March 27, 2007

MLB Hearing Strikes Out

By Shirley Brady

The U.S. Senate Commerce Committee held a hearing on MLB's seven-year, $700 million deal with DirecTV for Baseball's Extra Innings out-of-market package in Washington, D.C. today. Sen. John Kerry, who chaired the hearing, criticized the deal in a conference call yesterday, tried to play mediator today to nudge MLB and Extra Innings' other incumbents closer to an agreement—but it didn't make any difference as MLB held its ground.

At today's hearing, MLB president and COO Bob DuPuy held up cable's sports programming exclusives (in particular, cable's baseball exclusives such as Comcast's deal with the Phillies and Cox Communications' arrangement with the San Diego Padres) in defense of Baseball's deal with DirecTV. According to a MarketWatch report, EchoStar's Carl Vogel, a former cable operator who's now president of Dish Network, commented: "Creating exclusivity arrangements with sports content is anti-competitive."

"There's nothing sinister, illegal, wrongful or frankly unusual about that form of business negotiation or results," DuPuy told the Committee, according to a report on MLB.com. "This is not a matter of fans being unable to view MLB's out-of-market games. It's a matter of not being able to watch those games on a particular system."

Jacobson and Vogel also said MLB was not offering their companies the same offer as DirecTV because it was missing the opportunity to acquire the same 20% equity stake (or any stake) in the channel. DuPuy said only DirecTV deserved a stake because "It's very common in the broadcast industry for the early movers to get a piece of the equity."

In Demand pres./CEO Rob Jacobson argued that sending non-DirecTV subscribers to the Internet to watch out-of-market games is an insult, according to an AP report: "I won't be able to see the games unless I huddle around a 4-inch picture on a computer."

Instead of forcing fans to the Web, Jacobson proposed that MLB take the Baseball Channel off the table so an Extra Innings deal matching DirecTV's terms could be signed before Sunday's regular season opener.

"This would ensure that for the next two years at least, all baseball fans would have access to the Extra Innings package,'' Jacobson argued. "If we're unable to reach an agreement when the channel launches, we'd give baseball the right to cancel the Extra Innings deal. We think this is a fair compromise.''

Kerry tried to coax DuPuy to consider the offer—but he wouldn't bite. "We believe that DirecTV has the right to begin to help us build the channel,'' he responded, adding that In Demand's cable operator owners (Comcast, Cox and Time Warner) had nine months to negotiate a deal. Still, DuPuy added, "Our door remains open."

The parties agreed to meet in the next 48 hours, although the major sticking point remains: In Demand and EchoStar refuse to offer the Baseball Channel to 80% of their subscribers, as DirecTV is doing, depriving MLB of the bigger per-subscriber fee bankroll with which it's hoping to launch the channel.

If, as seems likely, In Demand or EchoStar can't reach a deal with MLB by Sunday, DirecTV will get a de facto exclusive on Extra Innings so fans who don't subscribe to DirecTV will be forced to purchase and watch a Web-only subscription package from MLB.tv.

DirecTV is also charging $39 extra (or $199 for the total package) to get Extra Innings' games in HD as part of a Super Fan package. DTV's Extra Innings package increases $40 on Apr. 7.

Earlier >>

3/26/07 MLB's Extra Innings Gets Senate Hearing + Q&A with In Demand's Jacobson

3/21/07 MLB to Cable: "Strike 1!"

3/20/07 Cable Ops Prep For No MLB Deal

3/8/07 DirecTV/MLB Deal Announced