By the end of the month, Major League Baseball plans to be one of those American professional sports that will open up for business without any paying customers.
How major league teams can still make money in front of empty stands
July 9, 2020 at 5:02AM
It's such an odd situation that it deserves to be unpacked a little. That includes wondering out loud if this is the year, with a global infectious disease pandemic, that sports moves closer to completing its transition from an in-person experience to a reality TV show.
And is sports played for TV still live? Of course, even "live" needs some explanation, what with the average length of ninth-inning games in Major League Baseball setting another record last year, at more than 3 hours and 5 minutes. The last decade has really become baseball's second "dead ball" era.
Baseball is not timed. Over in the National Football League where games are run off a clock, play is simply stopped when it's time to run more advertising in front of fans watching on TV.
What we're seeing this year is, of course, shaped by an effort to improvise a season that had been suspended this spring due to the COVID-19 pandemic. MLB and its teams couldn't work out an agreement with the players' union, so the league office then elected to dictate a 60-game season. The Minnesota Twins are scheduled to open play this year in Chicago on July 24.
With our country's dismal performance in restricting the spread of the coronavirus that causes COVID-19, baseball may not make it all the way through the World Series or, even worse, get going at all.
You could hear the stress and unease as Twins players and others have talked about playing this year, and several high-profile players have opted to skip the season altogether.
The teams generally decline to say anything about their finances, so it's not easy to know how a business can still be a business when it opens up without customers. The best we can do to get a sense of where the money comes from is the estimates routinely published by Forbes.
In 2019, MLB hit another record for annual revenue, about $10.7 billion, Forbes reported. The league isn't one business, of course, more like a cartel with 30 members, many making a lot more money than others.
In its last detailed look at how the individual teams performed, Forbes said only one team lost money.
Last year was a good one for in-person baseball in Minnesota, too, with a consistently winning Twins team attracting about 2.3 million customers. That isn't close to the record attendance that followed the opening of Target Field in Minneapolis a decade ago, but it was a big jump from 2018 and also better than the American League average attendance.
The Twins were nicely profitable last year on $297 million in revenue, again according to Forbes. Yet the interesting thing is, and this is common for all of baseball, only about one-quarter of its revenue came from gate receipts.
The shortened season currently planned envisions ticket revenue of approximately zero. There is other in-stadium revenue besides selling the tickets — from beer sales to collecting $11,000 for a game on the Budweiser Roof Deck — that will be lost this year, too.
The team won't have the expenses of serving fans onsite, narrowing losses, but its reality TV business model is intact.
Last month, when the league and its players' union were making news just for their fruitless negotiating, word also got out that Major League Baseball had a new, long-term TV deal with one of its main partners, the WarnerMedia unit of AT&T.
The annual fee reportedly will jump from $325 million in its current deal to about $470 million. If the ESPN unit of the Walt Disney Co. renews its commitment to baseball with a similar increase, then revenue from national TV deals should jump to around $2 billion a year.
This suggests that the TV audience for baseball is booming, which is not exactly the case. The World Series ratings from last season show the audience is not much more than a third the size of what it was in 1991, when the Twins won the championship.
Even if the TV audience does not expand, the money does, as live sports have grown in relative importance in television, from attracting customers for expensive cable packages to advertising.
Part of what makes baseball games valuable is that they are only really fun as they happen. Maybe some fans will want to binge-watch a four-game baseball series like fans of a crime drama can do on Netflix, but there can't be that many. The value, then, is because fans watching a game live on screens can't easily skip the ads.
There's local and regional TV revenue for teams, too, and the Twins' winning season last year increased its audience on Fox Sports North by roughly two-thirds. Teams also get a chunk of the revenue from other sources.
Hanging onto the TV money became the business imperative of 2020, probably for all of major league sports. Yet it's not really clear, today, how much of the payments will be made this year.
On Disney's quarterly conference call for investors and analysts in May, the company's chief financial officer congratulated a stock analyst for having already read in the quarterly filing with the Securities and Exchange Commission that Disney had continued making its sports payments. She then declined to take a swing at the obvious "how long that could endure" question the analyst pitched.
MLB has similarly described terms of its media contracts as confidential.
When these big TV rights deals are announced, MLB calls the media company a "partner" and gets called a partner in return. Partner is an overused term in the business world, often stretched to apply to parties that won't really be sharing much risk or reward.
One of the things we will likely find out as this challenging year for sports unfolds is if baseball and its TV partners really meant it.
lee.schafer@startribune.com 612-673-4302
Pioneering surgeon has run afoul of Fairview Health Services, though, which suspended his hospital privileges amid an investigation of his patient care.
