Major League Baseball: Profiting Beyond The Ballpark With Satellite
Corporate Executives at Major League Baseball (MLB) were faced with a significant dilemma: they needed to increase viewership and widen the access of the games, expanding the brand beyond the playing diamonds around the country. After examining the possibilities, MLB executives made the decision to upgrade the company’s network infrastructure and create a stronger online play with baseball fans worldwide. The company network enhancement was not only successful, but continues to provide new revenue-generating opportunities for the corporation.
The Advanced Media division of MLB (MLBAM) turned to satellite technology and, in 2004, expanded its online presence incorporating retail, enhanced programming and interactivity. Managed by MLB.com, this portal, which delivers everything baseball, has increased viewership, online sales and revenues for MLB by more than 30 percent, further making this national pastime a successful business and worth the upgrade investment the company made for a robust hybrid network.
Like most executives in charge of corporate networks who are required to stay one step ahead of the competition in today’s heated business environment, Joe Choti, CTO for MLBAM, saw an opportunity for his company’s network platform to turn into a stronger corporate utility that generated additional revenue streams. But this was no easy task. Choti required a system upgrade that would include capturing, encoding and distributing live video footage over the Internet. More specifically, programming to be streamed needed to include 2,430 games, press conferences, exhibition games, spring training and other MLB key events. And as if that content lineup was not enough, Choti also had to deliver a network platform to simultaneously manage video from 15 games and audio from 45 feeds from both television and radio outlets across the United States. Needless to say, this was a rather complex lineup of business agenda items. To ensure project success, executives had no intention of investing in run-of-the-mill technology but rather turned to an advanced solution involving satellite that worked in conjunction with the company’s already established terrestrial platform.
Granted, in MLBAM’s case, much of the network revolves around programming and broadcasting of live and cached baseball game content. But MLB.com’s success story regarding the implementation and exploitation of its now robust network can also transfer to other organizations, regardless of their industry or market business offerings. For corporate CTOs who rely on seamless connectivity and CFOs who must make the capital investment for network upgrades, the overlying challenge remains the same: how to enhance a network in an effort to bring in additional revenue and meet specific growing business needs without crashing the existing system or gaining zero return on the initial investment. Likewise, and at times most importantly, executives undertaking such measures need to have a platform in place with open architecture that, in the long term, can expand as the corporation’s business needs change. Without such measures in place, enhancements ultimately cost the corporation millions of dollars; money that can mean the difference between succeeding in the black or failing in the red. In MLB’s case, its network upgrade turned out to be a positive financial investment and continues to keep this portion of the business in the black.
Transporting Baseball From Stadium To Laptop
Back in 2000, MLB created the interactive media and Internet division, managed by MLB.com. In its infancy, the site carried some games of the major league and truly was the beginning stage for building a community. “We saw the growing interest coming in and knew we had to expand our offering,” says Choti. “Our goal was to increase game access, both major and minor league events, to a worldwide audience. That way, fans could have the opportunity to view the games of their favorite teams regardless of their location. No blackout game days, no restrictions.”
From the first elementary phases of the MLB.com site, corporate executives realized their business objectives would be met. A community was forming, the brand was reaching beyond the ballparks and an expansion of their viewership was materializing. At first, some cached games were available. Today, “fans get an entire baseball experience” from the Web site, says Choti.
With continued network upgrades, managed by BT Broadcast Services, MLBAM began offering enhanced packages on its MLB TV. Now, live and archived video Web casts of entire games, game summaries, team and player statistics were coming to fruition. “We started offering live and video-on-demand (VOD) to our subscribers,” says Choti. “Likewise, we also started listing box scores for fans to be able to search statistics for either their favorite player, team or both even while watching a live game being streamed to their computers.”
One of the reasons MLBAM’s Web site is successful resides in the fact that with a satellite-enabled network platform, a diverse array of content can be offered, giving executives the flexibility to change, improve or build upon as business demand increases. In addition to free content, MLB.com offers a series of subscription packages for fans following the baseball season online. Packages range from $14.95 for a season subscription that offers streaming audio, to a full video, audio and interactivity season subscription for $99.95. “Fans listened to and watched nearly 600 million minutes of streaming audio and video as well as viewed roughly 40,000 hours of live programming in 2003,” says Choti.
In general, subscribers have a choice of purchasing three season packages. For subscribers purchasing the $14.95 Game Audio package, fans receive more than 7,000 hours of live game broadcasts, including foreign language feeds, both home games and away games accessed from any computer site. For subscribers purchasing the $79.95 MLB.TV package, fans receive more than 2,300 games with more than 97 percent of them streamed live online. Likewise, this subscriber tier has the option of watching the games on demand as well. The last main package offered, the All Access season pass for $99.95, gives fans both live audio and video feeds of games. These fans also receive highlights, condensed games and video box scores on demand. Lastly, the All Access package offers classic games from baseball’s past as well as key matches from last season. MLBAM executives say there are currently 10 million registered users on the site.
“In addition, our subscribers are between 800,000 and 850,000,” says Choti. “This is up from 500,000 in 2003. Today we expect a 30 to 40 percent growth rate in our subscribers as the site gains popularity.”
Thus, all that went into the implementation of this robust hybrid network has paid off. Though executives at MLBAM would not disclose the initial investment put forth in enhancing the company’s network, revenues have indeed begun to surface from this business initiative. “Revenues were $130 million for 2004, up from $36 million in 2001,” says Choti. “MLBAM expects a 30 to 40 percent growth rate for the next five years as well.”
