Launched in 2000, MLB.com was funded by the clubs in an agreement that had them each investing $1 million a year over four years. The cost was targeted at $120 million. To the joy of the owners and MLB, the Website started generating excess revenue in only the second year of its existence, allowing them to invest only $70-$75 million before beginning to see a return on their investment.
When the decision to launch MLB.com occurred, MLB moved all of its Internet rights into a centralized location. No longer were team Websites controlled by individual clubs; now they were under a single umbrella. This was the start of a focused effort to completely control and centralize all products and services provided on the Internet by MLB.
To put just a few numbers into the discussion, from 2004 to 2005 sales on MLB.com rose 220% from the year prior with a 200% increase in sales through just the MLB.com Shop. MLBAM revenues for 2005 are expected to rise 88% to $260 million, and annual revenue is expected to jump 30-50% over each of the next five years. A huge cash cow for the 30 owners in MLB that get to split the profits. Last year, the MLBAM inked a deal with Microsoft and AOL to stream MLB games live onto PCs. That deal totals as much as $40 million over two years from just Microsoft alone. AOL’s deal totaled $9 million over the same period.
But where MLBAM has been extremely savvy has been in the diversification of holdings under the Advanced Media’s umbrella. Not counting the season’s $9.5 million in online ticket sales, MLB.com will still rack up an estimated $25 million this year in sales and auctions of licensed merchandise and collectibles.
In November of 2004, Tickets.com was acquired by MLBAM. This allowed for broader control of and centralization of MLB related ticket transactions. It made good sense, as MLBAM had inked a three-year deal in 2003 to cover the lion’s share of ticket sales for MLB.com and was the exclusive online partner, providing service to 20 of the 30 franchises.
via Hardball Times
This year the start-up is expected to rake in $500 million in revenue, and that makes them a player in the TV market.
While the other major leagues are blundering around the internet, MLB is defining the future and everyone is following. You can see this with online streaming of games, where MLB pioneered the concept and every league has copied.
The next step is in TV deals where the majority of league money comes from. Right now those deals are TV first and internet a distant second, and sometimes ignored altogether.
Only ESPN is aggressively dealing for the internet with its “best available screen” strategy, but they have to fight their own maker to achieve that. The cable companies, like Comcast and Time Warner, don’t want to pull customers away from their cable subscriptions.
It’s a confusing mess for everyone involved and that is why MLB Advanced Media is so critical. They have a clear determined strategy for growing baseball, from simplifying ticket sales to offering technology to watch four games at once. Their business is growing by leaps and bounds and driving the market.
Only time will tell how it all plays out but having a major player in the market focused on the internet is surely going to change the game.