This morning I wrote a post about baseball’s need to make itself more accessible and to grow for the future. I have a final thought which builds on that. It may sound weird coming from me given how often I’ve mocked the “baseball is dying” crowd. To be clear, I DON’T think baseball is dying, but I do think it faces a pretty big challenge in the not-too-distant future. And, if it doesn’t successfully navigate the rough waters ahead, it could be in for some trouble.
The issue is cable money. TV deals between RSNs and individual teams, networks and the league as a whole and by virtue of the league having its very own cable network have sent oodles of money into MLB’s coffers over the past decade or so. Rights deals that used to pay clubs eight figures over a series of years now pay billions. Billions more come from the national deals.
Cable companies and networks pay this money to MLB (and other sports leagues) because live sports are perceived to be DVR-proof. People want to watch them as they happen and, when they do, they willingly sit through commercials in order to do it. At the same time, cable networks like ESPN have made serious bank by forcing cable companies to carry their networks at huge premiums per subscriber because, again, sports is seen as the key to getting people to sign up for cable. There are battles in all of this — carriage rights disputes which keep channels off of certain providers for a time — but in the end, the model has long held: cable subscribers spew money in the direction of RSNs and sports networks, the sports networks spew money at sports leagues and the sports leagues get rich.
It’s a nice system, but it’s not one that anyone should believe will hold true forever. A lot of people are cutting the cable cord these days. Not yet an overwhelming number but a non-trivial number. They are opting for internet-only entertainment options like Netflix, Amazon Prime, Hulu and the like. ESPN once had 99 million subscribers. They’re down to about 92 million now and it’s cutting into both its profitability and Disney’s stock price. The same dynamic is no doubt affecting other cable networks and RSNs.
There are possible hedges against that decline for the networks. Standalone products like HBOGo but for sports in which people may be willing to pay a certain amount to get their sports programming at a rate that is less than what they pay for cable but more than zero. There’s also the long-held pipe dream of a la cart pricing for cable channels. Most studies on those things however, have concluded that such products would not offset what the sports networks have been losing from the cord cutting. Not every cable subscriber or cord cutter is a sports fan, after all, many of them will not migrate to the standalone product and certainly not at a price that makes it make sense for programmers. If anything, non-sports fans have been subsidizing sports programming, not the other way around. You get cable so your kids can watch Nick Jr. and ESPN benefits because you’re technically an ESPN subscriber too. When you realize your kid can watch “Dora the Explorer” on Hulu or whatever, you’re not necessarily gonna go get ESPN separately.
All of which comes back to baseball. Over time, if this dynamic persists, the networks which pay MLB and its clubs billions for broadcasting rights are going to demand discounts. In some cases maybe they’ll decide to chuck the idea of broadcasting games altogether because it just doesn’t make financial sense. Maybe some companies even go belly-up in the middle of rights deals, declare bankruptcy and leave clubs in the lurch abruptly. When rights fees drop or disappear so do baseball revenues. And when baseball revenues go down clubs, players and the league will all suffer.
All of which puts baseball in a precarious position. A position that, if you squint and tilt your head, looks like the position print media was in in the 1970s through the 1990s. Profits for newspapers were HUGE. Subscriber bases were at all time peaks and advertising rates followed. Sure, TV news was a competitor, but localized monopolies were on the rise as three-paper cities became two-paper cities and then single-paper cities. Getting into the media business was a no-brainer then and executives at media companies made serious, serious money.
But then something changed. One small thing happened — the advent of the Internet — and all of the assumptions upon which the newspaper industry was based were suddenly inoperative. Media didn’t disappear, of course. And neither did most newspapers. But the revenue model was fundamentally altered and media companies are still trying to figure out how to monetize their product the way they used to. Or in any way even approaching the way they used to.
I don’t think baseball is in the dire straits the newspaper business was in when the Internet dawned. It has the benefit of being its own product as opposed to simply being a means of communication someone else can take up tomorrow. It likewise has diversified its means of dissemination to a large degree in the form of MLBAM and MLB.tv. Indeed, MLBAM is its own business now that does lots of stuff beyond simply sending out baseball over the tubes of the Internet. It’s a cash cow and could be spun off into its own business soon, enriching its owners even more. At bottom, it’s baseball and people love baseball in its own right, not just because it shows up on their front porch each morning.
But there is still a heavy dependence on cable and RSNs in all of that. You can’t cut the cord and watch your local team on MLB.tv. You can’t watch a good portion of the playoffs either given how much of the postseason has migrated to cable. Given how cable revenues work it’s understandable why MLB does not allow local fans to stream games of local teams at present (i.e. the local RSN pays good money for those eyes), but over time more and more people are going to make the judgment that cable costs aren’t worth what they were a few years ago and that a huge amount of their entertainment needs can be fulfilled with streaming services. What then?
Major League Baseball is run by a lot of smart people and they no doubt realize this. And, hopefully, they have a plan to more fully transition into a world where billion dollar cable deals aren’t handed out as freely as they are today and where people expect to be able to stream everything, including the hometown nine. If they don’t, or if their plans are inadequate, they’re going to fail to attract those younger fans they’ve been trying to court over the past few years. Baseball, as a televised entertainment product, will simply be invisible to them. The demographic concerns baseball has now — only middle aged people are watching it — will seem quaint as the the current middle aged people die off and no one takes their place.
No matter what they’re doing to prepare for that, it seems pretty inevitable that the landscape of broadcast baseball is going to be very, very different a decade from now than it is today. It will be different financially and structurally. Baseball has a head start over a lot of forms of entertainment in that it has invested in its own platforms so it could very well benefit from those changes in ways I’m underselling at the moment. If it doesn’t thrive in the new world it could, being a popular sport a lot of people love, simply weather those changes well enough and keep chugging along like it always has. It could, however, be battered by those changes just as any number of successful endeavors have been battered when underlying assumptions shift. Baseball is not dying, but it isn’t written anywhere that it will always be popular no matter what.
Whatever happens — whether baseball benefits from a changing landscape, simply weathers it or is battered by it — will go a long way toward determining the future of the sport. And how we watch it.
