MLB has a sports gambling wildcard to protect its media rights

Major League Baseball is at the negotiating table for media rights and has a wild card to play.

The league’s deal with Disney-owned ESPN is in renewal talks, and the outcome could change how baseball looks on national TV during the week. Some media experts believe that MLB’s Monday and Wednesday package is worth $ 150 million to $ 200 million per year.

The chatter began to circulate when The Athletic reported that ESPN is willing to part with some of its baseball content. The story led to predictions that MLB’s media rights fees could collapse.

“I think they will be sold, but not at the asking price of $ 350 million,” media rights expert Dan Cohen told CNBC. Cohen, the senior vice president of Octagon’s global media rights advisory division, said he believes MLB will cut the asking price on the package if that’s the number. But not much.

“MLB does not intend to give these rights away for free,” Cohen said. “There is value for baseball games that are televised nationally on Mondays and Wednesdays.”

The point is, it is not an exclusive value. And it makes MLB get creative about its future, with permission around sports gambling as leverage.

To help its network partners overcome losses from Covid-19, the league gave them permission to use limited sports gambling commercials.

MLB controls which ads run during games, although there are still restrictions on sports betting ads. During the pandemic season of network shortening, MLB approved the ads and helped its partners.

The National Football League took a similar move earlier this month, according to the Wall Street Journal. The league provided its national media partners with more ad spaces during the postseason games and Super Bowl LV.

Sports betting companies such as DraftKings and FanDuel spend millions on marketing. One of the best options for them is to buy ads around sports content.

Expenditure must continue. That means the MLB can once again increase the number of ad places it delivers to networks. The partners will collect their fees and pay a portion of MLB. In a way, the competition protects its media rights.

ESPN has a reason to devalue the MLB package. And again, the games on Monday and Wednesday are not exclusive.

In 2012, it agreed to pay the MLB $ 700 million annually in an eight-year, $ 5.6 billion deal. ESPN will receive an exclusive Sunday game and rights to the Home Run Derby.

But on Mondays and Wednesdays, regional sports networks also broadcast the games, giving consumers in the market no incentive to watch ESPN’s broadcast.

“If the (New York) Yankees or (Philadelphia) Phillies games are available on a regional network, they get the most ratings, and ESPN is not doing very well with its national game,” said a former TV executive and former chairman of CBS Sports Neal Pilson.

“I’ve always wondered why ESPN has that package at all,” added Pilson. “And if they give up now, I think that’s a smart move.”

Octagon analysts used 108 of the 114 games over the past three years to determine the average viewership on the Monday-Wednesday package on ESPN, excluding ESPN2 broadcasts. The findings: An average viewership of 761,434 in 2018, which fell to about 632,000 in 2019.

Viewership dropped to an average of 358,947 in 2020, but sports viewership was also affected by the pandemic, social unrest and the US presidential race.

“I call them semi-exclusives,” added Cohen. “Sometimes you talk about the big markets – New York, LA, Chicago, Boston, Philadelphia – but you’re still missing 90 percent of the rest of the country.”

But in the absence of exclusivity and other league rights, such as the National Hockey League, available, MLB may have a new home for its package.

ESPN and MLB declined to comment due to active negotiations.

Reports suggest ESPN is looking to cut its annual fee by about $ 150 million. Assuming MLB starts its price at that figure or more, it plans to get creative around its offers to justify the cost.

Gambling advertising can attract networks. Another is the actual game, since MLB controls what can be displayed, it controls the marketing that networks can use on the screen.

According to those with knowledge of negotiations, the league does not believe it needs to lower the value of the package and will use its broadcasting rights to protect it.

Cohen suggested that Sinclair may be interested in a partnership.

The company owns 14 regional networks that broadcast MLB games. It has a streaming game featuring Stadium, which was backed by Chicago White Sox owner Jerry Reinsdorf, one of the most powerful owners in the MLB club.

Sinclair could pay for itself with the national package, feed some of the content into Stadium, and sell more ad slots with permission from MLB.

NBCUniversal is scrapping its sports network this year and moving media rights to the more accessible US network. The channel has a history in the sport and NBCUniversal was just playing to wrestle with its Peacock service holding the rights to stream WWE matches in the US. MLB on the US and also get access to special ads.

“There’s a lot to consider,” said Cohen. “I think they can get pretty smart and creative.”

MLB also has partnerships with Twitter, Facebook, and YouTube, which means it appears to already have streaming options. Using the streaming model, MLB could get short-term deals similar to NFL’s Amazon package and create flexibility as it wouldn’t be tied to a partner in the long run.

And if ESPN walks away, MLB will still be at the forefront of the media rights card game.

The league has already secured new rights payouts with Fox Sports WarnerMedia owned Turner Sports, the latter of which adds a Tuesday game to its coverage. The network will pay more than $ 3 billion to keep baseball.

Whatever the game, MLB seems to have its joker and is ready to go. And don’t forget, there are still additional late season games it can add to the deck. But for that, MLB needs permission from a leading media rights partner – the players’ union.

Disclosure: Comcast owns NBCUniversal, CNBC’s parent company.