The blackout is one of the best things to happen to baseball fans in the last 20 years. Although conventional wisdom regards MLB’s blackout policy as a scourge, the truth is much different. Blackouts, which are based on territorial exclusivity, are the foundation of the sport’s economic system, and, it’s because of them that most fans today have access to an unprecedented number of games at an extremely affordable price.
Television territories that cause these blackouts are integral to the economics of the game. They’re a foundation of the very structure of the league.” – MLB Commissioner Rob Manfred, quoted by Forbes.com
Railing against MLB’s blackout policy is old hat, but new Commissioner Rob Manfred’s recent defense of the system has elicited fresh condemnation. At the heart of these criticisms is the premise that major league baseball is being greedy and short sighted by denying fans an opportunity to watch the game they love. However, when you boil down these arguments, the motive is much more self-centered. What those who call for the abolishment of blackouts really seem to be saying is: “give me what I want when I want it and at a price I want to pay.”
Before addressing some of the specific arguments against MLB’s blackout policy, it’s important to understand how it works. Basically, MLB allows teams to sell television rights in a particular market. These rights come with a guarantee of exclusivity, which enhances their value to the regional sports networks (RSNs) bidding for the contract. With exclusivity in hand, RSNs can demand larger carriage fees from cable operators, who in turn pass along sports surcharges to their customers. Everyone gets paid in the process, which is why the contract values keep increasing exponentially. This system can be extremely unfair to the consumer…unless you are a sports fan.
Because cable operators spread the RSN carriage fees broadly across their customer base, non-sports fans wind up subsidizing the cost. Of course, turnabout is fair play, and sports fans with no other TV viewing interests wind up paying the freight for other channels they don’t watch. Still, because athletic events have become such a coveted TV programming asset (i.e., it is one of the few things most people exclusively watch live), sports fans wind up coming out ahead.
Another way baseball fans have benefited from the sport’s economic framework is access…the very point of contention raised by those who oppose the imposition of blackouts. For about $120/year, baseball fans all around the country can watch just about every game on MLB.TV. However, it’s important to remember that MLB.TV is not a self-sustaining service; it is a provider of streaming broadcasts that are produced by RSNs. Without blackouts, there would be much less incentive for RSNs to bid for rights and produce games. And, without those games, there would be no MLB.TV.
Eliminating blackouts would be like removing the link in a strong chain, the consequences of which would not only be detrimental to each team’s economic health, but also limit the number of games available for viewing. The potential for such irony, like the complexity of baseball’s economic system, seems to be lost on so many who ardently oppose blackouts. So, below are three of the most common arguments followed by a more specific rebutal.
1. I am a cord cutter. Why should I pay for cable just so I can see my home team play?
Cord cutters are people who have canceled their cable contracts in favor of subscription-based streaming services like MLB.TV. The only problem is home team games are blacked out on MLB.TV. So, why won’t baseball let cord cutters root, root, root for the home team? Because, if they did, the entire system could collapse.
Sports programming is arguably the cable industry’s best defense against cord cutters. Because most people watch sporting events live, and the live games of home teams are only available on cable, sports fans are still beholden to the operators. If MLB decided to eliminate this protection, and a significant number of fans canceled their cable subscriptions as a result, the impact would ripple throughout the system. Cable operators would lose subs; RSNs would lose per-subscriber carriage fees; and eventually teams would see shrinking rights payments. How would they make up the difference? Probably by raising the price of an MLB.TV subscription.
Not only would fans face a price increase for MLB.TV under this scenario, but fewer games could also be the result. Remember, without RSNs, there is no MLB.TV, so if these regional channels were squeezed out of the mix, it’s likely that the number of available games would begin to shrink. Granted, MLB could decide to pick up the slack by producing its own broadcasts, but the cost of doing so would also be reflected in the subscription price.
It seems obvious that if everyone cuts the cord, the cost of watching baseball games on a subscription basis would go up significantly. That’s the only way to replace approximately $1.75 billion in annual revenue from regional cable television contracts, a figure that is expected to continue growing exponentially. For perspective, if MLB tried to replace that amount of money with an MLB.TV price increase, an annual subscription would skyrocket to about $800. Clearly, having a broader subscriber base subsidize sports programming works pretty well for baseball fans, so those who advocate ala carte programming should be prepared to replace the cord with a significant cost.
Hypothetical MLB.TV Revenue Replacement Model
Note: Average cost of 2014 MLB.TV assumed to be $120 (average of premium and basic subscription). MLB.TV revenue estimates based on 2013 comments from then MLBAM CEO (and current President, Business & Media) Bob Bowman. MLB.TV subs based on that estimate divided by a $120 subscription fee.
Source: Royalsreview.com and upperdeckchatter.com
2. I am from out of town and enjoy watching my favorite team play on MLB.TV, except for when a national broadcast blacks me out. I paid my subscription. Why can’t I watch every game?
With last year’s contract extension, FOX agreed to limit the breadth of its exclusivity. Instead of blacking out all games in FOX’ designated window, MLB.TV now only restricts access to the game being aired in each network affiliate’s local market. ESPN’s Sunday night broadcast is also restricted. So, unless a fan doesn’t have access to ESPN or a local FOX affiliate, they should still be able to see every game played by their favorite team.
Those without ESPN and FOX will be left in the dark when their favorite team plays on national TV, but missing out on 10 games or so is hardly cause for outrage or worthy of sympathy, especially considering the cord cutting dynamic explained above. Using the same assumptions, the price of an MLB.TV subscription would need to climb to almost $700 to replace the annual revenue from baseball’s national TV contracts. Being blacked out of a few games seems like a small price to pay for avoiding such a sharp increase in the cost of MLB.TV.
3. I live in a city that falls within the territory of my favorite team, but their games aren’t available on cable. Why is baseball preventing me from watching on line when there is no other alternative?
This argument deserves sympathy, although the claim is often exaggerated. For example, North Carolina is often cited as a market where baseball fans are victimized by MLB’s blackout policy, which restricts live streaming of games played by the Nationals, Orioles, Reds and Braves. However, each of those teams is available on cable in blacked-out North Carolina markets (MASN, which airs Orioles and Nationals games, is available on various cable systems in the state; Fox Sports Carolina airs Reds games from Fox Sports Ohio and Braves games from Fox Sports South). Unfortunately, when cable operators and RSNs can’t come to an agreement on terms, as was the case in North Carolina, fans in blacked-out markets get exposed, but that’s no different from what happens when there are contract disputes within a home territory.
If there are parts of the country in which a team’s rights holder isn’t making a reasonable effort to provide games on cable, MLB should consider ways to temporarily lift blackout restrictions. However, if the RSN is making an effort, MLB shouldn’t get involved. Otherwise, the league runs the risk of undercutting its broadcast partner in a local market, which will ultimately lead back to the team.
The number of fans who legitimately have no way of watching their favorite team is small, especially when compared to the millions who now have nearly unlimited to access the sport. Although MLB shouldn’t abandon these fans, it would be foolish to overturn a system that has served so many well.