Could Streaming Threaten Your Favorite Team's Future?
WHY YOU SHOULD CARE
Because the era of easy TV sports money may be over.
By Matt Foley
For five straight losing seasons, a nightly hodgepodge of overmatched roster-fillers have dotted the field at Citizens Bank Park in Philadelphia. But listen closely: Hope is in the air. The impending MLB free-agent frenzy and a gargantuan sum of television money may inject the City of Brotherly Love with some much-needed juice.
In Barack Obama’s final year as a spry first-termer, the Phillies finished 81-81. Subsequently, the roster was gutted, and any semblance of contention suspended. But in 2014, the genesis of future excitement arrived in the form of a $2.5 billion, 25-year television extension with Comcast SportsNet. Even though it’s not the most lucrative cable deal in baseball, it emboldened Philadelphia to plan for future success. Not normally thought of as a big-money team, the Phillies are now prepared to spend like heavy hitters (the Dodgers, the Yankees, the Red Sox et al.) and, perhaps, revisit the glory of a World Series victory. But will the threat of disappearing cable viewers thwart their plans? In this era of cable cord-cutters, where will live sports broadcasts go next? “We believe in the team that we have here,” Phillies pitcher Aaron Nola told OZY prior to the start of the season. “But we have to work with what we’ve got.”
Live sports are still king on cable, but you have to plan ahead of the trend and determine what works for digital.
Andy Tennant, ESPN executive producer
When Philadelphia’s deal with Comcast closed in 2014, management began aggressively clearing payroll. In two seasons, the Phillies dropped from third place to 26th in total payroll, and the on-field product plummeted. Nola’s spring-training optimism was not unfounded, but overall the roster leaves much to be desired. So, as the Phillies round out June at the back of the NL East pack, rumblings of impending trades and free-agent signings have begun.
The cable revenue and $200 million in payroll cuts provide a fluffy cushion, but management included one more meticulous detail. Incredibly, Philadelphia is committed to only rising star center fielder Odubel Herrera for any amount of money next season. Beyond Herrera, who’s signed through 2023 and is owed $3.35 million next year, every player becomes a free agent at season’s end. That means Philadelphia is in the perfect position to pounce next summer when, arguably, the richest pool of free agents ever hits the open market. “That class is an incredibly deep group,” says Brewers scout Pete Vuckovich Jr. “Probably 10 of the best players in baseball will be signable.”
The Phillies — and every other team with cash — covet Washington outfielder Bryce Harper. Entering his prime, Harper is a lock to bypass the current $325 million record ink of Miami’s Giancarlo Stanton. If Harper does become baseball’s $400 million man, a team with flexibility, like Philadelphia’s, may reel him in. All-stars like Manny Machado, Josh Donaldson and Clayton Kershaw also will be available. Indeed, signing a dynamic duo looks more realistic by the day.
While the Phillies’ doormat-to-dominance plan remains a wish of tomorrow, the blueprint for success already exists. When the Cubs re-upped TV deals with Comcast, WGN and ABC in 2014, it was a bottom-of-the-barrel club too. And, like Philly, Cubs president Theo Epstein dumped costly veterans and developed young talent through the farm system. A year after the new TV deals, Epstein signed several key free agents, and the rest is history.
Now Cubs management is eyeing an even bigger target: launching its own television network once its current cable deals expire in 2019. “We look forward to the day we start our own channel,” team chairman and owner Tom Ricketts declared. Owning a television channel, as the Yankees do with the YES Network, would further stretch the shifting boundaries of live rights in MLB.
Crane Kenney again confirms #Cubs will launch own TV network in 2020 after other TV deals expire.
— 670 The Score (@670TheScore) November 11, 2015
At present, individual clubs and networks own the rights to all TV broadcasts, while MLB owns all streaming rights. With an estimated 1 in 5 American homes ditching traditional cable services in favor of streaming, a turning point is near. Live sports is still the most lucrative content on television — last year 27 of the top 50 cable broadcasts belonged to the NFL alone — and it’s widely viewed as the last stronghold against cord-cutters.
Nonetheless, live sports broadcasts are headed to the Internet too. After testing Twitter as a streaming platform last season, the NFL in April agreed to let Amazon stream 10 “Thursday Night Football” games on Amazon Prime this season. Likewise, in May, MLB signed a 20-game live-streaming test run with Facebook. In the announcement, Dan Reed, Facebook’s head of global sports partnerships, said that Facebook is “thrilled to connect fans around the action, no matter where they live in the U.S.”
Not long ago, these streaming deals were an MLB long shot. Prior to this season, anyone attempting to watch a local market game on MLB.com was barred. The blackout was a defense mechanism, of course, but now the floodgates have opened. Will lucrative network deals like the Phillies’ pact with Comcast SportsNet lose their luster as viewers move to streaming? “Live sports are still king on cable,” says Andy Tennant, executive producer of ESPN’s E:60 and Outside the Lines, “but you have to plan ahead of the trend and determine what works for digital.”
New York bankruptcy attorney Anthony De Leo can envision litigation, as was the case when the Houston Astros’ now defunct partner, Comcast SportsNet Houston, went under. “In situations when the money dries up,” says De Leo, “payouts occur by priority. Eventually, everyone takes a haircut.” Hypothetically, says De Leo, “the highest-paid players could be on the hook for a lot of money.”
So, what’s next? Likely, personalized live-broadcast presentations, based not simply by region but also by interests and browsing tendencies. That is, if Facebook has any say in the matter.