MLB's Real Competitive Advantage

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Not For Sale

The key to the operation's success is video editing software the league designed from scratch. The program lets employees produce highlights in just a few minutes, which is important because the group is sending out about 200 highlights a day during the regular season. It works like this: Each game plays on a computer in a small window. As soon as something important happens, an MLBAM employee rewinds the game in the computer and marks, then saves, the highlight. It's then passed along through two supervisors who send the highlight out over the Internet.

"The program took about two months to make," says MLBAM's Joe Inzerillo, senior vice-president for multimedia and distribution. Would MLBAM ever consider licensing its program? "We've had inquiries about people wanting to buy the program, but it is so tethered to our back end that we'd have to address compatibility issues. It's unlikely it would make sense to sell it."

Instead, the company uses its technological advantages to work with other sports. This year the NCAA paid between six and seven figures to run its live streaming of the men's college basketball tournament through MLBAM's servers. They also run Major League Soccer's Web operation. MLBAM thinks it's unlikely other sports will want to swallow their pride and ask baseball to run their Web operations.

Big Revenue Opportunity

MLBAM sees mobile phones as the next big revenue opportunity. It's already built customized applications for a number of phones, including the BlackBerry from Research In Motion (RIMM). The league plans to role out software in early September that will let owners of Apple's iPhone tap into the statistics from the Gameday Web site. That's likely to be followed by similar applications for other phones, including those from Nokia (NOK), Motorola (MOT), and Sony-Ericsson (SNE, ERIC). "The one device we all rely on is our cell phone," says Bowman. "It is with us, sadly perhaps, as many as 24 hours a day."

Four years ago, MLBAM hired a separate staff to design mobile Web sites and applications. MLB's mobile site now gets more than 10 million page views a day and it has more than 25 mobile applications. Still, in spite of the large audience, MLBAM's mobile offerings generate just a sliver of revenue for the company now. "It's a long ramp to economic nirvana for content publishers in mobile," says Bowman. "The ramp is not steep. It is much longer term." Right now, the company only makes around "10 to 12 million," from mobile, according to Bowman. "It's not a $50 million business for us," he says. "I'm not sure it is for anyone, but those days will come."

The company could increase revenue from advertising if it figures out how to place ads on its mobile Web sites. However, MLBAM, like most companies, is still trying to figure out the best strategy. "If the 10 million page views our mobile site got was on a PC, that could be real money," says Bowman. "The advertising for wireless is not robust. How do you put an ad that is big enough to read on a small screen?"

As technology continues to improve, and streaming video becomes easier on all devices, some fear television contracts and ratings will suffer. Bowman isn't worried. He has a pretty simple strategy: "If you serve the fans, you take care of your business."

Yarow is a reporter for BusinessWeek.