Walt Disney Co. is in talks to acquire a stake in the tech arm of Major League Baseball Advanced Media, which develops and manages the league’s digital products, including a popular streaming service, according to people with knowledge of the matter who were not authorized to comment publicly.
Disney is expected to acquire a one-third stake in the technology services unit of MLB Advanced Media, known as BAM Tech, valuing the company at about $3.5 billion, according to a person close to the negotiations.
For Disney, the pact would give it a major beachhead in the sports streaming business at a time when consumers are migrating to online viewing options and in some cases leaving their televisions behind. The Burbank company’s flagship cable network ESPN has lost several million subscribers in recent years -- but this partnership could provide Disney with a hedge against that shrinking traditional audience.
ESPN is Disney’s most lucrative asset, and it makes sense for the company to bet big on digital delivery of sports. ESPN needs to grow its revenue base to keep up with the escalation of sports rights fees at a time when its traditional source of revenue -- cable affiliate fees -- is under threat by so-called cord cutters and the move to smaller cable bundles.
The cable sports juggernaut commands the highest rates from pay-TV operators seeking to offer it to their customers. But ESPN has been scrutinized by investors since last summer, when Disney Chairman and Chief Executive Robert Iger commented about head winds in the company’s business during an August conference call with analysts.
This year, Nielsen Co. said that ESPN had lost 1.2 million subscribers in 2015. Disney owns 80% of ESPN, with Hearst Corp. owning the remainder.
MLB Advanced Media’s flagship product is MLB.tv, which enables users to stream live broadcasts of out-of-market games. In all, Major League Baseball had about 3.5 million subscribers for its Internet and mobile offerings by the end of last season.
But the company isn’t just focused on streaming baseball games.
In recent years, MLB Advanced Media has cut deals with other media companies to help them improve their streaming offerings. For example, the company, which is owned by the 30 Major League Baseball teams, worked with HBO to develop that company’s HBO Now streaming service. It was successfully launched in April 2015 for the premiere of the fifth season of “Game of Thrones.”
MLB Advanced Media has also assisted ESPN with the company’s WatchESPN streaming website and mobile app.
Also, MLB Advanced Media, which was founded in 2000, said last year it would spin off BAM Tech. It bids on streaming rights for other content and brokered a six-year deal with the National Hockey League in August 2015.
In an interview with The Times last year, MLB Advanced Media CEO Bob Bowman said he believed his company was “ready for another round of investments.”
Disney has made a handful of high-profile investments in the digital realm. Most recently, the company acquired Maker Studios, a producer of content for YouTube, for more than $500 million in 2014.
A spokesperson for Major League Baseball declined to comment. Disney did not respond to requests for comment.
Bloomberg News first reported the prospective deal.
Times staff writer Bill Shaikin contributed to this report.