What Happened to Sirius XM's MLB Deal?

Yesterday, Sirius subscribers that do not have the "Best of XM" package received an email from Sirius XM Radio (SIRI) asking them to buy an XM radio in order to receive Major League Baseball content. Sirius subscribers were hopeful that a deal could be worked out with MLB to get all the Major League Baseball games via the "Best of XM" package. As recently as March 12th's Q4 2008 conference call, Sirius XM CEO Mel Karmazin said the following in regards to negotiations with MLB,

We are hopeful to work with Major League Baseball to be able to get the games. All of our content partners so far but for Major League Baseball we have been able to work it out and we’re having discussions with Major League Baseball about getting the games and we think that will also drive more of the SIRIUS subscribers toward getting that content.

Sirius XM Radio pays Major League Baseball an enormous $60 million dollars a year to broadcast baseball on XM Radio. Based on the recent email advertisement to Sirius subscribers from Sirius XM Radio it would appear that talks with MLB in regards to getting baseball games on Sirius have broken down, thus the need to ask Sirius subscribers to buy an XM Radio in order to get the MLB games. The package that Sirius XM Radio is offering offers 3 months free of XM when buying a XM radio for Sirius subscribers.

Sirius XM Radio's David Frear said on the Q4 2008 call,

Note that since year end, restricted cash on our balance sheet for the benefit of Major League Baseball and NASCAR was released to those parties in satisfaction of obligations that would otherwise be paid from cash on hand. In the case of baseball this means we have pre-paid all of our obligations through March of 2011.

Sirius XM Radio has already pre-paid Major League Baseball through the rest of its current contract with XM and now MLB wants additional money to broadcast the games on Sirius.

It is good to see Sirius XM Radio being more fiscally responsible in not overpaying for content. To date, only a quarter of the "Best of" subscribers subscribe to "Best of XM" due to MLB not being a part of the package. The "Best of XM" package costs an additional $4 per month to Sirius subscribers. Sirius XM Radio must take care to not give that entire "Best of" additional $4 per month to Major League Baseball. Due to the fact that the Mirge interoperable radio is now available for purchase, and for many other reasons, care should be taken to use the bulk of that $4 per month for interest payments as part of the Liberty deal, to pay Sirius XM Radio shareholders, and not to pay Major League Baseball an additional unreasonable amount.

Disclosure: Author holds a long position in SIRI

Comments

[Neal Barkett:]

I'm glad Sirius is holding its ground. In these economic times a lot of fans have a hard time swallowing the salaries of what these athletes are paid. People have to fork out a day or 2 wages to take a family to a game. I think from a public relations standpoint it doesn't bode well with the fans that MLB can't come to an agreement w/ Sirius. I may be mistaken but I thought MLB owns shares in Sirius Xm. Wouldn't them coming to an agreement help them from the increase in share price.

Mar 26 12:18 PM

[mrfield16:]

I am confused...if they merged..and they are one company now...aren't prior agreements applicable to both networks? Why is there even a discussion about it? If the terms of the agreement give an 'out' for MLB to wrangle for more $....whoever did the contract at XM should be fired.

Mar 26 12:22 PM

[duey23:]

MLB is more interested in charging people through their website for both video AND/OR audio feeds of all games. Why would they make it easy for any of their partners, when they can get incremental $ via their own web offering? They need money to try to PR their way out of the steroid issue. Also Bud Selig is an old fuddy-duddy. He wouldn't know a satellite radio if it hit him in the face.

Mar 26 12:32 PM

[kevin8:]

This is crap and i'm all done with sirius XM radio.You have a product people want and will pay for. Mel is trying to figure out how to soak more money out of his customers . I hope they fail !

Mar 26 01:55 PM

[GetSIRI:]

Kevin8... Go back and read the article. Wasnt Mel's doing. It was MLB

Mar 26 02:45 PM

[GetSIRI:]

You and your 1 post. I thought the people who jumped into unfairly trash were all gone

Mar 26 02:46 PM

[dead elvis:]

give mlb a piece of the movie you are going to star in re sirius/xm

Mar 26 03:03 PM

[between the...:]

Could there really be a Reality Radio channel coming to SIRI XM? They could play reruns of American Idol or do a similar show. That would be a great idea!!

Mar 26 03:52 PM

[between the...:]

Think about it. Listen to several singers and vote for your favorite on SIRI's web site. Listen to comedians and vote on your favorite on SIRI website. Listen to analysis and call ins on the latest American Idol show, Bachelor show, MTV etc for all reality shows. Howard can run with the ball and have porn stars do their best moan and vote for that on his web site. This could be huge.

Mar 26 04:05 PM

[Frustrated ...:]

Not only re-runs, but they could do the live American Idol show...I mean really, how much do you need to see (no pun intended with the blind contestant this year!).

Mar 26 04:07 PM

[between the...:]

Really could be a huge and big seller. I think they should be working on this NOW. Millions of people love American Idol and other reality shows. Trump should lead this up. Come on get creative. Lets roll!!!!

Mar 26 04:09 PM

[connorport:]

Amen!!! Who cares about these spoiled overpayed professional players. Its time WE made some money. The younger crowds could care less about MLB. Lets scratch MLB and use some of the money to get something entertaining. Baseball on Radio is boring and nearly dead.


On Mar 26 10:43 AM JamesPS wrote:

> It is disengenuous for MLB not to agree to letting sirius sub listen
> to MLB.
>
> MLB benefited from an extreamely high inital contract, due to competition
> between the two sat companies. The number of incremental listeners
> will be fairly small.
>
> I think Sirius should not pay additional money for sirius rights.
> Let the contract run out in 2011, let MLB be the only professional
> league to not be broadcast on the best audio medium in the country.

