MLB officials were beaming last week, believing that they had broken through the logjam that has stalled local video streaming efforts.
By announcing a deal with the Yankees and YES Network — not to mention a second deal waiting in the wings — MLB officials believe they have a general template that will be used by the other MLB clubs. In fact, MLB President and COO Bob DuPuy told a conference call last week that most clubs would have a streaming deal in place by next season.
I don’t share that optimism.
In fact, I think the other regional sports networks will continue to reject MLB’s current video streaming terms. One other team is expected to roll out a service this season. But I don’t see any chance other teams will have local video streaming services up and running this season.
The biggest obstacle for these RSNs is a philosophical one that they’ve been battling for nearly a decade and don’t appear close to resolving. RSNs don’t think MLB Advanced Media should be so involved in local deals struck between teams, their RSNs and their local cable providers. If local TV deals are cut between the teams and RSNs, why should streaming rights be any different?
They argue that MLBAM is more effective negotiating national streaming deals.
But the truth is that MLBAM is right in the middle of the local deals, and that’s not likely to change. That’s one of the main reasons why YES Network finally cut the deal that it cut.
Under terms of the Yankees’ deal, MLBAM will collect 50 percent of all revenue, minus operating costs, derived from local streaming. The other 50 percent will be split among “local interests,” which include the RSNs, teams and cable operator.
MLB Commissioner Bud Selig outlined the revenue split in a memo that he sent to all teams on June 19.
A copy of the memo found its way to my desk and illustrates how contentious the local streaming issue has become. In fact, even Selig admits that he doesn’t know how much money video streaming deals are worth and pledges to review the revenue split in two years to see if it needs changes.
But there are several other aspects to the two deals that rankle the RSNs.
RSNs are legitimately concerned that these streaming deals have the potential to devalue local rights. Even the most wildly optimistic revenue projections for video streaming represent a mere fraction of what MLB teams generate from TV rights. Why gamble a cash cow (local TV) on a small and unknown revenue stream (broadband)?
But YES doesn’t see it as a big gamble. It’s testing the waters to see what kind of demand there is. And because Cablevision was involved with the deal, YES officials don’t believe they are hurting their real cash cow, which is their TV channel.
RSNs also hate the idea of allowing cable operators to sell online games essentially on an a la carte basis. Programmers have been fighting a la carte on the TV platform for years. Why roll over and allow cable operators a la carte access to specific games online?
Another gripe for RSNs is where the online games will be hosted. Right now, it looks like fans will be able to access games through three sites: Yankees.com, YESNetwork.com and Cablevision’s OptimumOnline.net. Officially, MLB.com will host the streams. Other RSNs do not want to give up that control.
The RSNs all support the streaming plans developed by the NBA, which has been agreed to in principle and should be ready by next season. By releasing the rights to the teams, the NBA is charging $3,000 a game — close to $250,000 per season — for networks that want to stream live games locally, industry sources said.
The NHL is somewhere in between the NBA and MLB. Like MLB, the NHL has been holding on to its streaming rights. But sources say it would be willing to sell those rights for the right price.
Selig’s memo shows how difficult the local streaming issue has become. In it, Selig says he “agonized” for years about how to split the video streaming revenue.
MLB hired Allen & Co. to determine the value of the local streaming rights. “Only one thing is in fact certain,” Selig wrote. “There is some set of revenues that we are not generating.”