Microsoft is expected to pay $40 million over two years to stream live video of Major League Baseball games onto PCs.
The deal could heighten competition with rival RealNetworks and signal rising costs for online video programming.
One source said Microsoft may also sell baseball subscriptions through its MSN Web portal. Users will also be able to access games, using Microsoft's.
Microsoft isn't the only company expected to soon strike a deal with the baseball league. America Online plans to announce a two-year, $9 million deal with MLB Advanced Media (MLBAM), the league's Web business, to offer live audio streams and 20-minute video clips for each game, the sources added. AOL will offer the games for free to itsmembers, most of whom pay $14.95 a month on top of their broadband bills for the service.
Besides the MSN and AOL deals, the baseball league will sell video and audio subscriptions on its Web site, the sources added.
Representatives of MLBAM, Microsoft and AOL declined to comment.
The expected deals will come about two months after streaming-media companywith MLB to sell subscriptions for live audio of MLB games. However, RealNetworks said the terms of that deal had made it difficult to achieve profits.
Earlier this month,, claiming that the league violated its contract in not offering RealNetworks' streaming-media player alongside other media players on MLB.com. The baseball league denied any violation of contract.
The renewal of MLB rights underscores a complicated balance of power between content providers and Web distributors. On the one hand, Web giants need content to attract users and to sell subscriptions and advertising. But leagues such as the MLB, which are accustomed to selling broadcast rights at hefty rates to television networks, are beginning to demand a higher price tag for their content.
Over the past few months, executives at MLBAM have shopped around its packages to many other potential partners, including Yahoo, SportsLine.com and RealNetworks. However, many involved in the negotiationsprice tag for entry, claiming that the league was overcharging for its content.
Microsoft and AOL may be in a different position to other Web sites. Both companies areto faster broadband services and cheaper dial-up options. MSN and AOL have adopted a "bring your own access" strategy, through which they sell their online services without Internet access. The idea is to give people with other cable modem or digital subscriber line connections a way to continue using their MSN or AOL accounts for an additional monthly fee.
AOL, in particular, has staked its future on its AOL for Broadband service. The company has secured content from other divisions in its Time Warner corporate family, such as magazine articles from Time and film clips from Warner Bros.Upping the ante
Microsoft in recent months has made streaming video a priority. The company in October unveiled a . The service launched with video clips from its MSNBC joint venture, as well as other programming from NBC's news and entertainment shows.
In contrast, RealNetworks has for years sold subscriptions to its streaming media service RealOne SuperPass, which had MLB as its marquee partner. During the past year, RealNetworks has shifted its focus to selling music subscriptions, as evidenced by its. It's unclear to what extend losing MLB will affect RealOne's subscription business.
Gaining MLB could offer a significant boost for Microsoft, which competes with RealNetworks over video streaming software. The hefty premium paid for an unproven video streaming model was not surprising to some analysts.
"I think to an extent it's Microsoft being Microsoft," said Michael Goodman, an analyst at The Yankee Group. "It's a cost center for them to acquire this content, and if it's a money loser, it's a money loser. What it gives them is an anchor program. It gives them a high-profile piece of programming to build around."
The deal also pushes the envelope on the price that online distributors must pay for popular programming. Just like television networks that pay billions of dollars for rights to the National Football League or the Olympics, the Internet is quickly such a valuable medium for sports fans that Web portals are more willing to open their wallets.
"Some of the new mediums, including consumer Internet and satellite radio, are looking to use the model that worked well for companies in TV," said Mark May, an equity analyst at Kaufman Bros. "It's yet to be seen if the strategy benefits new mediums like it did TV."