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Wednesday, April 30, 2014

Broadcast Bubbles and the Reds' Upcoming TV Deal

David Lazarus thinks the current Dodgers situation could indicate that we're seeing the first signs of the baseball broadcast bubble bursting, per his LA Times article and conversation with Ben Lindbergh on Effectively Wild.  Here's an excerpt:
The problem for Time Warner is that the company shelled out a reported $8.35 billion for exclusive rights to distribute SportsNet LA. That whopping sum pencils out only if almost all other pay-TV customers in the region can be forced to pay an additional $4 to $5 a month for the channel. For Time Warner to cut the monthly rate or, God forbid, offer the channel a la carte, recouping that multibillion-dollar investment would become much more difficult if not impossible.
The Dodgers' TV deal is what has permitted them to sport the highest payroll in major league baseball this season, easily eclipsing that of the Yankees.  If their deal, in their enormous media market, does not pay off for Time Warner, then it could have ripple effects for the rest of MLB...especially teams that haven't yet gotten in on the broadcast contract bonanza.

Teams like the Reds.  And as I noted earlier this month, the Reds' payroll is set to spike pretty dramatically next season thanks to both escalating long-term contracts and the fact that several of their young core are about to become arbitration eligible for the first time. While Castellini and Jocketty have said they're not counting on a big broadcast deal when making their contract extensions, there's no question that a burst in the baseball broadcast bubble could have dramatic, negative consequences for the Reds if it happens before their current TV deal expires after the 2016 season.

Lazarus's comments on the Effectively Wild podcast were also pretty interesting.  My family is case in point of what he was talking about: we got tired of Dish Network bills in excess of $100 per month, and so we have dropped everything in favor of high speed internet alone, netflix, hulu, and for me, MLB.tv.  The MLB.tv package is basically a la carte product purchasing, and there's little question in my mind that this is going to be the long term solution for a lot of tv consumption.  It may take some time, but consumers won't settle for anything else.