Baseball is ahead of the curve when it comes to streaming video.
With the Major League Baseball season coming to a close, the league will see 20% to 25% growth in the number of subscribers for its Internet and mobile services, bringing the total to about 3.5 million. Some of them pay up to $129.99 per season for its top-of-the-line service, MLB.tv, which enables users to stream live broadcasts of out-of-market games.
The success of the league-owned entity MLB Advanced Media, which develops and manages the league’s digital products, has drawn the attention of other entertainment content companies, which have hired it to create streaming video apps for them. With HBO, MLB Advanced Media developed the premium cable channel’s streaming service HBO Now inside of just four months so it would be available — and reliable enough — to handle the heavy online viewing traffic for the April premiere of “Game of Thrones.”
“They had to get it right or it was going to be the biggest public fail ever,” said Eunice Shin, a director for the technology consulting firm Manatt Digital Media. “A ‘Game of Thrones’ premiere is about as big as it gets in entertainment.”
With more consumers using broadband Internet for TV, Advanced Media’s track record has made it a darling of the tech world. It received onstage recognition during Apple Chief Executive Tim Cook’s presentation of the latest edition of the Apple TV streaming video device.
Advanced Media — owned by the 30 Major League Baseball teams — is hoping to cash in on the fast-changing TV landscape by spinning off the technology services end of the business into a separate company, known as BAM Tech. The new company has bid on streaming rights for other sports and entertainment content.
“Our board has been very clear with us they think this is a business we can and should grow,” Advanced Media CEO Bob Bowman told The Times in a recent interview.
Bowman added that he’s seeking minority investors for some help.
MLB Advanced Media showed its willingness to compete for streaming rights when it landed a six-year deal last month with the National Hockey League. The pact pays the NHL $100 million per season and also gives the league equity in BAM Tech, guaranteeing a minimum of a 7% stake.
By January, BAM Tech will be operating the NHL’s Gamecenter Live, the site and app that streams TV broadcasts for out-of-market games, and will get the revenue for the ads sold in that online content.
This year the league swung a deal with the PGA Tour to produce and sell exclusive coverage of early rounds for nonmajor golf events not seen on cable or broadcast TV. Several hundred thousand users have signed on for $4.99 a month to get the coverage, which is available only through the PGA Tour Live app.
Bowman noted that the growth of digital streaming is likely to have more sports leagues and organizations looking more closely at selling digital streaming separately from TV packages.
“As the digital rights get more valuable and the digital-only partner comes in and says, ‘We’ll pay you X for the digital rights,’ there will be some content owners that will start to split them up again,” he said.
The company will need some partners to help it compete.
Bowman said BAM Tech prefers not to give up equity in any future rights deals as it did with the NHL. But he is meeting potential investors who can bring sports rights business experience to the table as well as reduce financial risk. He played down speculation in the financial media about an initial public offering.
“I don’t think we’re ready for an IPO,” said Bowman, an investment banker before he joined MLB Advanced Media when it launched in 2000. “I think we’re ready for another round of investments. We’re a neophyte in the rights business. We have a pretty good way to monetize rights.”
He also said the company has a “clear vision how to build apps, how to make them user-friendly, how to get fans to then buy apps and use them all the time, and tell their friends about. But what we’re not experienced at, and we’re trying to get better at, is getting in the middle of these rights acquisitions.”
Advanced Media was launched when the 30 MLB owners were asked to kick $120 million over four years into the company that would build and manage all of the clubs’ digital needs such as websites and online sales of tickets and merchandise.
In 2002, MLB became the first league to offer live-streamed games, starting with a small package of key pennant stretch drive contests. The following season, the league made every game available, nearly two years before YouTube was founded.
By the time teams had put in $77 million of their original investment, the business was generating positive cash flow. The owners were paid back in 2008 and have received yearly dividends since then.
“They deserve the credit they get for being forward looking,” said a sports media executive who did not want to discuss the company on the record because he was not authorized to speak publicly. “In terms of leagues in embracing the digital space, they’ve been out in front of the others.”
The MLB digital properties will not be a part of BAM Tech, but the team owners will have a stake in the new asset.
Does Bowman worry that other leagues and their well-heeled owners will start tech businesses of their own to compete?
“I don’t think a league is going to want to try and create a third-party service business,” he said. “We’ve been building this for 15 years. So I think just in that regard there’s been a lot of time, a lot of money and a lot of knowledge that’s gone over the transom. But whether it’s a league or something else, there will be competition out there for us. We recognize that.
“We don’t sleep easily at night. We wake up paranoid every morning,” he said.