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Market mysteries: The case of Extra Innings

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4 Responses

  1. If you’re interested in this, Gregg Easterbrook (TMQ at ESPN) has written on this topic many times with respect to Sunday Ticket. I suspect that a search for “Easterbrook” and “Sunday Ticket” will turn up some fodder.

    I think the explanation may relate back to simple monopoly pricing from Econ 101. With competition, MLB is $129 for 60 games a week (I think including HD), wherease a monopoly price for Sunday Ticket is for $225 or more a year plus $99 for HD for 11 games a week (at least 5 games are shown locally anyway).

    So, DirecTV is willing to pay a lot to:

    1. Charge 2x or more

    2. Attract more subscribers due to the exclusivity

    Thus, I tend to agree that the result will be inefficient.

  2. Salil Mehra says:

    There are two dynamics at work here.

    Like Michael said:

    (1) DirecTV values Extra Innings and Sunday Ticket more because there are many people who will subscribe to DirecTV seeking these products who would otherwise subscribe to cable. Cable doesn’t face the same marginal incentive. So DirecTV will pay MLB and the NFL more for the rights to Extra Innings and Sunday Ticket, respectively.

    (2) DirecTV is national in scope, unlike the cable companies. Despite some recent competition (like RCN in NYC), cable companies are patchworks, sometimes regional (e.g., Comcast from ME to VA, save NYC and some other holes) of mostly local monopolies. Both cable and satellite business models require that you get a certain number of subscribers to break even, after which marginal costs are fairly low, but marginal revenue may stay relatively high. However, DirecTV should have a higher value for national sports league programming like Extra Innings and Sunday Ticket than Comcast, which might be able to get away with showing (at lower cost) Atlantic 10 basketball and ECAC hockey to draw regional interest, and which can count on local affiliates showing most MLB games of local interest (e.g., Phillies, Orioles, Nationals).

  3. bluemontanaskies says:

    Isn’t a monopoly against anti- trust laws? For many a dish is not allowed, for others interference is too great. And who wants to watch MLB.com on a tiny laptop screen? No one with cable will buy a dish & keep both. Cable providers will lose a fortune.

    I cannot believe Comcast and the other providers will sit back & watch mass revenue disappear. Perhaps contacting our cable providers & telling them we may switch because baseball is that important, they will fight MLB/ Directtv deal.

  4. james dougherty says:

    IT’S NOT OVER YET…CALL YOUR CABLE COMPANY OR DISH AND GET THEM TO UNDERSTAND HOW MANY CUSTOMERS THEY WILL LOSE AND CALL MLB AT 212-931-7800 AND TELL THEM THE SAME…