Because a robust satellite-enabled network was already in place, allowing rich content and a higher, more secure level of interactivity to occur between customers and MLB.com, the company now had an opportunity to build upon the base subscription offerings. In addition to the viewing and audio offerings surrounding each season, MLB.com further expanded its streaming network platform with the additions of an online store and a portal for fans to buy baseball game tickets, through its recent acquisition of Tickets.com.
The $66 million purchase of ticket seller Tickets.com was a further strategic business move by MLB.com, designed to offer the League a more active role in selling tickets for both major and minor league games through its Web site. Tickets.com currently provides ticket distribution for 11 MLB teams.
“In terms of tickets sold online, there were 2.9 million in 2002, 4.4 million in 2003 and 11.2 million in 2004,” says Choti. “MLBAM expects up to a 40 percent growth in 2005, especially since we are bringing the minor league online, estimated to have 50 teams to start.”
In addition to ticket sales, online revenues have also materialized from the company’s Web store, selling authenticated baseball memorabilia and merchandise. Likewise, MLBAM conducts auctions, with the most successful one occurring last season after the historic Boston Red Sox victory.
According to company executives, a Boston Red Sox game-used lineup card from Game 4 of the 2004 World Series brought a site-record $165,000 bid in MLBAM’s exclusive auction of game-used and autographed items. This auction represented the largest collection of World Series championship-related memorabilia ever put up for bid by MLB.
“Our merchandise and auctions are designed to distinguish officially authenticated Major League Baseball memorabilia from other items on the market,” says Choti. “Fans can go to other auction sites and purchase an autographed bat or ball, but many times, there is no official certification with those purchases. We have that guarantee.”
Since its inception, more than 650,000 autographed and game-used items have been authenticated through the MLB Authentication Program, including historic achievements from the 2004 season such as Randy Johnson’s perfect game and Ichiro Suzuki breaking George Sisler’s single-season hits record.
Users in more than 70 countries have now come to rely on MLB.com during baseball season. This fact was cemented during the first game of the 2004 Major League Baseball season. “Even though I was working and not sleeping, I knew that many fans were not going to get up in the early morning hours for the Tokyo game and that’s when our archived Webcast of the games such as this one would become highly beneficial,” says Choti. “Fans were able to go to their computers and watch the game later on.”
Last season was also a major business milestone for the MLBAM group. Distribution deals worth an estimated $50 million with AOL and MSN to stream live games and highlights over the Web were announced, successfully achieved because of its hybrid network. Then, in an effort to reach more of the broadband market, deals with cable operators Comcast, Charter Communications and Cablevision were put in motion to provide live Webcast of the more than 240 games a month, as well as enhanced archive features.
A Strategic Partnership Is Key
In establishing this upgraded network platform, Choti says that its success was due in great part to the strategic partnership between MLBAM and BT Broadcast Services. “We needed this done quickly and we had to find a satellite service provider that could work within a compressed timetable,” he adds. “Because our Web site offerings had to be global and transmission had to be of a hybrid mix, we needed a partner who could handle both the technological connections as well as the content management and distribution.”
For MLBAM, its partnership with its service provider had to materialize in 30 days. BT Broadcast Services expanded the existing encoding platform, BT Mediastream, defined the implementation team and plan, mapped out the acquisition points and gained IRD authorizations, put together the hardware and software solutions, set up the monitoring process and established back-up routing and redundancy options for network connectivity. Likewise, BT Broadcast Services constructed additional routing paths to accommodate as many as 20 games for simultaneous transmission.
“By far, one of the keys for this network upgrade being successful was that we formed a true partnership with BT and did not merely acquire satellite time,” Choti says. “To this day, BT offers us support and works with us as we continue to enhance and grow our product offering.”
This Year And Beyond
From armchair coaches to dinner table managers to dabbling prognosticators, fantasy baseball players are now on the radar screen of MLB executives. What was once a casual gathering of a group of friends has turned into a multimillion-dollar industry with 10 million subscribers scattered throughout the world and MLB wants a bigger cut of the action.
As this home-based baseball season gets under way, MLBAM is launching a new fantasy baseball section on its Web site to capture those enthusiasts and capitalize on that market. MLB.com and millions of fans around the world in February celebrated the first ever Opening Day for Fantasy Baseball enthusiasts. What used to be a hobby for millions of fantasy players around the globe is now an official event, according to MLBAM executives. In January, MLB paid its players union $50 million over five years for the exclusive rights to the game’s names, statistics and logos.
During the opening day celebration, MLB.com and many of its officially licensed partners, unveiled their new and expanded 2005 fantasy offerings while providing all the tools needed for fantasy players to draft rosters and dominate leagues. In addition to the new and improved games MLB.com offers, Web site executives plan to introduce new games during this month.
MLB.com’s day-long content offering for fantasy owners included a two-hour live video fantasy call-in show with fantasy experts Mike Siano and Cory Schwartz discussing top sleepers and busts at each position and answering calls and emails from fans; video fantasy previews of all 30 teams, ranging from 7-10 minutes each; stories that included tips from experts, a look back at top fantasy players of the past 25 years and fans weighing in on the No. 1 picks of the 2005 season.
“We are excited with this new offering because we plan on giving more licensed fantasy providers, more fantasy players and new and improved games,” says Choti. “This really has the chance of taking fantasy baseball to a new level.”
While MLB dabbles in fantasy play this year, reality reigns king with regard to its Internet platform. With all upgrades successfully in place and revenue continuing to flood through the hybrid network, it is easy to see how an investment in an advanced corporate utility can pay off for strategic business endeavours in the long term. MLBAM is a formidable example of how executive management teams in any industry sector can take a corporate network and make it operate as a revenue-generating viable business unit.
Nick Mitsis is Editor of Satellite Business Solutions.