Cable TV and Major League Baseball are firing beanballs at each other, and members of Congress and federal regulators may end up as the umpires.
Cable TV’s negotiating agent In Demand started the latest dust-up with Major League Baseball on Wednesday by announcing in a statement that it will offer to renew MLB’s out-of-market games “on the same terms” as DirecTV.
“In Demand’s strategy of negotiation by misleading press release is a failed one,” snapped Tim Brosnan, MLB’s executive VP for business.
Fuming, Rob Jacobson, president and CEO of In Demand, said, “By rejecting this matching offer, MLB has proven it never intended for In Demand to have a fair and equal opportunity to bid for Extra Innings.”
Extra Innings is the package of out-of-market baseball games, and what makes these talks between cable TV and baseball significant is that up to 200,000 cable subscribers will lose the chance to buy the games if DirecTV ends up making an exclusive deal with MLB, which would begin next month.
Fan deprivation doesn’t sit well with D.C.-based consumer groups and political figures such as Sen. John Kerry (D-Mass.), who have already begun to denounce negotiations that would keep In Demand from wide circulation.
MLB gave In Demand a deadline of March 31 to agree to an offer that, in effect, asks cable TV to 1) pay about $66 million a year for seven years to continue carrying “Extra Innings” and 2) take a new MLB Network on 80% of cable’s base of digital subscribers. The MLB Network would kick off in 2009; cable TV has about 32 million digital subs.
But MLB’s Brosnan said In Demand’s claim of meeting MLB’s terms falls well short of reality. In Demand will actually pay a license fee based on the number of digital subscribers who pay the $179 a year to get “Extra Innings.”
That clause doesn’t work for baseball because DirecTV has done a better job of marketing “Extra Innings” than individual cable operators. As a result, instead of paying $66 million a year, cable TV could end up paying MLB less than $50 million. DirecTV also would pony up about $50 million a year in this scenario, even though cable has more than double the number of digital subs compared with DirecTV. To baseball, that’s unfair to DirecTV.
And with the MLB Network, baseball said the In Demand numbers are also faulty. In its release, In Demand said it would funnel the MLB Channel to the percentage of subs DirecTV reaches. But baseball said that’s disingenuous: The DirecTV deal is based on 80% of the satcaster’s sub base, putting the total at 15 million or so. By contrast, the digital base of cable TV, in today’s numbers, would come to about 32 million. Eighty percent of 32 million comes to about 25 million.
The bottom line of this clash is that In Demand is setting the stage to blame baseball for depriving cable subs of Extra Innings if no deal is struck by March 31. For its part, baseball is trying to blame In Demand for not meeting the terms of MLB’s contract with DirecTV, which would get exclusive rights to Extra Innings for seven years, starting in April.
On Tuesday, Bob DuPuy, president and chief operating officer of MLB, and In Demand’s Jacobson will be the key witnesses at a U.S. Senate Commerce Committee hearing in Washington on the subject “Exclusive Sports Programming: Examining Competition and Consumer Choice.”
With baseball and cable TV at each other’s throats, the room should be packed.