In the corner of a room sits an 800-pound gorilla, obvious to everyone but Major League Baseball Commissioner Robert D. Manfred Jr. and MLBPA Executive Director Tony Clark. That gorilla is figurative, of course, and represents the fans — whom few are considering as labor tensions rise in the face of a CBA that expires on December 2.
The people who pay for it all, directly and indirectly, are those fans who shell out their hard-earned cash with every ticket they buy, every beer they gulp down, every licensed jersey they buy from the MLB shop, every commercial they watch on a broadcast, and every cable bill they pay. There is a trickle-down effect and just remember, it all starts with people who support baseball in varying ways. If nobody paid, the game would be close to what a typical high school baseball game looks like with no money flowing in to pay anyone. The stadiums would close and anyone who wanted to play would do so for the true love of the game. They would play on sandlots and at the local parks just like they did in their youth.
Baseball has been operating on the current five-year collective bargaining agreement that expires in just 37 days. Negotiations between the two sides have been taking place since last spring with little progress as reported. There are such obvious problems that begin with curtailing teams from tanking to setting a minimum team payroll “floor” to having better protocols if a future pandemic arises, and most importantly to how to build the game to attract more fans. What could happen is the extreme opposite — deterring fans.
Shouldn’t we try to do something that has never been done in pro sports such as reducing salaries and forcing owners to lower ticket prices? Yes, funny, isn’t it. The math is always interesting what a $35 million player contract really costs. If you take that number divided by 81 home games, and an average attendance of 20,000 fans, the cost in your ticket is $21.60 to support that player. If you have a full-season plan, the cost is $1,750. That is why attendance is so important. The more fans who buy tickets, the more they spread the dollars. Causing fans to stay away is bad for everyone.
The numbers are so ridiculous that it is just Monopoly money x $10,000. Just pass “Go” and collect $2 million. In the crosshairs of the fighting over money between baseball owners’ billionaires and labors’ multi-millionaires is just a fight over who will control more of the fan’s money. Baseball has been through this eight times before for work stoppages, and the last time was 1995. The damage was seen immediately in the drop in attendance as many fans were alienated and others stayed away in protest. Some never returned.
The luxury tax system that started with the 2003 season set baseball’s first bite at the apple to create parity, but teams found ways around that. The current CBT system is working better — but far from perfect and it needs some changes.
Free agents can start signing with any team on the sixth day following the World Series, and that day could happen within the next two weeks. This year’s group of pending free agents include some big names from Cy Young winners like Max Scherzer and Justin Verlander to MVP winner Freddie Freeman. Those players of course are already the richest of the rich — and they want to get even richer. MLB Network Radio host Jim Bowden threw out a number for Scherzer of $50 million a year for three years for his next deal.
Part of the disconnect is that the average baseball fan cannot afford season tickets. It is a luxury item. Consider that the median household income was $67,521 in 2020, and that was a decrease of 2.9 percent from the 2019 median of $69,560. Keep in mind, that is total family income. The average MLB player’s salary was $4.17 million on Opening Day of this year. Do the math: the average family would have to work into their 80’s to equal what the average MLB player makes in one year. Also consider the ancillary income an MLB player makes plus their pensions.
My point is that I don’t think the average family is relating to millionaire baseball players or the billionaire owners so many will just boycott the game. They did it before and will do it again and if there is another work stoppage they will lose some more fans forever. The fans they lose aren’t the die-hard fans who frequent TalkNats, rather these are the usually the casual fans who factor into the ratings for watching on TV or going as a family to three games a year because that is all they can afford. And they still count. It takes a rather large community to support a professional sports team.
You grow the game incrementally and to lose fans incrementally will deepen the shaky financial position that baseball is in. From the 2020 and 2021 seasons when billions were lost due to the COVID shutdown, and the slowed reopening of stadiums to fans this year, the losses grew. Maybe that is why the owners are digging in deep. The Atlanta Braves are the only team in the MLB that is owned by a publicly traded company, and we know in fact that they lost approximately $67 million in 2020 from baseball operations.
In October of 2020, Manfred told Sportico, “Baseball’s 30 clubs have amassed an unprecedented $8.3 billion of debt from their various lenders and will post $2.8 billion to $3 billion in operational losses this year.” Initially, Forbes estimated the losses (EBITDA) to be closer to $1 billion, but if you take the Braves number multiplied by 30 teams it is closer to $2 billion and most likely teams lost money again in 2021 as they struggled to get fans to pay for tickets. Interestingly enough, the Braves who had one of the loosest COVID policies were second in league attendance this year during the regular season.
Teams with the worst regional TV deals lost the most money along with those with the highest payrolls. The Washington Nationals were in both of those categories and supposedly lost over $100 million in 2020. Consider also that some teams have always budgeted to single digit profits which makes losing money at those large figures tougher to swallow for the newest ownership groups who already carry a large debt load. Few are crying for the owners who have seen their team valuations soar. But they lost real money in 2020 and 2021 as the Braves numbers are real. Of course it is all hard to tell the exact numbers since creative accounting is always at work and the players never trust what the owners say.
Speaking of real numbers, MLB saw the attendance combined for 2021 at 45.3 million fans which was a 33.9% drop from the 68.5 million fans n 2019. That marked the lowest number since 37 years ago in 1984. The Nats averaged 18,319 fans per game which was the 13th worst figure in MLB. To add to the woes, regional TV viewership is down according to Forbes and Sinclair Broadcasting according to the Sports Business Journal, last week, reported that “top executives from leagues and media companies share a common belief that the Sinclair subsidiary Diamond Sports Group, which owns twenty-one Bally Sports-branded RSNs, could be headed into bankruptcy.” Note that two of those RSNs are in other sports, and 19 in baseball.
Technology and competition is changing everything. If you have Wi-Fi you can now get a DirecTV streaming service with your local sports RSNs for as low at $90 a month. That allows you to even stream MASN in the local market. Manfred knows that cord-cutting is a major problem, and the youth are showing that the future of cable boxes is over. MLB is trying to pivot to local streaming services direct from each team for a small monthly fee. We will see where that goes.
“With fewer [subscriptions to cable], it makes the business more difficult. I think that the negativity surrounding the RSNs has been increased exponentially as a result of the situation with the Sinclair (Broadcasting) subsidiary Diamond,” Manfred said to SBJ. “Part of their problem is cord-cutting … There are RSNs out there that they’re not thriving or growing, but they’re going to survive.”
“Look, look, there are RSNs, YES and NESN that have businesses that remain profitable, they’re affected by cord-cutting. But the fact of the matter is I think the negativity has been increased by the [Sinclair] Diamond situation.”
The commissioner’s office is dealing with so many issues, and at some point it might not be possible to keep growing revenues from the 2019 levels if attendance doesn’t at least normalize and increase in the future, TV viewership on a regional level doesn’t expand, and ad revenue isn’t stabilized. One of the underlying problems is the Sinclair situation and as their largest group of RSNs, what happens if they go into bankruptcy and essentially not pay the teams they have deals with. Oh no, there are 19 MLB teams that are sweating it right now.
But if baseball strikes then nobody gets paid and the losses will climb with no revenues, and they will further damage the product in the short-term. Most believe there will be a lock-out on December 2, and they will get to work to fix this before Spring Training is affected.
It is all about the kids right? They are the real victims in this mess. More to come on this, as this will be the story that dominates the baseball landscape.