MLB Talks Head Into Extra Innings

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Major League Baseball’s negotiations with cable over carriage of its out-of-market live-game package are now officially in extra innings.

MLB met Friday with executives from In Demand Networks to try to strike a deal for distribution of MLB’s Extra Innings live-game package on cable systems. The meeting came one day after the league announced that it would give cable operators and EchoStar Communications’ Dish Network until the end of the month to reach an Extra Innings accord before the pay-per-view package becomes the exclusive property of DirecTV in a $700 million, seven-year deal.

The catch: Cable and Dish have to agree in principle to the same deal terms MLB and DirecTV announced for the Extra Innings package: placing the games on the operators’ most widely available tier of programming and taking a stake in the league’s baseball network when it launches in 2009.

But right now, it doesn’t look like those negotiations will yield a home run deal with cable operators. Pay television distributor In Demand, which is representing the cable industry, immediately shot down baseball’s pitch, calling it “a de facto exclusive deal” with carriage provisions that are impossible for cable operators to meet.

Meanwhile, the three-week negotiation grace period puts DirecTV in financial and marketing limbo. DirecTV CEO Chase Carey said its reported $100 million-per-year payment to baseball for the package will drop “significantly” if it loses exclusivity to cable or EchoStar.

“There’s a degree of short-term uncertainty -- this agreement has a period where it’s not clear how these rights end up in terms of exclusive versus nonexclusive rights,” Carey added. “It creates some short-term issues as to how we develop the properties around it, but we’ll work through that.”

About 500,000 people bought Extra Innings in 2006 through the three distributors, with DirecTV leading the way with a reported 270,000.

DirecTV will charge $159 for Extra Innings and an additional $39 for the SuperFan interactive features.

Both In Demand and Dish have to agree within a three-week window to meet DirecTV’s payment for Extra Innings, as well as to distribute the league’s 24/7 Baseball Channel on a basic tier, or perhaps field the anger of subscribers who will no longer be able to get the out-of-market games.

DirecTV will carry the channel -- in which it would own a reported 20% stake -- on its basic tier, reaching more than 15 million subscribers.

“It’s quite a simple process … we want to make this available to our fans,” MLB executive vice president of business Tim Brosnan said. “The issue is whether the incumbents want to pay the freight to make it available to their customers.”

While the industry is willing to match DirecTV’s price for Extra Innings, it wants to offer the new baseball channel on a premium sports tier rather than part of its basic digital offering. Cable-operator executives close to the negotiations said MLB spurned the industry’s guarantee to more than match DirecTV’s 15 million-subscriber commitment by the time the network launches.

“Major League Baseball has chosen to cut a de facto exclusive deal -- including conditions for carriage that MLB and DirecTV designed to be impossible for cable and Dish to meet -- with one satellite operator and disenfranchise baseball fans in the 75 million multichannel households who do not subscribe to DirecTV,” In Demand CEO Robert Jacobson said in a prepared statement.

EchoStar was also lukewarm to the offer. “We have been asking Major League Baseball to make the package available a la carte so that only those who choose to get the games today can continue to do so,” the company said in a prepared statement. “We hope they will act in the best interest of consumers and provide that option.”

It was unclear at press time if Dish officials had met with MLB Friday to discuss the new deal.

But MLB president Bob DuPuy said the extended negotiation window should allay any concerns and criticisms among fans and congressional leaders that baseball is trying to deprive baseball fans of the Extra Innings package, which cable has distributed since 2001.

“I would hope it would alleviate those concerns [from lawmakers] because the product is now being offered to everyone that had the package,” DuPuy said. “Going back to the incumbents was driven principally by our desire to deliver the most baseball programming to our fans.”

Sen. John Kerry (D-Mass.), who first voiced his opposition to a potential exclusive DirecTV-MLB deal in late January, was encouraged by baseball’s move but remained cautious. “I will review this deal to ensure that it benefits consumers,” he said.

As part of its deal, DirecTV will offer several interactive features to the Extra Innings package, including a mosaic channel that shows multiple games and a Strike Zone informational channel, according to Carey.

A DirecTV spokesman said the satellite service will soon roll out an extensive, national multimedia marketing and promotion campaign unprecedented in value for Extra Innings. Exact details of the campaign -- as well as an actual start date -- were not available at press time.

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