Major League Baseball is officially knocking on the NFL’s door. A losing business just five years ago, baseball has turned it around in a big way, pulling far ahead of the NBA and quickly approaching the National Football League for American sports supremacy.
Shocking as all that is, it is the way they’ve done it that is most astounding. Historically, no sport (and perhaps no other business) in this country has been as resistant to change as Major League Baseball. New revenues used to simply mean new customers; creatively was lacking, to say the least. Several times, the owners shot themselves in the foot (or came close) because of a lack of foresight, banning local radio and television broadcasts in the early days of those mediums, and refusing to even acknowledge Peter Seitz as he was about to change their business models forever.
But in the last fifteen years, Bud and co. have rocked the boat, overhauling what had been a perpetually slow-moving industry. During Selig’s tenure, the wild card and interleague play have been implemented, new stadiums are quickly becoming commodities, and television revenues continue to rise. On top of all this, no other sport has been able to keep up with baseball’s use of the internet and alternative media sources, thanks to MLB Advanced Media.
So despite some painful hiccups, the national pastime may once again be just that. The league-wide attendance record was just broken for the fourth straight season, and revenues topped $6 billion for the first time. Despite a possible U.S. recession in the coming year, most analysts are still predicting that these numbers will continue to rise, thanks to two new New York stadiums opening in 2009, as well as the upcoming Baseball Channel, set to launch the same year with enormous revenues already built in.
So what else can baseball possibly do to grow their business further? Jack Welch, as one might expect, has a fantastic way to look at potential growth: if you widen your market so that no one company has more than 10% market share, you will almost certainly see new areas for potential expansion. As an example, imagine that MLB assumed it was only in the “professional baseball” industry. Their market share would be well over 99% in the United States, with almost no room for growth.
But now suppose MLB decided to broaden its market, and consider themselves a part of the live entertainment industry. Its market share would instantly shrink to well under 10%. Now assume they went even further, assuming they were simply in the entertainment industry, not just in the United States, but globally. Their market share would now be a small fraction of one percent.
Looking at it from that perspective, it becomes clear that there is still plenty of room for growth. If Major League Baseball is in fact a group of thirty local entertainment companies, and not just teams that compete with each other, then each franchise should be looking to broaden its scope.
This, of course, involves branching out into other ventures besides live baseball. Several teams already do this, to varying degrees. Some teams own their own regional sports networks. Many hold concerts at their stadiums. The Red Sox have even reached into other sports, creating the Fenway Sports Group which, among other things, is a part owner of a NASCAR Nextel Cup team called Roush Fenway Racing. That other teams haven’t used their brands (admittedly not as strong as the Boston’s, in almost any other case) to delve into side ventures is a waste of resources.
Even RSNs haven’t been universal success stories. The Royals Sports Television Network is finished, as the team will move to FSN Midwest in 2008. Others have failed to grow past its small baseball niche (not to pick on Yankeeography, but…). NESN is a perfect example of what an RSN should be, as it is Boston’s premier sports station, not just the place people watch Red Sox games in the summer.
Then, of course, there’s the internet. While MLB and MLB Advanced Media are far ahead of the pack, there is an almost endless road down this path. Aside from continual growth, particularly in MLB.tv and Mosaic, there is also a key hole in the current strategy that could easily be fixed. Baseball has an incredible amount of video on their site, but it is all proprietary and only some of it is free.
This is a mistake that other big companies have made (and some have rectified) in recent years, and it inhibits growth. The most successful internet companies are open, interactive, and distributive by nature. While it makes sense to charge for live (or even archived) games, it makes no sense to hold back classic videos that are, in a sense, marketing tools for the existing product. Even more important, it almost certainly holds back the demand for the site, lowering traffic and stunting advertising revenue.
There are other growth areas (particularly live events, since people will be less and less willing to pay for music or movies in the future) that baseball could exploit, especially when the Baseball Channel goes live. But the key point is that $6 billion can actually be a starting point, even in the face of an economic downturn.
And if the NFL is smart, it would pay close attention.
Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com
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