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Grading the Leagues with Kristi Dosh: MLB
Posted By Russell Scibetti On November 18, 2010 @ 1:28 pm In Baseball,Governing Bodies | Comments Disabled
A few weeks back, I noticed that Kristi Dosh (@SportsBizMiss) was tweeting a bit about what sports leagues are the “healthiest.” This was in response to some comments from others saying that MLB was in trouble, to which she vehemently disagreed. This seemed like a great topic to discuss for all four of the major U.S. sports leagues, and who better to discuss them with than Kristi herself (you can learn more about Kristi at www.KristiDosh.com).
For each league, we’re going to use the following five criteria to determine an overall grade:
Russell: First off, I want to thank you for participating and sharing your thoughts on this topic. I really appreciate it. Let’s start with MLB, which I know you’re particularly passionate about. I have to say that ever since the 1995 season, I’ve been very impressed with the relationship between the league and the players association, at least when it comes to keeping the product on the field (I’m going to put aside their roles in PED usage for now). They’ve bested themselves year over year when it comes to total revenue generated, and I believe their attendance numbers have stayed fairly strong in spite of the economy.
To me, the biggest challenge to be in grading MLB comes from the tremendous impact of the local market on media exposure, revenue and team performance. Revenue sharing has helped, but as we learned earlier this year, some teams don’t apply their share of the pie to improving the team, and that impact on competitive balance hurts the league as a whole.
With all that said, my initial inclination is to give MLB a solid B.
Kristi: I agree with you on the great working relationship we’ve seen between the league and the players association since the strike. Not only have they reached new collective bargaining agreements without the threat of another work stoppage, they’ve done it without going to the media to make threats and grandiose statements (which is more than I can say for the other three leagues). For that reason, I recently wrote they are the healthiest of the four major professional sports leagues. While the other three leagues take to the media to throw around accusations and demands, MLB will quietly come to a new agreement following the 2010 season.
You’re right about the growth of revenue sharing, and I think we’ll see some modifications made to the provisions in this next agreement. Overall, however, I think the model is working in terms of the amount of money being moved around between teams. MLB now moves upwards of $400m a year between teams, which is massive compared to the NBA, which barely moves around $50m a year. I’m not sure any major tweaks need to be made to the formula for revenue sharing, but the leaked financial statements we all saw a few months ago prove that there need to be rules regarding the use of funds, or some sort of consideration given to how teams use funds to improve on the field performance. It could even be modified to take into account how well the team is run. For example, the NBA’s formula takes into consideration certain market performance standards, such as the value of the team’s media deal in relation to its market size and the value of sponsorships in relation to the size of the corporate base in the market. The bottom line is that revenue sharing is going to need a little bit of a face-lift this time around, but there’s no reason to believe that won’t happen since the revenue sharing provisions have been modified with each new collective bargaining agreement.
The real coup for MLB is MLB Advanced Media. MLB is head and shoulders above the other leagues when it comes to their media content. No numbers have been released since 2007, but MLBAM grew from $36m in revenue in 2001 to $450m in revenue in 2007. MLBAM not only manages MLB.com content, including live game packages, it also manages content for the NCAA and tennis’ French Open.
The last thing I thought about in terms of health of the league as a whole was attendance. MLB got some negative press for decreased attendance in 2009, but I believe it was deceptive. Attendance was down 6% in 2009, but it was the fifth highest attendance in MLB history. When you take into consideration that 2008 was the second highest ever, and the fact that smaller stadiums for the Yankees and Mets opened and accounted for nearly 30% of the decline, MLB had nothing to be ashamed of in terms of attendance. The season that just ended saw only a 0.42% decline, which isn’t really disappointing considering the economy.
I would give MLB an A-.
Russell: Great thoughts. I think the amount of revenue sharing shows both MLB’s strength and weakness. The teams willingness to agree to this system that supports teams in smaller markets shows a deep commitment to health and sustainability of all teams. However, the size of the revenue number shows how skewed those numbers are across the different markets, much more so then the other three major U.S. leagues. Unless specific structures are put in place to make sure that money goes back into the game, it’s too easy for small market teams to take the profit and run. And with such differences in local media revenue between small and large market teams, I can’t see that revenue sharing number dropping without other significant changes in league structure.
MLBAM is also a very valuable asset, but has its own set of limitations. One of the grading criteria was fan affinity, and some of MLBAM’s control measures when it comes to sharing and distribution of content can be frustrating for fans, and in my opinion, hinders their ability to engage with fans. My hope is that they will eventually find a better balance between ownership of content and shared distribution through non-MLBAM channels to stay better connected with younger audiences.
I completely agree with your take on their attendance numbers. With the current economic landscape, I was actually very impressed with how MLB has maintained their level of attendance the past couple of seasons.
The only other potential “problem” I wanted to bring up was with television ratings, specifically the World Series. This year’s ratings could be a sign of baseball fans being too fragmented across markets. Without the presence of a major market playing for the title, too many sports fans just didn’t tune in. I know that the time adjustment for this year’s games and the conflict between Fox and Cablevision also contributed to the low ratings, but I hope baseball hasn’t become too dependent on the success of major-market teams like the Yankees and Red Sox.
While I see why you’re giving them an A-, I don’t think I can go any higher than a B+ at best.
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