The business of making money in baseball today is not they way it was 25 years ago. For the first 130 years of professional baseball a good chunk of the way Major League Baseball teams made a majority of their money was by selling tickets. Getting fans through the gate and into the seats well outpaced advertising at the ballpark, or radio contracts, or from about 1990 on – television contracts.
All of that started to change at the turn of the century. While the mid-90’s started to see things change when, at least in Cincinnati, Sports Channel started showing 50+ games a year on cable, it was a handful of years later that really changed the game. That’s when the owners got together and started MLB Advanced Media. It was their all encompassing web presence that included what turned out to be a gold mine in MLB.tv. The technology gained from that led to countless amounts of money.
There was another technology shift that turned television contracts upside down, too. The DVR. While TiVo has been around for a while, it was a premium product for a while (it still is). But in the last decade-ish, pretty much every cable or satellite provider has provided the option for a DVR to their subscribers. That left advertisers less than willing to pay top dollar for many programs as consumers would often turn to them after the fact and then fast forward through the commercials. Sports, however, was immune to that as nearly everyone is tuning in to watch them in real time. And that led to the regional sports networks paying through the nose for broadcast rights because they could in turn charge through the nose for advertising because people would actually be seeing those commercials. That’s also led to enormous national contracts for television rights, too.
While I do think it’s going to be rather interesting to see how this plays out in the long run because now days when a commercial comes on what do you do? It probably isn’t just sit there and keep watching the television. You grab your phone or tablet and check in with the world. Advertisers are still ignoring that this is happening, mostly, but it won’t last forever. It’s one reason that sporting events are doing more “between plays” advertising. Sure, it adds an extra “ad-spot”, but it’s also one that they know consumers will actually see.
In today’s business of baseball a big chunk of the money brought in is through revenue sharing and television contracts – local, national, and the MLB.tv share. The ticket sales, while still having plenty of value, doesn’t mean nearly as much as it used to. And with the value of television contracts, and the lengths of them (some teams signed them for two decades), it’s led to situations where winning doesn’t actually matter to the bottom line anymore. Or at least it doesn’t matter much.
With all of that said, winning more does matter some. The Reds have been in what feels like a perpetual state of losing for the last half-decade. Last offseason they decided to try and make improvements from the outside of the organization, trading for three starting pitchers to add to the rotation, several outfielders, and a utility man. They also decided to replace almost the entire coaching staff. Some of it worked. Some of it didn’t. But in the end, Cincinnati won more games in 2019 than they had in the previous four seasons.
More wins, and perhaps more exciting games being played deeper into the season, let to better ratings on television and more tickets being sold. On the television side, ratings were up from last season’s 4.1 rating. In 2019 that jumped up to a 5.2 rating, which means about 44,000 homes were turned into the Reds games each night in the Cincinnati market. That’s very high in terms of a rating, which was 6th in baseball, but given how small the television market is, it’s still a small number of viewers by comparison to many teams in baseball. For example, that same rating in St. Louis, also considered a “small market” by television standards, would be 61,000 homes. In New York a 5.2 rating would be 369,000 homes.
But depending on how the Reds are dealing with their ownership in Fox Sports Ohio – they got an unnamed percentage stake in the company as a part of their last television contract – which also gives no details on the amount of money they get per year – it’s possible that more viewers leads to more money to spend on the team. That is, of course, assuming the organization is treating that ownership stake as “baseball money” and not just some investment for the owners. We don’t know how they are choosing to handle that.
Then there is the increase at the gate. The Reds attendance jumped up to 1,808,685. That’s up from 1,629,356 in 2018. But it’s also the lowest outside of that in a decade. In 2009 they dipped to 1,747,919. The 2019 attendance is the 3rd lowest in the last two decades, and the 5th lowest since 1987. So while things were technically “up”, it was still very low, even by Cincinnati attendance standards.
That can be both good and bad. The bad, of course, is that it’s low and while tickets don’t make or break the budgets anymore – they still do matter. With an average ticket price of $44 in Cincinnati, 300,000 extra tickets sold is $13.2M just from the ticket sales. If they could get back to the 2.4-2.5M they were at earlier this decade, then you’re looking at an extra $25-30M a year to spend thanks to ticket sales. And that’s the good. There is clearly room for growth in ticket sales. Now it’s up to the organization to give the fans a reason to buy more tickets.