Wednesday, July 30, 2014

Five Reasons Baseball is the Healthiest Sports League

July 25th, 2010 | 10 comments »

While the word “lockout” is being increasingly used in discussions about the NBA and NFL, and the NHL Players Association is still searching for an executive director, Major League Baseball is enjoying one of the most prosperous and competitive eras in its history.  Owners and players seem to be getting along, attendance is good, and division races are hot.  Here’s a look at five reasons (in no particular order) why baseball is the most healthy professional sports league in 2010:

The words “strike” and “lockout” are as far from the collective minds of baseball owners, players and fans as they’ve ever been.  There is no doubt in my mind, or that of anyone else who is familiar with the situation, that the owners and players will come to an agreement before the current collective bargaining agreement expires in December 2011.  Both sides have indicated that discussions will begin following the 2010 season, and neither side has announced any extreme or unreasonable demands.  Meanwhile, the NFL and NFL Players Association are airing their arguments over competing websites and appear to be making no discernable progress towards a new agreement to replace their current agreement expiring in March 2011.  The NBA isn’t fairing much better, and the NHL Players Association still hasn’t appointed an executive director, although they have extended their current collective bargaining agreement through the 2011-2012 season.

Baseball doesn’t need a salary cap for greater parity amongst teams.  The only league without a salary cap, Major League Baseball has as much balance as any of the other leagues.  Although direct comparisons are a little tough because the playoff formats differ, I’ve put together a handy chart to demonstrate how the leagues compare from 2000-2009:

  Percentage of Teams Participating in Playoffs Number of Different Participants Number of Different Champions
MLB 27% (8 of 30 teams) 23 of 30 8
NFL 38% (12 of 32 teams) 29 of 32 7
NBA 53% (16 of 30 teams) 29 of 30 5
NHL 53% (16 of 30 teams) 30 of 30 7

Each time the owners and players prepare to negotiate a new agreement, we all wonder if baseball will finally get a salary cap like the other professional sports leagues.  I, for one, am relieved to hear there will be no push for a salary cap this time.  (If you’re interested in my case against a salary cap in baseball, see here.)  In an interview with Sarah Spain back in October, Bud Selig indicated that there is no need for a salary cap in MLB, because the league already has more parity than ever before.  He went on to point out that he’ll be looking to tweak the revenue sharing system with the new agreement in 2011, but I don’t think that will come as a surprise to the Players Association or anyone else.

MLB survived the economic issues of 2009 with very little impact on attendance.  MLB attendance suffered a 6% decline in 2009, but that number is a bit deceiving.  The two new ballparks in New York, each of which is smaller than its predecessor, have been estimated to account for approximately 30% of the decline last season.  Even at a 6% decline, the 2009 attendance was the fifth highest in MLB history, following seasons that saw the first (2007) and second (2008) highest attendance marks.  When put into perspective, MLB weathered the economic downturn of 2009 with very little impact to the overall league picture.

MLB had record revenue in 2009.  Piggy-backing on the last point, MLB had record revenue in 2009 of $6.6 billion.  Meanwhile, the NFL came in at $6.5 billion, the NBA at $3.2 billion and the NHL at $2.4 billion.  In one of the worst economies of baseball’s history, it produced record revenue. 

MLB Advanced Media is a cash cow.  I’ve wanted to write something nice and long about this for awhile, but I’ll have to settle for this brief blurb for now.  MLBAM is the reason baseball is pulling away from the other leagues in terms of revenue.  The numbers are few and far between, and the most recent ones I have are from 2007, but I’m confident that MLBAM is what has, and what will continue to, set baseball apart from the other leagues.  Under the MLBAM umbrella is MLB.com, MLB Extra Innings, MLB’s deal with XM Radio, and MLB Network. 

As of 2007, MLB.com saw 8-10 million unique visitors every single day.  It provided games to over 500,000 live package subscribers and approximately 27 million of 80 million tickets were purchased online.  In addition, MLB struck a 5-year deal with Stub Hub to be the official reselling outlet, which allows MLB to essentially profit twice from the same ticket.  Revenue has grown from $36 million in 2001 to $450 million in 2007, and is projected to increase by 30% each year.  MLBAM doesn’t just control content for MLB, it also provides live feed for other sporting events like the NCAA basketball tournament and the French Open in tennis.  MLBAM streams more than 12,000 live events per year, more than any other web producer in the world. 

