The New World of Streaming is Already Here – How Brave Will the Cubs and MLB Be?

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The New World of Streaming is Already Here – How Brave Will the Cubs and MLB Be?

Analysis and Commentary, Chicago Cubs News

There was a time when the Chicago Cubs’ next TV rights deal was among the two biggest off-the-field stories in the Cubs’ world, together with the renovations at Wrigley Field.

And it’s still really, really, organization-shiftingly important, but how often do we hear about the TV rights these days? Once every few months? I can’t think of too many stories that died down as the ultimate decision drew closer and closer, but that’s how it’s been for the Cubs’ broadcast rights.

There are a variety of reasons for that waning of public attention, from the competitiveness of the team on the field to the attendant revenue boon, but I think the biggest reason might be the nearly un-trackable shifting of the markets in which the Cubs’ rights must live. In other words, it’s very difficult to speak intelligently about the Chicago Cubs’ broadcast rights when every month brings a profound shift in the way consumers spend their entertainment dollars, in the way cable companies try to stave off obsolescence, in the way media conglomerates keep consolidating, and in the way tech giants keep disrupting our attention modes.

More on that in a moment.

Circling back to the billion-dollar story that is back in the spotlight, the Chicago Cubs’ TV broadcast rights – currently doled out in three separate deals with Comcast/NBC, WGN-9, and ABC-7 – are set to reach free agency, so to speak, after the 2019 season. They are extremely valuable rights, the auction of which could leave the Cubs in a new stratosphere of revenue. Ideally, the Cubs will want to get the deal done before 2019 begins, giving themselves enough runway to ramp up and be fully ready to go in the new digs in 2020.

So, then, we should really see the rubber meet the road very soon, right? Chicago Cubs President of Business Operations Crane Kenney spoke about that topic at the Cubs Convention this weekend, in a session with bloggers, a forum with the fans, and a separate session with the local beat writers.

His most detailed comments on the state of TV negotiations came with the latter group, and you can read his remarks here, here, and here, among other places.

Presently, Kenney says the Cubs are about 80 percent inclined to move on from NBC Sports Chicago (Comcast/NBC), which holds the rights to most of their games, after 2019. At that point, the Cubs would instead create their own Regional Sports Network (RSN). NBC Sports Chicago, you’ll note, is partly owned by the Ricketts Family, together with Blackhawks ownership and Bulls/White Sox ownership.

There are a couple things I really want to highlight there, because it’s a very foundational part of this entire TV rights discussion. Previous comments from Kenney indicated that the Cubs’ plan was to start their own RSN (not an 80-percent-inclined situation), which makes you wonder if they’ve become slightly more open to the possibility of a very traditional rights deal (an existing cable network buys their rights, full stop). Moreover, even if the Cubs started their own RSN, they would presumably still partner with either a sports network or a cable/satellite provider to work with on distribution (for example, the Yankees’ YES Network was the creation of their own channel, but it’s 80 percent owned by Fox and 20 percent owned by the Yankees).

That is all to say, even if the Cubs “create their own channel,” there will probably be a partner involved, who will be participating in this bidding process.

To that end, Kenney unsurprisingly mentioned the Disney purchase of 21st Century Fox, which will include Fox’s large cache of regional sports networks. Because that deal would mean Disney/ABC/ESPN is getting into the regional sports game – something they haven’t done before – the Cubs could have the opportunity for a significant additional potential partner, either to create a new Cubs-focused RSN, or to carry the Cubs’ games on a network they create for the Chicago market.

Moreover, there are non-traditional possible tech partners emerging in this market, as well as the groundwork being laid for large entertainment entities (like the Cubs) to create their own streaming platform (the ultimate truly-your-own channel). But those paths come with a number of complications because of the at-issue relationships between the Cubs, Major League Baseball, MLB’s tech arm, RSNs, and streaming services.

To get there, we have to step back and widen the lens.

You may recall, there was a time not so long ago that the Cubs going out to start their own cable channel after 2019 was something like a 100 percent proposition. They would find a partner – either a cable/satellite company or an existing sports network – create a new regional sports network, all the providers in the greater Chicago area would carry that channel for a huge fee, and things would be hunky dory. The Cubs would get huge TV rights fees (and an equity stake in the RSN), the RSN would get huge carriage fees from the providers, the providers and the RSN would get advertising dollars, the providers would get monthly subscription fees from their users, and the users would get an increasingly inflated cable bill (they’d get Cubs games, too!).

But then the landscape started changing. Rapidly. So rapidly that the Dodgers’ massive deal from just four years ago was immediately so out of whack with the realities of a streaming world that the carriage fees necessary to support the money owed to the RSN were flatly refused by providers in Los Angeles. A majority of homes in Los Angeles literally have no access to SportsNet LA, aka the Dodgers channel. Although it’s put a ton of money into the Dodgers’ bank account, the cost in goodwill among fans who can no longer watch their favorite team is arguably immeasurable.

That build-an-RSN model – at least the version of it that came with an $8+ billion rights deal for the Dodgers – is DOA. The Cubs may very well try to accomplish something like it, but I have no doubt that success would require a whole lot more creativity, strategic planning, and good old fashioned caution. Otherwise, they could find themselves creating a cable ghost town like the Dodgers did.

