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I don’t think this is a defeat, as much as it is a public recognition that the economy is terrible, and the costs of running this operation are constantly going down.

Let’s think this through logically. The price of the top-tier (or ‘Premium’) package is going down from $119.95 to $109.95, or 8%. Last year, MLB.tv reportedly brought in ~$225M in revenue, or 1.875 million Premium-equivalents. We know nothing about MLBAM’s expense side, but the cost of bandwidth is dropping like a rock. Being conservative, we can assume that MLBAM’s streaming costs will fall by at least 10%.

So assuming that each subscription was at least breakeven or slightly profitable in 2008, it should be even more so in 2009. And remember, the lower pricepoint should help drive volume. Yes, the economy is a mess; but as people become more and more comfortable with online video, MLB.tv should naturally gain traction. It also could become a solid trade-down product for fans that don’t want to spend $200 on MLB Extra Innings (yes, you read that right).

Long-term, as I wrote on BP on Thursday, MLB.tv is a tremendous product for MLBAM. Live sports broadcasts are probably the most valuable programming a television network can own at this point, since it’s the closest thing you can get to being DVR-proof. This is why networks keep paying the leagues ever-higher sums, even as the broader television audience shrinks. So as internet video becomes more ingrained, and MLB becomes more and more of a content distributor, the money should continue to pour in.

Also keep in mind, this is all before we even consider the potential of IPTV. We’re not so far from a time where you’ll be able to watch your MLB.tv Mosaic player on your television, in high quality. It’ll probably start cannibalizing Extra Innings sales at that point, which sucks for the cable providers, but really is no big deal for MLB. The thirty teams only get some of the profits from EI, but they own all of MLBAM. So why not push this angle?

All in all, that’s a pretty solid future to look forward to. In the meantime, cutting prices in the midst of a horrible recession and gaining some extra traction seems like a pretty solid move.

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com


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