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A Ratings Game: Television Deals Influence Spending Across Baseball

October 15, 2012

Getty Image via Jeff Gross

by Kelsey Doherty, Marketing Communications, 2014

Major League Baseball has signed a deal with FOX and Turner (TBS) to enter an eight-year-contract with both networks, ensuring both companies will carry the league’s games through 2021. These contracts doubled from $400 million a year to an annual average of $800 million. Combined with ESPN’s deal, baseball now commands over $12 billion in broadcast rights.

Along with the eight-year, $5.3 billion deal signed with ESPN, baseball stands to bring in roughly $1.4 billion annually just from the national broadcast rights of the three aforementioned networks.

There’s no doubt that baseball was looking to create a situation similar to that of the NFL—football struck a deal with three networks (CBS, FOX, and NBC), which calculated to over $3 billion paid out annually collectively. Baseball, of course, has a difficult time commanding the same type of money and long-term deals, with the majority of their games not broadcast on national networks. Each team has a unique contract with their regional affiliate, or team owned network. While the money from the ESPN, FOX, and Turner deals is going solely to the league, and doesn’t cover broadcast rights for individual teams, a precedent is still being set.

On a non-national level, teams are commanding big money for their own contracts, well into the billions, taking advantage of rising broadcast prices. These new deals are not just to help pay the electric bill or for stadium maintenance, rather, are factoring into how franchises can build a roster.  Players like Yu Darvish of the Texas Rangers and Albert Pujols of the Los Angeles Angels of Anaheim never would have found inked the mega-contracts they did without a little help from local sports networks.

In 2010, the Rangers secured a deal that will pay out $3 billion in total by the year 2020. The $60 million deal they signed Darvish to during the 2012 offseason is fractional compared to the $300 million the team is making from FOX Sports Southwest each year. Just three years ago, the Rangers were bankrupt. Now, the team has an annual $125 million payroll. One of the major catalysts in this turnaround? FOX Sports Southwest.

These deals are now determining how a team can rebuild and reconstruct a roster. The small market versus large market philosophy is changing, and the balance is shifting with the help of television deals. Even a team like Kansas City, perceived to be a low payroll team, may soon reap the benefits of television money, and become high(er) spenders.

When the Angels went out and committed hundreds of millions of dollars to CJ Wilson and Pujols, the preamble to those signings was Angels’ owner Arte Moreno striking a lucrative deal with Fox Sports. With a 20 year television deal, there was less reluctance on the part of the franchise to oblige Pujols’ request of a 10-year contract. With $3 billion dollars on the table from FOX, the financial risks of a decade-long contract were not as damaging, even if Pujols and Wilson did not live up to the billing.

Arizona Diamondbacks president Derrick Hall is eager to follow this trend and enter talks with FOX Sports, expressing the importance of a big deal and what it could me to the team, even calling the Rangers’ deal a “game changer,” according to USA Today. Teams are recognizing the importance of these deals, understanding the right television deal could be the difference between signing a franchise player, or watching him walk to a big market.

Across the majors, there seems to be little concern about negative effects from these big deals—teams are excited to sign them, and immediately turn around to purchase big-name players. Bud Selig has even deemed the “unprecedented and historic commitment from these networks” to be “truly amazing.”  While the money coming in seems all good and well, the way it is spent may be questioned in the coming years. More recently teams have confidently signed players to expensive and binding contracts, yet history has shown that these contracts are still rather risky, as seen with the Barry Zito, who still has a year remaining with the San Francisco Giants on a $162 million deal. Yet, the team has not seen his ERA find its way under 4.00 in his time at AT&T Park.

It’s clear where teams are spending their new-found broadcast money, but what remains unclear is how Major League Baseball, as an entity, will allocate its own funds. With roughly $20 billion in broadcast rights, baseball has the chips to make some major changes, if it chooses to do so. But with networks paying more money to carry the games, they too need an increased income of revenue. In a statement released by the American Cable Association, the ACA expressed that while MLB may find great benefits in these deals, there is expected to be a gradual rise in the average fan’s cable bill.

