Last week, Major League Baseball agreed to add an
additional wild card slot to both the American and National League, allowing
for a total of 10 teams to compete in the playoffs for the World Series title.
(ESPN)
What I was wondering is whether or not this move was
a positive note for the league economically or not. Or to further propose was enough change made
to improve the league financially?
In 2010, Reuters reported that the MLB was making a
record amount of revenue, surpassing $7 billion. However, the fact was that attendance at
games was down, and television viewship also took a toll. The only reason revenues were up was the
value that advertisement slots had on numerous companies. Sports sponsorship and advertising is an art
form in itself, but I want to focus on the longevity of the main variables in
sports business success: attendance and viewship.
When we see decline in both attendance and viewship,
this signals huge red flags for the league.
One of the big financial problems that other leagues, especially NASCAR,
have had in the past is the lack of interest in the regular season. NASCAR was forced to adapt a playoff series
in order to gain younger viewers and attempt to rejuvenate a dying sport. For the MLB, many concerns with younger fans are
the numerous amounts of regular season games, followed by very few spots in the
playoffs. This turns away many people
from the sport, and overall causes a lack of interest in the league.
The majority of the viewship for the MLB comes
during playoff times. By increasing the
number of teams, there is bound to be higher viewership if the right amount of
games is adjusted. I believe that
majority of American’s utility curves towards playoff games, regardless of the
sports, has a regular production curve, where diminishing returns are
eventually reached. The point where the MLB
stands though, in my opinion, is very low on the utility level. Therefore, I expect to see some growth, but
far more potential growth, with the development of just two more teams in the
playoffs.
At this point, the costs of including more teams in
the playoffs are far below the potential benefits of more playoff teams. Fans enjoy seeing their team winning. With the viewship and attendance down in the
MLB, it seems only logical to test the waters.
Furthermore, advertisement slots are most sold (and most expensive)
during the playoff season. By having
more games, the probability that demand will still exceed the level of supply
to keep prices high on advertisement slots.
I am interested to see what the MLB will plan to due in the next five
years, as I see so much potential for a sport that has lost the place of
America’s sport in the past decade.
References:
- Klayman, Ben. “Analysis: No Perfect Game but MLB to Post Record Revenue”. Reuters. http://www.reuters.com/article/2010/10/25/us-baseball-economics-idUSTRE69O4GQ20101025
- “MLB, Union Agree to Expand Playoffs”. ESPN. http://espn.go.com/mlb/story/_/id/7638357/mlb-expand-playoffs-two-teams-10
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