MLB Advanced Media: The future of America’s pastime
MLB Advanced Media was a pioneer in digital streaming and is now leading the way towards direct-to-consumer content distribution.
MLB Advanced Media gets its start
In late-2000, following months of lobbying by a few forward-thinking Major League Baseball (MLB) owners, Baseball Advanced Media (BAM) was formed, pooling the digital rights of the entire league into one jointly owned entity. BAM’s main goal at the time was leveling the internet playing field among all 30 teams and establishing a foothold on the web for baseball. Despite the rise of the internet in the late-1990s and the dot-com bubble (that had yet to burst) leading to incredible excitement about opportunities in a new digital economy, baseball did not even own “MLB.com” and many individual teams had yet to build websites.1 Initially, BAM attempted to leverage external expertise and outsource website creation, but after a disastrous first attempt that resulted in consultant-built MLB.com barely functioning, BAM decided to bring all technology development in-house.2 It was this decision to control the core technology that would enable BAM to become a digital powerhouse over the next decade.
Disrupting distribution
Historically, MLB video broadcast rights have been split into local and national distribution agreements. Under this distribution system, each MLB team has the right to telecast their games on TV in their home market (except those covered by national TV deals) and individually negotiates with local TV networks, primarily regionally focused sports stations on cable, to sell these rights. Additionally, MLB separately negotiates with national TV networks, such as Fox, TBS, and ESPN, to sell the rights to nationally broadcast a smaller number of games, including all playoff games. While a small number of games would be shown on freely available broadcast TV, fans had to purchase increasingly expensive cable packages to watch the majority of games.3 Prior to 2001, MLB had no direct distribution channel to connect fans with baseball broadcasts.
This started to change following the arrival of Japanese superstar Ichiro Suzuki to the Major Leagues’ Seattle Mariners in 2001. To allow Japanese fans to follow Ichiro’s transition to US baseball, BAM experimented with live audio streaming of Mariners games, building the required technology from scratch. This initial effort failed to attract a significant fan base, but the seeds of direct distribution had been planted and the following year in August 2002, BAM decided to experiment with its first online video stream of a regular season game. While the video quality was choppy at best, due to both the early stage of BAM’s streaming technology and lack of widespread high-speed internet at the time, over 30,000 fans watched the game. This successful experiment led to BAM launching the first paid online streaming package for US professional sports, enabling fans all over the world to watch nine important regular season games and the playoffs. The following year, BAM made a bold move and launched an online package that let fans stream all games outside their home market that were not on national TV. This proved to be a tremendous success, with over 100,000 customers buying the $79.95 package in the first year, enabled BAM to become financially profitable for the first time.4
This digital success led Major League Baseball’s BAM to becoming an unexpected pioneer in both online video streaming and direct content distribution, two trends that have shaped the media landscape over the past decade. BAM’s early entry into online streaming led to the development of advanced technology and established infrastructure that they leveraged to create a white label streaming service for other companies. BAM services now run the backend streaming for other sports leagues, including the NHL and WWE, and for global entertainment companies, including HBO, ESPN, and Sony. Additionally, BAM enabled Major League Baseball to go directly to consumers with their content, disintermediating the traditional distributors, over a decade ago. Despite widespread pushback from cable and satellite providers, other entertainment companies, including HBO (using BAM’s technology), are now attempting to adopt this model as well.5 Direct distribution to consumers should enable content providers to both capture additional margin and to create a closer relationship with their consumers.
Where BAM goes from here
Earlier this year, MLB spun BAM off as an independently run subsidiary. As part of this deal, Disney acquired a 33% stake in the company for $1 billion, with the option to acquire majority ownership in the future. One of the first projects the newly independent BAM is taking on is working with ESPN to create a direct-to-consumer streaming channel.6 With their established technology, infrastructure, and proven business model, BAM is well positioned to take advantage of the industry-wide move towards direct-to-consumer content distribution and should aggressively pursue this plan.
