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Tuesday, January 12, 2016

Television Rights, Baseball's Tsunami

I unfortunately don't have enough time to properly treat this story, but a couple related pieces turned up on Techdirt and Fangraphs on the always-interesting subject of television rights that are required reading for anyone concerned about the future of baseball. First, Fangraphs draws us up-to-date with a case I can't believe I had missed, Garber v. Office Of The Commissioner Of Baseball.
Long-time Fangraphs readers are probably already familiar with the Garber suit, as we’ve previously covered the case on a number of different occasions. By way of a brief recap, though, the lawsuit essentially alleges that MLB violates federal antitrust law by assigning its teams exclusive local broadcast territories (the same rules that also give rise to MLB’s infamous blackout policy).

Not only do the plaintiffs allege that the creation of these exclusive territories illegally prevents MLB teams from competing for television revenue in each others’ home markets, but they also contend the rules restrict teams from competing with the league itself in the national broadcast marketplace (preventing teams from signing their own national television contracts, for instance, or offering their own out-of-market pay-per-view services in competition with MLB Extra Innings and MLB.TV).
The plaintiffs want to entirely do away with regional broadcast restrictions, which would possibly pave the way for MLB Advanced Media (MLB.TV) to take over that entirely. It could also allow the Indians to sell games in the New York market, or vice versa (much more likely), opening the prospect for both internecine warfare and additional revenue streams. MLB will argue that fans benefit from the current situation by keeping smaller market teams in higher revenue local TV deals. There is something to that argument, particularly with respect to casual fans, who are mightily subsidized by cable viewers who don't care about baseball.

Such subsidies are unfortunately not part of Techdirt's analysis, which fails to grapple with the fact that the overall revenue picture is much bigger with cable than without, for the simple reason that the average fan can only shell out so much:
It's an argument that essentially claims that MLB must limit the number of broadcast options customers have to choose from because not limiting them will eventually lead to even less options when teams fold. This argument rests on MLB's revenue sharing practice, where teams negotiate their local broadcast rights and leave the national rights entirely up to the league, which then doles out national broadcast (and streaming) revenue democratically through the league, meaning the popularity of the Yankees and other large market clubs is resulting in income for small market teams (like the Tampa Bay Rays).

Here's the thing: everyone knows this argument's time was twenty years ago. Fans know it, because they use the internet and streaming services and they embody the desire of customers to watch more teams in more ways without blackout restrictions. MLB knows this as well, as you simply can't make sense of all the work the league has done to expand its streaming options without that knowledge. What they are trying to save in all of this is a bit of the right to still handle national streaming rights the way they handle national broadcast rights. It's about retaining control. But the league itself is what allowed for the expansion of the league into small market areas. For them now to rest the argument for their antitrust exemption on the un-viability of those markets, resulting in harming consumer choice, doesn't make any sense. It's essentially asking for a kind of bailout for some teams via the exemption. Put another way, MLB's argument amounts to: some of our teams don't have enough fans to sustain themselves, so we need an antitrust exemption to keep them afloat, just because. How is that in the public's interest, even if MLB's assessment is correct?
A fine question. The assumption hitherto is that team valuations can only ever go up, at least over a long enough time frame; but much of that in turn is built on a foundation of cable TV rights deals, deals that now look not only long in the tooth but primed for extinction.

Addendum: An interesting David Lazarus column from a few days back in the Times about cord-cutting; the author details the calculations by which he reckoned it would save him money. Time-Warner had an uptick in video subscribers, about which they made a booming press report, but in reality 32,000 is a tiny drop in the bucket compared to their overall subscriber base.
A recent report by the New York research firm EMarketer estimated that about 17% of U.S. households will have cut the cord by the end of this year, rising to nearly a quarter of households by 2019.

"Cord cutting is unambiguously accelerating," Moffett said.

