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Q&A: YES's Dolgin On Streaming Local Sports

YES Network, on July 8, became the first regional sports programmer to offer live broadcast streaming of a local pro team within its territory. Tracy Dolgin, president an CEO of the New York Yankees-owned regional sports network, recently spoke with news editor Mike Reynolds about the deal with Major League Baseball Advanced Media, which controlled the digital rights to the Bronx Bombers' ballgames, and Cablevision Systems. The operator's digital-cable subscribers who get Yankees games on the network and subscribe to its Optimum Online high-speed Internet service may now buy the Yankees on YES streaming package, which is available for $49.95 for the balance of the season, or $19.95 for any 30-day period.

MCN: How long were you talking to baseball about this?

Tracy Dolgin: It's got to be closing in on a decade. It has been sort of philosophical [issue], including back to my days here and my days back at Fox and with some of the other RSNs. I agree philosophically that anything that is in our footprint that we paid for, as the regional sports network, should be ours. Baseball doesn't share that same philosophy with us.

MCN: What broke the logjam?
Dolgin: Over the last decade, the entertainment landscape is littered with people who sat on their hands and did nothing while this convergence happened. To me, having a logjam in itself is a riskier proposition than having a deal done and having the product out there.

You know, in the music business case -- I was involved in the music business for a while -- people didn't start stealing music, in my opinion, because they were thieves. They started stealing music because they wanted music digitally and it wasn't available for sale. I think if it was available for sale they'd no more steal music than they

would've pocketed a CD at a store. Most people just aren't that way. But they had no other way to do it.

The newspaper business? You have a newspaper business that is suffering more than all the rest of us are probably from the recession. But apparently it has a new-media problem where, instead of buying the news, many people are able to access the same or a similar level of content [for free]. So when you see things that aren't working what you try to do is you try to figure out a solution that will not just preserve your core business -- I mean because that's the most important part. Building a new business is great, but you have to build a new business on top of the core business.

So we tried to look for a solution that preserved the core business and at the same time actually could grow our business on top of it and that worked for our distributors, worked for our advertisers, worked for our consumers, worked for us, and worked for Major League Baseball.

MCN: You started with Cablevision...

Dolgin: We were negotiating the affiliation agreement with Cablevision; they're the biggest cable operator in the region by far. To have that as the first piece that fit into this puzzle timing-wise made the most sense, as opposed to going to a distributor where we had an existing contract.

MCN: With your deal, those who want to receive Yankees on YES, must be both a Cablevision video and high-speed data subscriber. Cox and the San Diego Padres have worked it a different way, where there is only a broadband component. Were you guys thinking of that? How did you kind of come to the dual subscribership formula?

Dolgin: Well it was pretty simple. When you are doing a deal that is a breakthrough deal, there are no guideposts. Who knows what this business will look like in five years. You can't be naive enough to believe that what you're doing today, exactly what you're doing today, is not going to change.

Having said that, my biggest concern was authentication. So again, not being a rocket scientist here, but if authentication is your biggest concern, it just seemed to me that having the subscriber be both a video subscriber and a broadband subscriber made authentication much simpler. And, at least in its initial incarnation, gives it a much higher probability of success.

One of the most important things was to do a deal that works with the specifics of the YES Network. We have the Yankees so they're the most, you know... You're a Yankee fan, right?

MCN: Oh, sure.

Dolgin: But the Yankees are undoubtedly the best brand in sports. So a deal that works for the Yankees may not be the same deal or the same product that works for a team that is not the greatest brand in the history of sports. I know what my affiliation agreements say. I know what level of advertising I'm selling and how the advertising market is in New York. I know all these very specific things for the YES Network and what's important to be in a deal.

To me the risk of not doing a deal now was that somehow, some way --and I don't know how it could happen -- but I would get trapped into a one-size-fits-all deal that may not really work to build my business and preserve my core business. So that's why being an early person in this was another thing that was important to me because I wanted the deal for us to reflect that. But that means that by necessity for Cox and San Diego, you know, this deal may not be the right deal. I don't know.

MCN: As the most-watched regional sports network with the biggest team, is it symbolic that you were first. Or is it another case of the "Evil Empire..."