But with the very same disruption that blew things up for SportsNet LA comes new opportunities for the Cubs. Namely: streaming services.

As former cable subscribers cut the cord and opt for streaming services, many of those platforms, and other technology giants, are becoming increasingly interested in live sports content. We’ve seen Amazon pick up NFL rights, Twitter stream MLB games, and Facebook show a few local Cubs games on an experimental basis last year.

So, it’s simple, right? The Cubs should just marry up with one of the big tech companies on their next deal, ushering in a new era of local sports broadcast rights!

Come on, now. You know by now that nothing associated with MLB broadcast rights is simple.

Although Amazon and Facebook and Twitter and Netflix and whoever make for intriguing new potential partners for the Cubs or other big league teams, their presence in this market will force MLB to re-evaluate how it apportions the rights it controls. Yes, MLB controls the streaming rights for its teams, not the individual teams themselves.

Consider that the reason for those blackout territories you hate so much – territories delineated and controlled by MLB – is to protect television partners who pay big bucks for the local broadcast rights to an MLB team. If anyone in Chicago could just buy MLB.tv to watch the Cubs, then they wouldn’t have to pay to have CSN or Fox or ESPN on their cable package, and they wouldn’t watch those broadcasts and view the advertising. The rights, therefore, would not be nearly as valuable.

But that world – the one where everyone has a cable or satellite subscription, and that subscription includes a bunch of channels for which users pay in bulk – is crumbling. And, in the sports broadcast universe specifically, the entry of these national streaming services into the market as alternatives to cable has the potential to dramatically disrupt the entire model upon which huge TV rights deals are predicated.

Ah, but I know what you’re thinking: who cares whether the Cubs games are on a cable channel (that I can watch or stream) or a national streaming service (that I can stream)? The Cubs are going to get paid serious money either way, and the service will get my money either way. As Crane Kenney said, the Cubs want to control their own show.

So who cares about all this cable versus streaming stuff?

Well, again, MLB cares. That’s because the MLB entity – not the individual teams – controls the internet streaming rights for all clubs, going way back to the advent of streaming a decade and a half ago. In service of preserving some revenue balance, MLB had an interesting in ensuring that large market teams couldn’t blow their counterparts out of the water if this internet thingy blew up and became the sports content wave of the future. (So much for those who assumed the Bud-Selig-era MLB was always behind the times, right?)

That means, if the Amazons and Facebooks of the world are going to seriously bid on the Cubs’ full season rights, the Cubs will be presenting a unique case-of-first-impression problem for MLB.

A national streaming service is a tremendous opportunity for a big, national team like the Cubs, but not every team will have the same opportunity. And you’ve got to remember: MLB has an interest in seeing all of its teams doing well financially, not only because that is part of its stewardship role for owners, but also because, at some level, the sport overall is better when all teams are able to be competitive (the Cubs need to have opponents for the whole league concept to work).

So what is MLB to do? Do they forbid the Cubs from working with a national streaming provider because it might not be good for the competitive balance of the league as a whole? Do they allow it, but with restrictions on the market? Do they allow it with no restrictions whatsoever, banking on the fact that the landscape is changing so dramatically that they can’t risk closing off access to one of the most valuable team properties in the sport?

Or maybe this will all be avoided by the Cubs partnering with a “traditional” broadcast partner on some kind of new setup that harmonizes the cable channel and a streaming service. Note that MLB has been working with regional sports networks for two years to allow them to stream games to their authenticated in-market subscribers, but all of those deals have come *after* traditional broadcast rights agreements were worked out. The Cubs and its prospective partners are in a unique place to negotiate their deal within this already-existing new world. Maybe that will make some kind of hybrid approach – with cable subscribers, but also independent cord-cut streamers – more plausible than it would have been just a few years ago.

I have no doubt that these conversations are taking place behind the scenes – and hopefully much has already been squared away – but however this breaks, the Cubs’ TV deal/channel/streaming service is going to be revelatory of what is to come in “local” sports rights. Will teams try to change their world to match the one changing around them? Will they entrench into a familiar model?

Or will they forge an entirely new conception of delivering sports content?

Sound too grandiose? It’s not. Recall, it was MLB’s tech arm that invented large-scale sports streaming 15 years ago with the introduction of MLB.tv, which went on to serve as the infrastructure backbone for future streaming services at the NHL and HBO, among many others. It was so successful that last year, MLB sold a majority stake in that tech arm to Disney at a value approaching $3 billion. (The same Disney, by the way, that will soon own the RSNs covering half of MLB’s teams. *thinking face emoji dot hmmm*)

Is it really so crazy, then, to wonder if MLB will once again be the proving ground for a new way to distribute and monetize sports content? And where better to take those steps than with one of the most popular, most organizationally-sound ball clubs in your sport?

The changes might be subtle and nuanced when the contracts are all finalized, but it’s hard to imagine the Cubs, their partner(s), and MLB succeeding in this new world without some kind of reimagining. The world is different now. So, too, must be the delivery of the product.


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Author: Brett Taylor

Brett Taylor is the Editor and Lead Writer at Bleacher Nation, and you can find him on Twitter at @BleacherNation and @Brett_A_Taylor.