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article by: Michael Canter

29 August 2014

Global Sports Branding -- The Convergence Of Baseball, New Media And Social Television

As many of you may know, Jivewired is expanding it's core model to include televised internet delivery of indie music themed and sports programming in 2015 with the launch of Jivewired TV, an internet delivery television station on the Syncbak and Dwiddio platform. Going forward, we will publish a bi-weekly column that looks at the impact of New Media on our lives and the expanding digital arm of internet delivery entertainment.

American sports and entertainment television is a globalized phenomenon. We take it for granted because it seems that we've always had immediate access to sports and entertainment television but it has been less than a generation since coverages of both were limited to local audiences. Next week (September 7th) marks the 35th anniversary since the launch of ESPN, the very station that changed the way we view live sports and disseminate sports news.

Today, professional sports alone returns nearly 25 billion dollars in annual revenue and is growing at an annualized rate of 3.3% according to research published by both Forbes and the Wall Street Journal.  That growth is about to accelerate.  By 2016 nearly 72% of all mobile traffic will be video streaming based on a study done by Cisco Systems.  Baseball fans, and fans of all sports for that matter, across all cultures, are embracing the ability to eliminate the single seat experience, replacing that with video-enriched experiences on their mobile devices.  It is no wonder that baseball is embracing advances in internet delivery television and social media and offering mobile hot spots and/or wifi access in many major and minor league baseball stadiums.

The latest Nielsen ratings indicate that just over 40% of television viewers watch via internet delivery to personal, portable devices. Further, internet delivery television has connected with social media platforms to make real time broadcasting an interactive, social experience and a global phenomenon. We are in the middle of a mobility revolution in which the number of smart phones and tablet users will reach 10 billion within the next three years. It is a given that sports franchises are now expected to remain connected and engaged with their fans on a 24/7 basis. Sports franchises now celebrate fans and followers worldwide, with a large majority of those out-of-country fans having never been to an actual game. Forbes also estimates that the average fan generates $50 - $60 in revenue globally via personal expenditures on a yearly basis. 

Social television has opened up a new avenue for franchises to push their brand, market to new audiences and leverage lucrative advertising and internet broadcasting contracts.  The convergence of social media, internet delivery television platforms and professional sports yields the largest revenue streams for many sports franchises and their advertising partners.  In baseball, the New York Yankees, the Boston Red Sox and the Chicago Cubs are the most popular franchises on a global basis.  Indeed, thanks to the globalization of professional sports, baseball franchises have seen an average valuation of 744 million dollars per franchise. Since the Ricketts' family purchased the Chicago Cubs in 2009 the franchise valuation has nearly doubled (Forbes, March 2014).

Shared television revenues brings each MLB team over $52 million dollars annually but that is just the tip of the iceberg.   A somewhat hidden contributor to franchise valuations is Major League Baseball Advanced Media (MLBAM), the rapidly expanding digital arm of baseball that generates nearly $1 billion in shared revenues with a growth rate similar to Facebook. Every team in baseball owns an equal share.  In 2013 nearly 3 million followers of MLB subscribed to various products. In fact, MLB At Bat is the top grossing sports app of all time.  By 2020 MLBAM is expected to generate far more revenues for each baseball team than current, and very lucrative, television rights broadcasting contracts.

Generally speaking, New Media and Social Television has accelerated sports franchise valuations exponentially, making sports franchise ownership one of the strongest acquisition investments since the start of this century.  The convergence of internet delivery television platforms and social media has truly globalized the game of baseball. 

MLB Franchises With The Highest Valuations (as of April, 2014, data provided by Forbes)

1. New York Yankees
Purchase Price - $10 million dollars (1973)
Current Valuation - 2.5 billion dollars
Annual Revenues - $461 million dollars
Annualized Increase In Value - 12%

2. Los Angeles Dodgers
Purchase Price - $2 billion dollars (2012)
Current Valuation - 2 billion dollars
Annual Revenues - $292 million dollars
Annualized Increase In Value - 24%

3. Boston Red Sox
Purchase Price - $380 million dollars (2002)
Current Valuation - 1.5 billion dollars
Annual Revenues - $357 million dollars
Annualized Increase In Value - 12%

4. Chicago Cubs
Purchase Price - $700 million dollars (2009)
Current Valuation - 1.2 billion dollars
Annual Revenues - $266 million dollars
Annualized Increase In Value - 11%

5. San Francisco Giants
Purchase Price - $100 million dollars (1993)
Current Valuation - 1 billion dollars
Annual Revenues - $316 million dollars
Annualized Increase In Value - 12%

Based on growth rates, the current valuation of the Los Angeles Dodgers will double by 2016.  The Yankees, Red Sox, Cubs and Giants should double in value by 2020. The Cubs debt/value ratio of 35% may stifle that growth somewhat.

Sources -- Forbes, Wall Street Journal, Cisco Systems, MLB