Dolgin: I thought you were a Yankee Fan, not a Red Sox fan. I mean how could there not be symbolism in the fact that the number one regional in the United States was able to craft a deal specifically that worked for us in our

circumstances when we theoretically would have the most to gain or the most to lose? If you could do it with the biggest then, you know, it gives you, I would think, hope that there are other deals you can work out. Although, as I said, those deals may not look like our deals. Their businesses are different and, again, I did this to avoid a one-size-fits-all deal.

So I do think it's symbolic, that practical people can get together and do something that may not be perfect, but is less risky and more business-building than doing nothing.

MCN: Do you anticipate a lot of other MLB teams will join you and the Padres and Cox [where the operator's high-speed data service can receive local streaming of its Channel 4 simulcasts]?

Dolgin: I would assume you'll have more teams doing it. But you're already basically running up against August this year so I can't imagine there's going to be a ton of deals coming out for this season.

MCN September call-ups so to speak...

Dolgin: Yeah. I think that by next season, there'll certainly be more activity.

MCN: Would it have been preferable to start with the beginning of the season?

Dolgin: Absolutely, but we just didn't have the deal done. I wasn't comfortable that the authentication was going to work...

MCN: The authentication is in the hands of MLB?
Dolgin: It's a combination of [MLBAM] and Cablevision. As we roll out with new distributors with different kinds of products we've got to keep looking for the best way to authenticate.

MCN: What are the early returns?

Dolgin: We only have two objectives for this year. Number one is to start on our broadcast educating consumers that there is a way to watch the game when you're not able to watch it on TV and that is a long-term educational problem.
Objective number two is to make sure that we can do what we say we're going to do that the back end really does work; so that we can collect the money; we can distribute the money; we can have the consumers have a good experience when they're watching it; play around with feature sets...And have an off-season to basically sit and fine-tune this thing.

MCN: But you have collected some money?

Dolgin: I don't care. I couldn't even tell you what the number is because it's irrelevant. If the number is too high I'm thinking I'm doing everything right, which we know is not the case. And if the number is too low, I'm thinking I'm doing everything wrong, which is not the case.

MCN: Three years out are enough people watching to sell a different set of advertisers?

Dolgin: What first has to come is the ability to measure it and the ability for the buyer to actually recognize that people are watching the streamed games.

So I think for the near term you're going to see the same kind of ads you see on our air. We're going to go to our advertisers and get as much data as possible. We're going to work with Neilsen, or whoever measures this stuff. We're going to basically say what I believe to be true, that there are more eyeballs now watching our air than there were before. And if there are more eyeballs watching our air there are two possibilities. One, the advertiser will start paying you for the more eyeballs that are watching; or two, if they're not interested in these incremental eyeballs you have to find someone who is.

But that's certainly not this year, probably not next year. Although I think that we'll start testing next year.

And also, by the way, God-willing, it's a little better marketplace out there. I'm not sure I'd want to launch any new [ad-supported] product this year because people are having enough trouble finding money in their wallets to buy what exists. So I think we'll try to test some spots next year, but I think you're really looking a few years off.

MCN: Where do you stand with Time Warner, Comcast, FiOS?

Dolgin: We're in various states. I don't want to go into any of them individually, but we are talking to all of them and we've got some real interest. And we already have others who have said they are going to do it next season. So I will make a bold prediction: a least one, maybe even two...

MCN: Before the season is over?

Dolgin: Yeah. I mean that's my goal.

MCN: What have the other RSNs said?

Dolgin: I would say in general, the RSNs fall into two categories. There are still people who believe more strongly that it's philosophically theirs. And they just don't for the amount of money that's available, they don't want to go against what their philosophy is.

And I think that there are others out there who are really just trying to figure out the same question it took us a long time to figure out: What is the deal and what is the product that works for us and our unique situation?

MCN: How big a play can phones be?
Dolgin: One huge error is to sit on the sidelines on your hands while the whole world is passing you by. It's another  not to learn lessons as you're doing them first before you try to do too much too fast...We'll worry about the next business opportunity when it comes up.