Take Me out to the Web Site! E-COMMERCE: Much Hyped, Major League Baseball's Web Site Is Starting to Rally. Can It Be an Economic Model for Other Subscription-Based Businesses?
Schwarz, Alan, Newsweek
Byline: Alan Schwarz
There was a time, not so many decades ago, when Major League Baseball was so technophobic that one commentator feared broadcasting games on radio would leave the industry "shot to pieces." Later on, it was assumed, TV would douse any desire for fans to actually go to the ballparks. And as recently as 1996, as the Internet age dawned, MLB tried to stop online services from providing real-time updates on such basics as scores, home runs, and balls and strikes. The fear? Such information would dilute the excitement of a game in progress.
Not anymore. The excitement around Major League Baseball these days is how technology--specifically the league's Internet portal, MLB.com--can reposition this stodgiest of sports into a pioneer in personalized video and wireless content delivery. The Web site's lineup? Searchable highlights on demand. Live Webcasts of out-of-town games. Minute-by-minute updates through a Web-enabled Palm device or AT&T cell phone, complete with a custom "Charge!" ring when your team begins to rally. As for this tech company's neatest trick--making money by charging monthly subscription fees for content, a revenue model that used to be considered blasphemous to the Web--well, that rally is underway, with usage and revenue up dramatically. The numbers remain small compared with baseball's long-term expectations, but they're a good start. "To be successful economically, subscription services have to be the engine," says Bob Bowman, who oversees MLB.com as CEO of Major League Baseball Advanced Media (MLBAM). "It's happening, and will continue to happen."
MLBAM is a wholly owned subsidiary of baseball's 30 teams, founded in June 2000 as their centralized official Web presence. The interactive media company also represents one model for revenue-sharing for baseball that could help improve the sport's competitive balance. Unlike most money that individual teams take in--local TV, tickets, hot dogs--MLBAM profits will be shared equally among all 30 clubs. "Obviously not all clubs' Internet rights were the same," says MLBAM chairman Bob DuPuy, who is the overall No. 2 man to Commissioner Bud Selig. "For them to vote unanimously to share it was a significant step as we go forward." MLBAM is not a public company, so its numbers and optimism need to be viewed somewhat warily. But MLB.com is getting newfound respect from outside experts. Says Patrick Keane, the lead sports analyst for Jupiter Research, "Major League Baseball is quite innovative right now. I've always thought baseball was so far behind the other sports and sat on its hands. Now it's the polar opposite."
Baseball fans following the current playoffs and World Series can hit sites belonging to ESPN, CBS SportsLine, CNNSI and others for the standard fare of real-time scores, game reports and pitch-by-pitch simulations--all provided free to help attract traffic and build brand loyalty. Major League Baseball, meanwhile, is leveraging its exclusive ownership of game audio and video, both live and repackaged as highlights, by offering that content to its 2 million visitors a day, occasionally free as a promotion but primarily on a subscription basis. MLB expects to clear $7 million in revenues this year from its 800,000 subscribers (the rest of its users can still get access to free data like feature articles and roster updates) but sees the service evolving in three years to a $50 million annual business. Add that to its current $46 million (which is forecast to grow to $110 million) in revenues from game tickets, memorabilia, merchandise and advertising--up 89 percent from last year--and you have an Internet company that can swing from its heels.
Of course, it doesn't hurt that baseball's owners have kicked in more than $70 million over the past three years to launch MLB.com and, their tales of financial woe during recent labor talks notwithstanding, have more at the ready. And the audio and video content arrives free because the league already owns it. …