XM Radio will bring in $650 million over its eleven-year contract with MLB.  DirecTV very nearly reached a $700 million, seven-year exclusive contract with MLB for Extra Innings (which offers live, out-of-market games to subscribers for a yearly access fee), but eventually settled for a non-exclusive contract and a shared 1/3 interest in MLB Network with Comcast, Time Warner and Cox Communications.  MLB Network was expected to generate $201 million in 2009, including $151 million in subscriber fees and $50 million in advertising revenue.  It’s projected to be worth over $1 billion by 2015. 

An interesting note is that MLB Network is in approximately 50 million homes, earning around $0.24 per subscriber per month.  By comparison, ESPN is in hundreds of millions of homes worldwide earning approximately $3.65 per subscriber in the US.  Bottom-line: MLB Network has plenty of room for growth and every reason to believe it will continue to grow.

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10 Responses to “Five Reasons Baseball is the Healthiest Sports League”

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  3. It's a Swing and a Miss » Blog Archive » The Pirates Prove My Point

    [...] or anything else to improve competitive balance.  The current system is actually pretty great (see here for how MLB compares with the other pro sports in terms of competitive balance), and MLB as a whole is doing exceedingly well.  In fact, as it [...]

  4. It's a Swing and a Miss » Blog Archive » Baseball is Not Broken

    [...] In fact, I stand by a piece I wrote a couple of months ago, proclaiming MLB to be the healthiest of the sports leagues.  Chief amongst the reasons for this proclamation is the fact that is the only sport I believe is [...]

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  6. Jim Cox

    I apologize for the late response, but I recently found this blog, and I appreciate Ms. Dosh’s analytical arguments on the economics of sports.

    One comment on the chart comparing the parity of the leagues: I think it would be even more persuasive to compare the best and worst regular-season winning percentages from each of the leagues. My guess is that you will consistently find the greatest disparity in the NFL, with the same 1 or 2 teams at the top every year. This fact is masked by the single-game knockout format of their playoff that adds some randomeness to the evetual outcome. In contrast, my bet is that MLB consistently has the smallest spread between best and worst winning percentages. This fact, in turn, is masked by the number of games that the last place team is behind the first-place team.

    Also, while the title compares MLB to other leagues, the last half of the text only compares baseball now to baseball past. It would be interesting to compare attendance trends and multimedia revenue in MLB to those of the other leagues (especially since the NBA and NFL Networks are a little more mature). If you really want to get crazy, it would be interesting to compare the American sports leagues to, say, the English Premier League for a global point of reference.

  7. Kristi Dosh

    Thanks for your comments, Jim!

    My first thought on comparing best and worst winning percentages in each league is that you’re probably right, the NFL would show the most parity. However, I also think a huge part of that is the way schedules are determined. For those unfamiliar, teams rotate who they play from year to year, and some of the scheduling is dependent on the team’s record from the prior year. You can read more about it here: http://football.about.com/cs/football101/a/bl_schedproced.htm.

    As for comparing multimedia revenue, I would LOVE to do that. Unfortunately, MLB Advanced Media (MLBAM) does not provide any revenue numbers. I’m not sure about the other league’s media arms, but I would imagine the case is the same. I can say that the last information I have is that MLBAM streams the most live events of any web producer in the world. It not only streams MLB games, but also the NCAA basketball tournament and tennis’ French Open.

  8. Which League is the Healthiest? — It's a Swing and a Miss

    [...] Back in July, I wrote about why I thought Major League Baseball was the healthiest of the four major professional sports leagues in the U.S.  I stand by what I said, and now I’m debating the health of all four leagues with Russell Scibetti over on The Business of Sports.  We took on baseball first and will be moving to the NBA next.  Stop by and get involved in the debate! var a2a_config = a2a_config || {}; a2a_config.linkname="Which League is the Healthiest?"; a2a_config.linkurl="http://www.itsaswingandamiss.com/2010/11/18/which-league-is-the-healthiest/"; Posted in Business of Baseball, Competitive Balance Leave a Reply [...]

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