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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 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) Login to Bookmark
  Tags: broadcasting, economics

Reader Comments and Retorts

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   1. villageidiom Posted: March 31, 2020 at 09:00 AM (#5935174)
How long before cable companies drop the ESPNs? Their cost now far outweighs the value they bring. If a cable company dropped ESPN tomorrow ("temporarily") and lowered their fees by what ESPN charged, you think anyone would call to complain?
   2. Jose Needs an Absurd Ukulele Concert Posted: March 31, 2020 at 09:10 AM (#5935175)
That’s an interesting question vi. I wonder how the ESPN contracts work. My gut instinct is that ESPN will be turning the screws “drop us now and it will cost twice as much to get us back” but depending on how long this goes big a threat will that be? If this goes on long enough will there be a sea change in how much people want to watch sports?

I think a big part of this will be if football gets delayed. An NFL or NCAAF season skipped is going to be an issue if people start saying “hey,I like this free time.”
   3. The Yankee Clapper Posted: March 31, 2020 at 02:24 PM (#5935271)
When I hit the Trending option on the cable guide, I still see ESPN programming among the first group of programs - Sports Center, past games, compilations, etc. I don’t do it often enough to know how their overall ratings are holding up, but I’d be surprised if many cable systems would drop them. Another month and that Belarus Soccer League might be getting ratings comparable to the Super Bowl.
   4. What did Billy Ripken have against ElRoy Face? Posted: March 31, 2020 at 03:06 PM (#5935281)
Sports on TV are done now that we've been made aware of batshit crazy tiger farm owners.
   5. Walt Davis Posted: March 31, 2020 at 04:21 PM (#5935314)
Much to ESPN's chagrin, The Aussie (Rules) Football League is also shutdown.
   6. pthomas Posted: March 31, 2020 at 06:25 PM (#5935344)
I'm sure you will all be getting refunds for all the regional sports channels you pay for that no longer have teams to broadcast.

Early April Fools!

   7. Cooper Nielson Posted: March 31, 2020 at 09:22 PM (#5935386)
I'm sure you will all be getting refunds for all the regional sports channels you pay for that no longer have teams to broadcast.

I was wondering about my subscription -- it auto-renewed on me because I was too lazy to cancel it and it would be great if I could get a refund or a discount.

(To be fair, I think it's a great product and fairly priced, I just haven't used it much over the past couple of years, and don't plan to this year, because the Tigers are the only team I follow, and they're not worth watching.)
   8. John Northey Posted: April 01, 2020 at 01:15 AM (#5935406)
I'm glad I canceled my subscription back in the winter. They no longer show Jays games if you live in Canada so that took away the bulk of value for me. Whenever baseball comes back I'll look at signing up for Sportsnet's version (they have TV rights in Canada and are owned by the same company that owns the Jays). A bit more expensive but I'd get NHL/NBA/other stuff too. Any critical MLB games they show anyways (from playoffs to big regular season games) so I won't really miss out on anything.

Now, as to how that company is doing - their sports channel must be hurting as the Raptors looked likely to be playing deep into the playoffs (split with TSN - a competing sports network) and losing hockey kills sports channels in Canada (Sportsnet has most of the rights in Canada).
   9. Slutty Nutkins (CoB). Posted: April 01, 2020 at 03:48 AM (#5935415)
Much to ESPN's chagrin, The Aussie (Rules) Football League is also shutdown.

   10. Starring RMc as Bradley Scotchman Posted: April 01, 2020 at 07:29 AM (#5935428)
the Tigers are the only team I follow, and they're not worth watching.

Neither are the Red Wings, as this subscriber can tell you. (At least their season was finally put out of its misery.)
   11. Starring RMc as Bradley Scotchman Posted: April 01, 2020 at 07:46 AM (#5935433)
Another month and that Belarus Soccer League might be getting ratings comparable to the Super Bowl.

They're still playing in Nicaragua, too.
   12. McCoy Posted: April 01, 2020 at 07:52 AM (#5935434)
I was thinking the other day that a home cooking show right now would get crazy for ratings. Instead of cooking with fancy ingredients you use canned goods, stuff you can find in your pantry type goods.
   13. BrianBrianson Posted: April 01, 2020 at 08:15 AM (#5935435)
Without sports, cable subscriptions will rely entirely on people who are just too damn old to understand how to cancel their cable. That's not a terribly desirable customer base.
   14. SoSH U at work Posted: April 01, 2020 at 09:47 AM (#5935457)

BTF could use a marble fix CoB, preferably the dirt track stuff. Got anything for that?

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