By: Holly Horning
This past Monday, MLB announced that they set another yearly record for revenues. Obviously, it makes MLB very happy as well as the 30 shareholders who get to claim a piece of this pot.
But the news isn’t making baseball players thrilled. And when fans find out the real story, it’s not going to make them happy at all.
You see, these revenues aren’t coming from what is actually happening on the field. It’s coming from products, not play.
The reality is that baseball attendance fell last year. The sport is losing its grip on fans and fewer are showing up for games. Don’t believe the spin about it being due to the bad weather.
MLB players are finding that the gap between their share of the profits and what owners receive is only widening. And this gap is big enough that it may eventually end up creating a work stoppage after the 2021 season when the current CBA expires.
But let’s start at the beginning, shall we? Because the entire world of baseball finance is about to turn fans on their heads.
First of all, it’s important for fans to understand how their teams think. Owners place the priority on maximizing their profits as best they can. And they will choose this venue over putting a winning team on the team almost every time.
For a quick tutorial, check this out:
Unbelievably, owners also get rewarded for their team’s poor performance with multiple streams of revenue given to them by MLB. This additional income offers no incentive to field a better team. In fact, putting a winning team on the field is actually disadvantageous to owners. Why spend more money adding talent when you can tank and rake in bigger bucks?
Let’s add on with the latest trends. Player salaries are going down, fewer free agents are being signed and team payrolls overall are significantly trending downward. One third of teams announced in 2018 that they were in “rebuilding” mode.
If it walks like a duck, quacks like a duck, then it is a duck. Owners don’t want to spend anything more than needed as a blog this week spelled out:
So with this many teams not contending, it’s no surprise that attendance went down this year. There weren’t a whole lot of teams that inspired watching – especially at the prices these teams charge to attend games.
(Warning! You may want to sit down before reading the rest of this blog….)
And you may be shocked to learn that MLB and each individual team no longer need to depend upon fan attendance. They’ve got so many other ways to keep those revenue streams flowing. Profits now are no longer dictated by the play on the field. Owners no longer see fielding a winning – and entertaining – team as something they need to do in order to maximize profits.
But fans continue to believe that if their team tanks, and the seats are empty, that owners will be forced to put a better product on the field. Unfortunately, that’s no longer true. Owners are getting the vast majority of their revenue from “non-player sources.”
MLB has gotten adept at selling itself. Most of their money this past year came from selling BamTech shares (technology that allows access to content through electronic devices) for several billion dollars (so far as they still own some remaining shares) which has lined each owner’s pockets with approximately $100 million to date.
As if that wasn’t enough, MLB earned millions from partnering with foreign countries (like Korea) and other corporations. And then there are the partnerships with gambling-related organizations……
Owners now need earth movers in order to collect all this money. The same money that baseball players will never share in and will be a huge bone of contention as their association tries to negotiate with owners for the next CBA agreement. This might be the very first time we’ve felt sorry for the players and their agents.
And if that’s not enough, there’s the tv money, too. Broadcast deals that range from 10 – 30 years. MLB gets billions for signing off on the rights that expire as late as 2040. Money that comes in whether the teams are competitive or not. No wonder we always seem to see those infamous Yankees-Red Sox games being broadcast on national tv regularly instead of a contest between the Tigers and Orioles.
It’s easy money. And it’s pretty much free money. And if you were an owner, you probably wouldn’t care much about the product you put on the field knowing that this turnstile of cash was constantly dumping money in your bank account without you having to even lift a finger.
Your side businesses are keeping you very profitable, thank you very much. Just look at former owners like Jeff Loria and Frank McCourt who ran their respective teams into the ground and left baseball with huge financial windfalls.
Which brings us to the fans. We are definitely at the bottom of the heap. We’re seeing a poorer product on the field and getting scalped with the prices charged at the games. Best described by Miracle Max’s quote from The Princess Bride, “ Why don’t you give me a nice papercut and pour lemon juice on it?”
Owners are negating the lack of attendance by getting more bucks out of those who show up. Adding better seats, more restaurants and experiences and overall enhancing the “luxury” of the baseball experience is successfully squeezing more money out of fewer fans.
Attendance doesn’t really matter anymore.
And sadly, fans are losing their voices – and their importance to MLB. They’ve lost their leverage.
The bottom line is that owners no longer have a viable reason to put a solid team on the field. Why would they? It would mean having to spend more money. And it’s ideal that they can sit back and still reap millions upon millions of dollars. For doing nothing.
So we shouldn’t be surprised that recent reports show that half of the American League teams aren’t trying to be competitive or even try to improve their organizations for 2019. And these same reports also point to the new role of Front Offices – maximizing profitability. Not finding the best talent with an eye on winning.
It is a scary course of action by MLB and ownership. No longer caring about the overall fan base will eventually come back to bite them. Drive the fans away and eventually your side business partners no longer want to do biz with you. Contracts and relationships will disappear because the fan base has gone away and it’s no longer a profitable strategy for outside organizations.
And that’s why MLB needs to be concerned, very concerned with the news that attendance was down. Fans no longer care about the game the way they did even a couple of years ago.
It’s just a question as to whether baseball will see this before it is too late.
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