Major League Baseball’s negotiations with cable over carriage of its subscription package of out-of-market live games are now officially in extra innings.
MLB met Friday with executives from In Demand to try and strike a deal for distribution of “MLB Extra Innings” on cable systems. The meeting came one day after baseball said it would give cable operators and EchoStar Communications’s 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 operators and Dish have to agree in principle to the same deal terms that baseball and DirecTV announced last week for the $179 Extra Innings package. That would include placing the network on operators’ most widely available tier.
But right now it doesn’t look like those negotiations will yield a home run deal with cable operators. Pay-per-view and video-on-demand content 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-a-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 said. “It creates some short-term issues as to how we develop the properties around it, but we’ll work through that.”
About 500,000 customers of the three distributors bought Extra Innings in 2006, with DirecTV leading the way with a reported 270,000.
Both In Demand and Dish have to agree within a three-week window to meet DirecTV’s payment for Extra Innings, as well as 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 cable 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 as 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 statement.
EchoStar was also lukewarm to the offer. “We have been asking Major League Baseball to make the package available a la carte so only those who choose to get the games today can continue to do so,” the company said in a statement. “We hope they will act in the best interest of consumers and provide that option.”
Unknown at press time was if Dish officials had met with MLB on Friday to discuss the new deal.
MLB President Bob DuPuy said the extended negotiation window should allay concerns and criticisms among fans and congressional leaders that baseball is trying to deprive fans of the Extra Innings package, which cable has distributed since 2001.
“Going back to the incumbents was driven principally by our desire to deliver the most baseball programming to our fans,” DuPoy said.
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 remains cautious. “I will review this deal to ensure that it benefits consumers,” he said.
DirecTV agreed to add several interactive features to the Extra Innings package, including a mosaic channel that shows multiple games and a Strike Zone informational channel, Carey said.
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. Details of the campaign — as well as an actual start date — were not available at press time.
DirecTV will charge $159 for Extra Innings and an additional $39 for the “SuperFan” interactive features.