A Right-Sized Reckoning Is Coming for Major League Baseball

[Brock Beauchamp]

1 hour ago, DJL44 said:

So $10M off streaming, plus whatever they're still making from cable/satellite.

One thing that isn't being talked about here is cost and volume. It's bloody expensive to have a film and broadcast crew follow a team around for 162 games. And you have to pay sales people to sell those ads. And you have to buy very expensive servers to stream the content. The list goes on and on.

Those factors are easy to disperse if you're making $60m a year from the enterprise. It's a lot harder to figure out how to actually make money when that number is, say, $15m.

[lake_guy]

2 hours ago, nicksaviking said:

At some point, the non-major market owners are going to have to tell the large market owners and the MLBPA, that there's three options. Near complete revenue sharing like every other pro league, contract all the non-major markets or boot the major markets from the league. If there's a fourth option that keeps things as they are, I haven't heard anybody suggest it yet.

Out of all this mess, I really hope true revenue sharing is the answer.  Contracting the number of teams will eventually shrink the pie even for major markets because of overall lack of interest in the sport, it's a downward spiral.

[TheLeviathan]

4 minutes ago, Brock Beauchamp said:

One thing that isn't being talked about here is cost and volume. It's bloody expensive to have a film and broadcast crew follow a team around for 162 games. And you have to pay sales people to sell those ads. And you have to buy very expensive servers to stream the content. The list goes on and on.

Those factors are easy to disperse if you're making $60m a year from the enterprise. It's a lot harder to figure out how to actually make money when that number is, say, $15m.

Correct.  And my numbers were best case scenario.

[nicksaviking]

3 minutes ago, lake_guy said:

Out of all this mess, I really hope true revenue sharing is the answer.  Contracting the number of teams will eventually shrink the pie even for major markets because of overall lack of interest in the sport, it's a downward spiral.

Right, even if MLBPA hates it, it's still the better option for them than losing a bunch of organizations. Large market owners? Maybe they'd rather contract, but if they're in the minority, they should get out voted.

[DJL44]

4 minutes ago, Brock Beauchamp said:

It's bloody expensive to have a film and broadcast crew follow a team around for 162 games.

It's even more expensive to have TWO crews follow a team around. This is one of the first costs I see getting cut - MLB will likely shrink to a single broadcast crew for each game. Each team will provide one on-air announcer for the booth and the video crew will be locals.

[nicksaviking]

9 minutes ago, Brock Beauchamp said:

One thing that isn't being talked about here is cost and volume. It's bloody expensive to have a film and broadcast crew follow a team around for 162 games. And you have to pay sales people to sell those ads. And you have to buy very expensive servers to stream the content. The list goes on and on.

Those factors are easy to disperse if you're making $60m a year from the enterprise. It's a lot harder to figure out how to actually make money when that number is, say, $15m.

If the MLB hadn't been negligent and kept the sports popularity where it was 25 or so years ago, they'd have Amazon, Hulu, Youtube and Netflix all fighting to foot that bill right now.

[Brock Beauchamp]

Just now, DJL44 said:

It's even more expensive to have TWO crews follow a team around. This is one of the first costs I see getting cut - MLB will likely shrink to a single broadcast crew for each game. Each team will provide one on-air announcer for the booth and the video crew will be locals.

I've thought of this as well and it makes a lot of sense. You have a couple of additional cameras for team-focused use (sidelines, etc) and the broadcast crews travel with the team but camera crews are local. It makes a lot of sense.

[Major League Ready]

3 hours ago, Vanimal46 said:

Yeah, the solution has to be multi-pronged. Work a deal to get the games on an over the air channel, and nurture the relationship with cable/satellite companies. 

I haven’t been able to find any subscriber numbers for Arizona, but the Padres have 40,400 paid subscribers to their direct to consumer product. The Padres are making roughly $4.5 mill from streaming. That’s not gonna pay the bills. 

