The BIZ OF BASEBALL

One can evaluate a sports team in many ways, by playing success, by popularity, and by evaluation as a biz, etc. We’ll evaluate MLB’s teams as bizes using the 4 metrics as described below. (We also shall note 2014’s playoff teams.)

  • The Value of each team (Forbes) & % change vs the yr b-4;
  • The Operating Income (Forbes) of each team;
  • Each Team’s Total Payroll (USA2Day) Opening Day and;
  • Each Team’s Fan Cost Index (or FCI, from Team Sports Marketing, includes 4 avg-priced tix, the 2 cheapest draft beers in the stadium, 4 cheapest soft drinks, 4 regular-size hot dogs, parking for 1 car, 2 game programs & 2 of the least-expensive adult size adjustable caps.)

Table 1 is MLB’s BE$T BA$EBALL BIZ ranking. It is a shorthand composite of our 4 metrics’ rankings (that is found in it’s entirely in the APPENDIX). No system (such as ours) is perfect. For example while we weighted our 4 metrics equally, some would argue that such metrics as Team Value or Oper Inc should be weighted more than others, etc. We shall now briefly discuss the current status of each metric and then finish by revealing  our overall TOP 10 with some discussion.

$OME $PECIFIC$ OF THE BE$T BA$EBALL BIZE$’ METRIC$

Team Values Increase: 48% WOW!

From 2010 to ’11 avg Forbes’ Team Values grew 6.4%; followed by yrs of 15.7%, 21%, and 10.2%. Then from ’14 to ’15 the avg growth was a bombastic 48%. WOW! Additionally, we note that the 5 fastest growing Team Values b/t ’14 & ’15 were SF (+100%), and WSH (+83%) after winning the NL East last yr. Clearly location & winning make a difference. STL increased +71% (b/c it’s STL!) and NYM & NYY grew 69% & 68%, respectively. All hail NYC, while DET (+65%) was 6th with 4 consecutive Division titles.

Operating Income

There are 5 MLB teams whose B$BLL BIZ are 2nd to NONE. STL’s Oper Inc of $73.6 M is MLB’s BE$T (Forbes, 2015). Arguably, since WWII, the “Gateway to the Baseball” (with the help of An Busch and Jack & Joe Buck) has been the Cardinals and now it is MLB’s most profitable franchise. Then come CHC (+$73.3 M); SF (+$68.7 M); BOS (+$49.2 M) and PIT with its Oper Inc of $43.6 M. Since CHC, SF & BOS will receive more  later (TOP 10) we’ll move to PIT. It finally has a winner with a relatively new (and very fan friendly) ball park (PNC) in a smaller metro. It is managing its $$ very well by NOT engaging in player salary battles. Since Oper Inc stars will be discussed at the finish, we’ll quickly list and discuss our Fab 5 LO$ER$! (Neg Oper Inc Teams)

  • PHL (-$39.0 M) is a big market team with a big payroll ($133 M) and aging players. GOOD LUCK!
  • DET (-$20.7 M) is a mid-market team with the 4th biggest payroll and a committed and unquenchable THIRST for WINNING ( Illitch wants more than just a pizza slice of $ucce$$).
  • TOR (-$12.9 M) is a small mrkt where HOCKEY is king, the Raptors are queen and maybe the Js are the joker? Frankly, the Js will NEVER be able to enjoy biz success until they move! (Will they continue to be subsidized by MLB and/or CA’s gov. Lets face it, it is part of Canada’s mental health plan).
  • LAD (-$12.2 M) have MLB’s highest payroll (OUCH!) and appear like the NYY NOT to care so much about the $$.
  • ARI (-$2.2 M) has the smallest Payroll in MLB (28% of LAD) this yr and the biggest % decline in Payroll (-41%) since last yr. They’re 30th in Payroll & Attd. &, By the way, they had MLB’s wor$t W-L% in 2014. Even in 2011 when ARI won the NL West and won 4 post season awards they still ranked 18th in Attd. GOOD LUCK D-Backs.

