If ESPN wants local MLB rights, MLB.tv is the perfect way to do it

When a report emerged on Tuesday evening that ESPN was closing in on some sort of agreement to place MLB.tv on its new direct-to-consumer streaming service, which seems to be a licensing deal, not an outright purchase, reaction among baseball fans was mixed. Some groaned at the prospect of ESPN, who just six months ago was seemingly getting out of baseball entirely, gaining control of MLB’s popular out-of-market subscription service. On the other hand, some fans saw potential.

But for ESPN, it’s a no-brainer.

ESPN chairman Jimmy Pitaro has long extolled the virtues of local rights when it comes to Major League Baseball. The local rights are where the true value lies, not national packages like Sunday Night Baseball, which ESPN decided to drop following this season. Baseball is a regional sport. Fans follow the 162 games that their team plays, but don’t tune in for much else until the postseason. So why pay hundreds of millions of dollars for national games that don’t provide a great return on investment?

That’s seemingly the calculation that ESPN made earlier this year.

Prior to reporting about a possible MLB.tv deal, the conventional wisdom was that ESPN would look to partner with the league as it attempts to cobble together a nationalized package of local rights. Currently, the league controls the in-market local broadcast rights for five teams: the Cleveland Guardians, Minnesota Twins, Colorado Rockies, San Diego Padres, and Arizona Diamondbacks. By MLB commissioner Rob Manfred’s target of 2028, the hope is that the league can control in-market local broadcast rights for more than half the league.

The catch? It will be very difficult for the league to attract blockbuster clubs like the New York Yankees and Los Angeles Dodgers to join up. Those teams already have highly lucrative local rights deals, thus there is little incentive for them to join the league’s bundle of less-popular franchises. Assuming those types of teams stay put with their current arrangements, the value of MLB’s nationalized local rights package will inherently be limited.

That’s not the case with MLB.tv, which sells customers out-of-market rights for the entire league. All things being equal, there’s no question that in-market rights are more valuable. After all, fans of a particular team generally reside within that team’s local market. But without in-market rights for MLB’s top teams, the out-of-market package actually becomes quite attractive by comparison.

How many Yankees and Dodgers fans live outside of their team’s home markets? Quite a few judging by the MLB apparel you see walking down the street. That’s an attractive proposition in itself, without even accounting for the hoards of other transplants that want to watch their hometown team in a new city.

Not only that, but ESPN will then get to market MLB’s biggest and best teams as part of its new streaming service. As a comparison, look no further than how YouTube markets its NFL Sunday Ticket package.

Now, will ESPN’s reported tie-up with MLB.tv dissuade them from getting involved with an in-market package when the time comes? Not necessarily. In fact, CNBC reports that as part of its deal with MLB, ESPN would like to license the five teams the league controls in-market rights to as well. But for the time being, as the availability of those in-market rights are pretty limited, locking down MLB.tv makes all the sense in the world.