New MLB Commissioner reduces game schedule – will impact clubs

In his first public interview earlier this year newly installed MLB Commissioner Rob Manfred mentioned a number of ideas he was willing to explore, including a return to the 154-game schedule that existed in the American League prior to 1961 and in the National League prior to 1962.

But hold on. It doesn’t take a financial genius to figure out that lopping eight games off the season is likely to cost someone – owners, players or both – some serious coin. Or is it?

When MLB recently announced that it will conduct an economic impact study to determine the financial ramifications of a reduced schedule you knew the idea had gained some traction. This isn’t about the record books or stats. What really matters to the owners is cold, hard cash.

In case you can’t wait for the results of the study to be made public, here is an advance peek at a number of the findings. First, the revenue loss from four home games will impact some clubs – read, the Yankees and Red Sox – more than it will others, such as the Rays and Marlins.   That may make it difficult, but not impossible as you will see, to get the super majority vote needed to approve a change. Second, although players must approve any reduction in the schedule, don’t expect them to give up any portion of their salary even if it means more off days and less travel. That’s just not how unions – especially one as powerful as the MLBPA – work.

Third, the direct revenue loss – tickets, concessions, parking, merchandise and the like – could easily be made up with a slight, almost imperceptible increase in pricing in all categories. Fewer games would also create higher demand for the remaining dates. Variable and/or dynamic ticket pricing – which has been widely adopted across the sport – would account for most of the lost revenue.

Fourth, national television revenue from ESPN and FOX is unlikely to be impacted. Those networks would continue to broadcast the same number of games each year. In fact, if a reduced regular season schedule was coupled with an expansion of the playoffs – say, increasing the Division Series from five to seven games and adding another layer of playoffs – national media revenue is likely to increase. More problematic are local media rights. Most clubs have long-term media contracts that are based on broadcasting a certain number of games. However, most of those deals have built in flexibility clauses so total revenue from those contracts would not be adversely impacted from a reduced schedule.

Fifth, five-percent fewer games would likely reduce the number of player injuries, particularly those occurring from overuse such as strains, sprains, pulls, discomfort, tendonitis, inflammation and the like. With baseball’s disabled list costing the sport approximately half-a-billion dollars per year, if a shorter schedule reduces injuries it would likely save owners money. The problem comes in quantifying just how many injuries and how much money that would entail. But common sense suggests there would be some savings.

Sixth, any potential short-term loss in revenue would be quickly eclipsed in the not-so-long run. MLB projects gross revenue to increase from the current $9-10 billion range to $15 billion in the next decade. Much of that increase would come from additional international visibility and merchandise sales, internet revenue and of course, media rights including those resulting from expanded playoffs.

What isn’t often mentioned, but shouldn’t be ignored, is the inevitability of expansion, particularly international expansion, another Manfred initiative. Montreal wants a team. There are cities in Mexico and the Caribbean basin that would serve as possible expansion cities. Gone are the days when Bud Selig hand-picked owners and franchise purchase prices, e.g., Washington (nee, Montreal) for a paltry $400 million. The next wave of expansion will see prices exceeding $1 billion per franchise.

Manfred didn’t spend two decades in MLB and ascend to the commissioner’s job because he can’t read the tea leaves. So don’t be surprised if the study concludes that fewer games won’t adversely impact the finances of the sport. The key issues will be how to convince all the clubs they will benefit and of course, selling the change to the union.

To borrow a phrase from the NFL, it’s “more likely than not” that at some point soon we can expect MLB to reduce the regular season schedule.

Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He is a Professor in the Sport Management Department at SUNY Cortland and maintains the blog: http://sportsbeyondthelines.com Jordan can be reached at jordan.kobritz@cortland.edu.

© Copyright 2015 Tanna K, All rights Reserved. Written For: Tinytown Unleashed
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