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Memo details streaming plan

Major League Baseball believes it has broken through its self-described “logjam” for in-market live streaming of games by developing an economic model that pays MLB Advanced Media half of all related revenue.

The terms for local streaming deals, outlined in a June 19 memo that Commissioner Bud Selig sent to all 30 teams and was obtained by SportsBusiness Journal, will send the other half of the related revenue to local interests, such as the participating team, its regional sports network and the local cable provider. The 50-50 split between MLBAM and the local interests is “net of operating costs to participating broadband and wireless service providers,” according to the memo.

While each streaming deal will be different, in large part because of how the local half of the revenue is divided, Selig noted “the same relative terms” will be used in all future in-market streaming agreements.

Selig, however, hinted the revenue splits are not cast in stone and could change in two years. In 2011, he intends to review the structure to “determine the fairness of the allocation and the impact upon industry economics.”

The league and MLBAM, MLB’s interactive arm, last week announced a landmark agreement with the New York Yankees, the YES Network and Cablevision to begin in-market streaming of the club’s games beginning July 8. The effort, first reported by SportsBusiness Journal earlier this month, marks the first agreement of its kind by a major professional sports league in conjunction with local TV rights and represents a significant breakthrough after years of fruitless negotiations on the matter.

The package is priced at $49.95 for the rest of the season and $19.95 for a 30-day period.

A second in-market streaming deal set to be announced this week involves the San Diego Padres and Cox Communications, according to industry sources.

Selig’s memo was created and distributed with the intent of announcing two clubs had entered into in-market streaming agreements and to outline the economic framework for these and subsequent pacts.

Selig

In a similar memo nearly two years ago, Selig described the financial debate over in-market streaming as being in a “logjam” and pressed the MLBAM board of directors to pursue a solution. The latest memo references that prior note, as Selig calls the new framework “a fair and practical outcome to break what I have called the in-market streaming ‘logjam.’”

Other teams do not appear to be close to deals for in-market streaming on the heels of the Yankees and Padres, but MLB President Bob DuPuy last week said while announcing the Yankees’ deal that he expects “a majority” of teams will have such deals in place sometime next season.

Selig’s memo, however, shows the uncertainty that MLB has in determining how big the local streaming market will be. Similarly, MLB Advanced Media President and Chief Executive Bob Bowman last week acknowledged that part of the effort involves creating a new market.

In the Selig memo, the commissioner describes three years of “agonizing” over the issue, and how the league hired Allen & Co. to determine the value of local streaming rights. That research effort “provided guidance, but not certainty,” he wrote.

“Only one thing is in fact certain — there is some set of revenues that we are not currently generating,” Selig writes. “At the outset, I am convinced the revenues are likely to be quite modest and I am convinced it is in the interest of the game to begin an assessment of how our fans will react to this offering.”

Currently, the Yankees’ in-market streaming is available only to Cablevision subscribers who receive both the company’s TV and Internet service. YES President and Chief Executive Tracy Dolgin last week said the RSN is talking with other distributors to expand the footprint of the Yankees’ in-market streaming, as Cablevision’s penetration does not reach several key parts of the New York market.

But those deals, as well as any other MLB in-market streaming pacts, according to the Selig memo, will require that a user receiving the service must also “be a cable television subscriber to the club’s regional sports network” in order to protect the existing local TV rights.

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