Mar 26 06:44 PM

[connorport:]

They are basically two separate companies. XM is now a Subsidiary of the parent Sirius. They are renegotiating with the XM contracts as well as the XM debt. Thats been the issue the whole time. XM will soon be an uneeded liquid asset that will be liquidated to Liberty to cover all these high interest deals thats been made. Let hope the Liberty deal doesn't dilute our stock and lets hope MLB disappears off SIRI's books forever. Its time for SIRI to have an XM garage sale and throw away what doesn't sale including MLB.


On Mar 26 12:22 PM mrfield16 wrote:

> I am confused...if they merged..and they are one company now...aren't
> prior agreements applicable to both networks? Why is there even
> a discussion about it? If the terms of the agreement give an 'out'
> for MLB to wrangle for more $....whoever did the contract at XM should
> be fired.

Mar 26 06:53 PM

[justice for...:]

have u heard , yankees just paid 243 million for two has-been pitchers. I will never pay for another baseball game, ever.

Mar 28 12:25 PM

[I'm Not Jim...:]

What's unreasonable? Baseball is the only sport that fans consistently listen to on the radio for months at a time. However fans can buy the MLB package streaming on their website. Unless lightning strikes, don't expect that baseball will be on Sirius past their current contract. They know it, and so does Mel. I agree that young people don't follow baseball, but young people don't listen to Sirius either, so there is no advantage to let the older crowd go, because that's all the satrad has.

Between the sheets: I agree that no one ever went broke underestimating the taste of the American public, but here's the problem with your reality channel. Radio's peak usage hours are drive times. All of those shows broadcast well past that time. The people who watch those shows are all home at that time. If they're not watching them live, then they are surfing the internet or IM'ing each other. Many of them might well be doing all three at the same time. Think about it though. Why would they need a Sirius internet feed of the show when they can watch it on tv live if they're interested? So you're left with people who would listen to reruns of their favorite reality shows the next day while driving in their cars, and who can't wait until they get to their computers to watch it on any of the possible websites. Wow, that's a similar audience to the robust Martha Stewart channel!.

Mar 30 12:26 AM

[I'm Not Jim...:]

A little further exposition from another website why MLB will be gone from satrad after this contract.

"On Mar. 30, MLB will release an iPhone (AAPL) mobile application that will stream games live from all 30 teams—which is what Sirius customers get now—and offer video clips and live score updates for $10 for the entire season. Sirius' subscriptions that include MLB games start at $10 a month. The new app doesn't violate baseball's contract with Sirius XM, which covers rights to stream games only on satellite radio."

So now you know "the rest of the story" as the departed Paul Harvey used to say. Come to think of it, even now he draws more listeners than the Kevin Costner channel. lol

BTW, not saying don't buy Sirius. It's a great trade and has made many of us money this year. Just don't buy and hold for your kid's college fund.

Mar 30 12:40 AM

[siriusaldo:]

The CBS-acquired streaming music service Last.fm announced this morning that it will "soon" require users outside of the US, UK and Germany to pay €3.00 per month to keep the music rolling. In blog comments on the announcement, the company explained that those three countries were the only ones where ad sales were proving successful enough to monetize the free music that way; elsewhere the money will have to come out of listeners' pockets.

It's a dramatic move that could pave the way for other media companies to do the same and effectively open up international markets. People complain, but do you think that viewers would pay a similar monthly fee for international access to Hulu, for example? We do.

All the programmatic elements of Last.fm, like the taste-tracking "scrobbling," will remain free anywhere. The company also noted in its blog post that its number of users has doubled over the last year alone and now stands at 30 million per month.

We're still waiting for examples of US customers willing to pay for online services (the iPhone app store is a related example) but it will be interesting to see if the rest of the world is. Last.fm's announcement is an interesting response to the advertising market's belief that only eyeballs from certain countries are "worth" advertising to.

Meanwhile, the vehement insistence by users that every damn thing on the web be free works hand in hand with the rise of over-saturation in advertising. Let's see what kinds of user experience, features and services we can get by paying a little cash - shall we?

Mar 30 12:00 PM

[siriusaldo:]

The CBS-acquired streaming music service Last.fm announced this morning that it will "soon" require users outside of the US, UK and Germany to pay €3.00 per month to keep the music rolling. In blog comments on the announcement, the company explained that those three countries were the only ones where ad sales were proving successful enough to monetize the free music that way; elsewhere the money will have to come out of listeners' pockets.

It's a dramatic move that could pave the way for other media companies to do the same and effectively open up international markets. People complain, but do you think that viewers would pay a similar monthly fee for international access to Hulu, for example? We do.

All the programmatic elements of Last.fm, like the taste-tracking "scrobbling," will remain free anywhere. The company also noted in its blog post that its number of users has doubled over the last year alone and now stands at 30 million per month.

We're still waiting for examples of US customers willing to pay for online services (the iPhone app store is a related example) but it will be interesting to see if the rest of the world is. Last.fm's announcement is an interesting response to the advertising market's belief that only eyeballs from certain countries are "worth" advertising to.

Meanwhile, the vehement insistence by users that every damn thing on the web be free works hand in hand with the rise of over-saturation in advertising. Let's see what kinds of user experience, features and services we can get by paying a little cash - shall we?

Mar 30 12:02 PM

[itsjust$:]

Do you think the Tax Incentive's to buy a new Car this year
will boost sales for the Auto Mfg's or will it still be Flat to negative?

Mar 30 03:07 PM

[between the...:]

Sirius knows that they need to do something big fast to generate growth. They need a big personality. Howard was worth his weight in gold. They need another Howard. I believe that a reality radio channel would be excellent. Need to get this in the works fast to be able to market it for Christmas sales.

Mar 30 04:12 PM