SAN DIEGO – Major League Baseball critics complain about lower TV ratings, alleged video cheating by teams and yet another huge free-agent deal by the New York Yankees that will put other teams with less money at a decided disadvantage.
To MLB Commissioner Rob Manfred, who succeeded Bud Selig at the helm almost 5 years ago, professional baseball is "thriving." The league surpassed $10 billion in revenue for the first time in 2017, thanks in part to media rights, which will only increase after a 2018 agreement to renew its partnership with FOX. According to Forbes, the deal is worth roughly $5 billion from 2022 through 2028.
Manfred will run another round of media rights negotiations in 2020. Multi-year deals with ESPN, reportedly worth $5 billion, and Turner Broadcasting, worth another $2.4 billion, are set to expire.
He's also heading an investigation into Houston Astros for allegedly using technology in 2017 to steal pitchers' hand signals. The MLB is also embroiled in a legal battle with Minor League Baseball over a proposal to cut ties with 42 clubs.
Manfred sat down with CNBC at the MLB 2019 winter meetings in San Diego last week, before the league's dispute with Minor League Baseball erupted into an all-out war. Here's an edited transcript of the interview:
Q: Where does the Astros investigation stand?
A: We're conducting one of the most thorough investigations that the commissioner's office has ever under taken. Nearly 60 witnesses, 76,000 emails, a whole other set of instant messages that are being reviewed. We're going to be going back at some of the witnesses based on what we found in the electronics. But, I'm looking at promptly as possible at getting this wrapped up. People deserve to know what the results are and what the discipline is going to be. But we need to make sure we have the facts right before we do that."
Q: The battle with the Minor League Baseball continues to gain attention. What is the status of those talks?
A: Unfortunately, I think the minor leagues have escalated this outside the negotiating room in a way that has not been productive in terms of getting to an agreement. In addition, I think they misled a lot of people as to what they're about; they've been out there telling everybody that they want to preserve baseball in small towns.
I'm aware of six current instances where minor league franchises are looking to abandon the community they currently operate. Not to mention the 77 they've done over the last couple of decades. So, I'm a believer that when people get back in a room, they'll find a way to make an agreement. I hope that's the case. I think the strategies that the minor leagues have adopted has done permanent damage to this relationship, and it will make it harder to get to an agreement.
Q: Politicians like Sen. Bernie Sanders are getting involved. Does that change things?
A: I don't think politicians weighing in on information from one side of a negotiation really helps move the process forward. I hope they encourage Minor League Baseball to stop running around on Capitol Hill and get in a negotiating room, and maybe we'll get something done.
Q: There is some confusion among managers on whether the new three-batter minimum rule will take effect next season. Is that still the plan?
A: The Three-batter Minimum rule will be in place for next year. I talked to the field managers; they should no longer be confused.
Q: The investment fund vehicles that allow outsiders to invest in multiple teams, is that currently in place?
A: We passed the rule changes that are necessary to allow a fund to be formed. The reason there has never been a fund is we always had a rule that prevented you from owning even small interests into clubs. We've relaxed those rules under certain circumstances, and there are a variety of investment advisers who are out there trying to get funds pulled together right now. I expect in calendar 2020; those funds will be up and running.
Q: What is the plan with the funds, and what is the league hoping to accomplish?
A: Look, I think as franchise values have escalated, the capital structures in the clubs have become more complicated. The idea of having a fund that would essentially be a passive equity investor in a club or clubs is one that is helpful in terms of facilitating sale transactions in clubs. I'm hoping to see funds that will develop that will prepare to take equity positions in clubs.
Q: The league decided to allow ball clubs to sell their local digital streaming rights. What was the plan behind that decision?
A: Out of my hands. (Manfred smiles)
Q: Is that one thing the league wanted out of its hands?
It was really a historic issue. When the clubs agreed to create MLB Advanced Media, they granted certain digital rights to [the league]. The commitment at that time was when digital streaming became kind of a substitute for local broadcasting; those rights would go back to the clubs. We were just making good on that commitment that was made originally.
Q: Did it also have anything to do with the way MLB highlights are viewed via social media properties like Twitter, Instagram, and Facebook?
A: Not really. It certainly has to do with the fact the cable bundle is eroding, and we want clubs to be in a position to deliver their content locally on any platform, whether it's a digital one that you stream to or in the traditional cable bundle.
Q: Do you believe TV ratings are overrated?
A: Ratings are important. It's a measure – one measure of engagement. I think they are far less important now than they were a decade ago just because fans engage with the game in ways that are not captured in traditional ratings numbers. But it is one measure of engagement, something that we want to be a good one. But I do think it's very hard to look back 15 years and say they had this rating or that rating. It's a different environment.
Q: On the digital side, the league's Ballpark Pass option seems to be popular. Where do you see it going, and would you like for all 30 teams to offer subscription plans?
A: We got one million people a year in the ballparks. To do that, the clubs have to be creative locally about how they're selling tickets. The ballpark pass is one example of local club creativity trying to get to a younger audience allowing that younger audience to consume entertainment the way they like to.
They don't want to be committed or plan ahead. It gives them some flexibility in terms of when they go to the ballpark. Another great example and you see it all across the league, people are reconfiguring ballparks to have those standup millennial areas. It's more like a bar atmosphere; still see the game, but you're in the ballpark enjoying the experience. Those are two examples of clubs changing with the times to make sure they have a product that younger fans want to consume.
Q: The NBA is facing an uproar about the length of its season. With the MLB also facing pressure to shorten game-length, are there any discussions to also shorten the 162-game regular season?
A: There's not be a lot of conversation about shortening our season recently. More broadly, we look all the time and schedule format, how we can make it as compelling as possible, what changes we can make to make it more interesting for fans. That's in the on-going-project category.
Q: Fans also want to know what's in store for Oakland and Tampa Bay. Both teams are going through stadium issues, and you've said there would be no expansion until the Athletics and Rays get new ballparks. Is that still your stance?
A: Yes, it is still my stance. I just don't think that, until those two clubs are more settled, it makes sense to get into new markets that may be necessary for one or more of those [A's and Rays] clubs. I remain optimistic about Oakland; they've made some progress.
I think the biggest reason for optimism is the commitment that [A's majority owner] John Fisher and [team president] Dave Kaval have shown to try and get it done in Oakland. I'm sure you're familiar with the back, and forth that went on in the fall. It's a tough political environment. They just continue to grind away to the benefit to baseball fans in Oakland. Hats off to them.
Q: But is there a time frame you want these commitments to build new stadiums in place, especially in Oakland?
A: I don't have a firm date in my mind. But let me say this: When I met with both the Mayor [Libby Schaaf] and City Council President [Rebecca Kaplan], I made pretty clear to them this needs to move at a much better pace than it has moved in the last couple of years.