Business View Magazine - October 2016 7
Editor’s
Note
For those of us who are baseball fans, October is a month of incalculable pleasures. Even if one’s favorite team hasn’t made the playoffs (mine has
– go Red Sox!) there are more than enough games to go around. In fact, on a few choice days this month, one can watch four post-season games on
TV in a row. So, beware the uninterested spouse whose partner just can’t bear to share the remote.
But let us not forget that Major League Baseball (MLB) is also a huge business enterprise in America. Indeed, baseball has been a business, as
well as a sport, since the 1860s, when organized teams first started paying their players. And in the last several years, the business of baseball has
exploded. The values of all 30 American and National League teams have increased from around $5 billion in 1998 to approximately $36 billion in
2015 – a growth spurt of close to 600 percent.
Baseball’s recent prosperity has been due to a variety of factors, not the least of which has been the construction of 21 new ballparks over the last
20 years, thanks, in part, to a considerable helping hand from local and state governments. Throw in the creation of interleague play, greater than
before competition for division titles, and the establishment of two wild-card spots, and you have a great recipe for increased interest.
So just how does MLB make its money? First and foremost are the national television contracts with outlets such as ESPN, Fox-TV, and Turner Sports,
a division of Turner Broadcasting System, Inc. In addition, some teams even have their own sports networks: SportsNet LA became the exclusive
source of home Dodger games in Los Angeles starting with the 2014 season, and NESN, the New England Sports Network, launched in 1984, has
been broadcasting home games from Boston’s Fenway Park for years. Baseball TV deals are so big because sports is one of the only things people
still watch live. That means viewers actually see commercials instead of fast forwarding through them, and companies pay big bucks to advertise
during games. Then, of course, there are the online broadcasts. I watched my team on MLB.com, this past season, for about $85. When games were
blacked out, my cable company filled in. It gets some of my paycheck, too.
Baseball also makes money from selling season and individual tickets, accounting for about a third of its revenues. In 2015, the average ticket price
was $29 across all markets while the average price for a ticket to Yankee stadium was $305. (Playoff games and the World Series cost considerably
more. My college-age daughter just bought a cheap seat to a Red Sox ALDC game for a mean one hundred bucks!) When a team sells out, which is
often the case in St. Louis, San Francisco, and Boston, a team can piggyback on its admission price with other types of sales, i.e. parking, conces-
sions, and merchandise. In 2013, the Yankees brought in $53 million on food and drinks, alone.
Licensing revenue is another big source of income for MLB. Baseball has agreements with some of the biggest names in sports, including Nike Inc.
and New Era Cap Company Inc., to provide officially licensed apparel to both players and fans. Even for a team with a poor record this season, like
the Milwaukee Brewers, authentic men’s jerseys start at $164.99 at the MLB online store and go as high as $322.99.
Major League Baseball also has dozens of big-name sponsors: Bank of America Corp., MasterCard Inc., PepsiCo Inc., and Ford Motor Co., to name a
few. Sponsorships contributed close to $700 million to MLB coffers in 2014. A major contributor to sponsorship revenue is stadium naming rights.
The Mets’ Citi Field name will bring in $400 million over 20 years, while the Astros’ Minute Maid Park name is worth $170 million over 28 years, and
the Twins’ Target Field name will draw $125 million over 25 years.
Major League Baseball also has a revenue sharing system that redistributes income from the richer teams to the poorer ones in order to improve
competitive balance. Under the 2012–2016 collective bargaining agreement, each team contributes 34 percent of its net local revenue into a pool
that gets divided equally among every team. When the league is more competitive, regardless of the revenue disparity among all the markets, every-
one benefits: 23 of the 30 MLB teams made the playoffs, 15 reached the World Series, and eight different clubs won the championship in the first de-
cade of the twenty-first century. In fact, the 2000 season marked the first time in major-league history, dating back to 1871, that no team won or lost
as much as 60 percent of its games. That keeps the fans singing “Take Me Out to the Ballgame,” while the team owners smile all the way to the bank.
While you and I may never own a major league franchise of our own, we can still enjoy America’s Great National Pastime all month long and experi-
ence unbridled enjoyment by watching the Boys of October do what they do best. And let’s face it: it’s a lot more fun than sitting through all those
Presidential debates.
Al Krulick
Editor-in-Chief
Business View Magazine
