The Business of Major League Baseball FEI Colorado Chapter April 20, 2017

Baseball is too much of a sport to be called a business and too much of a business to be called a sport. --Phil K. Wrigley Cubs owner (1932-1977)

League Revenues (Billions) National Football League $13.0 Major League Baseball 9.5 National Basketball Association 4.8 National Hockey League 3.7 “Big Four” Leagues $31.0

Average Team Values (Millions) National Football League $2,388 Major League Baseball 1,537 National Basketball Association 1,355 National Hockey League 517 Average Team Value (1998-2017) 11.5%

“Baseball is in the middle of a golden age in which its popularity and financial position have never been more secure.” Stanford Economist Roger Noll

Growth of Major League Baseball Attendance, Revenues & Player Salaries Club Averages (1982-2017) 1982 2017 EST. % of 26 clubs 30 clubs Revenues Attendance 1,714,918 2,438,500 Local revenues $14,909,764 $184,000,000 75% National revenues 2,114,946 60,000,000 25% Total revenues 17,024,710 244,000,000 100% Player salaries $7,738,604 $129,000,000 53%

On Baseball Economics, July 2000. The goal of a well-designed league is to produce adequate competitive balance. By this standard, Major League Baseball is not now well designed. Proper competitive balance will not exist until every well run club has a regularly recurring reasonable hope of reaching postseason play. The Report of the Independent Members of the Commissioner’s Blue Ribbon Panel On Baseball Economics, July 2000.

Major League Baseball Franchises Postseason Play (Wildcard Era- 10 clubs advance) 2012-2016 Los Angeles (NL) 2013-14-15-16 St. Louis 2012-13-14-15 Baltimore 2012-14-16 Detroit 2012-13-14 Oakland 2012-13-14 Texas 2012-15-16 Washington 2012-14-16 Pittsburgh 2013-14-15 San Francisco 2012-14-16 Boston 2013-16 New York (AL) 2012-15 Toronto 2015-16 Cleveland 2013-16 Kansas City 2014-15 New York (NL) 2015-16 Atlanta 2012-13 Cincinnati 2012-13 Chicago (NL) 2015-16 Tampa Bay 2013 Los Angeles (AL) 2014 Houston 2015 Minnesota Chicago (AL) Seattle Miami Philadelphia Milwaukee Arizona Colorado San Diego

--NFL Commissioner Paul Tagliabue (Sports Illustrated, Sept. 10, 1990) Free market economics is the process of driving enterprises out of business. Sports league economics is the process of keeping enterprises in business on an equal basis. There is nothing like a sports league. Nothing. --NFL Commissioner Paul Tagliabue (Sports Illustrated, Sept. 10, 1990)

Average Major League Baseball Club Revenues Stadium Revenues – 60% Tickets (62%) Advertising & Sponsorships (15%) Concessions (12%) Suite Rental (9%) Parking (2%) Local TV & Radio Revenues – 18% Central Office Revenues – 21% MLB Central Fund MLB Revenue Sharing MLB Properties MLB Advanced Media (MLB.com) MLB Network Other Local Revenues – 1% Spring Training Retail Stores

MLB Revenue Sharing (Since 1994) Base Plan – 34% of Net Defined Local Revenue (NDLR) Sample Club $250,000,000 Total Revenues (100,000,000 less National Revenues less Stadium Expenses Equals $150,000,000 Net Defined Local Revenue (NDLR) $51,000,000 34% of NDLR $55,000,000 – 30 Club average $4,000,000 Revenue Sharing to Sample Club Net transfer $345 million to 14 clubs Range: $80 million payor - $50 million recipient

Major League Baseball Player Contract System MLB Debut 0 to 3 Years of Major League Service League Minimum: $535,000 e.g. Kyle Freeland (rookie), Chris Rusin (2.092) 6 Years of Club Control Arbitration 4 to 6 Years of Major League Service Player salary can be determined via Arbitration System Average Arbitration Salary: $3,425,000 e.g. Nolan Arenado (3.155) signed two year contract (2017-18) $29.5 MM Arbitration eligible- Blackmon, Chatwood, Lyles, McGee Last Rockies player- Wilin Rosario $2.8 MM ($3.3 MM player demand) Free Agency 6 or more Years of Major League Service Player salary determined via free agent market Average Dollars Per Win: $7,500,000 (Salary/WAR) Ian Desmond, Mike Dunn, Greg Holland, Alexi Amarista - $97MM commitment (17-22)

Major League Baseball 2017 Team Player Payrolls (in millions) 1 Los Angeles Dodgers $225 2 Detroit Tigers 200 4 San Francisco Giants 181 16 Colorado Rockies 128 29 San Diego Padres 62 30 Milwaukee Brewers 61

Major League Baseball 2017 Team Valuations (in millions) Value Revenue 1 New York Yankees $3,700 $526 2 Los Angeles Dodgers 2,750 462 5 San Francisco Giants 2,650 428 23 Colorado Rockies 1,000 248 29 Oakland Athletics 880 216 30 Tampa Bay Rays 825 205

MLB Ballpark Development Cost Summary Ballpark Opening Year Original Cost Public % Marlin Park (Mia) 2012 $525,000,000 70% Target Field (Min) 2010 $544,000,000 72% Yankee Stadium (NY) 2009 $1,300,000,000 17% Citi Field (NY) 2009 $600,000,000 27% Nationals Park (WDC) 2008 $611,000,000 100% AT&T Park (SF) 2000 $357,000,000 4% Coors Field (Den) 1995 $215,000,000 78% Average - 23 parks (1991-2012) $384,000,000 34%

A Tale of Two Cities San Francisco Giants Colorado Rockies 1883 (1958) First Season 1993 $2.65 B Team Value $1.0 B Charles Johnson Owner/CEO Dick Monfort $100 M Purchase Price $95 M 1993 Year Purchased 1992 $428 M Revenue $248 M $78 M Operating Income $26 M 0% Debt/Value 8% $193 M Player Expenses $127 M $180 M Gate Receipts $61 M

A Tale of Two Cities San Francisco Giants Colorado Rockies 4.6 M Metro Population 2.8 M 41,546 (4th) 2016 Avg. Attendance 32,129 (11th) AT&T Park Venue Coors Field Team Owner Stadium District 2000 Year Opened 1995 41,915 Capacity 50,398 $357 M Cost to Build $215 M Centerplate Concessionaire ARAMARK $44 Avg. Ticket Price $24 $170 Revenue per Fan $50 (8) 2010-12-14 World Series Champs 0

Author, The Entertainment Economy Entertainment– not autos, not steel, not financial services– is fast becoming the driving wheel of the new world economy. --Michael J. Wolf Author, The Entertainment Economy

could one day afford to buy a baseball team. What happens is that all your life you operated businesses in such a way that you could one day afford to buy a baseball team. And then you buy the team and forget all the business practices that enabled you to buy it. --George Steinbrenner Yankees owner (1973-1990, 1993-2010)

Questions?

The Business of Major League Baseball FEI Colorado Chapter April 20, 2017