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How baseball’s tech team built HBO Now

By Ben Popper

It was the first week of April, 2015, and New York’s Chelsea Market, typically packed with hordes of noisy tourists, was quiet. It was close to midnight, but five stories above, things were tense. The building is a former cookie factory, and the outlines of ovens still scar the brick walls. In their place, a vast array of screens are now mounted, each tuned to a live video feed. Joe Inzerillo and his team had their eyes glued to the glass, hard at work trying to wrangle the internet into doing something it was not built for.

The launch of HBO Now was just a few days away, but the product wasn’t finished. With both HBO and Apple promoting it heavily, the team had no idea how many people might tune in that first day. “The stakes were high,” says Inzerillo. “It was not lost on anybody here how important this was for our company, but also for this industry. Because if HBO Now had come out and face planted, there would be a lot of naysayers who turned around and said, ‘See, this is why the adults need to handle television.’”

Six months earlier, HBO had announced it was cutting the cord, finally offering consumers access to their programming without signing up for cable or satellite television. But the in-house streaming service it had previously built, HBO Go, had experienced high-profile outages during the season four finale of Game of Thrones and the premiere of True Detective. HBO Now was set to launch alongside the newest season of GoT, and it had to be perfect. “Game of Thrones is our World Cup,” says Bernadette Aulestia, who runs HBO’s digital distribution.

And so HBO went to the company that set new records for online streaming during the 2014 World Cup, a strange tech startup hidden inside of a sports league, Major League Baseball Advanced Media, or BAM for short. BAM began as the in-house IT department for the league’s 30 teams, a small handful of employees originally tasked with building websites for teams and clubs. But over the last 15 years, BAM has emerged as the most talented and reliable name in streaming video, a skill set suddenly in very high demand.

BAM competes for clients with streaming tech companies like NeuLion and Imagine Communications, as well as big telecommunication outfits like Verizon. But, says Dan Rayburn, a streaming industry analyst, “there really isn’t anybody who does the true end-to-end solution like MLB does, especially at scale, out in the market.”

“Their technical chops are the best, bar none,” he adds. “They set the standard.”

HBO didn’t give BAM much time. “It was a full-on sprint for the three and half months that we had,” says Inzerillo. As the clock ticked down, the crew from BAM ran through countless disaster scenarios. “What people forget is that the internet, as a technology, was never designed to do something like this — deliver flawless video simultaneously to millions of people.” Inzerillo explains. “I liken it to trying to live on Mercury. The planet is completely inhospitable. Every day all you’re doing is [fighting] a battle for survival in a place that really does not want you. Streaming video on the internet is sort of like that.”

On April 12th, a pair of fire-breathing dragons unleashed their fury across the internet — the Game of Thrones season five premiere, as well as the launch of HBO Now, were flawless. Today, BAM cemented its status as one of the most important players at the intersection of sports, media, and technology, announcing that it will be powering the mobile, web, and television offerings from the National Hockey League. It’s the first time BAM has been fully embraced by another major league.

“When you have HBO going over the top and Bob Iger’s talking about ESPN going over the top, Viacom’s networks are being kicked off cable, we had a real gut check,” says John Collins, the NHL’s chief operating officer. “BAM can help us dictate what happens to our content in a time when this media landscape is going through a lot of change.”

Like the deal with HBO, BAM will power the league’s streaming services. But the deal goes even further — BAM will be a rights holder of NHL content they can package and sell to an online audience. “It’s groundbreaking to have two leagues doing a rights deal,” says Collins. BAM recently forged a similar arrangement with the PGA. The new approach moves BAM beyond just a white label service provider, putting them in position to become an ESPN of the internet age, competing against the likes of Netflix, Hulu, and Amazon with the one thing all those services lack: live sports.

There’s just one catch. To make it all work, BAM has to grow beyond baseball.

In late July, I met Bob Bowman, BAM’s CEO, in the company’s office above Chelsea Market. We sat in a small conference room past a wall of trophies and a social media center blasting out baseball highlights across Twitter, Snapchat, Facebook, and YouTube. Bowman has CEO-caliber hair, swept up and to the right, in a dignified grey; he dresses in banker casual — khakis, boat shoes, and collared shirt unbuttoned at the top. On the whiteboard behind him, scrawled in black marker, was a warning: “INVESTORS GET FED! PIGS GET SLAUGHTERED.”

Bowman is a man with 31 bosses and a client base that both uses and competes with MLB’s technical abilities. He has to navigate between traditional broadcasters, cable companies, and fans who want their game on any screen with an internet connection. He has perfected the art of partnerships that hinge on give and take. When I ask him the significance of the quote, he says it’s a reminder not to build your own business at the expense of people who pay you.

