MLB - Layman's Guide To Why The Sport Is Headed For a Fantastic Financial Crash

Mon Apr 04, 2016 18:22:51PM

U.S. Air Force Thunderbirds perform the flyover during the 2014 MLB All-Star GameBy: Master Sgt. Stan Parker

A story I can't seem to get away from, or get enough of, is MLB's broadcasting costs fiasco it's gotten itself into.

Basically, Major League Baseball has had exponential success when it comes to revenue and rise in popularity and marketability over the last decade for it's sport. And with that, contracts and competition over ownership of airing rights have reached amazing (and apparently completely unsustainable) watermarks.

For example, take two team's brand new TV deals - the Texas Rangers and the LA Dodgers.

Rangers TV deal -

The Rangers will get a whopping $80 million a year, for 20 years with a new exclusive local deal with Fox Sports Southwest. That's worth $3 billion!! And that's just for one team, for one local sport's network, and doesn't even factor in all the other revenue streams in both advertising, other channels airing national games, ticket sales, merchandise, etc,etc. In a capless baseball world, sounds like the Rangers are rolling, right? For now, sure.

LA Dodgers banking big for the next quarter of a decade, for now...

Then take the Dodgers. And get ready for this one -- their new TV contract is worth as much as $8.3 billion! As insane as the Rangers deal might have initially sounded, it's not even close to this one. AND, the Dodgers get that money over 25 years, not 20. Comes to a contract with Time Warner Cable that nets them about $280 million annually. Breaks down to over $2 million a game, every game for the next 25 years! Just think about that.

Then simply ask yourself, where in the hell is all of this money coming from?? How does a local affiliate afford almost a million dollar a game rights? How can Time Warner afford to pay over $2 million a game, just and only for LA Dodgers baseball?

Well, damn sure know that it's not all coming from ad revenue. Not by a crazy long shot. No. Instead, it's coming from cable packaging consumers/subscribers, in the form of moderately charging people anywhere from $3-$5 (and in some cases more) a month. Problem is, Time Warner in particular is running into an awesomely major issue with this strategy. Simply charging folks more for a service that only a small fraction of ardent fans even care to have is a no go. Distributors are refusing to take on the cost, to pass to the consumer. And currently TWC is left holding the bag, the very expensive and egg on their face bag, at that.

A La Carte vs Bundling. The cable dinosaur is dying.

This is just one example. Well, two really. But it's all in the same conversation; MLB has been spending like crazy, operating on the idea that the market will always grow, and never change too much. But in real life, that's never the case. The economy of TV viewing is switching from cable to cable-cutters. A La Carte is the new thing. Not bundling.

MLB kicks off the 2016 season with arguably the most young and exciting talent it has had across the board in decades. Maybe ever. It is at a high watermark with viewership, revenue earnings, talent, franchises invested in spending billions, and overall buzz, and even exciting new trends and rule changes within the game itself. With opening weekend comes all that greatness. But 2016 also marks the first year that we can start to hear WAY more conversation of the great sport's broadcasting bubble that forever changed MLB's broadcasting landscape. And with the first game's kicking off, that conversation is already in high gear. It will only get louder.

How in the world do you fix this? Or at this point, is it all inevitable to collapse fantastically?

That's the big question. Opening day of baseball starts the great countdown in my eyes. How will the viewership fair? How will cable package subscriptions work out with Time Warner? Will fans refuse to usurp the extra expenses until the industry is forced into a very uncomfortable and costly corner?

All questions this season will begin to answer for us. Something in baseball is about to come to head quite soon. So, that gives you an added motivator to pay attention this year, aside from who the Met's best pitcher will turn out to be this season; my monies on Jacob deGrom.

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I see this thing completely collapsing. We could see teams being sold as a result.