April 11, 2005 3:21 PM PDT

MLB strikes out with Microsoft, AOL

Two high-profile deals between Major League Baseball and Microsoft and America Online have quietly been scrapped, raising questions about the value of exclusive sports programming rights on the Internet.

Microsoft on Monday confirmed that it ended a two-year deal to offer live video and audio broadcasts of Major League Baseball games to its MSN Premium subscribers. Under the agreement, which was inked last year, Microsoft was supposed to pay the league an estimated $40 million over two years. The software giant declined to say why it prematurely discontinued the deal in February 2005.

"All MSN Premium MLB subscribing customers were notified in advance of the changes and informed about available options to ensure their sports content needs are met," Karin Muskopf, product manager for MSN, said in a statement.

An MLB Advanced Media spokesman declined to comment for this report.

AOL this year also changed its deal with MLB Advanced Media, which runs the league's online business. AOL said it discontinued its two-year deal, estimated at $9 million, to offer live audio broadcasts and 20-minute edited video clips of each game for free to its broadband subscribers. Instead, AOL will use MLB's online fantasy baseball game.

"We felt moving forward that focusing on fantasy games was a better fit for our members as well as all fans," said AOL spokesman Billy Kenny. "Both AOL and non-AOL members, through AOL.com, can play in our baseball fantasy leagues."

While losing MSN and AOL is a setback for MLB, the league may be preparing to announce other relationships. ESPN.com currently is offering its visitors subscriptions for live video access for $14.95 a month, or $79.95 a season.

"This is a way for us to continue to bring the game to fans," said ESPN spokesman Paul Melvin. He declined to elaborate on terms of the deal.

The ending of MLB's MSN deal and the league's potential relationship with ESPN were first reported by blog PaidContent.org.

The original deals were test beds for whether sports leagues could develop business models by selling rights to their broadcasts for high fees. The model has worked well on television where sports leagues have cemented exclusive distribution rights for billions of dollars with broadcast and cable networks.

But the Internet remains a different story. Last year, executives from major Web properties approached by MLB fumed over the price tag for securing online distribution rights. MLB shopped around licensing deals after its exclusive three-year, $20 million deal with RealNetworks expired.

The appetite among Web portals for securing exclusive content arrangements remains strong. On Monday, AOL and XM Satellite Radio agreed to develop their own online radio offering that combines programming from both sides. The companies will offer the service for free to AOL members and will eventually sell it as a subscription-only service to nonmembers.

Yahoo has secured exclusive content arrangements with hit reality show "The Apprentice" and online animation shop JibJab.

 

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