Bob Dupuy, Deputy Commissioner, MLB (Getty Images) Word is out that MLBAM (Major League Baseball Advanced Media) is considering an IPO to hit the streets sometime during Major League Baseball's Spring Training. No less a luminary than Harvard's distinguished Clayton Christensen is touting the MLBAM plan (see Forbes article).
If you have followed this, you know that MLB had hired Morgan Stanley back in 2000, just before the bubble burst, to explore how they might cash in on the combined weight of MLB brands and the potential for an internet bonanza. Current Federal Reserve Governor Kevin Warsh was in charge of promoting the idea at Morgan. And MLB was not alone. NBA was working with JP Morgan at the same time on their own IPO plan for NBA Entertainment before agreeing to join up with Intel in the ill-fated Convera play (more on NBA and NFL later this week).
So, what is MLBAM doing and will it work and will the rewards be anything like the $2B value Christensen and the NY Times are pointing toward?
MLBAM is the brainchild of Bob DuPuy, baseball's 2nd in command. In 2000, with strong pushes from Southwest Sports and Tom Hicks, all MLB teams except the Yankees voted to put their internet assets into MLBAM. The teams dumped some meaningful cash into the startup, estimated at $40M to start (and supplemented since then). The Yankess opposed the idea because they wanted their Web assets to be part of their YES subsidiary, a network with its own IPO plans. Because MLB always moves forward as a group, the Yanks were forced to put their valuable assets into the MLBAM plan, but the Steinbrenner boys negotiated some very tough restrictions on how the content might be used.
Though MLB is very tight lipped about these facts, rumor has it that the teams' commitment was not open ended but for 10 years, expiring in 2010 and that after that they are free to go their own way. How MLBAM uses the upside of its possible IPO to get the Yanks and others to go along with a greater freedom for content deployment on the Web will ultimately determine the success of this offering.
When it launched, MLBAM was given a reaonable 10 yrs to succeed. Like any internet media startup from that era, they struggled through the first half of that decade, particularly since their strategy for selling subscriptions to internet media content proved to be a big bust.
Then just what is the $250M in revenues that serves as the backbone of the proposed IPO? The breakout for MLBAM has been ecommerce sales and ticket revenues. Once they proved enormously efficient at selling goods and tix, they had a real play. Combined with a best of breed technology service that they are now offering outside the MLB environment (NCAA to start), you start to see a real business.
With the stock market once again receptive to Internet service companies and a real chance that this IPO could drive very real value, don't doubt that MLB's teams will line up for another ten years to make this thing fly! Even the Yankees will understand that value, especially since their own YES deal is achieving tremendous traction as a Cable network and no longer needs the baseball internet rights.
MLBAM CEO Bob Bowman has put together a first rate team, a kick ass web site and has driven an amazing ecommerce story. Now MLB needs to take off the rights reins and let Bowman run hard with a content syndication strategy that will not only drive advertising revenues at least equal to ecommerce$, but will create the marketing engine that MLB needs to regain its place as the #1 sport. Effective use of MLBAM around the 2006 World Series could have avoided the tragic ratings...
If MLB does not give Bowman that kind of freedom then be careful with any MLBAM IPO stock. Don't fall for the mirage of the low margin ticket and ecommerce revenues if the upside is constrained by ill-considered content strategies.
The only thng that will stop MLBAM's success is the MLB teams! As always, Major League Baseball manages to put absurdity front and center!
If you have followed this, you know that MLB had hired Morgan Stanley back in 2000, just before the bubble burst, to explore how they might cash in on the combined weight of MLB brands and the potential for an internet bonanza. Current Federal Reserve Governor Kevin Warsh was in charge of promoting the idea at Morgan. And MLB was not alone. NBA was working with JP Morgan at the same time on their own IPO plan for NBA Entertainment before agreeing to join up with Intel in the ill-fated Convera play (more on NBA and NFL later this week).
So, what is MLBAM doing and will it work and will the rewards be anything like the $2B value Christensen and the NY Times are pointing toward?
MLBAM is the brainchild of Bob DuPuy, baseball's 2nd in command. In 2000, with strong pushes from Southwest Sports and Tom Hicks, all MLB teams except the Yankees voted to put their internet assets into MLBAM. The teams dumped some meaningful cash into the startup, estimated at $40M to start (and supplemented since then). The Yankess opposed the idea because they wanted their Web assets to be part of their YES subsidiary, a network with its own IPO plans. Because MLB always moves forward as a group, the Yanks were forced to put their valuable assets into the MLBAM plan, but the Steinbrenner boys negotiated some very tough restrictions on how the content might be used.
Though MLB is very tight lipped about these facts, rumor has it that the teams' commitment was not open ended but for 10 years, expiring in 2010 and that after that they are free to go their own way. How MLBAM uses the upside of its possible IPO to get the Yanks and others to go along with a greater freedom for content deployment on the Web will ultimately determine the success of this offering.
When it launched, MLBAM was given a reaonable 10 yrs to succeed. Like any internet media startup from that era, they struggled through the first half of that decade, particularly since their strategy for selling subscriptions to internet media content proved to be a big bust.
Then just what is the $250M in revenues that serves as the backbone of the proposed IPO? The breakout for MLBAM has been ecommerce sales and ticket revenues. Once they proved enormously efficient at selling goods and tix, they had a real play. Combined with a best of breed technology service that they are now offering outside the MLB environment (NCAA to start), you start to see a real business.
With the stock market once again receptive to Internet service companies and a real chance that this IPO could drive very real value, don't doubt that MLB's teams will line up for another ten years to make this thing fly! Even the Yankees will understand that value, especially since their own YES deal is achieving tremendous traction as a Cable network and no longer needs the baseball internet rights.
MLBAM CEO Bob Bowman has put together a first rate team, a kick ass web site and has driven an amazing ecommerce story. Now MLB needs to take off the rights reins and let Bowman run hard with a content syndication strategy that will not only drive advertising revenues at least equal to ecommerce$, but will create the marketing engine that MLB needs to regain its place as the #1 sport. Effective use of MLBAM around the 2006 World Series could have avoided the tragic ratings...
If MLB does not give Bowman that kind of freedom then be careful with any MLBAM IPO stock. Don't fall for the mirage of the low margin ticket and ecommerce revenues if the upside is constrained by ill-considered content strategies.
The only thng that will stop MLBAM's success is the MLB teams! As always, Major League Baseball manages to put absurdity front and center!
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