Payroll Roulette

7 of the 10 highest Team Values are among the 10 teams with the highest Payroll. Correspondingly, 7 of the lowest Team Values are among the 10 teams with the lowest payroll. The roulette part of this comes when we examine on the field success with payroll strength. Of the 10 playoff teams, 5 have TOP 10 payrolls; 3 have MIDDLE 10 Payrolls; 2 have BTTM 10 Payrolls. (The WrldSr Champ SF has the 6th highest Payroll while the AL Pennant winner KC has the 17th highest team Payroll this yr.)

Fan Cost Index

BOS has the highest FCI (at $350.86); followed by the NYY, CHC, PHL & SF (FCI at $241.13). Fans pay for the brand (THANKYOUVERYMUCH) and for winning (note SF’s status). The Twin’s think their new stadium is worth increased prices, period! We shall see. In 2014 the Twinkies won ONLY 70 games and had ONLY 27,745 fans per game. (The value of winning here can’t be overstated as PIT’s increased FCI % of [+6.5%] and AL winner KC’s jump in its FCI by a JUMBO 10.5% clearly indicates. Again, for %Δ data please see the APPENDIX.)

We played around with the FCI a little bit & multiplied it by the avg ATTD each team had in 2014 (Please see vol 25 issue 30 – PROMOTOPIA XXII for those #s).  MLB avged 30,456 last yr. The avg FCI is $211.89 so that means that each MLB game would gross about $1.65 M. Just 4 the record ONLY 2 teams grossed $3 M± per, the NYY ($3.58 M) & BOS ($3.2 M). The next 4 teams are at least $1 M (or more) less than NYY. These were STL ($2.58 M), LAD ($2.55 M), SF ($2.50 M) & CHC ($2.46 M). At the BTTM of the league were 3 teams’ whose avg gross would be less than a $1 M per game. Those were ARI ($0.81 M), CLE ($0.77 M) & TB ($0.70 M). It would take each team almost 5 home games to equal 1 NYY home game giving an avg FCI. WOW!  We think we have just solved the answer to why MLB has revenue sharing among its 30 teams. (The key for EVERY team beyond its W/L % is to have GREAT promos & make sure every fan has a real MLB experience.)

$IZE MATTER$ & THE TOP 10

We shall conclude this BE$T BA$EBALL BIZE$ issue by stating that 7 of the TOP 1/3± teams are located in large metros (with populations of 5M+). The MIDDLE 1/3± shows 3 (CWS, TEX [DLS] & ATL) in large metros. In the BTTM 1/3 there are 2 teams (HOU & MIA). Now to the TOP 1/3. (Please see APPENDIX for greater detail regarding Δ %s)

