In an effort to upgrade offerings and expand market penetration, the National Hockey League is selling digital and television rights to most league games to MLB Advanced Media (MLBAM) for $600 million: $100 million annually for six years.
The deal, announced yesterday, provides some stability for the league in a time of rapid change on the sports-media landscape. The old model of selling national rights to a third party — say, ESPN or NBC — is rapidly under fire as networks like HBO and ESPN move to offer services apart from the traditional cable firm. MLB has seen success offering direct access to games via electronic devices and DVRs, and the business strategy here is building upon MLB AM’s success and extending the same game plan to the NHL. MLB AM will take over direct sales of NHL games to consumers via the GameCenter Live service, take over the NHL Network (and receive cable fees) as well as management of the league’s websites. Guaranteeing $100 million in revenue annually to the NHL at a time when MLB AM does only $100 million annually on its own (overall it generates $800 million in revenue, but $700 million of that was on behalf of MLB teams, including transactions like ticket sales) is certainly a calculated risk. Still, it looks like a pretty good deal for the NHL; besides the annual fee, the league will receive a stake up to 10 percent in MLB AM’s tech unit, which could go public in the next year. From the Wall Street Journal:
As part of the six-year cash deal, MLB Advanced Media will pay $100 million annually to the NHL and take over its digital and broadcast operations, as well as rights for games outside the areas where they are being played. The NHL, in turn, will take a stake of 7% to 10% in MLBAM’s tech unit worth at least $300 million.
John Collins, the NHL’s chief operating officer, said the pressures on the U.S. pay-TV ecosystem factored into the league’s decision to strike a deal with MLBAM.
“In an environment where [Disney Chief Executive] Bob Iger is talking about ESPN going ‘over the top’ and Viacom is getting thrown off cable operators, what’s the future of a single-sport linear network like NHL Network?” Mr. Collins said. Under the umbrella of MLBAM, there’s a greater potential for hockey to become a bigger business and brand “on a global stage,” he said.