Major League Baseball hit a grand slam with its new TV rights deals.
Under the terms of its freshly signed eight-year agreements, Walt Disney Co.'s ESPN, News Corp.'s Fox and Time Warner Inc.'s TBS will pay a combined $12.4 billion--about twice as much as what baseball received for television rights in previous contracts.
"This is a remarkable day for baseball," Major League Baseball commissioner Allan "Bud" Selig said in a conference call Tuesday.
The new contracts take effect at the start of the 2014 season and run through 2021. Fox's rights fees will go from a per-season average of about $257 million to $495 million. Turner's rights will increase from $150 million to $325 million per season. ESPN previously agreed to an increase from $350 million per season to $700 million.
The deal also clears the way for Fox to use baseball for a new national sports cable channel it is planning to launch in the summer of 2013. Fox's pact with baseball allows it to put as many as 40 games on a nationally distributed cable channel starting in 2014. Fox also received broad rights to baseball highlights that could be used for a sports news program similar to ESPN's "SportsCenter."
While Fox has declined to comment on its planned channel, people familiar with the matter said the company will convert its niche sports channel called Speed into a broad-based sports network.
Besides baseball, Fox will also put NASCAR racing, college football, soccer and Ultimate Fighting on its cable channel. The working name for the channel is Fox Sports 1.
"There will be a lot of things to come in the not too distant future," said Fox Sports Media Group Co-President Randy Freer.
Both Fox and TBS will continue to carry regular season baseball and the majority of postseason baseball. Fox retained the rights to the World Series, the All-Star Game, one league championship series and added two division series starting in 2014. TBS kept the rights to one league championship and two division series. ESPN and TBS will each also carry the new wild card games.
As part of the deal, Fox, ESPN and TBS now also have the ability to stream games online. However, consumers will have to already be subscribers to a pay-TV distributor in order to watch games online. "This is an essential part of our overall programming strategy," said Turner Sports President David Levy.
For consumers, the pricey new deals will likely mean bigger bills. Fox, TBS and ESPN all charge cable and satellite operators to carry their programming. The more they spend on sports, the higher the license fee to distributors who then try to recoup those costs by raising prices to their customers.
"Most costs ultimately get passed onto the consumer," said Jimmy Schaeffler, president of the Carmel Group, a cable industry consulting firm.
Given the popularity of sports programming, it is unlikely that rights fees will be decreasing any time soon. Last year, the NFL renewed its deals with CBS, NBC, ESPN and Fox and landed large rights fees increases.
Media consultant Chris Bevilacqua said the issue isn't necessarily sports, which does well in the ratings, but other channels that do not perform.
"There has to be an adjustment as to how distributors and programmers allocate value," said Bevilacqua. "Right now, you have a lot of subscriber costs put against channels nobody watches."
One of the issues, though, is how channels are sold. Programmers package popular channels with less popular ones rather than sell networks on an individual basis. That practice is known in the industry as bundling and it is becoming a lightning rod for distributors, programmers and consumer activists.
"There has to be a rationalization here by the system," said Bevilacqua. "Everybody has an interest in keeping the customer happy."