NEWSLETTER
In less than one year, the Chicago Cubs will be on some kind of new television broadcast contract. In a historically normal situation, we would have known many of the details about that contract by now. Maybe even by a couple years ago.
But, things in the sports rights world are not “historically normal” anymore, and we don’t know the details of the Cubs’ next TV deal yet. Because there is no next TV deal yet.
As you know, the Cubs have been working on their plans to cash in on the gold rush of broadcast rights for a decade now, and they did so against the backdrop of a foundational shift in the way people consume visual entertainment. On the positive side, live sports – things that can’t be “time-shifted” – are as valuable as ever to content distributors, in isolation. On the negative side, those content distributors are seeing fewer and fewer of their customers sticking around for the kind of cable bundles into which those sports rights have always been folded.
So, it’s a very tricky time for the Cubs to be selling the next 15 to 30 years of their rights, either to some existing network, or to cable and satellite providers in the form of their own new network.
And! Guess what! It just got much more complicated!
Some necessary background: as part of the original build out of MLB.tv when the league was more or less inventing internet streaming, MLB retained the streaming rights to all of its games. The individual teams were free to negotiate their own broadcast rights, but the league as a whole would sell streaming packages (subject to blackout restrictions to try to preserve the value of those local broadcast deals). It was an extremely savvy business move by the league as a whole, both because of the enormous value the build out eventually created (ultimately becoming BAMTech, and being acquired by Disney at a valuation over $3 billion), and because of the way it helped preserve some semblance of revenue parity in the league.
But what made a ton of sense 10 years ago makes a whole lot less sense today as cord-cutting significantly erodes the value of local broadcast deals that don’t include streaming rights. Appreciating this issue, MLB began negotiating individual deals with broadcasters a few years ago, releasing the local streaming rights to the broadcasters who carried that team’s games. In the arrangement, MLB got some cash from the broadcaster, and the broadcaster got to offer live in-market streaming to its “authenticated subscribers.” It was kind of a patchwork solution to the changing landscape, but you can see the logic in it.
Now, just a few years later, it’s not working for MLB anymore. At least not at whatever price points were originally negotiated.
According to Sports Business Journal, with those short-term deals having just concluded, MLB wants more money and a longer term to re-up with the local broadcasters. More here at Awful Announcing.
What makes the most sense, of course, is to develop over-the-top (i.e., pure streaming) solutions for all teams, duh, but that’s so much more easily said than done, given the individual long-term contracts at issue and the extraordinarily challenging issue of apportioning the revenues fairly to the teams that earn them while also preserving parity. I tend to think there could be some revenue-sharing formula that works for everyone, because MLB can’t take a step backwards right now when it comes to content delivery. Streaming isn’t even the “future” anymore. It’s the present.
Which brings us to the Cubs. If MLB is currently sparring about local streaming rights, then my lord, of course things are still held up for the Cubs. Possible partners on a new regional sports network are going to be all kinds of concerned heading into a new venture if they have a reasonable fear that they’ll immediately have to fight MLB for the streaming rights.
And if over-the-top options are being considered (remember our discussion way back in January about internet streaming providers getting in on team broadcast rights?), that just adds so much more complication to the Cubs wanting to do what’s best for the Cubs, and the league meanwhile trying to do what’s best for the sport over the next 30 years.
Heck, if local streaming rights are being held up by MLB right now, that might even make NBC reluctant to pony up big for the Cubs rights on a *traditional* deal! No broadcaster is going to pay huge money for rights when they don’t even know if they can stream the dang games in two-thousand-freaking-twenty.
As we’ve been saying more and more, there were already reasons to be a little nervous about what the next broadcast rights deal would bring for the Cubs. Now with local streaming rights back in dispute? Good gravy. No wonder it seems like the Cubs can’t project their future revenues with 100% confidence.
To be quite clear: I’m just connecting dots here. It’s entirely possible that, for reasons outside our visibility, MLB’s local streaming rights sparring will not ultimately impact the Cubs’ next TV deal (maybe that’s already been settled in some way?). But from what we can see, and from what I know about this industry, this looks like it has the potential to be a serious hitch in the giddyup. At a minimum, the Cubs are going to have to negotiate all kinds of contingencies, making a complicated situation almost comically complicated.