For years, BAM was a name known only to industry insiders, a sharpshooter organization called in to make sure the big game or series premiere streamed without fail. Over time, it forged long-term deals with clients like WWE and Sony Playstation’s Vue network. Now it’s moving from powering the platform to co-owning the content as well.

But it’s increasingly clear that to really capture the opportunity in front of it, BAM needs to become more independent. BAM doesn’t run like a startup — it doesn’t have equity to share with employees, causing it to lose out on talented engineers and developers that want upside beyond a salary. It also can’t easily raise outside capital to compete against rising competitors like Twitch or Ooyala while it’s still a central part of baseball’s day-to-day operations.

The idea of spinning BAM out to create a new company has been floated for years, but in the last few months it has hardened into a certainty. Today’s announcement that the NHL will invest in this new venture makes it a fact. Lawyers and bankers are finalizing the details, and Bowman is in active discussions with other potential investors, poised to run a new company with a valuation north of $5 billion.

“As everyone thinks about going over the top, about building out a global business, we are looking for a partner to help us double or triple this business,” says Bowman. “Things have been going fine, but to not move on this now, we lose the opportunity to get really, really big.”

When baseball’s then commissioner, Bud Selig, created BAM back in 2000, he had relatively modest goals in mind. The unit would be in charge of creating websites for each of the teams and consolidating MLB’s digital rights. By pooling resources, he would prevent the bigger teams from outpacing their smaller market rivals. And to keep the division honest and efficient, BAM would operate as its own company. The teams agreed to contribute a combined $120 million to the venture, $1 million each over the first four years, with each taking an equal ownership stake.

The group they assembled wasn’t a Silicon Valley dream team, more like tech’s version of Bad News Bears: a minor league beat writer, a former state treasurer, and assorted AV nerds from around the league. This was the height of the dot-com boom, and excitement about the internet was at an all-time high. Right out of the gate, BAM decided to pay a fancy consulting firm a huge chunk of its annual budget to help it create the MLB.com website. Unfortunately the website barely worked. BAM had to scrap it and start from scratch. It was a painful lesson. From then on, BAM would build its own tech.

In 2001, Ichiro Suzuki came over from Japan to play for the Seattle Mariners. Already an icon in his home country, he now had a full-time press corps of several dozen Japanese reporters covering his every move. BAM decided to experiment with streaming live audio of his games, giving his fanatical followers a way to keep up in real time. The company spent several million dollars building and advertising the product. “I don’t think we ever got to 1,000 subscribers,” says Bowman with a chuckle.

By the middle of 2002, heavy expenditures on these early projects had left the company strapped for cash. But when it consolidated the league’s digital rights, the MLB also gave BAM control over ticketing. BAM turned those rights into leverage. It made TicketMaster an offer: partner with us or you don’t sell baseball. The company gave BAM a $10 million advance, which it used to cover payroll as it pushed forward with its next big bet: video.

On August 26th of 2002, BAM produced an online broadcast of a game between the Texas Rangers and New York Yankees. This was well before high-speed internet was ubiquitous and three years before the launch of YouTube. The game streamed to around 30,000 fans at a now glacial 280 kilobits per second. “The technology existed to do it, but of course, that doesn’t mean it was good,” says Bowman. The first video stream “looked more like a flip book.”

Still, fans responded to the new offering and BAM kept experimenting. Two weeks later, it launched the first paid streaming video product, a pennant race package of nine games with postseason implications. Later that fall, it sold a $19.95 postseason package. MLB.tv launched alongside spring training in 2003, offering a full season package for $79.95. In the first year, over 100,000 customers signed up. The new revenue stabilized BAM’s finances; it only ended up taking $77 million of funding from the team owners before it began paying them a dividend out of its profits. And the unique challenge of live streaming baseball started to shape BAM into the industry powerhouse it is today.

Watching sports online has always had one major complication: regional blackouts prevent you from streaming a game in the same territory as a television broadcaster who owns local rights. That meant BAM had to figure out where a customer was and whether or not they could legally watch the stream. In fact, BAM’s very first post-season package wasn’t even broadcast live in the United States or Japan. Fox owned the national broadcast rights to the pennant race, so BAM’s first big broadcast took place in Europe. From the beginning, BAM had to perfect live video streaming on a global scale.