Edit: Correction it’s 45,400 paid subscribers 

Seems like their success will be dependent on their ability to sell advertising on their stream?  MLB needs to get involved and sell some primary national advertisers.

[Major League Ready]

3 hours ago, nicksaviking said:

MLB has already lost a generation of fans by only being concerned with short term profits. It's going to take years for them to build back up, if they can do it at all.

And if they can't get the yearly dividends that they used to from TV deals, I'm guessing there will be a lot of owners selling and cashing out on the huge equity they've gotten in the decades since they bought the teams. But new owners now without the decades of equity and smaller profits will just mean smaller and smaller payrolls. At some point, the non-major market owners are going to have to tell the large market owners and the MLBPA, that there's three options. Near complete revenue sharing like every other pro league, contract all the non-major markets or boot the major markets from the league. If there's a fourth option that keeps things as they are, I haven't heard anybody suggest it yet.

I was listening to MLB radio last week and they said the average age of ticket buyers has gone down significantly again this year and has been trending younger.  I believe they said the average age has decreased by 6 years.   This is from 2023 Statista Age Distribution.  

The general consensus was that the new rules for pace and length of game were helping.

[Major League Ready]

3 hours ago, TheLeviathan said:

Using this as a guide that would be about $400 per commercial.  ($10 per 1000.  That's 40 x 10 for 40k people) Let's call it $500 for fun.  (This would be top end then)  5 commercials per inning break plus pre and post would be about 60 commercials per broadcast?  That's about 30k per broadcast.  Which works out to be about 5M per season.

So 10M total with ads and subscribers.  And that's the top end of what I can argue.

It looks like you are using 40,000 subscribers for your math.  I would think that number is really low once the league and fans adapt to a new model.  The Twins had 3X that number in the past.  This new model will provide far greater access so what seems like a reasonable number?

[howeda7]

4 hours ago, USAFChief said:

The article also says the Padres are still available via local cable/satellite systems.

 

That seems like the key to me.

Get rid of the blackouts, which will mean less money from cable/satellite, but add some revenue back through streaming. 

 

Yes. They can't go exclusively streaming. The average MLB fan is like 50-something and won't be down for that. They need to have at least some availability on cable/satellite (DirecTV etc. will still give you some of the $$ they were paying Bally's just not nearly as much) and streaming and at least one game per week on a local OTA station.

[Squirrel]

3 hours ago, Riverbrian said:

Lots of complication with this but... Ultimately... First and Foremost... You have to increase interest in Baseball. Nothing is solved or sustainable without increasing interest in baseball. Even if you haven't figured out how to monetize that interest. You still have to increase interest in baseball. Selling exclusivity is a self imposed handicap to increasing interest in the game of baseball. 

Selling exclusivity is the exact opposite of what baseball needs because it limits accessibility. No RSN is going to be able to sell advertising at a decent rate without significant audience to charge those prices and their audience sized will be lowered significantly if consumers can watch the product elsewhere.

Exclusivity is part of the deal if you want that short term money meanwhile that exclusivity that you sold sets forth an inevitable downward spiral of waning interest because exclusivity limits accessibility.      

It is simply way past time to cut out the middle man and take control of your product. The regional sports networks have account managers who sell advertising. The Twins can also employ account managers who sell advertising and keep the profits that RSN's made for themselves which hopefully more than they paid for the rights. No middle man necessary. By handling it in-house... the Twins will be able to sell advertising across all platforms which is something the RSN's can't do. By combining your platforms, blackouts are no longer necessary,  accessibility is a reality, the middle man profits are now yours, interest is increased and maybe you sell a few more Royce Lewis jerseys in Vermont.     

Yes... the downfall of the RSN is going to be a tough adjustment in the short term but it's fantastic news long term. 

This isn't as simple as we got 45 million dollars from the RSN, let them take the risk and do all the work. It isn't as simple as the Padres have 40,000 subscribers and as result made X amount from those subscribers.  

How quickly can the Twins can put this together. Let's find out. They failed in their swiftness last year.   

