from the new-baseball-business-models dept
As a Techdirt reader, the business of professional baseball is not required reading. That said, for many reasons, the baseball business aligns nicely with many of the topics we discuss here, and baseball in general is probably the math-iest of sports. That's why it seems necessary to push back on this Chicken Little piece at the Wall Street Journal, which claims that the laughably large baseball contracts players are signing today are doomed to drop precipitously because of cord-cutting.
At first blush, the premise here might even seem reasonable.
But there is one question looming over the sport, even as it indulges in another no-holds-barred cashapalooza. Salaries in baseball have been rising without fail ever since the advent of free agency in 1975. But for the first time, there are real warnings from responsible people that the party may be coming to an end.The qualifier built into the premise is the premise's undoing. "If they can't find other sources of revenue" with regards to broadcast contracts, amounts to, more generally, "If baseball doesn't make as much money they won't pay the players as much." Well, yes, obviously. The problem is that no professional sport has positioned itself as well for cord-cutting as has Major League Baseball. As we've discussed at length in the past, MLB's Advanced Media product is the gold standard in sports streaming, so much so that other sports leagues are actually piggy-backing off of the MLB.TV product for use in their own sports. In addition, while the WSJ presents all this as some kind of surprise doomsday on the near horizon, MLB has been prepping for this for some time. We've already seen the league and its teams embrace streaming options with the current broadcast partners, as well as look to end the old blackout rules that would hamper streaming availability. What the WSJ piece attempts to paint is a picture in which it sees the doom coming, but MLB does not and is blithely handing out huge player contracts unwittingly. Baseball has done nothing to demonstrate that kind of ignorance, though, and in fact has done everything to demonstrate instead its willingness to be out in front of cord-cutting.
As more people downgrade their cable service for smaller bundles of channels, or “cut the cord” by disconnecting from cable in favor of online streaming services, or just decline to ever subscribe, the economics of baseball will take a hit. MLB teams will no longer be able to ask cable services to pay a premium for the right to show their games. If they can’t find other sources of revenue to make up for this, it’s hard to imagine salaries to escalate at this rate in perpetuity.
Vince Gennaro, the director of the graduate sports management program at Columbia University, said he wonders if the current deals between teams and cable services are sustainable. “These are major strategic issues that the consumer is going to have a large vote in,” he said, adding that he is not sure that baseball’s regional networks have an accurate view of the threat they’re facing. “Are the networks reading the market right? Are they reading the consumer right?”Valid questions, but not when it comes to MLB revenue and player contracts. There is nothing in the cord-cutting trend to indicate that baseball viewership is going away. And the viewers are all that matters for revenue purposes. In fact, the cord-cutting trend has quickened as sports streaming becomes more widely available. That would seem to indicate that fans are simply trading television broadcasts for streams which, while it may hurt the local broadcast partners, presents no reason why it should hurt revenue overall, thereby affecting player contracts.
In the end, the article does a lot of hand-wringing over the questions it itself is asking, and yet the league and teams are moving forward confidently. That should tell you everything you need to know about whether or not the league is prepared for cord-cutting.