Broadcasting Fees, Digital Access and Investment Savvy Boost MLB (Major League Baseball)

Major League Baseball (MLB) is a professional baseball league in North America. The league has 30 teams that play in two conferences, the National League and the American League. A season consists of 162 games played over approximately six months, usually late March through October. The season ends with the best-of-seven games World Series played between the champions of each conference.

After an off-season lockout in early 2022, MLB adopted a new collective bargaining agreement which introduced advertising jersey patches and helmet decals as new sources of revenue. The league has also expanded its playoff season and struck new streaming deals.

Baseball was long considered by some observers to be a slow-paced game. This deterred some fans from buying game tickets. The average game in 2022 required three hours and six minutes. Bear in mind that this was an average; some games ran much longer. Starting in 2023, new rules were introduced that were very effective in speeding up the game and making it more exciting. A large “pitch clock” is now on the field, allowing pitchers only 15 seconds to get the ball away (20 if runners are on base). Likewise, new rules make batters speed up their play. The bags marking each base are now larger, giving runners who try to “steal” a base a larger target and a shorter distance to run. By the summer of 2023, the average game time was down to about 2 hours and forty-six minutes. Game play is much livelier as well.

The New York Yankees are by far the richest club in baseball, valued in 2022 at $6.0 billion (followed by the Los Angeles Dodgers), according to Forbes magazine. Not only does the Yankees’ stadium garner staggering revenue in regular season tickets and luxury suites, it also brings in about $85 million yearly in sponsorship deals with PepsiCo, Bank of America, MasterCard and Delta Air Lines. In addition, the Yankees own a regional sports channel, YES Network, one of the most profitable regional networks in the U.S. (The team formerly owned 20% of the network with the remaining 80% held by 21^st Century Fox, the latter of which was purchased by the Walt Disney Co. The Yankees then bought Disney’s stake for $3.47 billion in March 2019.)

Eight-year broadcasting agreements with Fox, TBS and ESPN are in place that average $52 million per season for each of the league’s 30 teams from 2012 through 2021. Starting in 2022, new six-year agreements with the three networks will average about $60.1 million per season per team (augmented by local TV deals worth $40 million minimum per team). ESPN’s total contract value will be $3.85 billion; Fox, $5.1 billion; and TBS, $3.75 billion.

Lucrative local TV deals also include an $8.35 billion, 25-year deal for the Los Angeles Dodgers and a $2.5 billion, 28-year deal for the Seattle Mariners. In addition, the Philadelphia Phillies signed a $5 billion, 25-year agreement with Comcast for cable coverage beginning in the 2016 season.

SPOTLIGHT: MLBAM (The MLB’s advanced online game video technology)

Major League Baseball Advanced Media (MLBAM) owns and operates the league’s web site, www.mlb.com, which was the first to master streaming online technology that allows it to broadcast live games on its site. MLBAM began with an initial $80 million investment by all 30 MLB clubs, which is being repaid through hefty annual dividends. The site includes all out-of-market games. In addition, BAM sells $80 million in MLB merchandise yearly, such as hats, jerseys and signed balls.

Other content owners are looking to MLBAM to distribute content. ESPN uses it to handle online distribution, while HBO’s online video service HBO Now is powered by it. World Wrestling Entertainment uses MLBAM to operate its over-the-top (OTT) service (so called because it delivers video content without a cable TV subscription).

MLBAM spun-off its BAMTech unit, which focuses on non-baseball related revenue such as the digital and television rights to National Hockey League (NHL) games, for which MLBAM paid $600 million earlier in 2015. BAMTech was expected to eventually bring in billions of dollars in revenues from strategic partners including Walt Disney Co., Apple and other video distributors. However, in 2017, Walt Disney Co. acquired a majority ownership of BAMTech for $1.58 billion.

Success both on the field and off for particular teams is spread across the entire league thanks to a revenue-sharing system by which all 30 teams in baseball must abide. Teams with revenue above the league average must make payments (worth the difference between the team’s actual revenue and the league average) that are split among teams with revenue lower than the average figure. As a result, lower-revenue teams such as the Oakland Athletics, Miami Marlins and Tampa Bay Rays have increased their operating incomes.

Revenue sharing is an attempt to even the playing field between franchises. Otherwise, wealthy teams with the capital to pay big salaries (such as the Yankees and the Red Sox) could easily dominate the league, winning year after year by forming very expensive dynasties. The idea is that with shared revenue, less wealthy teams have the wherewithal to attract (and pay top salaries to) leading players. The goal is to achieve parity, making almost any team capable of winning the World Series and therefore bringing more excitement to the game. The average player salary in 2023 was $4.9 million, up 11.1% from 2022, according to an Associated Press (AP) study.

Big data has come to baseball in the form of Statcast, a number-crunching system designed to evaluate speed, movement and trajectories of both players and baseballs. Two systems are utilized, one developed by ChyronHego that tracks and photographs players, and another from TrackMan that tracks balls. A third camera is used to shoot the field as a whole. When combined, the “triple threat” affords TV commentators the ability to create stunning visual displays to illustrate plays. Statcast also is a powerful recruiting and coaching tool. Up-and-coming players’ abilities can be quickly analyzed, as can established players’ performance. For example, Houston Astro pitcher Collin McHugh’s curveball was measured and shown to have a very fast spin. When coached to throw the pitch more often, McHugh became a star player.

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