 

This first paragraph is key, imo. Baseball no longer has a national presence because MLB regionalized it too much with the division and playing within the division more than playing the other divisions. That and blackouts makes what's going on a long time coming.

[howeda7]

It's going to end up something like this:

Direct Streaming subscriptions: $5 million

Ads: $5 million

DirecTV $0.50/subscriber/month (vs the $5 or so they pay Bally): $2.5 million

Comcast: $2.5 million

Other Cable: $2 million

Local OTA for Sunday games: $2 million

Total: $19 million. Still a big drop from $40 million but not 90%.

[TheLeviathan]

13 minutes ago, Major League Ready said:

It looks like you are using 40,000 subscribers for your math.  I would think that number is really low once the league and fans adapt to a new model.  The Twins had 3X that number in the past.  This new model will provide far greater access so what seems like a reasonable number?

That number is based on San Diego's current subscribers.  Given this is what viewership looked like two years ago:

 

I think 40,000 is likely generous.

[BH67]

"The reason their payroll cut last offseason was so conspicuous and widely noticed was, first and foremost, because of the horrible timing, coming off a breakthrough season and playoff run. But it's also because the Twins were first in line for something that the rest of the league is soon to experience: the realities of a bursting TV revenue bubble, with massive implications on the economics of baseball.

I believe the Twins were the canaries in the coal mine..."

Well, well. Imagine a businessman trying to make a profit anticipating such an event two years in advance. In any other endeavor this would be celebrated, especially by those whose livelihoods are at stake as a result. But with a professional sports team? It's a "community asset" in which the businessman's actions are "greedy," "cheap," and "horrible."

My disappointment with the Pohlads is rooted in their acceptance of long-standing unsatisfactory performance in the quality of their product. Their opaque management style also sours fans that see something more direct and engaging from the Wilfs or A-Rod. For those reasons I'd prefer they sell the team, although that may risk again a club move out of Minnesota. I do not question their financial prudence, however. If the $130M baseline will be the new normal, the pending transition will be less disruptive for the Twins than it will be for other teams.

[TheLeviathan]

7 minutes ago, howeda7 said:

It's going to end up something like this:

Direct Streaming subscriptions: $5 million

Ads: $5 million

DirecTV $0.50/subscriber/month (vs the $5 or so they pay Bally): $2.5 million

Comcast: $2.5 million

Other Cable: $2 million

Local OTA for Sunday games: $2 million

Total: $19 million. Still a big drop from $40 million but not 90%.

Probably about right.  Now subtract the operating costs.  I think it's reasonable to expect profits no more than 10-15M

[The Great Hambino]

9 minutes ago, BH67 said:

Well, well. Imagine a businessman trying to make a profit anticipating such an event two years in advance. In any other endeavor this would be celebrated, especially by those whose livelihoods are at stake as a result. But with a professional sports team? It's a "community asset" in which the businessman's actions are "greedy," "cheap," and "horrible."

I'm guessing your hypothetical businessman didn't receive a nine-figure public subsidy for their place of business

[BH67]

1 minute ago, The Great Hambino said:

I'm guessing your hypothetical businessman didn't receive a nine-figure public subsidy for their place of business

You mean the family that 40 years ago purchased the "community asset" so that it wouldn't relocate to Tampa?

[I Miss The Lakes]

4 hours ago, jmlease1 said:

There's going to be a real danger of actually having a problematic tier system within MLB related to revenues where teams like the Yankees, Dodgers and a small handful of others (maybe Mets and Cubs?) are operating with revenues that are far and away beyond what any other club is generating locally that gives them the ability to not have to change their models significantly when everyone else is cutting back substantially. You'll have a large chunk (15-20) teams that function somewhat in the same ecosphere for payroll, and then a handful of teams that are flipping out non-competitive payrolls. but what's problematic is those structures, especially at the top can ossify.

