The Economist: Financial strategy in baseball: Everything must go

The Red Sox-Dodgers fire sale trade reveals the perils of having too-passionate fans.

Boston can ill afford to take a few years out of contention to “rebuild”, as typical fire-sale teams in small markets tend to do. The damage to the club’s brand and its fans’ loyalty would be immense, reducing its long-term revenues by far more than the $261m saved in salary. Thus, the question for the Red Sox is whether they can deploy that $261m to buy better players than Mr González, Mr Crawford and Mr Beckett…

Meanwhile, the Dodgers’ all-in move carries significant benefits that are not included in a simple dollars-per-win analysis…For a team in America’s second-biggest media market, a playoff appearance in 2012 might well be worth $60m—almost the entire amount they are thought to be “overpaying” to their new acquisitions…

Having a passionate fan base is a double-edged sword for professional sports teams. On one hand, it allows a club to maximise its revenues when times are good. But on the other, it forces management to try to put a winner on the field no matter what—even if a team is at a point in its “success cycle” when its stars are in decline, and the optimal strategy is to tear down and rebuild.