“Before anyone else was even thinking about these issues, BAM figured out compression, geofencing, and multi-application delivery at scale,” says Rick Heitzman, a venture capitalist who has worked with BAM over the years. “Like many pioneers, they took their fair share of arrows, but have emerged as the leading digital platform.” Bowman puts it a little differently. “We made all the same mistakes everyone else makes,” he says. “We just had the advantage of making them first.”

“Before anyone else was even thinking about these issues, BAM figured out compression, geofencing, and multi-application delivery at scale.”

Take syncing between devices. This is a great feature to have with a service like HBO Now, but with a baseball game, it’s absolutely critical. The last thing you want is a fan watching on their PC, pausing to head to the bathroom, pulling the game up on a phone, and suddenly it’s an inning later and the score has changed. BAM learned to do this with each game, and even with the stats a fan can pull up alongside the video for a deeper dive.

Inzerillo joined BAM in 2003 and began work on what would become MLB.tv. He had started his career as a cameraman with the White Sox, moved on to direct video operations for the league, and then ran the tech department at Chicago’s newly created United Center. In 2000, he left baseball to work at a startup that was developing digital television. When the dot-com boom went bust, he fell back in with his old company, and brought along a wealth of knowledge about the intersection of TV and the internet.

“The thing about broadcast television is, today people probably think of it as stodgy old engineers with big beer bellies and a pocket protector,” says Inzerillo. “But the truth is that there are a lot of things about the way they do it, the technology and the philosophy, that make it incredibly stable and scalable.” Inzerillo set out to fuse those two worlds, creating a platform with the agility of a web startup and the reliability of a broadcast network.

BAM’s early entrance to the world of streaming video gave it a big advantage in developing technology, but it also gave the group a head start at the process of deploying infrastructure. Great web streaming requires “points of presence” spread across the globe near population centers. For 15 years, BAM has been building out data centers and high-speed fiber connections, forging intimate relationships with the companies that control the guts of the internet.

That head start gives BAM a massive advantage in both speed and cost. When HBO originally set out to create HBO Now, the project was reportedly expected to take three years and cost $900 million. BAM turned the same project around in three and half months for less than $50 million. “We see a lot of things that are repeatable,” says Kenny Gursh, the head of business development, who helped BAM close deals with ESPN, Sony, and the NHL. “We applied the learnings from MLB.tv to WWE, and we applied the learnings from WWE to HBO.”

By the time the iPhone rolled out in 2007, BAM was ready

Just as it was early to video, BAM made a smart bet on mobile starting in 2005. That year, it built the MLB.com mobile site, which served up news and scores, and negotiated agreements with the four major US carriers to prominently feature a link to the site. A year later it launched its first mobile app, “MLB.com Gameday,” across Verizon, AT&T, and Sprint. The application included a scoreboard, Gameday pitch by pitch, and Live Gameday Audio — advanced features considering smartphone capabilities at the time.

By the time the iPhone rolled out in 2007, BAM was ready. MLB was onstage for the unveiling of the App Store, the beginning of a deep relationship with Apple that would see it grace the stage at the launch of the iPad and Apple Watch.

And it’s not just Apple that trusts BAM. Behind a locked door in its New York City headquarters, the company has a gadget geek’s fantasy trove: the latest smartphones, tablets, and consoles, all being tested months before they are publicly released. “On the iPhone, Roku, Playstation 3, Xbox 360, Apple TV, our infrastructure was always the first live streaming technology on those devices,” says Matthew Gould, BAM’s head of communications. “Now people come to us to ensure that when their hardware is released, there won’t be any issues.”

It’s easy to get lost wandering through BAM’s headquarters. Hallways loop back on themselves and there are half floors wedged in between whole ones. Bobble heads and figurines line the partitions between desks; entire walls are crammed floor to ceiling with monitors where color codes flash onscreen: green for live, yellow for standby, red as a warning about a problem. Young men and women stand, chatting, never turning their gaze from the live feeds, a position known around the office as “eye to the glass.”

As Gould leads me on a tour, I realize what a weird tech octopus BAM has become; a unique mix of startup and IT department. The core competency and biggest revenue stream is technology for streaming living video. But it still builds and maintains websites for most MLB teams, created and manages the system that sells the league’s tickets, and constructs its mobile apps and games. Hell, BAM even powers instant replay for the league. On game day, an umpire comes and sits in a windowless room above Chelsea Market to review footage, calling whether a runner was safe at the plate or not.