Regardless of where money is being spent, or how the average fan may be affected, big money television deals, for the time being, are providing team’s with a new way to lock up players to big deals, and are changing the landscape of baseball’s free agency and team-building.


One-Game Wild Cards Adds To MLB’s October Intrigue

October 9, 2012

By Malcolm Kelner, Journalism, 2015

Last November, when Major League Baseball announced that it was revising its playoff system, there was an extremely mixed reaction among baseball fans and the media.

Some loved the new format, with an extra wild card team in each league—making it five playoff teams instead of four—while the more traditionalist baseball fan strongly disliked the bold change.

Getty Image via Scott Cunningham.

Getty Image via Scott Cunningham.

The new remodel involves the two wild card winners playing each other in a one-game play-in game, the winner advancing to the League Division Series. The supporters of the change loved the fact there will be the added excitement of two guaranteed one-game playoff games every year, while the opponents questioned the new scenario in which a team can grind out a 162-game season, make the postseason, and potentially have it all end with a bad showing in just one game.

So why did Bud Selig and co. make this change?

Among the reasons they provided, putting an added importance on winning one’s division was first and foremost, according to Selig. The new format does that, and it will surely prevent any teams from “tanking it” at the end of the season to try to get a better playoff matchup.

But aside from the competitiveness reasons the league provided for the media, at its crux, this was a business decision.

Major League Baseball saw the incredible excitement that division tie-breaking “Game 163’s” in 2007, 2008, and 2009—improbably being needed in three straight years—generated. The all-or-nothing, do-or-die quality of the games thrills fans because they differ from the series’ that every other baseball playoff game takes place in. So now, baseball is hoping to duplicate that same excitement every year… twice.

And with excitement comes TV ratings, and increased revenue.

The 2009 American League Central Division tiebreaker between the Minnesota Twins and Detroit Tigers drew an average of 6.543 million TV viewers for TBS, which was, by far, the highest rating for a regular season game all year.

And now, you can rest assured that both MLB and TBS, which for the time being will carry the two, one-game postseason series, will be thrilled with their newfound cash cow.

You may love the new format, or you may think it’s being changed for cheap thrills. Either way, if you are any sort of baseball fan, the product the MLB created is exciting, and worth watching.

A Home Run Derby or a Sponsorship Derby?

August 10, 2012
by Kelsey Doherty, Marketing Communications, 2014
It’s called the Midsummer Classic. But for a game deemed “classic” in its nickname, the MLB All-Star Game is anything but when it comes to the fans.

The MLB All-Star Game has been a somewhat controversial subject for many years, with fans questioning how important Commissioner Bud Selig has made it. The game decides homefield advantage for the World Series, and if players should be allowed to “opt out” for the various reasons they cite, or if fan voting should be used to determine the rosters. Still, while the game itself has been questioned, the money it draws in for the host city is undeniable.

And then there’s the State Farm Home Run Derby.

At its peak, the Home Run Derby was a slugfest between the likes of McGwire, Sosa, Bonds, and other steroid-era boppers (but interestingly enough, until this year, Ken Griffey Jr. was the only multi-derby winner). But since those derbies, the intrigue has been lost, and the hype absent.

First came selling the naming rights of the derby itself, a tradition that began back in 2005 when Century 21 first sponsored the event before surrendering the rights to State Farm in 2007. In a sport riddled with sponsorships, baseball had always managed to avoid naming games after brands, but the home run derby did not escape selling its name, a practice that is more common in the BCS and other collegiate competition. State Farm has managed to work its name into every element of the event, and there certainly was no shortage of its commercials during the airing last month, either.

What’s more is the derby has turned into a promotional event because it lacks its former competitive edge which has turned off some viewers.

