look online to mount its counteroffensive.

“Major League Baseball has chosen to cut a de facto exclusive deal, including conditions for carriage that MLB and DirecTV designed to be impossible for cable and [Dish Network] to meet,” said Rob Jacobson, president of In Demand, a purchasing consortium representing the major cable operators.

During negotiations for Extra Innings, In Demand unsuccessfully offered to match DirecTV’s distribution of the channel household for household. But a key element of DirecTV’s contract is its distribution of the channel on its basic Total Choice tier, which reaches more than 15 million homes. To match, cable would have to offer the channel to at least 80 percent of its digital basic homes, according to baseball sources.

To keep baseball fans from churning to satellite, cable is considering offering free or deeply discounted access to Extra Innings’ broadband component, MLB.TV, according to several well-placed cable industry executives. This strategy would see cable operators seek to buy subscriptions to the full season of online programming from MLB Advanced Media and offer them to their former Extra Innings subscribers, who would then be able to watch the out-of-market games online.

If cable pursues this path, it would hope that the offering would mollify angry subscribers who are no longer able to subscribe to the out-of-market package.

Neither cable operators nor MLBAM executives would comment on the plan, but a senior MLB official said “we will not allow any of our assets to be used to undermine this deal” through an effort such as bulk buying of MLB.TV subscriptions.

Baseball’s offer to In Demand and Dish Network was part of an announcement  Thursday in which MLB and DirecTV disclosed a seven-year, $700 million deal for Extra Innings and the coming channel. The disclosure arrived nearly three months after negotiations were reported by SportsBusiness Journal and includes DirecTV gaining a minority stake in the MLB Channel. DirecTV also intends to introduce several enhancements to Extra Innings, including multigame and strike zone channels.

The MLB-DirecTV alliance has been hotly debated in industry and political circles over the past two months, and league executives said last week they hoped the offer for cable to renew their distribution of Extra Innings would address concerns coming from Capitol Hill.

MLB is firmly prepared to proceed with DirecTV exclusively if needed.

“The choice of whether the [out-of-market] games will be on cable will not be ours,” said Tim Brosnan, MLB executive vice president for business.

Cable’s still-developing response could see operators do nothing in the hopes that the DirecTV-MLB deal is arriving so late that they won’t be able to market the service adequately for the 2007 season. Opening Day is just three weeks away, and MLB executives have privately acknowledged the lost marketing time.

Traditionally, marketing for the Extra Innings service has begun soon after the start of spring training in mid-February.

Cable operators would also choose this strategy if they think they will be able to deliver Internet video to TVs by Opening Day 2008. The industry is hoping to roll out set-top boxes with technology that enables such a function in the next 12 to 18 months. Applications to port Internet content to standard TVs have already been announced by Apple and Sling Media.

The Web-based video quality would not be as good as that available via DirecTV’s Extra Innings.

MLB.TV’s list price for the 2007 season is $89.95 for the base, out-of-market package, and $119.95 for a premium-level offering that includes higher picture resolution and the Mosaic application, which allows for simultaneous viewing of multiple games.

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