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Jim Furtado
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Economics Newsbeat

Tuesday, March 31, 2020

MLB Isn’t Losing TV Revenues Yet

Underpinning the agreement between the players and owners about how to approach this season is an acknowledgement that revenues are going to be down in 2020, no matter when this season starts. To start, the season itself is in jeopardy as the country and world deals with the COVID-19 pandemic. And even if games are played, there are likely to be fewer than the typical 162; some of those games might not have any fans in physical attendance at all. Baseball teams are bound to take a huge loss at the gate compared to previous years. Whether MLB and its individual teams will take similar losses with their television partners isn’t as clear.

Before getting to the television money, though, let’s do a quick hypothetical on ticket sales. Forbes estimated thatin 2018, MLB teams took in around $2.8 billion at the gate. If teams play a half slate of games this year, and get half as much money at the gate in those games, we end up with $700 million in gate receipts and roughly $2 billion in revenue losses over a typical season. Now, if players receive only half their salaries, those losses basically even out. That isn’t to say that there aren’t a large number of associated revenue losses that will keep MLB teams from turning a profit, but even a massive loss at the gate wouldn’t create huge losses for MLB teams by itself. It’s losing television money that would create those losses.

MLB has three relevant national television contracts that amount to around $1.7 billion in yearly revenues, which are split among the 30 teams. There is roughly another $1 billion that comes from the central offices that is split among teams, per Forbes, but that revenue comes from MLB-owned properties like MLB Network, MLB.TV and MLB.com. The television deals are with FOX, TBS, and ESPN. While FOX and TBS air regular season games, most of the value in those contracts for the networks comes in the postseason, as well as the All-Star Game. FOX puts many games on FS1, but those games are on FS1 to gain the network subscribers rather than for advertising; the network suffers very little in terms of actual losses. In addition, FOX’s contract with MLB has already been extended through 2028, providing both groups incentive to work well together. TBS also airs some regular season games, but the bulk of the contract comes from air playoff games, which have yet to be impacted.

ESPN airs a single Wild Card game in the playoffs, so the loss of regular season games will impact the network and its deal. ESPN has been paying roughly $700 million a year to air more than 100 regular season games as part of a deal that expires in 2021. While ESPN makes a lot of money on subscriber fees, it also draws revenues from advertising, which they are currently missing out on. (It is worth noting that advertising money never comes close to equaling what the networks pay for MLB rights due to its penchant for demanding high per subscriber fees, and networks advertising their other shows, particularly on FOX.)

A few remarks on the economics of broadcasting under current conditions.

 

QLE Posted: March 31, 2020 at 01:03 AM | 14 comment(s)
  Beats: broadcasting, economics

Wednesday, December 25, 2019

Is the Baseball’s Composition Influencing the Game’s Economics?

Earlier this month, Gerrit Cole signed the richest deal in history for a pitcher. For the $324 million he will receive over the next nine years, he can thank his own prodigious talent, the analytically-driven coaching he got during two years with the Astros, superagent Scott Boras … and perhaps one other factor: the baseball itself.

The wild fluctuations in the sports’ most essential equipment are exasperating GMs, broadcasters and fans. They may also be influencing the economics of the game.

This has been a long time coming. Midway through the 2015 season, baseballs used in MLB games suddenly changed. Players noticed lower seams. Pitchers began reporting blisters. Most noticeably, the home run rate spiked. In ’17, the sport set a new longball record of 6,105. (The previous high, set during ’00, in the thick of the steroid era, was 5,693.) The next spring, a study commissioned by Rob Arthur, then of ESPN, found that the composition of the ball had been modified: the cores were less dense, which makes them bouncier and more likely to fly farther. Three months later, MLB bought Rawlings, which manufactures the balls, in the name of standardization. In ’19, hitters shattered the ’17 record, swatting 6,776 homers.

And then the playoffs began. Balls that in April would have been gone were in October settling safely into outfielders’ gloves. Hitters found themselves in trouble on the basepaths as they celebrated what turned out to be long singles. TV cameramen struggled to follow the unfamiliar parabolas. Fans in packed postseason stadiums could not decide whether to boo or cheer. Arthur, now at Baseball Prospectus, calculated the drag factor on the balls and found it dramatically reduced from the regular season, more like the balls of 2016. Teams began moving their outfielders in.

Complete with quotes from a longtime site associate!

 

 

QLE Posted: December 25, 2019 at 01:30 AM | 1 comment(s)
  Beats: economics, juiced baseballs

Sunday, December 22, 2019

MLB Sees Record $10.7 Billion In Revenues For 2019

Best to read the original article.

Jim Furtado Posted: December 22, 2019 at 09:53 AM | 26 comment(s)
  Beats: economics

 

 

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