Look at what's happening in the Premier League, where clubs like Manchester City, Chelsea, Tottenham, Liverpool, Manchester United, and Arsenal live in an entirely different world of revenue generation, in part because they've been so consistently in the top 6 of the Premier league for so long, elevating their status locally, regionally, nationally, and internationally and drastically increasing their ability to generate sponsorship and merchandising revenue, not to mention match-day revenue. The attempts at financial fair play rules imposed to stop another Citeh coming in and buying their way up the top and staying there until their revenues catch up have also made it safer than ever for those "big clubs" to stay at the top, no longer fear relegation, etc.

How do you manage baseball if the Yankees and Dodgers are always so much more successful than everyone else? or is MLB fine with that? Do they think that expanded playoffs with short series at the start provides enough upset potential that it doesn't matter if a big market big money team wins 110 games?

The other teams have to unite and demand that NY/LA etc split revenue from their regional broadcast deals, or else they can't broadcast away games at their stadiums.  I don't think it will happen, but I've been advocating for this approach for over a decade.  
Those big teams don't exist in a bubble, they need opponents.

[The Great Hambino]

2 minutes ago, BH67 said:

You mean the family that 40 years ago purchased the "community asset" so that it wouldn't relocate to Tampa?

I mean the one that threatened contraction and a move to North Carolina until they got their subsidy

[BH67]

8 minutes ago, The Great Hambino said:

I mean the one that threatened contraction and a move to North Carolina until they got their subsidy

Like Northwest Airlines in the early 1990s? How much would that lack of a subsidy have hurt Minnesotans? It surely helped Delta maintain MSP as a hub airport.

Yes, one and the same description of the Pohlads. Many people here are upset about how the team is managed as a business. Then comes this description of why revenue issues are serious, and dozens of comments here seek solutions that are innovative but not easily or quickly achievable. Impatience with the status quo needs be leavened by the economic realities of the sport, however unpopular that is to note.

[Woof Bronzer]

40 minutes ago, BH67 said:

Well, well. Imagine a businessman trying to make a profit anticipating such an event two years in advance. In any other endeavor this would be celebrated, especially by those whose livelihoods are at stake as a result. But with a professional sports team? It's a "community asset" in which the businessman's actions are "greedy," "cheap," and "horrible."

The greedy, cheap, horrible Pohlads got a half billion dollar handout from the community.  The community has invested in this team. 

The Pohlads have made $1.5 billion on the value of the franchise no matter how poorly they perform.  Normal businesses don't operate this way.

Professional sports are not like other businesses.  

[BH67]

3 minutes ago, Woof Bronzer said:

The greedy, cheap, horrible Pohlads got a half billion dollar handout from the community.  The community has invested in this team. 

The Pohlads have made $1.5 billion on the value of the franchise no matter how poorly they perform.  Normal businesses don't operate this way.

Professional sports are not like other businesses.  

They're businesses, and businesses exist to make a profit. A city or state doesn't have to be home to a major league sports franchise if they call the subsidy or relocation bluff of the owner. Faustian bargain, perhaps, but also reality throughout the USA up to now.

[TheLeviathan]

29 minutes ago, BH67 said:

They're businesses, and businesses exist to make a profit. A city or state doesn't have to be home to a major league sports franchise if they call the subsidy or relocation bluff of the owner. Faustian bargain, perhaps, but also reality throughout the USA up to now.

We really don't have to fall on our swords for billionaires.

[BH67]

2 minutes ago, TheLeviathan said:

We really don't jave to fall on our swords for billionaires.

I agree completely. But there'll be another city somewhere in America who surely will when it comes to major league sport. And team owners know this.

[Eris]

6 hours ago, TheLeviathan said:

The direct-to-consumer model isn't viable IMO.  The amount of money lost would be crippling.

While I don’t disagree with this comment on viability, the core aspect of the issue is that consumers are looking at their $120 - 150 / month cable bills and are looking for ways to reduce costs. They start by looking for options where they are paying for what they are watching. The reality is that many sports channels have been subsidized by non sports fans for many years. As consumers cut their cable and turn to alternatives, cable companies are pushing back or they will lose more customers. 
 