  1. BOS – While its pop is NOT quite 5M, the BOS Red Sox & Fenway Park are iconic. BOS is a “TOP 5” team in ALL 4 categories being #1 in FCI with its ability to command top dollars for its tix, concessions, etc. It is #3 in Team Value ($2.1B) & #4 in Operating Inc ($49.2M) ANYQUESTION$? (Even w/o The Babe, BOS is BASEBALL’$ BE$T BIZ!.)
  1. SF – While NOT a 5 M metro team SF has won 3 of the last 5 World Series WOW! B/T 2000 & ’15 its Team Value has soared from $483 M (9th in 2010) to $2 B (4th in 2015) for an incredible increase of 314% (and a jump of 5 places) vs the avg league increase of 144%. MYGOODNE$$! It’s Oper Inc has increased 191% vs a MLB avg of 3%. MYGOODNE$$!! MYGOODNE$$!!
  1. (TIE) The CUBS story is EZ. Metro CHI is the US’s 3rd biggest metro and the Cubs (like BOS) play in an icon field (Wrigley Field). Super Station WGN-TV brought the “lovable losers” to America in the late 1970s. In the early 1980s famed broadcaster Harry Carey became part of the Cubs charisma that captured America.
  1. (TIE) In the last 5 yrs, STL has won 2 NL flags and 1 World Series. While STL is NOT a large metro, it IZ MLB’s #1 town!!
  1. (TIE) WSH – The Nationals play in our country’s capital. Outside of the BOS Red Sox, they are the ONLY other MLB team to be a TOP 10er in ALL 4 The fact that their payroll is MLB’s 3rd biggest is amazing. The Expos moved to WSH in 2005. In 2010 WSH was valued at $387M (18th) vs $1.28 B in 2015 (9th with an increase of 165% in 2015 vs the league avg of 144%). Obviously, politicians want competitive MLB in the summer! (The Democrats want lefties & the GOP wants righties. GO FIGURE!)
  1. NYY – Everyone’s fave for #1 in biz of baseball, the NYY finished 6th. Its value is a runaway #1 ($3.2B). Its Operating Inc however, is #22 ($8.10 M & is less than 1/3 of 2010s).  Its starting team salary was #2 ($213.5 M) with a FCI of $337.20 (#2).
  1. LAD – America’s 2nd biggest metro has MLB’s 2nd highest Team Value ($2.4 B); it also has replaced the NYY as having the #1 payroll ($230.4 M). The Dodgers are #12 in FCI ($218.94).
  1. NYM – In many ways the Mets are a NYY While its Team Value is less than ½ of NYY, it has grown by 69% over the last yr. Its Opening Day payroll is but 20th (of 30) with a FCI that has actually lost 4.4% since 2013.
  1. SEA – Surprising some, the Mariners are a TOP 10 BE$T BIZ team. WOW! It ranks #11 in payroll, #12 in Oper Inc to go along with less favorable rankings for Team Value and FCI at #14 & #15, respectively . These values in sum lift SEA to its lofty #9th OVERLL spot. Truth be known, the Mariners have the least swing in the ratings of any other team being no higher than #11 and no lower than #15. Its consistency on the 4 metrics gives it a gaudy overall ranking of 9.
  • (TIE) PHL – The Phillies tie the Angels for 10th BE$T B$BLL BIZ team. The Phillies are in the US’s 4th biggest metro market. They have the 9th highest Value, the worst Oper Inc ($-39 M) OUCH! With the 9th highest Payroll (after decreasing it by 26% vs 2014) AND the 4th highest FCI, even though they won ONLY 73 WOW! PHL is truly a bsbll biz anomaly. GOOD LUCK!
  • (TIE) LAAThe 2nd team in America’s “new” 2nd city (LA) shows a strong Team Value (#8 at $1.3 B). #7 in Opening Day Payroll (as it has signed experience such as Albert Pujols and youth such as Mike Trout to long term contracts.)

PLAY BALL!!

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About bernacmd

For over 24 years, University of Detroit Mercy Marketing Professor Michael Bernacchi, Ph.D., J.D, has produced "uNDER tHE mIKE-rOSCOPE", a newsletter discussing current "marketing and advertising¹s bends, trends & ends." A well-know fixture in Detroit and national media, UDM's marketing guru has made several appearances on CNN's "Talk Back Live," the Voice of America worldwide radio network (VOA), ABC, CBS, NBC, MSNBC and on the pages of Sports Illustrated, Time, TV Guide, the New York Times, USA Today, the Wall Street Journal and the Washington Post, to name a few. At University of Detroit Mercy, he has taught courses in Marketing Management, Consumer Behavior, Marketing Communications, Research and Corporate Social Responsibility and Sports and Entertainment Marketing. Michael Bernacchi can be reached at 313-993-1116 or bernacmd@udmercy.edu. Please appropriately attribute the following for their work on uNDER tHE mIKE-rOSCOPE: Yen Ju Lee Robert Rouse Vidhyasagar Natarajan Eric Baumgardner & Ian Young
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