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Major League Baseball enjoys winning season
Question of the Day
Despite intense talk of a potential indictment for Barry Bonds, the spread of human growth hormone and Alex Rodriguez's sore toe, Major League Baseball is quietly having one of its most successful economic seasons ever.
Attendance is at record levels. Revenues are up. And the league just signed a new television deal that could reap even bigger benefits down the road.
Consider: Last year's leaguewide attendance was the highest on record, and 18 out of 30 teams are on pace to have even higher attendance this season. Of the nine teams that have seen attendance drop this year, three are still drawing more than 38,000 fans a game, and only the Washington Nationals, Baltimore Orioles, Oakland Athletics and Florida Marlins have seen attendance drop by more than 10 percent.
Meanwhile, revenues from national television, radio and Internet deals have increased from $250 million to more than $800 million since 1999, and the league earns more than $30 million just from its contract with XM Satellite Radio.
"From a financial-health standpoint, I don't think they've ever been better," said Maury Brown, an author with Baseball Prospectus, who has written about the sport's economics. "They look very robust right now."
What's more, the league is having one of its most competitive seasons on record. Twenty of the league's 30 teams are within six games of a division or wild-card leader, and only one team -- the New York Mets -- has a commanding division lead.
"I would say from an industry perspective, the league is healthy," said Dave Dombrowski, general manager of the Detroit Tigers, who have the best record in baseball just three years after a 119-loss season. "You can easily say that the game is doing very well."
Mr. Dombrowski credits the league's expansion of revenue sharing after the 2002 season for helping the Tigers turn things around so quickly. The league splits all national broadcast and Internet revenue, and about 34 percent of a team's local revenue is shared.
"I feel very good about where we are," said MLB Commissioner Bud Selig during a roundtable discussion at this year's All-Star Game. "The sport today is more popular than it's ever been. We're going to set another attendance record this year. And I want to keep it that way."
It's quite a change from 2001, when Mr. Selig attempted to contract two franchises and testified before Congress that the league was losing more than $400 million.
Fox and Turner Broadcasting showed their confidence in baseball last week when they signed a $2.5 billion, seven-year deal to broadcast most of the league's postseason, plus the All-Star Game and regular season "games of the week" on Saturdays and Sundays. The Fox and Turner deal, coupled with an existing contract with ESPN, brings baseball's television revenue to more than $5 billion through 2013, and MLB still is seeking suitors for the rights to broadcast one league championship series a year.
"What we see now is a sport that is in relative balance, helped by the new TV deal," said Neal Pilson, a communications consultant and former president of CBS Sports. "Fox and Turner are clearly enthusiastic about covering the games."
Players are making out well, too. Even though big-market teams such as the New York Yankees and Boston Red Sox have curbed payroll in the past two years, the average payroll has increased by $9 million since 2004. From 2002 to 2004, payrolls rose an average of just $2.2 million.
But the economic news is not great everywhere. The Marlins, three years removed from a World Series victory, now field a team of relative unknowns and often draw fewer than 10,000 fans a game. The Kansas City Royals are on track for their fourth 100-loss season in five years, and the Pittsburgh Pirates have not had a winning record since 1992.
To some observers, the struggles of these teams indicates that the league must share even more of its revenue with clubs in smaller cities, or institute a hard cap on team payrolls. High-payroll teams are required to pay a luxury tax, but there is no cap on team payroll as there is in the NFL, NHL and NBA.
"With no salary cap, it's not like you can hold the Red Sox and Yankees in check," said Jeffrey Phillips, director of the sports group at Houlihan Lokey Howard & Zukin, an investment banking firm. "The Yankees are always going to have a higher payroll than the Royals. It's difficult for them."
But most people close to the sport said the Marlins would be successful in a new, baseball-only stadium with luxury boxes and fan amenities galore. And they said the Royals and Pirates can only blame their own poor decision-making for their struggles, pointing to lower-payroll teams such as the Athletics and the Minnesota Twins that are routinely in contention.
"You have the doormats ... there's still the Pirates, there's still the Royals," Mr. Brown said. "But with the top and bottom taken out of it, there's a middle where everybody has a chance to make a run at it."
MLB officials have pushed for additional revenue sharing during its negotiations with players this year on a new collective-bargaining agreement. The league may also argue for a standard minimum payroll so that small-market teams are required to spend their revenue-sharing payments on players.
But major economic changes -- or another threat of a work stoppage by players -- is seen as unlikely.
"If your business is stable, everybody's going to make more money," Mr. Brown said. "Everyone's financially healthy right now, and when everybody's healthy, people are less likely to fight."
By Matt Kibbe
The short-term deal will assure long-term overspending
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