This is Part 2 of (W)Rap Technology PT. 1, where I wrote about how artists, creators, and athletes can position themselves for greater levels of ownership and influence in business, including technology companies.
In this article, I’ll tell you a story that gives an example of what is possible.
Let’s begin.
In 2014, Forbes Magazine called ‘BAMTech’ “the biggest media company you’ve never heard of”. Well, it’s 2023 and many still have never heard of BAMTech - the company which powered ESPN and Disney’s OTT (over-the-top) streaming services: ESPN+ and Disney+.
The story of BAMTech is a story of what happens when savvy business people come together. For me, BAMTech is an incredible business story; it’s a perfect example of foresight and innovation in the marketplace.
THE STORY OF BAMTECH
In 2000, seven years before Netflix began streaming shows, Major League Baseball’s team owners sought to create a digital property to exploit their baseball games and content. This endeavor resulted in MLB.com and MLB Advanced Media (“MLBAM”). MLBAM was funded by the 30 clubs in an agreement that had each invest $1 million a year over four years. The cost was targeted at $120 million, but the web presence for baseball started generating excess revenues in 2003, allowing [MLB team owners] to invest only $70-$75 million before beginning to see a return on their investment” (Brown, 2014).
MLB.com began an online platform to promote the league and its’ teams; but the team owners and MLBAM foresaw that there was a significant revenue potential in streaming Major League Baseball games; and, thus, MLB.TV was born. MLB.TV is, essentially, a streaming platform which sells subscriptions to watch out of market baseball games.
It’s the Netflix of Major League Baseball.
By 2014, MLBAM had streamed over 2 billion live games and would go on to power platforms and programs such as WatchESPN, HBO Now, 2014’s FIFA World Cup, the NHL, PGA Tour; and others (Brown, 2014). By 2015, the team at MLBAM, in deciding to focus on Major League Baseball (and profits), decided to spin off a component of MLBAM, BAMTech Media as a separate digital media and streaming video technology company with a focus on OTT content.
On August 9th, 2016, after negotiations, Disney and MLBAM, announced that Disney would “pay $1 billion to purchase a 33% stake in BAMTech” (Calcaterra, 2016). That deal netted Disney a 33% share in BAM and around $33 million for every Major League Baseball team owner (Calterra, 2017). Disney acquired additional shares the following year for $1.58 billion, granting them a majority ownership, bringing Disney’s total stake to 75%. This majority stake netted each MLB owner an additional $52 million; bringing each owner’s rough profit to $85 million (Calterra, 2017).
All in all, BAMTech, in addition to profits on sales and services, brought in roughly $2.58 billion.
JERRY DOLLARS
Before we continue, it’s important to understand that there is a distinction between league related revenue (which is shared between the league, teams, and players - and often defined slightly differently in different league’s collective bargaining agreements); and property owned by the league or the teams themselves. Particularly, for athletes, it’s also important to understand how revenue is shared in their respective league.
Generally, leagues will share “league-related income” between teams and players. The exact percentage and distribution method is collectively bargained for by the players’ union and the league. This revenue, typically, covers all revenue directly-related to the particular sports, its’ games, and the monetization of its’ intellectual property through sources such as media broadcasting rights, sponsorship revenue, ticket and merchandise sales; and other similar revenue that is directly generated as a product of game and league activity.
Understanding how this revenue is shared, and ownership rights in respective leagues is a key component of an athletes career and the collective bargaining process for player unions, league executives and team components.
That is the business of sports.
For example, in 2014, the NBA signed a $24 Billion, nine-year, media broadcasting agreement with Turner and ESPN/Disney for the broadcast of its’ games and programming (NBA Draft, NBA Awards; etc.). As a result, the salaries of NBA players skyrocketed. That’s because the money generated by that media rights deal is shared, almost evenly, with players. In 2014, the NBA salary cap (the soft-limit that NBA teams are allowed to spend on their players) was $64 million. For the 2023-2024 season, it’s $136.021 million.
That is the power of media.
It’s also the power of understanding the importance of negotiating rights and business; because in the case of BamTech, the players were not parties to any of those transactions.
The ability to build business around media (sports, entertainment and IP) is a not a small thing. There’s the example of ‘Legends Hospitality’, the company Jerry Jones (owner of the Dallas Cowboys) founded in 2008 - along with the owners of the New York Yankees. Legends Hospitality “originally started as a concessions company, but has since grown into something even more powerful; a company which helps teams build and operate stadiums and sells naming rights and license seats” (Newby, n.d.).
In 2017, New Mountain Capital bought a “one-third stake in Legends, valuing the company at more than $700 million at the time”; in 2021, it was valued at $1.3 billion.
Jerry Dollars.
HAPPILY EVER AFTER
So, Disney purchased a majority stake in BAMTech for around $2.58 billion; but that’s not the end of the story.
The company would go on to use the BAMTech platform, now known as ‘Disney Streaming Services’, to launch ESPN+, an OTT streaming platform which airs original ESPN programming, professional league games, and exclusive boxing matches. Disney also used BAMTech to power its new Disney+ streaming service which, of course, airs Disney programming such as the Marvel franchise.
Then in 2021 and 2022, respectively, Disney purchased the National Hockey League’s “10 percent stake in BAMTech for $350 million” and the outstanding 15% of the company from Major League Baseball for $900 million.
Today, according to reports, Disney+ has over 150 million streaming subscriptions and ESPN+ reported 25.2 million subscribers. On top of that, public estimates value Disney+ at $60 billion and ESPN+ between $22 and 24 billion.
Home run.