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- Salter, Chuck. “MLB Advanced Media’s Bob Bowman is Playing Digital Hardball. And He’s Winning.” www.fastcompany.com/1822802/mlb-advanced-medias-bob-bowman-playing-digital-hardball-and-hes-winning, accessed Nov. 2016.
- Goldman, Shayna. “An In-Depth Look at the Groundbreaking Partnership Between the NHL and MLBAM.” www.sporttechie.com/2015/08/23/sports/mlb/depth-look-groundbreaking-partnership-nhl-mlbam, accessed Nov. 2016.
- Thurm, Wendy. “MLB Strongly Defends Local Broadcast Territories in Court.” www.fangraphs.com/blogs/mlb-strongly-defends-local-broadcast-territories-in-court, accessed Nov. 2016.
- Popper, Ben. “The changeup. How baseball’s tech team built the future of television.” www.theverge.com/2015/8/4/9090897/mlb-bam-live-streaming-internet-tv-nhl-hbo-now-espn, accessed Nov. 2016.
- Fisher, Eric. “Sony, WWE extend MLBAM’s non-baseball business.” http://www.sportsbusinessdaily.com/Journal/Issues/2014/01/13/Media/BAM-Sony.aspx, accessed Nov. 2016.
- Castillo, Michelle. “Why Disney is spending $1 billion on the MLB’s technology unit.” www.cnbc.com/2016/08/09/how-disney-mlb-advanced-media-deal-sets-them-up-for-the-future.html, accessed Nov. 2016.
Phil, I am so glad that you wrote about this amazing company. It is truly remarkable that a single professional league had a foresight and execution power to build up its digital unit from scratch and devepoed solid technical capabilities to service back-end streaming that traditional media companies could not help but adapting. In fact, it seems that MLB even spun off BAM and set its mission to encompass non-baseball related business as well. (http://www.forbes.com/sites/maurybrown/2015/08/13/mlb-approves-new-digital-media-company-spin-off-that-will-create-billions-in-new-revenues/#b6da3942f01b)
And I’d be curious to know how much more active role MLB will play as a contents provider (operating MLB.tv). Its online direct to customer content distribution has already been acting as a significant counterweight to media industry’s hegemony. With dropping demand for TV consumption, mobile and online streaming is the key to the survival of these media giants. Yet, the fact that MLB is the very group that those networks have to negotiate the deal with signals that the battle is already in the league’s favor.
Pretty incredible story. I wish we could do a case on BAM – I would love to understand how, out of all the potential companies competing to bring live streaming to the masses, a spin-off of a sports league would be emerging as a leader. I expect that a great decision MLB made from the beginning was to set up BAM as its own division. There’s such a conflict of interest when relationships with the major TV networks are so important to MLB, and then to be building a disruptor to their industry in-house. I bet the MLB executives assumed this was a minor, “toy” project, and then were surprised once MLBTV came out of nowhere to have such great success.
Who knew the MLB was a first mover in the DTC content streaming model? Thanks for sharing the unknown and very innovative side of the MLB! Baseball certainly presents a unique challenge of monetizing broadcast rights for the 162 games in a season. I’m very curious to see how the ESPN deal unfolds. Most millennials are cable-cutters these days, and an increasing amount of other consumers are moving to this direction as well. Right now, cable companies make a largely disproportionate amount of revenue from ESPN, but if ESPN figures out a way to sell directly to consumers that will certainly change things. From a traditional supply-chain perspective, cable companies are just a “middle man” between content producers and the consumer, and ESPN is figuring out a way to displace them. I wonder what implications this has for consumers to follow teams outside their regions now that access a wide variety of games will be increased?
MLBAM is an awesome company. I am glad you wrote about them, Phil. We actually looked at pursuing MLBAM as an investment opportunity at Carlyle given MLBAM is literally the digital streaming industry leader. However, the company is so hot, we couldn’t get in! It is incredible how they changed the game by evolving completely away from baseball and becoming the streaming provider for HBO (including Game of Thrones, one of my personal favorite shows). It is not surprising at all that Disney viewed MLBAM as a great strategic investment given Disney’s goal is to penetrate as deep as possible into the consumer ecosystem.