Wednesday, April 17, 2013

Flush with Cash, Teams Should Reward Their Fans

Beginning in 2014 MLB will see a fundamental change in the way teams operate and this will have significant implications for on field production. It is also a perfect opportunity to garner some good will among the fan base. Thanks to new national television deals kicking in new money to every team starting next year the "small market" teams will be extinct. When considering all potential revenue streams, super agent Scott Boras estimates "[teams] are going to be making between $110 and $120 million before they sell a ticket". With the league so flush with cash even Jeffery Loria cannot complain about profits, there needs to be a league wide ticket price freeze for the next three years.

The majority of the increase is coming from newly structured television deals. Each team will get in the neighborhood of $52 million annually thanks to deals negotiated by MLB with Fox, ESPN, and TBS. This roughly doubles the previous amount. Regional sports network revenue is  another major part of the equation. These deals include the Yankees getting $85 million annually from YES (an amount that will increase annually to $350 million! by 2042). NESN pays the Red Sox $60 million. The Houston Astros, owners of the lowest payroll this year, signed a rights fee that will pay them $80 million annually for the next 20 years. The Cleveland Indians, at less than $30 million annually, are near the bottom of reported teams regional sports revenue. Fangraphs has put together known data on teams local television deals which you can find here

I have not even figured revenue sharing or luxury tax payments and we are still sitting on more money than most teams can wisely spend. We have already seen teams hand out significant extensions over the past two offseasons and I expect that trend to continue. Necessarily frugal, yet competitive, teams such as the Tampa Bay Rays and Atlanta Braves are now in a better position to acquire talent or lock in home grown talent going forward. The Rays extended Evan Longoria for an extra $100 million over 6 years (2017-22); The Braves acquired both B.J. Upton and Justin Upton, but should still be able to lock up Jayson Heyward and Freddie Freeman if they so choose. Rebuilding teams such as the Astros and Miami Marlins should continue rebuilding, knowing when their front office identifies core pieces they attempt to sign them long term.

Currently 18 teams are under $110 million payrolls, another 3 are under $120 million. Rather than trumpet the call for teams to spend money for the sake of spending it, I suggest front offices continue to invest wisely in players. The payrolls will naturally rise and going forward no one should have a payroll as low as the Marlins ($44 million), let alone the Astros. Teams will be better positioned to lock up their young stars which will help drive up local interest in teams. MLB should do fans the favor of freezing ticket pricing in recognition of the cash coming in. I do not expect a team to lower prices to reflect a poor on field product, but keeping prices stable has too many positive benefits to ignore.

MLB tickets in 2012 averaged $27, but taking a family of four costs over $200. For comparison, the a family of four is estimated to shell out more over $440 to experience an NFL afternoon or $300 for the NBA. Yes there are more MLB games than the other two combined which keeps the cost down, but the league should desire to not only bring the fans in, but get them excited about coming back. Cost certainty is an easy way for families to plan a few nights at the ball park each summer instead of one or two. As an added benefit this would likely lead to an increase in attendance which would offset ticket prices remaining unchanged.

The game is evolving, tickets and concessions are now needed to pad team revenues not determine them. Television companies are shelling out millions annually for access to the market. Most fans can't attend every game, but if teams make attendance more affordable, those same casual fans will reward them with buying the cable subscriptions which are leaving teams so flush with cash. MLB, it is time to step up and freeze ticket prices. Show fans you appreciate them. We love this game, with as much money as is coming in you should make it easier for us to "root, root, root, for the home team."