The public relations element of the derby has been taken to a new level this season with the heavy emphasis on social media. Players were allowed to tweet while at Kauffman Stadium (where the derby was held), and ESPN heavily encouraged fans to tweet, televising some tweets, and reading off some of the social media stats of the event. With 127,000 impressions just from Kansas City fans trolling the Yankees’ Robinson Cano, coupled with the second baseman’s reactions, one had enough drama for a soap opera.

Then there were players like the Miami Marlins’ Logan Morrison sitting at home sarcastically tweeting, and New York’s Curtis Granderson tweeting all about the ribs he ate in the clubhouse (ESPN also televised its own John Kruk eating ribs; you can’t make this stuff up). The hashtag #HRderby trended for hours along with #ASG for the All-Star Game, baseball truly became a social media spectacle during the derby.

The home run derby is an All-Star event with zero relevance to baseball’s season. The winning player wins a trophy and pride, but nothing more. Some analysts and players also believe that participating in the event can mess with the player’s swing or jinx the winner for the rest of the season. Managers around the league cringe when their best hitters agree to compete in the derby, but still the MLB knows that its driving revenue and promoting the image it strives for. There is never the mention of steroids when past winners are discussed.

But compare the derby to the NBA Slam Dunk Contest. In theory, the events are similar; they have no bearing on their respective seasons held before their respective All-Star Games, and are very much promotional. Still, even though the dunk contest has lost some of its thunder of late, its reputation is far better than that of the derby.

The home run derby isn’t without its benefits, however. The event has been used as a platform to promote fundraising for organizations such as Habitat for Humanity, and the Boys and Girls Club of America. State Farm donates money to the Boys and Girls Club for every home run hit when a special gold ball is pitched, an expected tradition over the past seven or eight seasons. This year, players also stopped by a construction site just outside the ballpark where they could help with the building of a home for Habitat for Humanity. Fans can rest assured that despite all the promotional hype and excessive advertising, there is still something worth caring about and appreciating.

The home run derby though, undoubtedly, has lost some of its thunder, and has become very promotional. After this year’s derby, commissioner Selig suggested the possibility of the host city send a player to the derby every season, an idea that many people scoffed at. Still though, despite the revenue created by the event, and the All-Star Game festivities in general, many people feel change is in order to reinvigorate the fans. 

Steroids Mean More to the Majors than Meets the Eye

July 11, 2012
by Kelsey Doherty, Marketing Communications, 2014

Last month, Roger Clemens’, arguably one of the greatest pitchers to ever play the game, was acquitted of all six charges of lying to Congress that stemmed from 2008 hearings regarding the use of anabolic steroids, human growth hormones, and other performance enhancing drugs in baseball.

Some questioned the verdict, especially after the admission from Andy Petit—Clemens’ best friend and New York Yankees starting pitcher—that he himself took HGH, and that Clemens had also used PED’s.

Others had been spoken out against Clemens’, including his trainer Brian McNamee, who supposedly had evidence of steroid usage, including needles with Clemens’ DNA. However, McNamee was deemed a “tainted” witness and the jury clearly could not accept his testimonies. As for Petit—strangely enough—after confessing to the media about his use of HGH, and apologizing, refused to testify in court regarding the friend he had already betrayed in the media.

Major League Baseball and Congress were certainly trying to make an example out of the Clemens’ case. It was a great way to show the public the significance and serious nature of honesty in court. But more importantly, it was a way for commissioner Bud Selig and all of baseball to prove their dedication to fighting the war against performance enhancing drugs in baseball. In the end though, was this all just a way to prove to the public—more than the players—that Major League Baseball is making an effort to stop steroid use?

Over the years baseball has been accused of silently allowing steroids to become engrained in the culture of the sport. In the 90’s, when viewership and attendance was down, McGwire, Bonds, and Sosa were able to pull the sport from the ditches and restored viewership numbers with the help of the home run. In an odd way, baseball had to be a little bit thankful for the phenomenal players that performance-enhancing drugs were producing.

