MLB’s Revenue Problem

**This article appeared in the Internet Baseball Writers Association newsletter on Saturday, January 9, 2021.  Just this week, MLB announced it’s intentions to move forward with Spring Training and a 162 game season.  Many teams have already said limited crowds will be permitted.**

While MLB might have been able to salvage a short season in 2020, the loss of 102 games was not without consequence. MLB and their franchises lost plenty of money and this may just be the beginning of the visible impact of those losses. Spring Training is set to begin in the next six weeks and plenty of uncertainty still remains headed into the 2021 season.

Spring Training

First up, what will happen with Spring Training? Last season, Spring Training was shut down by the pandemic in mid-March. In 2021, the Spring Training schedule is set, but what expectations can be had for attendance? The decrease in travel will surely have a negative relationship with crowds at Spring Training.

In a typical year, the Cactus League (Arizona) claims that Spring Training creates thousands of jobs paying more than $200 million and $30 million in tax revenue. The Grapefruit League (Florida) claims an even larger economic impact.

Spring Training may continue as planned in Arizona and Florida, but the usual number of visitors will not be there. Not even close.

The Schedule

Will the season start on time? While the season is scheduled to begin on April 1, so many of the states that are home to MLB clubs remain on strict lockdown orders. The San Francisco 49ers, for example, have played recent home games in Arizona due to restrictions in Santa Clara, California. There’s already been some discussion about delaying the start of the season until mid-May. Such a move would potentially shorten the season by 40 games (or more). In that scenario, Spring Training might be delayed until April.

Crowds

Will there be fans allowed at MLB games in 2021? It’s an obvious question that most fans are asking. In short, it depends on the restrictions that exist in the state or municipality in which each team plays. If you are looking to attend a game in New York City, Detroit or Los Angeles this season, you may not be allowed. If you are looking to attend a game in Houston, Kansas City or Atlanta, there’s a good chance that crowds (at least limited crowds) will be permitted. The NFL and college football have been a good indicator on which localities have allowed crowds. A similar trend is likely to continue.

Regardless of your opinion about COVID-related restrictions, it is difficult to argue that the effect of small, limited crowds (if any are allowed at all) and shortening the season would have major long-term consequences for the game. By most accounts, nearly 40 per cent of team revenue comes from ticket sales, concessions and game- related expenditures. The loss of one season alone is potentially devastating. What about two? A second season without crowds would likely have a major negative impact on revenue.

Most MLB franchises were already dealing with a decline in attendance prior to the pandemic. This will only exacerbate the situation.

What about TV ratings? The ever-expanding library of content available on streaming services competes with baseball on a nightly basis, all season long. Despite some reports that TV ratings were up in August, World Series ratings were reportedly down more than 30 per cent from 2019 (Nationals-Astros) to 2020 (Dodgers-Rays). In other words, there is no reassurance that TV revenue will make up the difference.

The Consequences

So what does it all mean? Spring Training may not draw its usual crowds. The season could start late. A number of games could be cut. Many cities may prevent live crowds. The problem is that the longer this persists, the more comfortable fans will become not attending games.

Even the most dedicated fans might find watching the ballgame in the comfort of their own home or on their patio preferable to taking the drive to the ballpark. Businesses are also finding many ways to cut costs and may be hesitant to renew their season tickets or luxury boxes. So the question is, when crowds are allowed to return in full, will they actually come back?

As revenue declines, the inevitable result is that player salaries will as well. Owners will look for ways to protect their investment and hold their money. In a sense, we may have already witnessed the peak of player salaries, lucrative long-term guaranteed contracts and expanding payrolls. The pandemic, the lockdowns and the absence of crowds will have a profound negative impact on the game, in ways we cannot currently understand. It’s also possible that the number of affiliated minor-league teams will be reduced again, due to losses in revenue.

Is There Hope for Baseball?

There may actually be some good news for fans in the future. The decline in revenue should lead to a decline in ticket prices, $10 beers and $6 hot dogs. In an attempt to get fans back into the ballpark, imagine reasonably-priced tickets, package deals, gimmick nights and family plans.

Future MLB ballparks could be designed to seat a lower number of attendees, but offer more spaced-out, comfortable seating arrangements. The future of the MLB ballpark experience may actually look a little more like MiLB.

The game has endured for over 150 years, through depressions, wars and civil unrest. It will survive the current climate as well. But expecting many of the current trends in the game to remain constant while the economic circumstances have drastically changed is nonsensical.

These are the realities baseball faces. Brace yourself for what’s to come.

 

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