The latest expression of this boundless initiative is Statcast, a big data approach to sports that only a major league nerd could love. High-speed cameras and radar installed in every stadium capture the game in three dimensions and allow for real-time tracking and tabulation of each motion a player makes on the field. Fans watching an amazing replay of a diving catch can learn exactly how fast that outfielder’s first step was, if he broke in the right direction, and how that compares to his historical average.

A promotional video explaining the technology behind MLB’s Statcast system

“My dad and I would go to Yankees games, and there would always be these arguments around Bernie Williams, how good an outfielder he was,” explains Gregg Klayman, who runs product development and content strategy. “My dad, right or wrong, he would always say, Bernie breaks the wrong way, his first step is really slow, but he makes all these great catches, diving to the turf or bouncing off the wall. If he made the right step, it would have been easy.”

Back then it was one of those friendly fan debates that would never get resolved. Today Klayman could simply call up the play on his smartphone and ask Statcast for the answer. “Was he a good player or just a very gifted athlete? Back then we had our opinions. Now I could know for sure.”

Not every attempt at a new tech project is a success. When 2K, the publisher of licensed baseball games on the Xbox, decided against publishing a new title for 2015, BAM stepped in and created an entire console game from scratch in a year and a half. The result earned withering reviews, perhaps no surprise given that a team of a few dozen was tasked with a job usually done by hundreds of more experienced professionals over a much longer period of time.

If BAM can pull off its plan to spin out as a stand-alone tech company, it could step away from such projects and focus on its core capabilities. “All the things that are related to baseball that aren’t streaming would stay behind at MLB,” says Bowman. Instead of the utility infielder juggling a dozen different jobs, BAM Tech would focus solely on the streaming business, trying to stake a major claim in the rapidly shifting media market.

A few weeks ago, Bowman sat down in a small studio at BAM’s headquarters to record a conversation with Rich Greenfield, an investment analyst and consigliere who works at the collision of media, technology, and television. Greenfield had recently helped guide the partnership between Vice and AMC, and was lobbing Bowman questions as an audience of bankers, venture capitalists, and potential investors tuned in.

BAM has been flirting with the idea of a spinoff since 2005, when it made the rounds with investors and bankers. But its revenue at the time was under $250 million, and streaming video was still far from mainstream. A decade later, BAM is on pace to earn $900 million, and says it’s been turning a steady profit. Add in a roster of high-profile clients and a massive media shift from pay TV to online streaming, and suddenly it seems silly not to look beyond baseball.

The NHL is the first public investor in BAM tech, but it’s also talking with partners like HBO’s parent, Time Warner, and ESPN’s overlord, Disney, who could help sharpen its skills at producing and distributing original content. “While sports is often a leader in new forms of distribution, from VHS to DVD to streaming, the long tail here is entertainment,” Bowman says. “And not just the standard formats. We want to be flexible enough to create new content that is specifically over the top.”

Bowman has some wild ideas for how BAM’s expertise could be tapped to create new genres. “Every night in clubs around the country, people are telling hundreds of jokes. Some of those are duds, but some are really funny.” The BAM team already has experience ingesting petabytes of live footage from dozens of games and quickly cutting together highlights. “What if we could do that for comedy?”

BAM has already taken a step toward creating its own content by buying production and distribution rights for digital content from the PGA and NHL. Just as cable and ESPN provided a home for sporting events that didn’t match the business model of broadcast television, BAM is bundling sports to sell a la carte on the internet, creating a new opportunity, and perhaps a way forward as pay TV slowly dwindles. “The media space has always been built on over time, the platforms taking more control of content. It was true on cable with ESPN, and in streaming with Netflix. So it’s natural,” says Greenfield.

The idea of helping to produce and perhaps even create new content is intriguing, but also risky. BAM would find itself competing directly with its own clients, like ESPN and HBO. A big part of the company’s success was its ability to work with companies and leagues traditionally viewed as competitors. “Media companies are not good at tech and really struggle with large scale,” says Greenfield. “They don’t trust companies like Google or Amazon, who want to displace them. BAM is seen as friendly.” If it spins out and starts making its own shows, that dynamic may change. And while it’s a world class technology company, so far it has little track record in creating original content outside baseball.

As consumers cut the cord on cable, BAM and its clientele are navigating treacherous waters. “It’s more complex than ever for media companies,” says Bowman. “You need to honor your existing partners, your existing contracts, while also figuring out new ways to reach fans who live beyond the traditional formats.” So far BAM has managed to bridge the gap between television and the internet. And Bowman is bullish on the future. “The fact that you can now deliver games on demand 24/7 to 4 billion devices around the globe, you couldn’t write heaven for a sports fan better than that.”


 

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