Streaming Media Steps Up to the Plate

Major League Baseball's Internet Ambitions

By Jennie Rose

Give $90 million over four years to build and maintain a Web site, appeal to baseball fans fanatical enough to use their mobile phones to check scores, then charge for Webcasts of the games, and how could you lose? In the summer of 2000, Major League Baseball had this plan in mind when club owners voted to centralize all Major League Internet operations under the umbrella of an official league site at MLB.com.

Each of Major League Baseball's teams are contributing $1 million per year to MLB's Advanced Media (MLBAM) group, which maintains the MLB.com site and infrastructure. According to spokesman Jim Gallagher, the site has funding commitments from all the teams that extend for a four-year period.

Unveiled on April 1, 2001 after a five-month-long development process, the relaunched MLB.com site gives visitors access to stats, summaries, and even pitch-by-pitch re-enactments of games. ( Figure 1 shows MLB's official site.) Perhaps the most interesting site feature, though, is a video-on-demand system that lets consumers not only watch their favorite games online, but also create custom clips and instant replays. Instead of sticking with a revenue model that relies on advertising, as other sports sites and video providers have done, MLBAM decided to put together a subscription-based service for the video-on-demand features.

Incentive

Site traffic analysis always showed that visitors to MLB.com were loyal, but whether those visitors could be converted into paying customers was a matter of incentive. Fortunately for MLBAM, fans already flocked to the site for the existing content, and it was a good bet that the free Daily Cuts video service would create demand for more video streams. What's more, many visitors seemed willing to pay at least $2.95 for a two-day "rental" of what MLBAM refers to as Baseball's Best Games. For the first time, fans would have easy access to classic games like the 1952 World Series.

Nearly three months after the launch, MLBAM was confident enough in the popularity of its streaming video that it released a new product for the site. The Custom Cuts video service lets subscribers create their own videos of instant replays for $24.95. To help gain more subscriptions, MLBAM packages live game broadcasts together with the Custom Cuts service. Together, the Daily Cuts, Baseball's Best Games, and Custom Cuts products form one of the strongest video-on-demand services available.

Strategic Partners

It's no secret that streaming media is the method of choice for serving video across the Internet. Unfortunately, streaming media is known for its vulnerability to technical glitches and service outages that can infuriate paying customers. Companies looking to bring streaming media to the masses face a major business risk if they can't deliver quality. To improve the odds of success, MLBAM decided to outsource the video encoding and distribution to several technology partners.

Before it could sell video-on-demand, MLBAM knew it needed to acquire the video, encode it into a popular streaming media format, index the content so it could be searched, and then upload everything to a location where it could be distributed to end users. Joe Choti, CTO of MLBAM, notes that the goal was to avoid reinventing the wheel. A project of this scope requires a large infrastructure investment—something that not every content provider should deploy in house. For MLBAM, the infrastructure needs were costly enough to justify outsourcing.

"Streaming in our case could be very expensive," says Choti. "Think about a game that's three to four hours in duration. Think about the cost to encode those three hours, the equipment and cost of digitally encoding it. Think about the cost of storing three hours of that stream permanently in your data warehouse. Think about the pipes you would need to push that high a volume of bits out of your infrastructure, and think of the multiple points of presence required. All of these are significant dollar investments."

MLBAM eventually chose RealNetworks for the streaming video format, and Virage for the acquisition, encoding, and indexing of all video. For content distribution, MLBAM relies on Real Broadcast Network for the Custom Cuts product, and on Akamai for all other media. Choti could not comment any further on the selection process, including the details behind the three-year RealNetworks deal. He admitted that there were other contenders, but "for business reasons, we chose Real." (Real founder and CEO Rob Glaser is part owner of the Seattle Mariners, but there was no comment on whether that had any effect on the deal.) The total cost to MLBAM over the three year term of this agreement is $20 million, and consists of RBN hosting services, advances against revenue sharing, and cash payments for branding and promotion.