The Walt Disney Company Acquires Stake in BAMTech

By: Zach Seybert, @zlseybert

Multimedia conglomerate, The Walt Disney Company, announced on August 9, 2016 that it is acquiring a minority (33%) stake in BAMTech, a digital media company formed by Major League Baseball (MLB). BAMTech has previously been valued at $3.6 billion, and this deal gives Disney a four-year option to purchase another 33% of the company.

Major League Baseball Advanced Media (MLBAM or simply “BAM”), the digital tech company of MLB is a limited partnership of the club owners of the MLB. It serves as the Internet and interactive branch of the league, owning and operating the official website for the league and each of the 30 MLB club websites through MLB.com. Forbes referred to it as “the biggest media company you’ve never heard of,” in a 2014 article, which is likely to have changed as streaming games has become more and more commonplace. BAMTech powers MLB.tv (the league’s out-of-market video subscription service), Time Warner Cable’s HBONow, WWE Network, Sony’s PlayStation Vue Internet TV service, the PGA and Glenn Beck’s TheBlaze. According to the MLB, BAMTech “handles video distribution and other services for nearly 7.5 million total paid subscribers on behalf of clients.”

The streaming of games, whether on a computer, tablet or mobile device is referred to as “Over-The-Top” content, or OTT. This encompasses the delivery of audio, video, and other media over the Internet without the involvement of a multiple-system operator in the control or distribution of content. In layman’s terms, it is essentially using the Internet to stream/watch content (in this case, MLB games) without a subscription to a cable or satellite service. In an effort to keep up with other OTT providers (HBO Now, CBS, etc.) ESPN announced that it would roll out its own OTT service, which excited viewers and sports fans alike. However, unlike the company’s current streaming service WatchESPN, which requires a cable subscription, this new service will not include major sports packages like Monday Night Football or MLB games. According to The Information, this service will most likely offer “niche leagues” and some college sports.

With the investment in BAMTech, Disney (ESPN’s parent company) and ESPN plan to launch this new “multi-sport” subscription streaming service. It will feature content from both BAMTech, presumably baseball games, and ESPN, with an expected launch date by the end of 2016. It will cover live regional, national and international sporting events.

This move has signified a split between BAMTech and MLBAM, which will each operate as separate entities. In August 2015, the National Hockey League (NHL) and MLBAM agreed to a groundbreaking partnership to further enhance the NHL’s digital content in addition to creating new properties. The deal was for six years and reportedly worth $600 million, and in return for MLBAM’s purchase of the rights to the NHL’s digital platforms and products, the NHL gained between 7% and 10% equity ownership in BAMTech. With Disney’s investment, the NHL received a minority interest in BAMTech.

With many customers turning towards subscriptions for digital video streaming services such as Netflix, Hulu and Amazon, cable subscriptions have either been slimmed down to just the basic channels or even discontinued all together, or what is being referred to as “cord-cutting.” This has caused Disney/ESPN’s subscribers to decrease which, as you can imagine, is not very appealing to the company’s executives. BAMTech allows Disney/ESPN to offer its sports and other content directly to consumers which is a way to appeal to the cord-cutters.