When ESPN opted out of its Major League Baseball contract in February, it was not a particularly sterling look for the league. Mere months after the most-watched World Series in years, the most powerful entity in sports media was saying that its baseball rights — which included Opening Day, the Home Run Derby, “Sunday Night Baseball” and a full round of playoffs — were not worth even $550 million/year.
At one point in negotiations, per The Wall Street Journal, ESPN wanted to pay only $200 million a year — about the same as it pays for rights to LaLiga soccer.
All of this was surely humbling for MLB, though much of it was its own fault. The league reset the market for its rights by giving away exclusive game inventory to streamers for a pittance — $85 million/year for Apple and just $10 million/year for Roku. It is hard to blame ESPN for seeing $550 million as entirely too much money in that context.
Indeed, if there is any takeaway from the outcome of the media rights negotiations, it is that the ESPN package really was not worth the money the network was paying. Between “Sunday Night Baseball” and the Wild Card playoffs (a reported $200 million/year for NBCUniversal) and the Home Run Derby (a reported $50 million/year for Netflix), the main pillars of the ESPN deal will go for less than half of the current $550 million/year price tag.
ESPN valued its existing package at $200 million a year, and that is not much less than what MLB will be earning from NBCUniversal and Netflix.
Add in the Apple and Roku deals — which were created after ESPN gave up its Monday and Wednesday night rights in order to reduce its lower rights fee in the 2021 negotiations — and the ESPN package that was once worth 3/4 of a billion annually is now worth less than 1/3.
But MLB is nonetheless exiting negotiations with an increase in rights fees, thanks to an entirely new ESPN package consisting of exclusive rights to the MLB.tv digital out-of-market package, in-market streaming rights to six MLB clubs, and a slate of exclusive weeknight games. ESPN will reportedly pay the same $550 million/year for the package, which combined with the $235-250 million being paid by the new rights partners will result in MLB earning $800 million/year from the negotiations.
So does MLB come out of this situation as a winner? The expiring ESPN package has been thoroughly devalued, and the new ESPN package consists of highly coveted local and out-of-market rights that may well have sold for more in prior — or future — negotiations. It could be that MLB has again set the price too low for valuable inventory.
At the same time, it was far from a sure thing that MLB would come away from this unexpected auction with an increase in its media rights revenue. The league was also able to add two new major media partners without sacrificing its ties to ESPN and Disney, adding a broadcast television platform in NBC and the most popular subscription streaming service in Netflix.
Add to that the creation of new, marquee TV windows — standalone primetime games on the first two nights of the season and Labor Day, a Memorial Day slate, and a regular season finale — that have the potential to juice an already-growing audience. Perhaps it would be a stretch to call MLB a winner, but there are certainly some wins. These negotiations were always going to be a salvage operation, and MLB has apparently succeeded in saving face beyond most expectations.
And for commissioner Rob Manfred — who started these negotiations by pronouncing the MLB-ESPN relationship dead, criticizing the network’s coverage, reach, and distribution model, promising a new deal that would come within weeks and rebuffing ESPN’s attempts to re-engage — ‘saving face’ may be an understatement. Part of the job of being commissioner is to be routinely humbled (ask Cathy Engelbert), but considering that the ESPN renewal is the only reason this deal looks even passable financially, Manfred owes Jimmy Pitaro for being pragmatic enough not to take any of the opprobrium personally.
Having said that, it is fair to say that MLB is not the biggest winner in these talks. The biggest winner in this situation is quite clearly ESPN.
ESPN got exactly what it wanted from the beginning. It was John Ourand of Puck who reported in February that ESPN was willing to maintain its $550 million/year rights fee if it secured local and weeknight rights. While that came at the cost of ESPN losing its existing rights in the process, the fact is that the company finally accomplished one of its biggest goals — acquiring the local rights are the lifeblood of baseball — without paying any additional money or even losing its rights to an exclusive game per week.
While MLB.tv is not the only out-of-market option for baseball fans — MLB Extra Innings will continue to exist via linear cable — it is the only option for the cord-cutters whose behavior and preferences have reshaped the industry. ESPN clearly understands the necessity of third-party content on its new app, and rights to MLB.tv would go a long away to making the service indispensable for six months of the year.
In addition, it may only be six teams, but ESPN acquiring local in market rights to the Mariners, Guardians, Padres, Twins, Diamondbacks and Rockies — plus any other teams that may leave the RSN model behind — marks a milestone in the network’s history. It was not so long ago that ESPN was on the doorstep of becoming the biggest owner of RSNs, until it was forced to divest the Fox Sports-branded RSNs it acquired as part of its deal with 21st Century Fox. Now, if a bit delayed, ESPN will in six markets have true ‘must-have’ content.
Yes, ESPN had to give up “Sunday Night Baseball,” but it will have exclusive games on another night of the week (and one could make a credible argument that a weeknight exclusive package has some advantages over Sunday night, given the football competition in the final month of the year). Yes, ESPN had to give up the Wild Card Series, but that has been hit or miss. Yes, ESPN had to give up the Home Run Derby — the pillar of its summer schedule — but that is but one night of the year.
For what it received instead — churn-proof, season-long programming that is deeply meaningful to the core fan — ESPN made out handsomely.
As for the new partners, NBCUniversal gets a property to complete its year-round Sunday night sports lineup of “Sunday Night Football” in the fall, “Sunday Night Basketball” in the spring and “Sunday Night Baseball” in the summer. It also has secured rights to the Sunday morning package of games that previously aired on Peacock in 2022 and 2023. Comcast gave up that window less than two years ago when it was unwilling to spend even $30 million to renew, but as part of a more extensive package — and a much more aggressive sports strategy — it is now evidently worth the money.
NBC now joins ESPN as the only domestic sports divisions with rights to three of the “Big Four” professional sports. Next year will be the first that NBC has held rights all three of the NFL, MLB and NBA since 1998, the start of a disastrous five-year stretch when the network — perhaps feeling invincible on the entertainment side thanks to the likes of “Friends,” “Frasier” and “Seinfeld” — lost all three leagues. (NBC ultimately went nearly three years between “Big Four” sportscasts from Game 4 of the 2002 NBA Finals to the debut of the NHL on NBC in January 2006.)
In addition to NBC and Peacock, NBC said last week that “dozens” of MLB games will be simulcast on the new NBCSN cable network, which launched Monday. NBC Sports president Rick Cordella said on the Sports Media Watch Podcast last month that the network is now “agnostic” on whether viewers consume Peacock-exclusive content via the app or other sources, though it is hard to see the upside of NBC’s aggressive sports strategy if viewers do not even need to sign up for Peacock to watch the games.
For its part, Netflix continues to build a sports lineup based primarily on one-off events, and without all that much commitment. All of these deals are a mere three years in length. And if the deal does work out, it gives Netflix a leg up in 2028 when rights will become available to a few more blue-chip properties, including the All-Star Game itself.
Perhaps the only loser is Apple, which was considered a contender throughout the process but emerged from negotiations with nothing but the Friday night package it already owned. It is hard to tell what direction Apple is moving in, considering its expensive acquisition of Formula 1 racing and its recent move to shorten the length of its Major League Soccer contract. The streamer was mentioned throughout negotiations as a contender for MLB rights, but also at one point was erroneously reported by Yahoo! Sports to be out of MLB entirely.
Ultimately, no party comes out of this deal in better shape than ESPN, and that should be no surprise. This was ESPN’s show from the beginning. And while Rob Manfred tried to paint ESPN’s opt-out as mutual, and MLB as rejecting its long-time partner over various slights, ESPN played the situation to perfection.
