A few updates from the Convention this weekend on the television broadcast rights and streaming fronts …
- Chicago Cubs President of Business Operations Crane Kenney reiterated this weekend that the Cubs’ goal is to have their own regional sports network (RSN) when the current TV broadcast rights deals with CSN, WGN-9, and ABC-7 expire at the end of the 2019 season. As we’ve discussed before, although it’s been possible that some other network would step up to pay the Cubs enormous fees for their rights after 2019, that isn’t the way large market teams have done things in the last five years. Instead, they partner with an existing network or cable service provider to form a new RSN, which in turn buys the rights from the team. Or the RSN simply broadcasts the games without a charge, and the team and cable partner share the revenue generated by advertising on the channel and carriage fees. There are complicated reasons to do all of this one way or the other, but that’s a bit beyond our scope today. Just know for our purposes that the Cubs will probably partner with a network or a cable provider to create a new “Cubs Network,” and you will hear about the value of that “deal” in the way you’ve become familiar with (“Cubs are getting $300 million for their rights in 2020, $305 million for their rights in 2021, etc.”).
- However this is ultimately structured, you can expect the Cubs’ revenue to increase dramatically in 2020 and beyond. (Or, technically, depending on the structure, the Cubs’ owners revenue – but I am confident that money would still go back into the organization. Again, the reasons you’d do things this way are a bit complicated, tied to MLB revenue sharing, and more than we need to get into right now, so long before we actually even know about the structure of the eventual deal.) The Cubs already passed the luxury tax cap in 2016, so the mind drifts into a comfortable zen thinking about what this front office could do with another $50 to $100 million annually to spend on baseball operations.
- … of course, the way baseball games – all content, really – are increasingly consumed via streaming these days will have a dramatic impact on the structure of the new TV deal. Predicting that aspect right now, when the landscape shifts so markedly every six months, is incredibly difficult. But that’s part of the Cubs’ job in this. Which brings me to the next thing …
- SUPER DUPER BOILED DOWN CATCH YOU UP TO SPEED SO YOU CAN UNDERSTAND THE NEXT BULLET THING: The rights to stream games over the internet are owned by MLB, not the individual teams (and all teams share the revenues for that – MLB.tv and Extra Innings – equally). Obviously some teams (like the Cubs) would love to have their own streaming rights, but MLB has a competitive balance interest in denying that. But what about in-market games, when MLB.tv is blacked out? What about those streaming rights? Well, the reason for those blackouts largely answers the question: in-market games (Cubs in Chicago, for example) are blacked out on MLB.tv because the cable networks that pay HUGE money for the local broadcast rights want to make sure you demand that channel on your cable subscription (and, you know, hang onto your cable subscription). If you could instead just pay $15 a month for MLB.tv, then maybe you would cut the cord, and those rights suddenly become dramatically less valuable.
- So, what MLB has been doing is negotiating individual deals with local rights-holders to allow in-market fans to stream games *IF* they already subscribe to that channel on their cable package. Until last season, if you were in Chicago and had CSN, but wanted to watch the game on your phone or tablet, you were out of luck. And, until now, those deals had been reached only with Fox-affiliated networks. Kenney said at the Convention, however, that he’s optimistic a deal will be done before this season to allow in-market streaming on CSN for authenticated subscribers of that channel (he said a deal was done in his remarks, but then apparently backtracked that a bit to “cautiously optimistic” a deal would be done in later comments to the media – see, for example, Crain’s). What about WGN and ABC games? Well, that would require a separate deal with MLB, and I have no update for you on whether that, too, is being brokered behind the scenes.
- (The blackout lawsuit, which was settled at this time last year adds, yes, another layer of complication to things. That could also lead to the WGN/ABC games being available to those who genuinely cannot get them over-the-air locally (but who are still in the Cubs’ blackout region), but clarity will not come on this until much closer to the start of the season.)
- Last year at this time, Kenney said that the Cubs need to start building out the network two years in advance of its launch, which, if still true, means that deals need to be in place by no later than 2018.
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