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Thursday, January 07, 2016

Ken Griffey, Jr. And Mike Piazza Elected To The Hall Of Fame

Per ESPN, Ken Griffey, Jr. and Mike Piazza were the only players voted into the Hall of Fame. Griffey, who is by no means an inner-circle Hall of Famer, garnered a 99% vote, which I presume is mostly a protest at the steroid era. Piazza is the lowest draftee ever to go to Cooperstown, and Griffey the highest (first overall):
While Griffey was selected first in the 1987 amateur draft and became the first No. 1 pick to make the Hall, Piazza was selected by the Los Angeles Dodgers with the 1,390th pick on the 62nd round in 1998. Since the draft started in 1965, the lowest draft pick elected to the Hall was John Smoltz, taken with the No. 574 pick in the 22nd round in 1985.
Update: I should explain a bit on my remarks about Griffey. There's a 30-point JAWS dropoff between Mickey Mantle and Junior, the largest between any two players above the mean. Partly that was from memory, so if you want to disagree based on the fact that he's well above the mean of 70.4 JAWS, feel free to do so.

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Wednesday, December 30, 2015

Buying Low On Aroldis Chapman, Or, The Precedent Of Michael Vick

David Pinto passed on an excerpt from a Mike Axisa essay about the Yankees possibly buying low on Aroldis Chapman:
I think it’s pretty gross the Yankees essentially used a domestic violence incident to buy low on a player. That’s how I feel. You’re welcome to feel differently. The Dodgers had a deal in place for Chapman earlier this offseason, then backed away when news of the incident got out. (Here’s the story if you haven’t seen it.) The Reds then dropped their asking price — Brian Cashman confirmed it during a conference call yesterday — and the Yankees swooped in. There are a lot of people out there whose lives have been impacted by domestic violence and I think turning a blind eye to it sends a very bad message. Pro sports teams — it’s not just baseball, it happens in every sport — have shown time and time again they will overlook stuff like this as long as the player is good enough. I’d like to think the Yankees hold themselves to higher standards but it’s clear they don’t. It’s one thing for a player to be a jerk and difficult to get along with. Allegations of domestic violence are much more serious. Not a good look, Yankees.
There are a lot of potential responses to that. A particularly greasy, commercial observation came from (at least) MLB Trade Rumors, when they noticed that if Chapman misses 45 days (the maximum possible for the domestic violence offense he's accused of is 50 days), the Yankees could end up with not one but two years of team control. This means the Yanks might land arguably the best available reliever in baseball at a comparatively bargain price, and on a multiyear deal, no less. (No telling how Chapman might react if it turns up the Yanks schemed to get the commissioner's office to throw the book at him in full force.)

But if Chapman's poor self-control off the field costs him in his contractual matters, it says very little about what sports leagues more generally need to do about domestic violence. One of the bigger off-field cases to come up in recent years was that of the NFL's Michael Vick, which I wrote about at the time. Vick's depravity to dogs, his lack of remorse, and his failure (entirely due to the state prosecutor in the case) to spend a single day in prison on animal cruelty charges led me then to conclude the league had taken inadequate steps to deal with the situation. It did not help that the league itself appeared to be a willing participant in the charade, even going so far as to hand him a farcical Comeback Player of the Year award. From what, exactly, did he come back?

And so with Ray Rice, whose pugilistic elevator exploits had to be broken on TMZ Sports, of all places, presumably because ESPN owes the NFL a great deal. Certainly, the cable giant is not in a position to want to tarnish the NFL's brand; quite the opposite, as Deadspin documented amid arched eyebrows. This pattern of the league covering for an active player — and in the case of Vick, a former (and newly rising) star — seems nothing if not constant.

Largely, the fans have been complicit with such efforts, provided enough time elapses between the observed complaints and the player's reinstatement. Vick continues to play unimpeded, most recently for the Pittsburgh Steelers, but previously for the Philadelphia Eagles a mere two years after his initial suspension due to occupying a jail cell. Ditto Rice, who didn't even have to wait that long after TMZ's release of the surveillance video, winning a reinstatement the same year. Protests have been muted, and have had little lasting effect. Particularly, the league's mealy-mouthed domestic violence policy changes amounted to a nothingball, something Roger Goodell could have implemented on his own had he chosen to do so. While Rice remains for the moment sidelined, it's hard to imagine this state of affairs will last beyond next year, and may not even survive the coming offseason.

