Gabelli Sports Business Initiative

00;00;00;00 - 00;00;42;17
Mark Conrad
Hello and welcome to the Sports Business Podcast with Prof C, the podcast that explores the world of professional, collegiate, amateur, and Olympic sports. I’m Mark Conrad, or Prof. C from Fordham University’s Gabelli School of Business, where I serve as Professor of Law and Ethics and the Director of the Sports Business Initiative. Since 1990, ESPN has been a stalwart broadcast partner of Major League Baseball.

00;00;42;20 - 00;01;17;12
Mark Conrad
As recently as five years ago, the sports network broadcast 90 regular season games and 10 spring training games. It also aired a package of highlights under the “Baseball Tonight” moniker, as well as other MLB-related programming. Under its current agreement in place since 2021, ESPN’s baseball coverage dropped to just 30 regular-season games -- mostly on Sunday night -- and the wild-card postseason series.

00;01;17;15 - 00;01;57;22
Mark Conrad
ESPN paid dearly for these truncated rights – about $550 million a season, proportionately much higher than Fox and TBS, which hold the lion’s share of the baseball national broadcasting pie. And particularly galling to the suits at Disney, the owner of ESPN, are the reduced fees that streaming services like Apple and Roku are paying. Apple pays $85 million per season for a Friday night package it has aired since 2022, while Roku's deal for Sunday afternoon games is worth $10 million per year.

00;01;57;24 - 00;02;35;12
Mark Conrad
So, ESPN execs felt they had little choice but to exercise a contractual opt-out to end their deal early after the 2025 season, three years earlier than the original date. Media reports noted that the divorce was not pretty, but more importantly, ESPN’s exit raises questions about the financial future of Major League Baseball and traditional television. Baseball is in a challenging position because it has so much content. With 162 regular season games, plus multiple rounds of playoffs,

00;02;35;14 - 00;03;08;17
Mark Conrad
it has more tonnage than any other sport – by far. The NFL, with 17 games a season, has monetized their product by negotiating exclusively with national broadcasters for over sixty years. The NBA, with combination local and national broadcasting packages, secured a huge increase in broadcast rights due to its popularity and youth appeal. Baseball has not been as fortunate. With an older demographic and multiple games almost every night,

00;03;08;19 - 00;03;40;00
Mark Conrad
Commissioner Rob Manfred is facing an uncertain analog and digital landscape. One of his biggest headaches involves local broadcasts on regional sports networks or RSNs, those cable channels that are devoted to sports in a given market. When cable TV penetration reached 110 million people, the RSNs were supporting the local markets while national games of the week and playoffs created a more national audience.

00;03;40;02 - 00;04;15;11
Mark Conrad
But with cable subscribers dropping by at least 40% in the last decade, this model has broken. In 2023, Diamond Sports, the leading regional sports network whose local cable channels carried games from about half of the MLB teams, filed for bankruptcy. It successfully reorganized, but the result was that a number of teams ended their arrangements early and others were forced to accept less money from the new entity. While Diamond Sports also carried games for NBA and NHL teams,

00;04;15;17 - 00;04;47;23
Mark Conrad
the effect of the financial troubles was more acutely felt by baseball because there is a question on how much money these teams can make with future rights deals, and the ESPN exit certainly has not helped. Manfred is in a tough spot. He must steer a legacy sport with less than stellar ratings into a new era. He could corral more local teams into a streaming universe and try to nationalize those deals with streamers like Amazon Prime, Netflix or Hulu.

00;04;47;25 - 00;05;11;01
Mark Conrad
He could try to get another network to take some weekly games – maybe an over the air network like CW. Manfred, with the agreement of the owners and players association, could create more special events like the NHL’s wildly successful “Four Nations” tournament. He could try to get ESPN back in the fold with a cheaper and more limited rights deal

00;05;11;06 - 00;05;40;15
Mark Conrad
since it has been reported that ESPN is still open to pursuing a deal with a reduced rights fee. But the dirty little secret was revealed by CNBC’s Alex Sherman on the podcast known as The Varsity. ESPN and others get a higher Return on Investment from one-off or limited run sports creations like the “Four Nations” Tournament rather than a century old legacy sport.

00;05;40;18 - 00;06;16;15
Mark Conrad
MLB has to address a change in this media landscape before the other leagues. Its broadcasting agreement with Fox and Turner expires in 2028, which is not that many years away. The landscape is treacherous and not an easy challenge for Commissioner Manfred. For the Sports Business Podcast at Fordham’s Gabelli School of Business, I’m Mark Conrad, or Prof. C. Have a great day!