Why Shifting Sports Media Landscape Made Mlb-espn Opt-out Possible

When ESPN earlier this month triggered an opt out clause in its $550 million per year MLB deal, ending the contract three years early with this season the last, it was a rare instance of a sports media deal ending early due to the parties utilizing such a provision (MLB also pulled the end-this-deal- early ripcord).

“They’re rather draconian, which is why you don’t see them a lot,” said Robert Thompson, a former Fox Sports executive.

Fox Sports and Warner Brothers Discovery also have MLB deals, but those contracts are set to run through 2028. If those deals have opt out clauses, they are not getting used.

“I suspect that ESPN negotiated for it and Fox and WBD did not,” said sports media consultant John Kosner. “Fox and WBD also control the most valuable postseason inventory.”

Media contracts have a variety of provisions on ending and restructuring deals, said Thompson. Look-ins are periods during the term that are put in the contract for the parties to decide if the deal is still fair or if the terms should be re-negotiated. Right of first refusal, sometimes called back end rights, gives the incumbent broadcaster the right to match an offer for the team or league at the end of the contract.

WBD last year triggered this clause famously to try to hold onto the NBA after submitting a matching offer to the Amazon Prime deal. WBD even sued the league when the NBA rebuffed its overture, but the parties ultimately settled.

Opt outs a decade and more ago were not common because the length of media deals were shorter, Thompson said. Deals typically were three to five years, and if one party was unhappy, the wait wasn’t too long. But now TV contracts can stretch a decade or more. 

Also the kind of accelerated shifts in the media paradigm ongoing as the world moves from linear to digital was not an issue until the last five to 10 years. So before, there wasn’t a great fear a new media deal would be antiquated anytime soon.

“So what it does, it kind of protects both sides for monumental changes in the business at some point during the term,” Thompson said of opt outs. “And as these deals stretched out in length from what used to be three to five year deals to eight to 10 year deals, people got concerned that the ever changing media marketplace would change and would render a deal that made sense, maybe at the time, not make sense at some point during the term of the agreement.”

For ESPN, inclusion of the opt out may have also been a concession it knew it was likely paying too much. It has Sunday Night Baseball (SNB), the Home Run Derby, and the wildcard games. But the bulk of the playoffs are on WBD and Fox, which has the World Series.

“SNB was exclusive and Pay TV distributors gave ESPN credit for it,” said Patrick Crakes, another former Fox Sports executive. “But ESPN has made numerous investments in NFL and College sports that made SNB not as crucial as it once was.  They saw this vision emerging and built the opt out for optionality.”

Thompson added, “If you look at what they were getting compared to what they’re paying, it sure didn’t seem like very much.”

Perhaps the most significant opt out hovering out there is the one in most of the NFL’s media deals, which allow it to re-open those contracts in 2029, well before the 2033 expiration. The conventional wisdom is that given the pace of media change, the rich TV contracts the NBA inked last year, and of course football’s hold over the American sports audience, the NFL will choose to opt out.

Not all parties have the leverage to insist on an opt out.  The NFL clearly has it, and ESPN did too with its MLB relationship.

“Somebody at ESPN was nervous and concerned about the content, either the quality or the amount and versus the price paid, so probably asked that it be included,” Thompson said.

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