When it comes to television ratings, it sure seems like doom and gloom for Major League Baseball.
On Thursday Fox reported that Game 1 of the World Series received a 7.6 rating and 12 share, which is a 13 percent decline from last year and an all-time low for a Fall Classic opener. It continues a troubling trend for MLB, a league which has seen ratings and viewership drop by as much as 50 percent since the early 1990s.
But despite historically low ratings for the World Series and All-Star games, networks are still shelling out money for the rights to broadcast MLB games. Two months ago ESPN locked up MLB for $5.6 billion from 2014 to 2012, doubling what it currently pays for baseball rights. And even the leagues that struck out on an attempted deal with MLB (NBC and Fox) are still interested in coming to some sort of agreement with the league.
Commissioner Bud Selig told the New York Times that the new TV deal demonstrates that baseball is in a "golden era," while ESPN president John Skipper said the agreement would ultimately benefit both parties.
"It is a lot of money,” Skipper said. "We don’t do these deals without acutely understanding how to grow our business. In that context, it makes sense to us."
In a recent Forbes article, Tom Van Riper breaks down the networks' thinking. ESPN and its competitors, Van Riper writes, are betting that "baseball and other premium sports programming will hold up as the glue that holds together the product bundle that cable companies push into homes."
Baseball's extended season and numerous opportunities for content make the sport valuable for local TV stations. Additionally, as Van Riper noted, baseball fans tend to be "tribal." That is, they are very dedicated to their teams, and they'll go to lengths to watch. Now that local TV is forming a more significant portion of all media revenue, Van Riper called it a "financial game-changer that dwarfs all others."
Indeed, new deals with local TV stations appear to be the catalyst behind the increasing value of baseball franchises. Mike Ozanian notes in Forbes that the best case scenario for baseball clubs is to own an equity stake in a regional sports network, that way they share in the network's profits. The New York Yankees' YES Network, Ozanian writes, generated $224 million in operating income while paying the club $90 million for rights.
The catch is that these local networks are in direct competition with national stations like ESPN. And ESPN's deal with the MLB gave it significant flexibility in determining which games it would like to showcase. That ability to cherry pick, if you will, could rob the local networks of viewership for marquee games.
While the TV stations squabble over rights and viewership, the league can rest comfortably knowing that, despite historically poor ratings, the future may be bright after all.Full Story >>