An Innovation Home Run
What do you do when your flagship offering has been in steady decline for decades and your market-dominating product now fights for second place? If you are Major League Baseball, you innovate and reap the rewards.
It may already be football season, but there are lessons to be learned from the boys of summer. At first glance, it is hard to see how MLB's recent history could be anything but a tale of woe. A bitter dispute between players and owners in 1994 led to the cancellation of 920 games (including the World Series). "America's Pastime" hasn't been that since perhaps the 1960s. Plummeting World Series ratings over the past few years—this year's series had the lowest television ratings in history—indicate how MLB has lost part of the war for the casual viewer.
So, with its casual fan base diminishing and its national distribution slumping, how could this be a good time in the industry? Thanks to innovation.
MLB has done a phenomenal job of finding new ways to deepen its connection with its core consumers. At a local level, teams have experimented with revenue streams such as forging lucrative partnerships with regional cable networks (or, in some cases, creating their own networks), courting corporate sponsorships, building in-stadium restaurants and luxury boxes, and launching tie-ins with local merchants.
Estimates suggest that almost 75% of industry revenue comes from local sources such as ticket sales and television contracts, buffeting the league from some of the seemingly alarming national-television trends.
Additionally—and in the long run, probably more importantly—MLB has created a booming Internet and interactive media venture called Major League Baseball Advanced Media (MLBAM). Estimates suggest the venture's revenues in 2005 eclipsed $250 million, with some financial analysts pegging it at more than $2 billion.
Any company facing the prospect of seismic industry change can draw several lessons from MLB's success.