And to bring in the New Year

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Thursday, Jan. 01, 2009
Baseball Takes a Swing at Its Own Network
By Sean Gregory

If the nation's economic doldrums are going to slow down the national pastime, there's not much evidence of it yet. This past season, baseball blasted a home run, scoring a record $6.5 billion in revenues. During the winter offseason trade rumors and expensive free-agent signings have kept fans hooked. Struggling media outlets still saw fit to send some 370 journalists to Las Vegas to cover the sport's winter meetings, an annual hardball cattle call packed with rumor-hungry execs, scouts and assorted hangers-on, all looking for the next big deal.

In fact, Major League Baseball is so confident in its staying power that it is launching its own 24/7 cable channel in the midst of the country's worst recession since the Great Depression. On January 1 the league, looking to tap into fans' endless demand for stats, scores and late-breaking news on a middle reliever's rotator cuff, will debut the MLB Network, a channel that promises to cover every crack of the bat, in or out of season. (Read TIME's Top 10 sports moments of the year.)

But is there really demand for that much baseball, especially at a time of year when most sports nuts are focused on college bowl games and the NFL playoffs? The nation's cable and satellite providers think so: the MLB Network will debut in over 50 million homes – the U.S has around 115 million television households – making it the largest pay-TV launch in history. "This is the next step in the evolution of delivering baseball to our fans," says Bob DuPuy, baseball's president and chief operating officer.

Baseball, of course, doesn't amount to much in the dead of winter, so the network's New Year's Day debut will consist of an hour-long studio show at 6 p.m., followed by the original telecast of Don Larsen's perfect game in the 1956 World Series. Before the season starts, the MLB Network will primarily feature sports news, original documentaries and spring-training reports of every team. The channel will broadcast World Baseball Classic games in March, and 26 regular season games during the year. The network's signature show is slated to be MLB Tonight, an eight-hour nighttime highlights program featuring updates and occasional live coverage of ongoing games. Think of ESPN's popular highlight program, Baseball Tonight, on, er, steroids.

Popular ex-ESPN commentator Harold Reynolds and former Mets pitcher Al Leiter will man the studio, provide analysis and serve as the faces of the channel. The network was planning to eventually move into a shiny new office tower in New York City's Harlem neighborhood, but construction never started because of the credit markets collapse. Instead, baseball's channel will operate out of MSNBC's old studios in Secaucus, N.J., which was supposed to be a temporary home until the Harlem building was finished. The space features a 9,600-square-foot replica baseball field, replete with dugouts, outfield seats and a 25-foot scoreboard modeled after the one at Citizen's Bank Park in Philadelphia. On this set, analysts will provide on-air instruction about the subtleties of the game. It's called Studio 42, named after Jackie Robinson's uniform number. "We have a lot of toys in here," says Tony Petitti, the former number two at CBS Sports who was tapped to run the network in April. (See pictures from the last ever night at Yankee Stadium.)

An eye-catching set is nice. But in an advertising market that's softer than a knuckleball, baseball realizes it's a horrible time to be launching any kind of business. "This economy is not good for anybody; it would be silly to say anything else," says Tim Brosnan, MLB's executive vice president in charge of business.

However, the MLB Network's 50 million homes give it unprecedented scale. The other league-owned and operated sports channels still haven't hit baseball's numbers, and they've been around a lot longer. NBA TV, launched in 1999 but still relegated to the more expensive sports tier of cable channels, has only 15 million subscribers. The five-year-old NFL Network, which has waged mortal combat against cable operators for more favorable distribution terms, reaches just 42 million homes. The subscription revenue from the cable and satellite operators could keep MLB Network buoyant in a tough advertising market. In fact, most analysts are bullish about the channel. "We expect them to be profitable from day one," says Derek Baine, a senior analyst at SNL Kagan, a cable television research firm.


It's not just baseball's popularity that got it such good distribution right out of the batter's box; the league made a major sacrifice to get into those 50 million homes, realizing that if you can't beat the cable powers, you might as well join them. Unlike the NFL, baseball offered the pay-TV operators minority ownership of the network. Satellite provider DirecTV owns 16.5% of the MLB Network, while the three largest cable companies, Comcast, Time Warner Cable and Cox Communications, together own another 16.5%. Major League Baseball owns the remaining two-thirds. "We watched the path that the NFL network took, and we decided to take a different one," says Brosnan. "We decided early on that we'd be open to the possibility of giving ownership stakes to the operators to get distribution."

Though other large operators, like Charter Communications and Cablevision, don't have a stake, they agreed to carry the channel after the big boys signed on. Thanks to baseball's rather inexpensive asking price, companies have been more willing to play ball with MLB. Baine says that while the NFL demanded an 85 cents-per-subscriber fee from operators to carry its network, baseball asked for a more reasonable 25 cents. The network will appear on the basic digital tier of every major provider except for the Dish Network. "No one is going to get 50 million homes out of the cable operators again," Brosnan boasts.

He may be right. But some analysts believe baseball's business decisions will cost the sport down the road. "They gave up too much equity," says Marc Ganis, president of SportsCorp Ltd., a consulting firm. "The initial wide distribution is a great short-term benefit. But it's almost like they're assuming they would not have grown. They could have gotten into 50 million homes, and beyond, without sacrificing one-third of the ownership. Major sports programming is something viewers will always find."

When defending the merits of its strategy, baseball throws a different pitch. "It would take an awfully long time to grow to the value that being in 50 million homes is immediately going to provide," says DuPuy, Baseball's COO. "It makes sense from an economic standpoint, and plus, these companies are partners that will help grow the game, and at the end of the day, that's to everybody's benefit as well." Baseball's bet: in five years, it will have a 66% stake in a network worth $1 billion or more, instead of a 100% cut of a company worth $660 million or less.

But without enough compelling programming, those 50 million households won't keep watching. Baseball's daily rhythms do give the MLB Network an inherent advantage over other single-sport channels. During the season, every team plays almost every night, so fantasy players, stat geeks and casual fans will have a reason to keep tuning in. "Baseball really has so much more going on day in and day out than the other sports, especially football," says David Carter, director of the Sports Business Institute at the University of Southern California.

One potential problem is that MLB's excellent website, mlb.com, already satisfies this fix for many fans. For $14.95 per month, you can even watch out-of-market games on baseball's site. Plus, despite baseball's overall economic strength, its television ratings dropped like a sinker last season. Fox's regular season baseball ratings fell 13%, ESPN's shrunk 7%, while 15 local networks that broadcast baseball saw double-digit ratings declines for their games. The 2008 World Series, between the Philadelphia Phillies and Tampa Bay Rays, was the least watched in history. In that respect the new network's timing may be terrible.

What's more, at least these other channels show a steady diet of games, while the MLB Network is slated to show a relatively paltry 26 of them all season. It could still end up increasing that number this season, and plans to air more games down the road. But for the moment, the channel is contractually restricted from airing games opposite those being broadcast on ESPN, Fox and TBS, baseball's national television partners. Will fans care enough about documentaries, shop talk and game highlights that they can also get from ESPN – and from ESPN personalities they've become attached to – to turn into devoted viewers of the MLB Network?

Even Petitti, the new network CEO, admits he's a bit nervous about winning viewers' loyalty. In the MLB Network's bustling Secaucus studios, Petitti can't contain his energy, asking employees to show him the latest screen graphics and alternate lighting angles. "Because we're launching into more homes than any network ever has, we've got to be more ready," Petitti says from his corner office. "We have a responsibility to make it feel like we've been around awhile on day one." In other words, the MLB Network can't afford too many rookie mistakes, or else it might be spending a long time in the media minors.

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