Major League Baseball's Screwball Economics

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

While the NBA and NFL constantly remake rules for speed and action, baseball's last significant change was the designated hitter. In 1973.

The result has produced a spectacle once described by the Boston Globe's Ray Fitzgerald as "six minutes of action crammed into two-and-one-half hours." Forgive young men for preferring Call of Duty or football by the time the Fall Classic rolls around.

"Baseball has been declining in interest for some time in terms of the young male audience," says Patrick Rishe, an economist who studies sports at Webster University in St. Louis. "I think baseball is seen as archaic. The sport moves at a slower pace. Their athleticism doesn't jump off the screen. I think they have to find a way to speed it up."

Tug McGraw in the 1980 World Series.
Manny Millan/Icon SMI
Tug McGraw in the 1980 World Series.
MLB Commissioner Bud Selig and his wife, Sue, at Game 2 of the 2008 World Series.
Flickr
MLB Commissioner Bud Selig and his wife, Sue, at Game 2 of the 2008 World Series.

But the game is hamstrung by its sizable purist wing, those who believe the slightest change invites heresy. Meanwhile, the economic disparities continue to mount.

No one knows this better than the people of Kansas City. During the '70s and '80s, the Royals were a power on par with the Red Sox, despite playing in the country's 31st-largest market.

"Stands were filled," says Joe Posnanski, the town's former dean of sports writers at the Kansas City Star. "Everyone talked about the Royals. It was really one of the best baseball cities in America at that time."

Yet Kansas City stopped playing for titles in 1985, just as the league's crevice between rich and poor was becoming too wide to jump. The Royals sunk to little more than schedule-filler, a talent farm for the rest of baseball.

Players like Carlos Beltran, Johnny Damon and Zack Greinke "were traded before their contracts expired because the Royals said they could no longer afford them," according to Posnanski. "It started to feel like a vicious circle, and it depressed many Kansas City Royals fans."

He has no doubt that "if the Royals start to win, and win big, the young fans will get excited about them."

But that winning part is a big if. Local TV will bring Kansas City just $20 million this year. Even with an estimated $25 million in revenue-sharing, they're still at a four-to-one disadvantage against the Dodgers. Toss in a potential fan base that's but a speck of L.A.'s, and the Royals become a mom-and-pop clothier parked next to Walmart.

They might win a sale or two, even have a good year. But few succeed in business or baseball when the odds are this stacked.


Television's Strong-Arm Racket

The collapse of baseball's TV revenue won't come from diehard fans. There's no indication that the sport's truest disciples won't pay more and more until there's nothing left.

The problem is non-fans, who are picking up most of the check.

Here's how it works: Just six companies control 90 percent of America's TV programming. And they won't let your local provider simply carry the channels you actually want to watch to keep your bill modest.

When Disney negotiates contracts, anyone who wants ESPN is usually forced to buy a bundle that includes lesser fare like ESPN Classic or ABC Family, whether they want them or not.

The same goes for programmers like Viacom. If you want Nickelodeon or MTV, you're also required to buy Logo and VH1 Classic, among the lowest-rated channels in television.

"It's incredible," says Matthew Polka of the American Cable Association. "If you want one popular channel, they make you take 10."

Most contracts require that all channels be included as part of a cable company's "basic" package. That's why your TV menu is loaded with shows about tow-truck drivers and women who make bras.

"It causes us to basically be forced to provide a bloated, expanded level of basic cable service," Polka says. "Our customers know that these aren't channels watched on a regular basis, but they still have to pay for the monthly subscriber fee. Because of your market power, you are essentially forcing me to carry channels I don't want."

Baseball rides comfortably in the back seat of this strong-arm game. According to the research firm NPD Group, the average cable or satellite bill will reach $200 by 2020. Half of that fee will go to sports. And everyone pays, because most providers are barred by contract from moving sports to a premium package.

That's why Fox can double its payments to carry the World Series. Though only 10 percent of America will watch, the remaining 90 percent will cover the freight.

Yet consumers have clearly tired of picking up someone else's check. During a single quarter in 2012, Comcast lost 117,000 subscribers. While such figures are cyclical, cable and satellite have lost customers nine years running.

What's worse for baseball, the largest exodus involves the young, who increasingly turn to cheaper fare like Netflix and Hulu. They're not just turning away from the game; they don't even want access.

But neither television nor baseball seems to notice these darkening skies. Take the country's most obsessive TV market, Los Angeles, where a school of piranhas has attacked the city's cable bill.

Not long ago, L.A. hosted just two regional sports channels. Soon there will be seven. The Lakers charge $4 a month. Fox bills $5.40 for its two channels. The Dodgers are expected to add another $5. And Bevilacqua just negotiated a stunning 500 percent increase for the Pac-12's media rights.

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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

@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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