Baseball season begins this week, and with it comes news that fans will now have to pay to listen to games on the Internet. RealNetworks and Major League Baseball announced the landmark deal last Tuesday, with Real laying out $20 million in cash and services (such as hosting radio feeds) to stream broadcasts over the next three years. For the Seattle technology company, it's an investment with potentially huge rewards: Fans will be offered subscription plans ($9.95 for the season at mlb.com, or $9.95 a month for Real's GoldPass, which includes NBA broadcasts), for which they get access to radio broadcasts from both the home and visitors' teams, as well as the option to assemble video highlights. Given the failure of advertising to create revenue for the Web, industry-watchers will surely train their eyes on the Real/MLB deal to see if the subscription model can generate a windfall. Real's president and chief operating officer Larry Jacobson discusses the deal in this week's ChatRoom.
Seattle Weekly: You've talked about this deal as an exploration of the "beginning of the next platform." Can you explain that further?
Larry Jacobson: I view what we're doing here as creating the next distribution platform for content. By that I mean, think about how people experienced baseball 50 years ago. Most people had a little transistor with an earplug and that was about it. Then something came along called black-and-white television, which became color television, then cable and more choices, and now there's satellite. And there'll be digital television at some point beyond, if the industry ever figures that one out. Now we have something called—for lack of a better term—the Internet platform. We have to give it a better name that consumers understand, because it's not just about the PC, it's about wireless delivery and the like. What it means is it's a whole new dimension to how people discover and entertain themselves. . . . Everyone always talks about how television is a lean-back experience and the Internet's a lean-forward experience. Well, this is kind of where the two meet.
SW: In your previous roles, as president at both Fox and Ticketmaster, you've shown a commitment to the Internet. With so many people abandoning the Internet as a revenue source for content, why do you show so much faith in it?
LJ: It's already been proven. [Real has] 175,000 people paying $9.95 a month for GoldPass, which includes NBA broadcasts, so we're already well on our way to showing there is a marketplace for subscription content on the Web, and it's just a matter of organizing it, dealing with the premier content providers, and presenting it in a way that's valuable to our customers.
SW: With baseball, there's a legacy of radio being part of the national pastime. What do you say to a baseball fan who's accustomed to listening to games for free and who now will have to pay for it?
LJ: The answer is this: What they will be getting is an unprecedented amount of content that was never collected or produced in the way that it's going to be produced here. For example, the fan will be paying $4.95 a month and receiving over 4,000 individual baseball feeds for the entire season, in different languages, with enhanced statistics. . . . Over-the-air radio will continue to exist. This does not affect local games, so anyone who wants to hear their local team will always be able to hear that. Now with the Internet, they can hear the call of the game both from the local team and the visiting team; so you can toggle back and forth and have some fun with that.
SW: Do you see this model as something that can be applied to other content on the Internet? Do you see this as a pioneering move?
LJ: I really do, and that's not because I'm just speaking from Real here. You look at how cable developed and you say, "OK, there's a basic cable tier." When you ask most people, "Do you pay for ESPN?" they say, "No, it's free with cable." We have millions of customers who buy our RealPlayer Plus technology . . . and there's millions of people buying just that technology. Now what we're saying is, "Hey, if you buy that technology, now get baseball for free with it." We're creating the same concept as a basic tier programming on the Internet with the best of technology together with the best of content.
SW: Real's paying $20 million over three years and possibly more through revenue sharing, so what kind of profits or, inversely, losses could Real encounter through this deal?
LJ: That's a question that we haven't given any information about publicly. I think you're going to have to watch to see how quickly we can ramp up on subscriptions. Clearly when you look at the value of the annuity stream of subscription, you can expect that they'll be tremendous value of having a subscriber loyal to you over a long period of time. Once you have that subscriber—AOL's a good example of things you can do—we tend to expand the offering.
SW: Why was the announcement of the deal made so close to the start of the season?
LJ: I think the answer is: Why was the deal able to close—and it's because the season is about to begin. Often when you're under pressure to really get up and going, it's always good to have batter up on April 1. We've been in discussions for quite a period of time and we were happy to be able to announce this before the start of the season.
SW: How long specifically?
LJ: We've been in discussions since last spring.
SW: Any predictions for the World Series in 2001?
LJ: Yes. It's gonna be the Red Sox in five.