I cut cable along time ago, primarily because my spouse was not happy about the bill. I rely mostly on radio and the MLB at bat app for baseball. 
 

How many Twins fans would pay $150 / season to watch the Twins?  500,000 at 50% margin gives about 37 million.  Is this achie able.

[Fire Dan Gladden]

4 hours ago, Bigfork Twins Guy said:

A few thoughts...

• The owners and union will never agree and will sink the ship before they do because they think ONLY of their interests.
• The large markets will do the same and kill their sport because they do not want to share.
• Non-large market teams will all cut back on salaries and the mid-level veteran player will be squeezed out.
• People will not pay for streaming PLUS their cable packages.  Also, people will not pay for the primary streaming package (the one they use for all non-sports viewing) PLUS a sports-only streaming package.
• People will not pay for MULTIPLE streaming packages.  E.g. some games on Apple, some on Amazon, some on Paramount, etc.  The teams will need to pick ONE streaming package if they want fans to purchase it.
• People will not pay for a total sports streaming package.  Who wants to pay for sports that they do not enjoy just to see maybe the one sport (or one team) that they do enjoy.
• Using supply and demand principles, player salaries are going to have to come down more in line with regular salaries.  It's up to the union whether or not that is somewhat evened out or a few making millions and a ton of minimum level players.
• It's going to be an interesting year!

You have summed up most of the issues here...

People forget how the NBA, NFL, and NHL all came about.  The NBA and NHL were once basically dead, the NFL had a ton of infighting.  It wasn't until each of them determined that pushing the league as a whole was more lucrative then regional marketing.  How else would cities like Green Bay and San Antonio have teams that are so popular and financially strong.  MLB owners have always looked at today and never looked at tomorrow.

This is not new news.  As long as NY and LA (along with a few others) refuse to play ball, there will be zero chances of this working out long term.  As bad as it is now, the 70% of the teams that generate the smaller incomes will continue to dwindle.

Going back to an 8 team would not surprise me in my lifetime.

[jmlease1]

1 hour ago, BH67 said:

They're businesses, and businesses exist to make a profit. A city or state doesn't have to be home to a major league sports franchise if they call the subsidy or relocation bluff of the owner. Faustian bargain, perhaps, but also reality throughout the USA up to now.

Sports franchises are different though: there's far more profit to be had from the appreciation of the asset than from the operating of the business, which makes it different than almost any other business. It's why the Boston Celtics are going up for sale this year: it doesn't matter if they've lost $200M operating the franchise (they probably haven't), they're about to make $3B on the sale.

[BH67]

4 minutes ago, jmlease1 said:

Sports franchises are different though: there's far more profit to be had from the appreciation of the asset than from the operating of the business, which makes it different than almost any other business. It's why the Boston Celtics are going up for sale this year: it doesn't matter if they've lost $200M operating the franchise (they probably haven't), they're about to make $3B on the sale.

Only if they sell the franchise...though I'm sure many owners are considering selling at the peak of this asset bubble.

[TheLeviathan]

47 minutes ago, Eris said:

While I don’t disagree with this comment on viability, the core aspect of the issue is that consumers are looking at their $120 - 150 / month cable bills and are looking for ways to reduce costs. They start by looking for options where they are paying for what they are watching. The reality is that many sports channels have been subsidized by non sports fans for many years. As consumers cut their cable and turn to alternatives, cable companies are pushing back or they will lose more customers. 
 

I cut cable along time ago, primarily because my spouse was not happy about the bill. I rely mostly on radio and the MLB at bat app for baseball. 
 

How many Twins fans would pay $150 / season to watch the Twins?  500,000 at 50% margin gives about 37 million.  Is this achie able.

Honestly, no.  It's not.  I'm not sure where you got the 37M from, but that's not doable.

The Padres have a seriously engaged fan base and got to 40,000.  The Twins won't achieve 12 times that many fans.