by EJ Fagan
February 2024
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NOTE: The following comes from EJ Fagan's substack page and is shared with permission.
Please check out EJ's substack page for more great articles.
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MLB Trade Rumors recently published some data on how much each team makes from its local television deal. We’ve heard a lot this offseason about how teams are hesitant to commit to long-term free agents because they are concerned about their local television deals. Is that true, or just an excuse for cheap owners?
To answer that question, I did some back-of-the-envelope data crunching. I found data on each team’s average ticket price, attendance, local TV revenues* and share of national tv revenues. These data don’t include some revenue sources like concessions, playoffs, parking and merchandise, but should include the vast majority of team revenue.
*The Blue Jays don’t report their TV revenue. I gave them the MLB average. Some teams report 2022 TV revenue, others report 2023.
Let’s compare estimate 2022-2023 team revenue to 2024 payroll:
The way to read a scatter plot like this is to examine how far above or below the line a team is. Teams above the line are spending more than their revenue relative to other teams. Teams below the line are spending less.
So who are the cheap teams? The Athletics, Pirates, Orioles, Padres and Red Sox. All of these teams are spending way less than you would expect given the amount of money coming in the door.
The Yankees are spending a little more than expected, though I would guess they make a little more on other revenue than the other teams. I don’t think that these data suggest that the Steinbrenners are being cheap relative to their ownership peers, although it’s possible that MLB owners as a whole are being cheap.
But maybe some teams are really nervous about television revenue. Cable TV is dying. The Diamond Sports Group bankruptcy is just the first wave of trouble for baseball. They might be able to replace some of their local TV revenue with streaming. But, the rest of the entertainment industry is struggling to make nearly as much money on streaming as cable. Lean times are ahead.
So which teams are most reliant on television revenue? Let’s compare each team’s estimated TV revenue to estimated gate revenue.
Teams above the line are getting a higher proportion of their revenue from the gate. Teams below it are getting more revenue from television. A lot of teams that were awful last year rank low in this area.
We can see a few teams that are clearly in trouble. Seattle’s financial woes have been a story this offseason. Not only are they dealing with a struggling television channel that is being dropped from local cable packages, but they are also heavily reliant on television revenue. The Angels are in even worse shape, as their terrible attendance is only offset by the league’s third best local TV deal that is a part of the Diamond Sports Group bankruptcy. Miami’s perennial attendance woes are going to cause real problems when their Diamond deal gets reduced.
The winners are teams that pack the ballpark and command high ticket prices. Milwaukee, San Diego, St. Louis, Houston, Boston, New York, San Francisco and the Dodgers are.
One team that stands out is the Chicago White Sox. The Other Chicago Team isn’t drawing like team in the third biggest city in the U.S. It makes sense that the White Sox are trying to move their stadium closer to downtown, where they might be able to attract a larger, richer crowd. The current stadium isn’t particularly old, but it’s Yankee Stadium-level miserable. Full post on them coming eventually.
The Yankees are in great shape. They sell a lot of tickets at a high price. They own a piece of the YES Network and sell some of their games to national streaming platforms. Lots of fans like me live outside of the New York area and pay MLB.tv $130/season. My guess is that they’ll have a gentler decline relative to other teams.
The bottom line from these data is that baseball economics are about to get more unequal.
Teams that are good at convincing their fans to come to the ballpark are going to do well. Teams that aren’t putting a strong product on the field, or compensating with a high quality experience at the park, will suffer.
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Yankees are cheap when you consider revenue and what’s spent to put best product on the field. Haven’t done that in a decade or more.
Thought this was going to be a really short article:
Oakland
Baltimore
The whole cable system was wrong, and borderline illegal. But no one ever stepped in, so it just became as business. That's why it's dying. Each station wants their own deal. How many of the cable subscribers are paying for stations that they will never ever watch? I'll even say the percentage of stations that are watched as opposed to unwatched is maybe 40%. The model was never going to last. To paraphrase Spock from the TOS episode, 'Mirror, Mirror' The Cable system was eventually inebitable to fail. But outside if the Atlanta Braves, we don't see the P & L statements, complete with the different line items. I mean all the teams share billions in merchandising, share other billion…