MLB's Real Competitive Advantage

How baseball is using cutting-edge technology to rake in millions on the Internet

by Jay Yarow

It's the bottom of the eighth inning, and Jayson Werth steps into the batter's box for the Philadelphia Phillies. The bases are empty, the game tied. The right fielder faces Steven Shell, relief pitcher for the Washington Nationals. On Shell's fourth pitch, he leaves a sluggish curveball hanging over the plate. Werth smashes it into the stands for a game-winning home run.

As fans cheer, a highly sophisticated yet little-known technology operation at Major League Baseball swings into action. A team of about 60 people in downtown Manhattan slice and dice the video of Werth's hit and send clips zipping through the Internet to thousands of computers and cell phones around the world. Five minutes after the homer a commuter on the local train to Philadelphia's Main Line could watch it for free on his mobile. A visitor to MLB's Gameday could learn that Shell's pitch was a mere 74 miles per hour and that it broke 14 inches.

All the effort pays off. The tech operation, known officially as Major League Baseball Advanced Media (MLBAM), pulls in about $450 million a year. About half of that comes from fans who pay $120 a season to watch games live over the Internet, with the rest generated by advertising alongside free content and other extras. The business has grown into a significant revenue source for Major League Baseball, which has total revenues of about $6 billion. "They have a passionate base that they went after in a smart way," says Bobby Tulsiani, analyst with the market research firm JupiterResearch.

The league's strategy may be instructive for other sports franchises and, indeed, for other companies in the online content business. While most leagues limit what they put on the Web and avoid streaming live video online out of fear that their television ratings could be hurt, MLB's experience suggests that such concerns might be misplaced. "Rights fees are up, attendance is up, viewership is up," says Bob Bowman, chief executive at MLBAM. "Somehow the strategy of putting [baseball games] on every device that has a plug or a battery has worked for the business partners. Even more important, it's worked for our fans."

Staggering Amount of Stats

What draws fans to the league's online offerings are features they can't get on the plain old boob tube. At the Gameday site, they can find out that Werth's home run came on Shell's 18th pitch of the evening. They can also learn that his first and third pitches to Werth were both 89 mph fastballs, while the fateful curveball was 15 mph slower.

An obsessive fan could get lost in all the data in the MLBAM archives. There are video clips of each major event in the league's games this season. Statistics are available on how particular players have done against a starting pitcher. The site has final standings for every season back to 2001, too. "It's much more than what you can get on television," says Jupiter's Tulsiani. "It taps into the base by offering multiple camera angles, stats, and on-demand video."

MLBAM's New York offices are like an adolescent's idea of a dream job. On one recent summer day, dozens of workers sat at desks watching hour after hour of baseball live on sleek Apple (AAPL) iMacs. They chatted and joked as the day's games unfolded. There was a flurry of activity when something important happens in a game, like Werth's homer or a crucial strikeout.