Why these things are as they are should be obvious, given the direction of incentives: the player, the team who employs him, and the league more generally do not want bad press. The player presumably is a valuable commodity, someone who can fill a limited number of open positions and do it creditably (or even well); the team is a part of the league, and has some say in its operation; and the league is the captive of its constituent teams. All of which is to say, none of these entities can be relied upon to manage the interests of third parties not subject to contract or for whom liability only weakly attaches. Expecting teams to adjudicate this liability in any way other than for their own benefit is, charitably, naive, and more realistically, a fool's errand. Ultimately, it becomes a test of the fan base's overall sense of disgust with the particular crimes at hand (itself a question of the nature and graphic detail of the publicly available evidence), and the distance in time to them. Those expecting otherwise are like Charlie Brown hoping Lucy will really hold that football this one time, despite all those other times.

And so, I discharge sports leagues from enforcing the criminal laws on their contracted employees. Such work rightfully belongs to the police, and while the Rice case in particular made it evident that municipal gendarmarie are also not immune to the same forces that hushed up the video record of his offense, at least their paychecks come from a source not directly tied to the NFL. That much cannot be said for Roger Goodell or the Baltimore Ravens.

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Saturday, December 26, 2015

Some Great Koufax Stories From Wired

David Dobbs in Wired has some fantastic stories about Sandy Koufax, one of the greatest left-handed pitchers ever to throw the ball (and until Randy Johnson, arguably the greatest). The whole story is worth your time (it also gets into why the curveball is so effective: it combines physical movement with an optical illusion), but I wanted to focus on this excerpt:
2. A Koufax story I read a few years back, either in Leary’s bio of him or perhaps an Angell piece. Koufax, retired almost 20 years and in his 40s, was pitching batting practice to the Dodgers (whom he often helped coach) between post-season series in the mid-1980s. This was the great-hitting Dodger line-up with Sax, Garvey, Baker, Cey, and others. Koufax is just throwing easy minor-league 45-year-old man fastballs for BP, letting the hitters groove their swings. One of the hitters calls for the famous curveball. This Koufax usually didn’t throw, lest it aggravate his elbow. But this hitter wanted to see the thing, see if he could hit it, so Koufax indulges him.

This is a major league hitter who knows what pitch is coming, batting against a man in his mid-40s.

Curve comes in, drops like a stone — a swing and a miss.

Hitter calls for another. Same result.

Several more; the same.

By now the hitter’s teammates, watching, are in hysterics. They’re howling. The batter gives up, walks off, tells his buddies, Fine then, you try it. And one by one they do. This great Dodger line-up comes up, every hitter knowing what pitch he’s getting, and no one can connect. Koufax is 45 or so — and with one pitch, pre-announced, he is unhittable.

...

As the story goes, manager Lasorda walked out to the mound and, using the pretext he wanted to protect Koufax’s arm, asked him to stop — but to Koufax he said, Cut it out already, I don’t want my hitters mentally destroyed just before a post-season series because they can’t hit a one-pitch man in his 40s.

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Wednesday, October 14, 2015

The New Chaos: On Arte Moreno's Hyperactive Ownership

I read with no surprise, sadly, that the Angels had just barely missed the postseason (old news), and that Jerry Dipoto resigned after years of arguing with Mike Scioscia (even older news) to be replaced, temporarily, with Bill Stoneman, GM emeritus, returning to that role. So when former also-ran and Yankee front office product Billy Eppler won the job, it took me a bit to realize something fairly important: Eppler is now the fifth general manager the Angels have had in the Arte Moreno era (fourth if you count Stoneman's two terms as one). You think the Gene Autry era was tumultuous, what with its loud personalities and poor decision-making skills? The worst they managed was three GMs in as many years, from 1991 through 1993. Arte's got a problem, and whether it's in the mirror, or the field manager having too much power, or both, the echoes of the old, bad teams from the early 1990's are impossible to ignore.

