Root, root, root - and pay - for the road team
Baseball could get more money if it drops plan to let DirecTV have exclusive deal to sell out-of-market games to hard-core fans.
NEW YORK (CNNMoney.com) -- Long-distance relationships may not work for romances. But it's a different story for sports fans.
Professional sports leagues are tapping into the interest that many fans have for their favorite team even after they've moved far from home. It is quickly becoming one of the fastest-growing sources of revenue for the leagues...and one of the more controversial.
While local and national broadcast sports rights fees are showing only solid gains, if that, the leagues are seeing the rights fees for out-of-market games soar. Some fans pay a couple of hundred dollars a year to watch games not available in their home market.
Such packages seem to be a small price to pay for Boston fans far from Red Sox Nation or Packers fans in warmer climates. So it's not surprising that cable and satellite television providers have been fighting for the packages as a way of attracting customers.
Major League Baseball is close to selling the rights to its "Extra Innings" package of out-of-market games for $100 million a year -- or more. That's more than triple the $30 million or so a year that sources said baseball got in its last Extra Innings deal.
When the NFL renewed its exclusive package for Sunday Ticket with DirecTV (Charts) in late 2002, it got $400 million a year, up from $130 million a year previously, according to trade publication Sports Business Daily. And DirecTV agreed to pay $700 million a year for the Sunday Ticket rights when the contract was renewed again after the 2005 season, according to the publication, according to the publication. More than 2 million fans had that package last year, according to an estimate from Kagan Research.
Meanwhile XM Satellite Radio (Charts) and Sirius Satellite Radio (Charts), which recently announced plans to merge, had been busy competing for the rights to packages from the different sports.
XM landed MLB for a reported $650 million deal that stretches 11 years. It also ponied up for the rights to Nascar, the National Hockey League, golf and tennis. Sirius signed a three-year deal with the NFL for $220 million and also broadcasts Nascar events as well as National Basketball Association games.
The controversy comes because DirecTV is trying to get an exclusive contract to carry the MLB package, as it already has with the NFL. That has raised criticism and threats of legislative action by Sen. John Kerry, D-Mass., along with a statement by Federal Communications Commission Chairman Kevin Martin that he is also concerned with the expected change.
Both men, as well as an estimated 180,000 baseball fans who subscribed to Extra Innings last year on cable and 50,000 fans who did so with the competing satellite service from EchoStar Communications (Charts), might get their wish without a change in legislation.
One source familiar with negotiations said he now believes that the Extra Innings package will remain available to all three services.
"I'd be surprised if the DirecTV deal goes through," he said.
The key isn't likely to revolve around more money, but an agreement by the cable operators to provide broader carriage for a Baseball Network which MLB intends to start operating in 2009.
DirecTV had been willing to let all 15 million of its subscribers have the new Baseball Network right from the start, as well as helping with some of the start-up costs, according to multiple sources. It isn't willing to be as helpful to MLB's upstart network if it doesn't gain the advantage of an exclusive deal on Extra Innings, though.
But after initially rebuffing the MLB demands for carriage of the Baseball Network, the cable operators are now coming around, according to the industry source.
"There will be a commitment to carry the Baseball Network (on cable)," said the industry official. "Where it will be placed, that still needs to be sorted out."
Another source with the league said he was not aware of any shift away from plans to go with an exclusive deal for DirecTV. But talks have lingered for months without an official announcement even as baseball's opening day draws near.
A non-exclusive deal would not only reduce the risk of any interference from Washington. It will also allow baseball to not anger more than 200,000 of its most loyal customers who would have to shift television services to keep following their teams.
The motivation for the exclusive deal has been reported -- incorrectly -- as baseball's desire to get the top rights fee for the Extra Innings package.
The big cable companies, which collectively own a service called In Demand that airs the Extra Innings games, were reportedly willing to pay $70 million a year for a non-exclusive deal.
And while DirecTV won't offer $100 million for a non-exclusive deal, it seems safe to say that it and the Dish Network, along with the telephone companies that are making their own push to provide television service, would easily pay more than $30 million combined for non-exclusive deals.
Plus, it's not as if DirecTV is likely to take a big financial hit if it doesn't get an exclusive MLB contract. Sources familiar with subscription numbers say that DirecTV already has 270,000 Extra Innings customers...more than the cable companies. Assuming DirecTV can hold onto all these customers, that works out to $50 million in subscriber fees.
There hasn't been as much heat over DirecTV's exclusive contract with NFL's Sunday Ticket, but that's because that has always been an exclusive deal. But that doesn't mean the cable operators have given up hope getting into that deal as well.
Sen. Arlen Specter, R-Pa. said at a hearing of the Senate Judiciary Committee in December that DirecTV's exclusivity with Sunday Ticket was a reason to strip the NFL of an antitrust exemption it uses to negotiate television deals for all of its teams. Cable company Comcast (Charts) is based in Specter's hometown of Philadelphia.
This topic will definitely be worth watching in Congress. Clearly, the absence of a favorite sports team makes many fans' hearts grow fonder. And the leagues, along with cable and satellite providers, are only too happy to cash on that.
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