By Brad Hubbard | @bradhubbard
It wasn’t a secret that Disney was looking to take a stake in MLBAM (BAM) but the end number may surprise some folks. According to Bloomberg Disney is buying 33% of BAM for $3.5 billion with an option to buy more in a few years. That is a valuation of over $10 billion. Not bad for an entity that doesn’t even turn a profit yet.
A few years ago Fast Company did a profile on BAM and within that article there was an estimated IPO price for BAM in 2005. That number was $2.5 billion so the company has essentially increased around $8 billion over the last 11 years. If you did some loose math based on that article you could see that BAM was more or less breaking even.
That’s not to say that MLBAM isn’t worth a $10 billion valuation. They are a white label solution as their CEO Bob Bowman would say. They are the streaming backend for MLB, WWE, NHL, Watch ESPN and have even done the Super Bowl. They made bets that paid off and with this purchase by Disney, it puts them in a position to stay in the lead when it comes to live video streaming.
Disney for it’s part made another shrewd investment. It’s no secret that their cash cow, ESPN, is having to adjust to the new realities of cord cutting. Enter an investment by it’s parent company and Disney has created an A to Z revenue stream when it comes to over the top video. It’s like selling the car and the gas that goes in it.
This is a very smart purchase by Disney. They have the cash to do it and it’s very well timed. It’s no wonder that the Disney board wants Bob Iger to stick around a bit longer. It will be interesting to see if BAM competitors like NeuLion look to cut deals or merge with CDN or network. In the meantime the only one doing better in this space is probably Amazon.com.