In recent years Selig requested that former Senator George Mitchell create a report, not necessarily to name players, but more specifically to understand the extent of steroid use in the game. To some, this just appeared to be a way for baseball to prove that it was taking the necessary to stop steroid use. Random testing has also been put in place. Every once in a while, a player fails a drug test. Most notably has been Manny Ramirez, who continuously failed tests. It is clear that baseball is in cracking down on its policies but with its image already so tainted, what will it take to reverse that?

During these past few years, names from positive steroid testing listing have been leaked to the media. Many players have handled allegations fairly well, apologizing to the media, such as Andy Petit and Alex Rodriguez. Those moves have earned respect among the baseball brass.

The big question that has been looming for some time is whether or not any of the “greats” that have used steroids will ever make the Hall of Fame. Thus far, voters have made it quite obvious they will not vote for the likes of McGwire or Bonds, and it seemed as if Clemens,—as exceptional a pitcher as he was—would not make the Hall either. But now, found not guilty, will writers accept this verdict and allow him a place in history?

We will soon reach a point at which the majority of the Hall of Fame candidates will be from the steroid era, and it will be up to the writers whether they vote in mediocre players that were not linked to performance enhancing drugs, or if they finally allow the big names in with an asterisk by to their name. This great debate will be something we just have to wait for and watch unfold.

When voters decide on this era of players, however, it will be interesting to see who if anyone they vote into the Hall. When McGwire and co were doing their damage, they were head-and-shoulders above every other power hitter in the game. But gone are the days of 70 home run hitters. So even if steroids are still a part of the game, and a major part of the game, are they giving players a decisive advantage? And if not, should that be taken into account in voting?

Infographic: MBA vs. NBA [via]

July 6, 2012

Here on the SBS blog we talk about the ins and outs of sports and business. But what about comparing the two?  To illustrate the comparison for us, we have an infographic courtesy of, a site dedicated to helping students find the right business school for them.

While NBA players are the highest earning professional athletes, top business execs do pretty well for themselves also. Check out this infographic to see how some of the top names in business compare with those in the NBA.


For more information: See the original post here.

Ticket Resellers at the root of MLB Ticketing

June 20, 2012
by Kelsey Doherty, Marketing Communications, 2014
For fans that do not mind spending the extra money and want to avoid virtual waiting rooms or long lines, StubHub has become the mecca of ticket sales. Fans can count on StubHub to find tickets well after an event is sold out, knowing it is a more trustworthy source than the middle aged men scalping tickets around the corner from stadiums and arenas throughout professional venues.StubHub was founded 12 years ago and has seen great success as the middleman between traditional ticket sales and scalping, serving as an online ticket reseller.

The company was purchased by Ebay for $300 million in the summer of 2007, and has thrived since then. It is considered a legitimate source for legal ticket resale and the go-to site for anyone looking for last minute tickets to a game or concert. With an estimated annual revenue of $325 million (Forbes), it is clear StubHub’s ticket price was worth the investment for Ebay, as many fans are taking advantage of the service.

Over the last five seasons, StubHub has been the official ticket reseller of Major League Baseball. The contract, put in place in 2008, is due to expire come the end of this season. Although there is little news available about the possibility of renewal of said contract, it seems as if baseball has been happy with the services provided by StubHub. However, some teams may not be in favor of sticking with StubHub come 2013.

Recently, the Yankees have voiced its frustration with StubHub—blaming its low attendance on the company—despite the fact the team still has the fifth highest attendance in the majors this season. Although it took the team until mid-June to claim its typical spot atop the AL East standings, the Yankees has put themselves back in first place. The team’s attendance is down 3.6 percent this season from last year’s numbers, while last season the team saw a three percent decrease from the year prior.

