Major League Baseball's Screwball Economics

As another season begins, MLB faces an unsustainable future -- and you’re picking up the tab.

Human nature, however, isn't partial to watching a baseball game three days after it's played. Viewers still want to see it live, even if it means opening their homes to Flo from Progressive.

"Live sports and a few other events, like the Oscars, are still must-see programming," says Maureen Huff of Time Warner Cable, the company soon to be writing those very large checks to the Dodgers.

Advertisers also see sports as the best weapon for reaching young men, who are known to have a special gift for eluding commercial reach. Never mind that baseball's youthful audience has gone AWOL. More women age 50 and older watched the last World Series than did men under 49. But compared to babe cops and reality fare, the game's ratings practically shine.

"It's kind of counterintuitive," says Paul Sweeney, a media analyst for Bloomberg Industries. "It's just that sports are kind of less bad. They're doing better than other programming."

You can't blame baseball for cashing in on this backhanded blessing. After all, when your customers willingly pay $8 for a lukewarm Budweiser, it's safe to assume they'll buy anything at any price.

Chris Bevilacqua should know. He negotiated the Rangers' TV deal, and arranged another $60 million a year for the feeble San Diego Padres.

"It's like any other market," he says. "The markets go up and down. In the case of media and sports rights, they very rarely go down."

He's right. Or at least that's been true in the past.

Bob Gessner knows the drill. He's president of MCTV, a cable provider in Massillon, Ohio, that carries Cleveland Indians games. For the past decade, the Tribe has been a woeful club, losing games and fans with equal facility.

"In a year when the team does well, the reset [for broadcast fees] is due to the team doing well," Gessner says. "When the team is doing poorly, the rates will jump just as much because they need money to rebuild the team."

Cable and satellite companies grudgingly succumb, no matter how illogical the deal. Every provider feels forced to carry the same channels, lest customers flee to a competitor.

With no one saying no, the networks see sports as a no-lose racket, with ESPN as its piper. The sports channel charges cable companies $5 a month per customer, by far the highest monthly fee in national television. While that may seem a pittance, it's big money when spread over the 100 million U.S. households with pay TV. And it's made the other big boys envious.

NBC and CBS have launched their own sports channels. Another from Fox is on the way. Even regional sports channels are starting to broach that $5 mark. Their bet is that viewers will always be willing to pay more. And more. And more.

Economics on the ground say otherwise. Today, the average TV bill rests at $86 per month, about half of which pays for sports programming. That's more than double a decade ago. So it's no coincidence that the cable and satellite industries have been jettisoning customers for nine years straight.

The new round of deals promises to hasten these unpleasant trends. "I can't tell you what will be the trigger," says Matthew Polka, president of the American Cable Association. "But I am certain that at some point in the very near future, that balloon will burst."

And when it does, baseball will take the brunt of the explosion.


Fixed Odds and Fleeing Fans

To understand baseball's decline is to appreciate its awkward relationship with the very thing it sells: competition.

The NBA and NFL, those exemplars of socialism, share most of their revenue, realizing that for their sports to thrive nationwide, Green Bay and San Antonio must get the same cut of hope as Boston and Chicago.

Yet baseball hews closer to raw capitalism, where the big crush the small with painful regularity. If you're a fan in Miami or Denver, that's not entertainment; that's everyday life.

On opening day next year, the Dodgers' local TV contract will pay for their entire $200 million-plus roster — the highest in baseball — before they sell a single ticket, hot pretzel or warm Pepsi.

Across the country in Minneapolis, the Twins' deal will be enough to cover the salary of their best player, catcher Joe Mauer — with perhaps a weak-hitting infielder to spare.

Though baseball has long played with a rigged financial deck, it's about to get perilously worse.

The game, of course, does its best to subdue such talk. The surest way to keep front-office types from the phone is to request an interview to discuss how the latest local TV deals will affect competitive balance. The Padres, Dodgers, Cardinals, Twins, Brewers, Indians and Pirates all declined comment for this story.

Selig's office isn't any more effusive. "We are going to take a pass on this one," says spokesman Matt Bourne.

Still, it's safe to say that these fixed odds have deposed generations of fans in smaller cities across the land. In any given year, half the teams are in the midst of three-to-five-year rebuilding projects, since they're financially barred from the faster route of free agency. At the same time, the league has done little to make all that losing bearable.

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5 comments
primi_timpano
primi_timpano topcommenter

It seems that baseball is doing just fine. Your article seems to concern the broadcasters more than the teams.

JustSaying
JustSaying

I would like to see a graph on the interest in baseball superimposed over a graph of the percentage of fatherless homes in that same time frame. Baseball, more than any other sport, is one that is passed down from generation to generation. It almost always starts with 2 baseball gloves and a game of catch with your dad.

Dallasalli
Dallasalli

Rangers increased ticket prices overall and made some sections (third level behind home plate) into more expensive options.  Hard to believe they did that since they've lost so many veteran/fan favorite players this past summer.  I'm guessing fans will find everything more expensive, beer, sodas, food, etc.

fergusontx
fergusontx

Very interesting with quite a few points I wasn't aware of.  As a baseball fan, the one thing I did know was that the added financial burden would fall to me ... whether through cost of beer, pretzels, tickets or cable.

mcdallas
mcdallas topcommenter

@JustSaying That is one of the best points I've seen in D.O. commenting in months.  Thanks!


...and...I totally agree.

 
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