A friend of mine mentioned that a class* he is in was going to have the CEO of MLB Advanced Media, Robert Bowman, as a guest speaker this week. I took the liberty of sitting in on the class, and I thought I would pass along some of the most interesting pieces of information.
-MLBAM is jointly owned in equal shares by all 30 Major League teams. Revenues last year totaled around $650 million, and all teams received an equal share of about a $100 million dividend. The revenue comes from four different streams: 1) Online ticket sales (~$150 million) 2) MLB Shop sales (~$100 million) 3) Content subscriptions (~$250 million) and 4) Advertising / Sponsorships (~$150 million). Each of these revenue streams is growing at roughly 25-27% a year, except for the MLB Shop which is growing at roughly 7% a year. He expects that the total dividend paid out might be around $150 million this year.
-When asked about the impact of MLBAM revenue on leveling the playing field across teams, he said that it helps some, and specifically mentioned Kansas City as a team that it benefits, but he also said that he thinks the biggest thing it does to level the playing field is provide high quality content to all fans, regardless of market size. He emphasized how expensive and difficult it is to stream a huge amount of data to 3,000 different combinations of devices and operating systems, and that Royals fans have the same quality MLB.tv service as Yankees fans. This is something I hadn't considered before, and I am certain that as a Royals fan and MLB.tv subscriber I am a beneficiary of this effect. Does anyone think that David Glass would invest in creating a comparable online video product for Royals fans?
-On the issue of MLB.tv, he was also asked about blackout restrictions. The notorious Fox Saturday blackouts are part of the contract with Fox, and Fox has insisted on them based on the idea that baseball fans will watch whatever game is on broadcast, even if it isn't their team, just because they love baseball so much. Fortunately, he said that 2013 will be the last year with such blackouts, and that Fox has agreed to end Saturday blackouts starting in 2014. He did say that local blackouts will probably be around for the near future, but seemed to hint that cable providers might make concessions in this area down the road. He said that it is basically the one thing that cable operators ask for when securing rights, so they haven't really pushed very hard on it at all at this point.
-Another interesting topic was the use of electronic tickets. The Nationals have gone to a system this year where all tickets they sell are digital, and he suspects all teams will do so within the next few years. If someone wants to resell a ticket, they need to digitally transfer it to somebody else. This enables MLB to track customer behavior more closely and know who is attending how many games and when. This tied in to MLB's plan to begin offering free Wi-Fi access at all stadiums. MLBAM pays for all fees and equipment related to offering free Wi-Fi (the individual teams only forego the rent they would have gotten from the square footage within the stadium where all the equipment is set up). MLBAM's intention is for teams to use data about customer behavior to offer discounts and promotions. His example was "Thanks for coming to three games this year, here is a digital coupon for some free concessions". He noted, however, that some teams will probably try to use the data to extract more short term revenue from customers, but he made clear he thought that was a bad idea and short-sighted. It will be interesting to see how the Royals use customer-level data in their marketing and sales.
-He told a funny story about how their generator was starting to run out of diesel after Hurricane Sandy, and how he had people go out into Manhattan looking for trucks with diesel and offering to give them World Series tickets in exchange for fuel. He had fuel in the tank on the roof of their building within two hours. The morning of the second day there were trucks lined up on the street waiting for them to try and trade diesel for some World Series tickets.
-He thinks stadiums will have a trend of fewer seats and more open social areas, much like the Royals did in the outfield concourse.
-He thinks Facebook is garbage, but really likes Twitter.
-MLB.tv has pretty poor sales among 18-25 year-olds. He thinks it is primarily due to the fact that it cost $125 a year and that the demographic doesn't have a lot of money. They are trying to partner with universities to have the university pay them some sort of heavily reduced fee and then offer MLB.tv as content that is included in the price of a student activity fee. He says that this will cannibalize some existing sales, but that they think it is more important to establish a broad user base. He thinks that to significantly increase subscriber numbers, that the price would have to be dramatically reduced. He also thinks they could probably raise the price without losing many subscribers, but that he is afraid to do so because if he turns out to be wrong it will be very difficult to recapture the subscriber base that they currently have.
-He said to pay attention to what happens in Cablevision's lawsuit against Viacom. Cablevision is asserting that Viacom unlawfully requires them to purchase a bundle of channels instead of allowing Cablevision to pick content a la carte. This is important because cable providers (like Cablevision) do exactly the same thing to customers, and that this could potentially have an impact on a la carte cable subscriptions.
I didn't take notes, so this is just what I remembered off the top of my head. If there is something else you would like to know, please ask, and I will try and remember if he said anything about it.
*The class is outside of the law school, so it wasn't in our catalog, but I am kicking myself for not knowing that this class existed and was available to law students. It is taught by Peter Guber (one of the Dodgers' new owners) and past guests have included the CEO of ESPN, the Pac-12 Commissioner, and Al Michaels among others. Next weeks guests are Scott Boras and David Stern followed by Shawn Green the week after that. I am hoping it will be offered again next year. If people are interested, I will post notes from next week's session as well.
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