Tuesday, August 28, 2012
Analyzing the new MLB-ESPN rights deal
By Darren Rovell
ESPN and Major League Baseball have announced a new eight-year rights deal, worth a total of $5.6 billion, a number first cited by the Sports Business Journal.
So what stands out?
Well, first the number: The $700 million-a-year average is an increase over the old deal, which averaged $350 million annually. If you assume that Fox and Turner -- whose deals expire after next season -- or even a new player like NBC, also pay double, MLB will be pulling in about $1.5 billion a year in total national rights from 2014 through 2021. That puts MLB ahead of the NBA, which currently pulls in $930 million a year from its TV partners, and the NHL, whose latest deal has the league pulling in $200 million a year from its only national U.S. TV partner, NBC.
For what it's worth the MLB deal is a far cry from the deals for the country's most popular league, the NFL. Excluding the NFL Network, because we didn't include MLB Network rights, the NFL's new deals -- which start in 2014 and expire in 2022 -- are worth a combined $4.95 billion a year. That doesn't include another $1 billion from DirecTV.
Major League Baseball really makes its money being the ultimate content provider. As networks look to fill more and more air with live games, no sport offers what baseball does. In the new eight-year deal, ESPN is guaranteed 808 games on television. That compares to 136 games ESPN gets from its "Monday Night Football" deal in an eight-year period.
As everyone knows by now, sports generates its value by being live. More than 99 percent of viewers who have ESPN on their TVs are watching it live and that includes studio shows. When fans are watching live, commercials have more value.
This is indeed the golden age for sports on television, but it's also the golden age for sports everywhere.
Baseball, with its MLB At Bat app, has shown that fans are willing to pay some significant dollars to see or listen to their games live while they are on the road. With this deal, all of the baseball games the network broadcasts will be available on its WatchESPN app. And you must be portable in this day and age.
But the star of this deal is the highlights, which run over and over again on ESPN shows like "SportsCenter" and are now available in greater capacity on ESPN's digital properties.
The stock market reacted with a "So what?" shrug to the blockbuster deal as Disney's stock price was up fractionally. But when analysts reference the cash cow that ESPN is to its parent company, you'll often hear them talk about its robust carriage fees and about how the network uses what they pay for.
Each number seems more eye-popping than the next, but the theme is rights do have more value over time. By the time we get to 2020, I have a feeling even this deal will be seen as a bargain.