TV SportsHow Baseball Moved Its 24-Hour Channel Into Scoring Position
By Richard Sandomir The New York Times
May 28, 2007
Major League Baseball plotted for two decades to create a 24-hour channel, and last month it got its way after months of tortuous negotiations with DirecTV and cable operators.
The channel first envisioned by the former commissioner Peter Ueberroth is to start in early 2009 with nearly 47 million cable and satellite customers, with its first major programming being the World Baseball Classic.
The channel will begin its life with more subscribers than any other cable network before it, partly because of a strategy that used Extra Innings, the package of out-of-market games loved by fans who have relocated from their home teams, as negotiating leverage to build up the nascent channel.
The strategy emboldened baseball to make the renewal of Extra Innings from 2007 to 2013 contingent upon carrying the new channel on broadly distributed digital basic tiers, not narrower digital sports tiers.
The evidence of that is that we started doing one-year deals on Extra Innings in 2004, said Tim Brosnan, baseball's executive vice president for business, who has been working on the channel for about five years.
Robert D. Jacobson, the president of the InDemand consortium owned by the cable operators Comcast, Time Warner and Cox, battled Brosnan before finally agreeing to a deal on April 4.
We weren't surprised with what they did, Jacobson said. They kept rolling over Extra Innings as one-year arrangements because they hadn't figured out their channel strategy.
What publicly appeared to be negotiations about Extra Innings were much more about the 24-hour channel, which, because its elements are known only to baseball officials, lacked a constituency of fans clamoring to get it.
Some people thought that Extra Innings was the dog and the channel the tail, said Chris Tully, baseball's senior vice president for broadcasting.
He said baseball made sure it was the other way around.
But cable subscribers protested with e-mail and on-line petitions that they would be disenfranchised by a tentative deal approved by baseball owners, but not signed, that would have given Extra Innings to DirecTV exclusively for $700 million over seven years.
DirecTV also guaranteed that 15 million of its 16 million subscribers would get the channel. For that, it received a one-third stake in the channel.
The Senate Commerce Committee held a hearing that baseball officials resented attending.
A Boston Red Sox fan site, bostondirtdogs.com, altered a photograph of an apartment building pocked with satellite dishes, all with the name Bud on each of them, referring to Commissioner Bud Selig. The caption read: Welcome to Budville.
And on March 21, MSNBC's Countdown with Keith Olbermann awarded Brosnan the bronze medal for being one of the three worst people in the world that day for rejecting InDemand's offer to renew Extra Innings and carry the channel. Brosnan could not reach Olbermann to vent his anger, but was calmed by a friend of his, the Democratic Party strategist James Carville.
He said, God can you believe this?' Carville said in a telephone interview, and my reaction was that I had been No. 18 in the entire world for Spy magazine on its list of the most appalling people in the world. And it was one of the best things that ever happened to me. He told Brosnan to show the segment at owners' meetings.
He's made them a lot of money.
Brosnan has heeded Carville's wisdom: he playfully showed the segment to a visitor to his office.
Two weeks after the Olbermann flap, baseball and cable operators reached an agreement, but it might have been a different one if not for the fan furor, Congressional scrutiny or DirecTV's willingness to drop its exclusivity on Extra Innings.
We have to credit a confluence of events, Brosnan said. We could only be so smart.
Selig, who was criticized by some as insensitive to cable fans, said: It was worth taking some of the rips. This is critical to our marketing for the future.
The lucrative deal will:
Pay M.L.B. an average of $80 million annually for Extra Innings.
Generate total cable subscriber fees of $112 million in 2009 and $152.7 million in 2015, according to a presentation made to owners on May 17 in Manhattan by the investment firm Allen & Company. Baseball must split those revenues with cable and DirecTV.
Produce advertising revenues that will rise to $65 million in 2015.
Create an asset in the new network that Allen estimates is worth $1.2 billion to baseball, based on its two-thirds ownership stake. DirecTV ended up with a 16.67 percent stake, Comcast with 8.34 percent, Time Warner 6.35 percent and Cox 1.98 percent, based on their proportional shares of subscribers in the network.
Baseball's first stab at a channel, in 1987, was not as grandiose, and came when it was also looking at making its first major rights deal with a cable network. Two consultants' reports were analyzed, and another plan was proposed by Tom Curley, then the president of USA Today, and Thomas Freston, who was running MTV.
Ultimately, a four-year deal worth $1.6 billion was made with ESPN, which lasted from 1990 to 1993, obviating the need for a baseball channel. It was just easier to make a deal with someone to pay us $400 million a year, said Bryan Burns, a former head of M.L.B. broadcasting and now an ESPN executive.
The idea was revived, with a twist, when baseball teamed with ABC and NBC from 1994 to 1995 to create The Baseball Network, a venture in which M.L.B. got no upfront rights fees but sold all its own broadcast TV advertising.
It failed amid acrimony between the networks and baseball, and the impact of the players' strike.
The cable network got more traction around 2002 and owners gave it the go-ahead two years later, believing then that digital sports tiers, which charge subscribers extra fees, would become more popular than they are.
Baseball altered its strategy, and its distribution plan mirrors that of the NFL Network, which has 42 million subscribers but is in the midst of a legal fight over whether the channel can be carried on digital sports tiers.
The channel will spend upward of $30 million in start-up costs (with the rest of the continuing costs paid through cash flow) for a network that will carry 26 Saturday night games (which will compete with local broadcasts); archival and fantasy programming; studio shows; and perhaps some reality series.
This channel, Brosnan said, will not rise or fall on games but on the creativity of our nongame programming.
The channel will also serve as leverage if national TV partners like ESPN, Fox or TBS do not pay what baseball wants.
It would be a viable alternative, said Jerry Reinsdorf, the owner of the Chicago White Sox. I can't imagine it happening, but it's hard to imagine G.M. not being the biggest seller of cars. You've got to constantly plan ahead.http://www.nytimes.com/2007/05/28/sp...gewanted=print