Randy Levine, the Yankees’ president, recently made comments to the New York Post claiming that the team has a poor relationship with StubHub. But there are other factors that could be playing into the Yankees dwindling attendance. Ticket prices were raised when the Bronx Bombers opened up shop at the New Yankees Stadium, which is now starting to lose the appeal of its newness. The team also struggled out of the gate, raising skeptics. The New York Mets is sharing the same attendance struggles as well, and this may serve as evidence that the economy and the city itself are struggling as a whole, and the Yankees is not the only team feeling the pressure. Of course, the Mets has not finished above .500 since opening its new ballpark in 2009, making it difficult to fill the seats.

It seems that if StubHub was at the root of the problem, then the majors as a whole would see a drop in attendance, but that hasn’t been the case. Baseball has experienced a seven percent increase in attendance across the entire league. The big contributor has been the Miami Marlins and its new park, which on average is drawing in 10,000 more fans a game than it did last season.

Either way, the Yankees is not the first team to be weary of StubHub’s ability to raise prices and negatively influence ticket sales. The Boston Red Sox signed a deal with a much smaller secondary market agency for its ticket sales, Ace Tickets, back in 2008, just before the season started, when StubHub was early in its MLB contract. Ace Tickets falls under the strict scalping laws of Massachusetts and guarantees 200 percent refunds for illegitimate tickets, something StubHub does not offer their customers.Most likely what it came down to was that the Red Sox saw an opportunity to make more money in an Ace Tickets partnership versus the large StubHub-MLB deal. It seems that the Yankees is regretting not making a similar decision and this may be why they are blaming StubHub. As its contract runs out at the end of the season, the team hopes to improve ticket sales for the 2013 season by finding a smaller, localized ticket reseller. Regardless, ticket sales are predicated by a number of variables, and simply switching to a smaller ticket reseller will not automatically mean increased attendance.

Interleague Play: Loved or Hated?

June 12, 2012
by Kelsey Doherty, Marketing Communications, 2014

Interleague play just celebrated its 15th birthday, but its value is still being questioned by some. The system of gameplay was originally put in place for the entertainment value of fans and for baseball’s economic structure back in 1997. During the late 90’s, baseball saw a seven percent spike in game attendance during interleague play. While for many fans and teams it was never fully accepted or enjoyed, it has become an expected part of the season, yet is still often dreaded by some clubs.

Baseball has worked to win over the approval of fans when it comes to interleague play, but as we approach the two week stretch of cross-league matchups, there is no doubt that some players are still unimpressed, while Bud Selig is happy to see a jump in revenues and game attendance.

Many ball clubs today dislike interleague play because they are forced to prepare to face teams they only see once a season. This does seem to be unnecessary and especially taxing on managers and catchers, who spend a great deal of time researching each team and its strengths. It does not seem like a worthwhile venture for teams, but Selig and co sees some value in it and continue to push the interleague agenda.

Over the past several seasons, baseball has tried to find natural rivalries in places like New York and Chicago, but it has also tried to generate rivalries that never truly existed such as the Boston Red Sox and the Atlanta Braves (formerly the Boston Braves for 11 years during the 1940’s and 50’s).  There is no question that games like those in the Subway series do bring in more viewers and they certainly sell out, but is that honestly enough to make up for the other games that no one really cares about? It is clear that baseball’s powers believe so.

Fans may get excited to see teams match up that have not met since a World Series several years prior. However, over the past few seasons, the American League has dominated interleague play.  Since 2007, nine AL teams carry above a .500 winning percentage during interleague play, while only four National League teams have remained above that mark. For teams like the Los Angeles Angels and the Boston Red Sox–the two teams with the highest winning percentages over the past five seasons–interleague play signals a sense of relief and an opportunity to jump ahead in the standings. Other teams teams like the Houston Astros (.358 winning percentage in interleague play since 2007) cringe at the thought of playing American League teams.

So the question remains: Does the economic benefits of interleague play outweigh its negatives? For the time being, the answer is yes.