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Tuesday, June 30, 2015

Cord Cutting Continues, Now Up To 8.2% Of The Subscriber Base

Something I forgot to write about last week: a new study by Digitalsmiths shows an 1.3% year-to-year decline in the number of people with cable TV, making 8.2% overall who are former cable customers, while "a much larger 45.2 percent said they reduced their cable or satellite TV service during the same time frame." This "cord shaving" suggests people are doing other things with their free time, and cable/satellite TV is increasingly irrelevant. Unclear how many of them are in the LA area, but this can't be a good sign for traditional cable.

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Wednesday, June 17, 2015

Why Sports Net LA Can't Sell A La Carte

With the Dodgers' $8 billion/25 year TV deal in the can but not realized (still), Time Warner taking on water to the tune of a $1 billion loss over the life of the contract, and the proposed merger with Comcast dead, it's been a terrible year for Dodger fans hoping to see their team on TV, and mostly without hope. Or it was, anyway, until Time Warner bid and won on the consolation prize of Charter Communications, immediately expanding the reach of SportsNet LA. For customers on that network, nine innings of Vin Scully is a reality again.

But the money drain continues for that channel; they still have less than half their projected audience, and there's no other sign of them getting to an agreement with the remaining cable and satellite carriers. It's interesting, then, to take a look at one of the more commonly suggested answers to the problem of rising cable costs, a la carte purchase. Despite a great deal of belief in the idea that live sports are the last redoubt of cable TV, the reality is somewhat more complicated; for instance, only 35.7% of those polled said they would buy ESPN if it were offered as a separate channel. Similarly, the economics become highly questionable, to say the least.

Let's dig in by first taking a look at a recent Times story on the ratings boost provided by the Charter acquisition. Charter serves 300,000 subscribers, while Time Warner has "four times" that number, making 1.2 million for that carrier, or 1.5 million in all. An earlier LAT story suggests the total number is closer to two million, but it's unclear whether that includes San Diego County homes that would be in the Padres broadcast area and would not get SportsNet LA; for this discussion, I use the lower figure. If we take Time Warner's subscriber base and reverse the calculation that they're 30% of the market, the overall subscriber base should be 4 million.

As a sanity check, let's look at the dollar figures from the contract to make sure we're not missing something. The first year of the deal required Time Warner to pay the Dodgers $210 million, which means if we were to assume they merely broke even, that would be

$210M/year / $5/subscriber*month / 12 months/year = 3.5M subscribers

(For the purposes of simplicity, I round up the $4.90 per subscriber per month figure to $5.) So we know we're on the right side of these numbers; Time Warner has to make a profit somewhere (that's the extra 500,000 subscribers from our earlier calculation). Now that we know the size of the market, we can look at prior years' ratings to give us an indication of the number of people willing to fork over their hard-earned dough so they can root for the Dodgers.

Ratings vary quite a lot depending on whether a team is winning or not, and the Dodgers are no exception. Their successful 92-70 2013 season resulted in average per-game ratings of 154,000 viewers, where the mediocre 82-79 2011 season yielded an average of 65,000, less than half. While the 94-68 2014 season was even more successful than the prior year, the cable TV impasse sent ratings even lower, to an average of 40,000 viewers per game, the lowest figures in nearly two decades. So let us assume that the Dodgers are capable of averaging around 100,000 viewers per game, even though we know the variance is quite large. Let us also assume that each and every one of those viewers will be willing to pay for a subscription to see the Dodgers. In an a la carte scenario, that means we're going to divide the expected revenue by the number of viewers.

Get ready.

$210M/year / 12 months/year / 100,000 subscribers = $175/month*subscriber

One hundred seventy five dollars per month per subscriber. This monthly figure is more than the price of MLB.TV for the year. Nobody's going to pay that, and hardly anyone could afford it. In short, this isn't happening, now, or ever, unless the Dodgers give up their current salary structure.

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