MLB has sports betting wildcard to protect its media rights

Major League Baseball is at the media rights negotiating table and has a wild card to play.

The league’s deal with Disney-owned ESPN is in renewal discussions, and the result could change the look of baseball on national television during the week. Some media experts estimate that MLB’s Monday and Wednesday package is worth between $ 150 million and $ 200 million a year.

The gossip began to circulate when The Athletic reported that ESPN was ready to part with some of its baseball content. History has led to predictions that MLB’s media rights fees could collapse.

“I think they will be sold, but not at the asking price of $ 350 million,” media rights expert Dan Cohen told CNBC. Cohen, senior vice president of Octagon’s global media rights advisory division, said he believes MLB will lower the asking price on the package if that is the number. Not a lot, however.

“The MLB is not looking to give these rights away for free,” Cohen said. “There is value for nationally televised baseball games on Mondays and Wednesdays.”

The point is, it’s not an exclusive value. And that makes MLB creative about its future, with the sports game allowed as leverage.

To help its network partners overcome losses from Covid-19, the league has granted them permission to use limited commercials for sports betting.

MLB controls what ads are shown during games, although there are still restrictions on sports gambling ads. During its pandemic season, during which networks were sidelined from the games, MLB endorsed the announcements and aided partners.

The National Football League made a similar move earlier this month, according to the Wall Street Journal. The league provided its national media partners with more advertising space during its postseason games and Super Bowl LV.

Gambling companies like DraftKings and FanDuel spend millions on marketing. One of the best options for them is to buy ads around sports content.

Spending is expected to continue. This means that MLB can once again increase the number of commercials it provides to networks. The partners will collect their fees and pay a share to the MLB. In a way, the league protects its media rights.

ESPN has a reason to devalue the MLB package. And again, Monday and Wednesday matches are not exclusive.

In 2012, he agreed to pay MLB $ 700 million per year in an eight-year, $ 5.6 billion deal. ESPN gets exclusive Sunday play and the rights to the Home Run Derby.

But on Monday and Wednesday, regional sports networks are also broadcasting the games, giving market consumers no incentive to watch ESPN’s telecast.

“If the Yankees (New York) or Phillies (Philadelphia) games are available on a regional network, they get the most ratings, and ESPN doesn’t do as well with its domestic game,” said a former television executive. CBS Sports President Neal Pilson.

“I’ve always wondered why ESPN had this package in the first place,” Pilson added. “And if they give it up now, I think it’s a smart move.”

Octagon analysts used 108 of 114 games over the past three years to determine the average audience for the Monday-Wednesday package on ESPN, not counting ESPN2 broadcasts. The results: an average audience of 761,434 in 2018, which fell to around 632,000 in 2019.

Audience has dropped to 358,947 on average in 2020, but sports audiences have also been impacted by the pandemic, social unrest and the US presidential race.

“I call them semi-exclusive,” Cohen added. “Sometimes you talk about the big markets – New York, LA, Chicago, Boston, Philadelphia – but you’re still missing 90 percent of the rest of the country.”

But for lack of exclusivity and other league rights, like the contending National Hockey League, MLB could have a new home for its package.

ESPN and MLB declined to comment due to active negotiations.

Reports suggest ESPN wants to cut its annual fees by around $ 150 million. Assuming MLB starts its price at this number or higher, it plans to be creative in its offerings to justify the cost.

Gaming ads can attract networks. Another is the actual game, since MLB controls what can be displayed, they have a say in marketing which networks can use onscreen.

According to people familiar with the negotiations, the league doesn’t think it needs to downgrade the package and will use its broadcast permissions to protect it.

Cohen suggested that Sinclair might be interested in a partnership.

The company has 14 regional networks which broadcast MLB games. He has a streaming game with Stadium, which was backed by Chicago White Sox owner Jerry Reinsdorf, one of the MLB club’s most powerful owners.

Sinclair could pay for itself with the national package, feeding some of its content into Stadium and selling more ad slots courtesy of MLB.

NBCUniversal is dropping its sports network this year and shifting media rights to the most accessible US network. The channel has a history in the sport and NBCUniversal just made a play for wrestling with its Peacock service securing the rights to broadcast WWE matches in the US And with live entertainment the main force protecting the cable model, NBC Sports could make a game for MLB in the United States and also get special access to advertising.

“There is a lot to consider,” Cohen said. “I think they can get pretty smart and creative.”

MLB also has partnerships with Twitter, Facebook and YouTube, which means it already appears to have streaming options. Using the streaming model, MLB could get short-term deals similar to the NFL’s Amazon package and create flexibility as it wouldn’t be locked in for a long-term partner.

And if ESPN goes, MLB is still ahead in the media rights card game.

The league has already secured new rights fees with Turner Sports, owned by Fox Sports WarnerMedia, adding a Tuesday game to its coverage. The network will pay more than $ 3 billion to keep baseball.

Whatever the game, MLB seems to have its wild card and ready to go. And don’t forget, there are still some extra post-season games that he can add to the deck. But for these, MLB will need permission from a leading media rights partner – the Players Union.

Disclosure: Comcast owns NBCUniversal, which is the parent company of CNBC.