clock menu more-arrow no yes

Filed under:

The Royals and every other team are about to get a $50 million windfall

New, 34 comments

Disney’s purchase of BAMTech will be lucrative to teams

World Series - Kansas City Royals v New York Mets - Game Five Photo by Al Bello/Getty Images

In 2000, MLB was wise to this “internet” thing everyone was talking about, and created “MLB Advanced Media” (MLBAM) to standardize their team websites and online ticket purchasing. Each team plunged $1 million per year for four years to fund the venture, giving them each an ownership stake. In addition to ticket services, MLBAM branched out to video streaming and the very popular app “MLB At-Bat” providing scores and highlights on-demand.

Before long, MLBAM was an industry leader in providing digital sports content. Eventually, the NHL signed a deal with MLBAM to run their digital properties. And it wasn’t just sports leagues - HBO worked with MLBAM to create “HBO Now” to provide their content through streaming services. MLB had stumbled upon a very successful venture that was changing the industry.

"Before anyone else was even thinking about these issues, BAM figured out compression, geofencing, and multi-application delivery at scale," says Rick Heitzman, a venture capitalist who has worked with BAM over the year.

In 2015, MLBAM spun off “BAM Tech” into its own company, that would focus on the non-baseball business of providing streaming content, such as the work with the NHL and HBO, and new ventures with ESPN, WWE, and the PGA. In 2016, Disney purchased a $1 billion stake into BAM Tech, which valued the entire company at $3.5 billion, which all 30 teams still owned a stake.

This week, Disney announced it was purchasing another $1.58 billion stake in BAM Tech, giving it a majority share of 75%. MLB owners collectively will still own 15% of the company, but will receive $50 million per team, from the acquisition. That’s right, a $4 million investment back in 2000 has turned into at least a $50 million payout.

Part of the deal includes Disney getting the right to air one game per night on its streaming service through ESPN for a “significant sum” to MLB. The game will be behind a paywall, but will not be exclusive to ESPN and can still air on regional sports networks.

What does this all mean for the Royals? Well, they happen to be at a crossroads right now, with several key players - Eric Hosmer, Mike Moustakas, Lorenzo Cain, Alcides Escobar, and Jason Vargas - facing free agency this winter. A payout of $50 million makes it harder for David Glass to not at least make an attempt to re-sign those players.

The Royals already have over $100 million committed to next year’s payroll, which would leave them little flexibility if they don’t increase payroll from this year’s franchise-record $145 million payroll. Dayton Moore talked last winter about how payroll has been “above our means”, but this kind of influx of cash should give them more “means” to work with.

Of course, every other team will be flush with cash too. Does that mean we are due for a crazy free agent market this winter? Will Eric Hosmer get the $200 million contract he seeks simply because owners hit the lottery? At the very least, Scott Boras must be giddy with excitement.

This week’s development is just further proof that baseball is long removed from the days when owners could cry poor and not be laughed out of the room. Baseball is absolutely awash in cash, with even small market clubs like the Royals enjoying better financial situations than they could have ever dreamed. We will see if that money trickles down to players and how exactly, the Royals decide to spend their windfall. But at the very least, any thoughts that baseball is dying or floundering should be scoffed at. Baseball is making money. Lots and lots of money.