The Chris Moeller Archives

Make Baseball Profitable Again

Happy Opening Day, a tad late. You’ll have to forgive me. The Cardinals season always extends until at least mid-October, and so the off-season can feel short. I use all of it. I’ll be raring to go well before the Cards complete their two-city, Jupiter, FL to St. Louis excursion through Pittsburgh and Atlanta. By the time the Clydesdales make their appearance on Monday, and Hall of Famers Red, Lou, Gibby, Ozzie, Bruce, and Whitey bounce from the flatbeds of the red Ford pick-ups, dressed in their bright red sport jackets, the season will have arrived.

Just a note about the extraordinary popularity and robust financial health of America’s-- and the world’s-- greatest sport. Molly Knight, the author of last year’s book, “The Best Team Money Can Buy,” describing the modern-era Los Angeles Dodgers, provides insight in Chapter One into how the National Football League actually comes nowhere close to matching Major League Baseball in economic prosperity. Commissioner Goodell's No Fun League is not even in the same ballpark, if you’ll pardon a popular American expression that might seem a little out of left field.

In 2012, when the Guggenheim Group, starring superstar minority investors Stan Kasten and Magic Johnson, purchased the Dodgers for $2.15 billion, virtually all observers, whether they be sporting, financial, or amateur, thought the price was outrageous. The group had paid fully three times the amount at which Forbes magazine had valued the franchise. What those people didn’t realize was that baseball’s television revenue was about to surge towards heights unseen by any entertainment industry anywhere. Eighteen months later, Time Warner agreed to pay the Dodgers $8.35 billion for the rights to broadcast their games for the next twenty five years. Bam-o.

The NFL stands in second place. The league's highly-lucrative TV deal with traditional networks CBS, FOX, NBC, and ABC/ESPN certainly promotes parity between teams in profit (MLB has more parity on the field), and it has rewarded the NFL with an unprecedented visibility on football Sundays and Mondays (and sometimes Thursdays and Saturdays), but for sheer dollars, thanks to television, radio, and internet advertising, Major League Baseball is King Ball.

The Dodgers televise all 162 of their games on Time Warner Cable and SportsNet LA. That's approximately three hours per game, plus pre-game and post-game fanfare that amounts to about five hours of targeted audience programming nearly every day for six months. Plus, you have potentially more than 20 post-season games per year, on national broadcasts for either FOX and TBS, and profit from the league's service, MLB Network. Before the Dodgers even get a whiff of the playoffs each year, they have netted $334 million.

Compare that haul to that of the NFL’s most lucrative team, the Dallas Cowboys, who play only 16 games a year, and four post-season games at best (as if), all with an extraordinary number of eyeballs fixed, but again limited to likely fewer than 20 contests, and sharing its TV money equally with all of the other NFL teams besides. The Cowboys do not have the freedom to negotiate separately for a TV deal, as each MLB team does. So, yes, MLB has become more of a regional product than the NFL, but not because of financial limitations, but because of how extraordinarily profitable it has proven to be to sell your product to a entity with a primary focus on the local level. It's a fascinating business model. You can sell jerseys and caps to dedicated fans, but on television, you're getting paid even for eyes that aren't on the game.

The Dodgers’ top man, Mark Walter, defending the size of his receipt for the Dodgers, has claimed that the Cowboys would have to rake in one hundred dollars in beer and T-shirt sales per fan per game at Texas Stadium to be worth as much as the Dodgers. Nobody’s going to be holding any bake sales for the Cowboys, but, relative to baseball's titans, they can’t compete with the just the extraordinary number of total advertising hours in a post-DVR, post-TiVo, post-internet streaming world in which only sports contests are still watched in real-time by TV viewers.

Now, not every MLB team has the TV package that the Dodgers do, obviously. Or the New York Yankees. Or the LA Angels. But the boom is also just beginning. Many of the old rights agreements have not yet expired. When the Dodgers' $334 million-per-year deal went down two years ago, the small-market Cardinals were making only $25 million annually in media revenue. Their turn at bat came during this past off-season. The new deal between the team and its long-time cable TV partner, Fox Sports Midwest, will deliver more than a billion dollars to the club between 2018 and 2032. At least 16 of the 30 MLB clubs now also own a direct stake in the entity that broadcasts their games.

As a football fan, my TV options sucked for the last fifteen years. As a St. Louis Rams fan living only six hours away in the Central Iowa TV market, I'll bet there weren't six games in the last decade that I could watch in my home, choosing as I did, never to prescribe to the NFL Network. The putrid Rams played sixth fiddle to the Bears, Packers, Vikings, Chiefs, and Broncos, and were never given prime-time showcases on Sunday or Monday nights. Oh well, the NFL took care of that problem for me in January.

Anyway, like I said, Happy Opening Day to everybody. It's not yet a federal holiday, but Cards' great Ozzie Smith and Budweiser began a petition drive two years ago to make it one. Don’t let anybody tell you that the sport, or its major leagues, are dying. All the sports leagues are businesses, first and foremost. This one's still the king of the land, and the gap may actually be growing.

posted by CM @ 6:45 PM