Strike Out or Home Run? How MLB Used Pricing to Resolve a Legal Dispute with MLB.TV Customers

Doug Fuehne

I’m a baseball fan. Pitchers and catchers reported last week, and America’s pastime is about to get into full swing, with Opening Day only a month or so away.

I’m also a pricing fanatic. I received an email last week about a class-action suit brought against Major League Baseball’s MLB.TV app/service and was immediately intrigued. MLB was sued for access, with the class claiming that MLB unfairly limited access to games played by local teams. As you will see, pricing of the product was brought into the action.

MLB was required by its channel partners (networks, cable companies, and the owners themselves) to “blackout” both home and away games played by local teams, using ZIP codes to identify which teams were local. It is clear that MLB’s channel partners wanted eyes on their product, whether it be a network advertisement or an in-stadium experience.

Channel pricing complexities are issues for almost every company, and tracking pricing down by different channel partners is a big reason companies buy software like PROS. It is almost always necessary to have a different pricing approach for each channel, and software helps manage that.

Though this legal action was about access, the proposed settlement put forth by MLB “solves” the problem with pricing and several new product offerings.

In the proposed settlement, MLB agreed to lower the price of its premium all-access service, and limit price increases for four years. They also added the capability for people to receive “my favorite team” broadcast services, a new product that is bundled with this service. You can read more here.

Now, a crafty marketing person may take an opportunity like this to make changes that would be better for the business and that were desired anyway. The suit may have helped MLB ”change the game.” In an environment where some of its channel partners are coming under increasing pressure, MLB could use this action as a reason to continue to drive change. Was this a good thing for them? Is this what happened? Let’s think about this …

In the settlement, the price level was reduced by 12% from last year, which, as we all know, directly hits the bottom line. Will they pick up between 15% and 20% new subscribers needed to break even? (These are estimates from standard SaaS company financials; I’d tell you the exact amount, but MLB is notoriously silent on their income statement.) I think they will. I certainly bought in; last year, I waited until midway through the season before purchasing the service to reduce overall spend. So this was perhaps a good move.

The product offering changed. They now have an option for a person to pay a lower amount and follow a single specific team they desire … but they have to have cable. This keeps baseball’s main customer and partner constituencies happy, while extending their reach to a broader audience. Sounds like a good deal to me.

All in all, a clever solution by MLB that is forward looking. More and more people are ‘cutting the cord’ to their cable company, using apps like MLB.TV to consume content. This updated offering update helps MLB continue their innovations in this space while expanding reach. The offering still protects the base, though – the segment of the market that is not willing to pay for the MLB.TV service can still consume via network affiliates and the free “over the air” service. And the in-stadium experience cannot be duplicated.

More broadly, the trend of ‘cutting the cord’ is increasing in popularity. Is this channel conflict? How will cable companies react as more and more content providers are legally “forced” into disintermediating them?

All in all, I salute MLB for turning a “problem” into an opportunity. No strikeout here; they hit a home run. What about you — do you think this s a good or a bad deal for baseball fans?

To learn more about pricing best practices, download The Definitive Guide for Better Pricing.

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