Big Ticket Signings Don’t Drive Attendance by Dave Cameron December 9, 2011 With the Angels throwing a small mountain of money at Albert Pujols, a common justification for the expenditure is that the revenues he creates through gains in attendance and merchandise sales will make up for the costs of acquiring him in the first place. This argument is a pretty common one among people looking to defend free agent prices, but it has one fatal flaw – there isn’t much in the way of evidence to support the idea. The merchandise argument is almost a total non-starter, in fact. As part of MLB’s revenue sharing plan, the profits from sales of jerseys, hats, and the like are pooled into the central fund and distributed equally to each team around the league. While about one-quarter of all baseball jerseys sold have a Yankees logo on them, each team shares equally in the profits from those sales. Even if every person to walk through the gates in Anaheim next year purchased a Pujols jersey, the Angels wouldn’t get much benefit from those sales. Where teams can really differentiate themselves and create additional revenues are attendance and television contracts – teams pocket the profits they make by selling more tickets or by negotiating better rates with their local cable provider, or, in many cases, creating their own regional sports network and cutting out the middle man. The Angels’ spending windfall is essentially a direct result of the latter option, as Arte Moreno exercised an opt-out clause in the team’s television deal last winter and renegotiated a new contract that will reportedly pay the team $3 billion over the next twenty years. The contract essentially tripled the team’s TV revenues, upping them from $50 million to $150 million per season. However, that deal was already agreed to before their recent series of signings, and adding Pujols won’t allow the team to extract even more money from Fox Sports. The franchise secured those revenues prior to signing Pujols, and his presence won’t earn them any extra money even if their ratings go through the roof during his time in Anaheim. By the time the Angels television contract is up for renegotiation again, Pujols’ days will be long since finished, and his presence on the roster a decade prior won’t have much impact on what kind of deal the franchise will be able to negotiate in 2031. That essentially leaves revenues from items related to stadium attendance – ticket sales, parking, concessions – as the one area where Pujols could generate an increase in profits for the Angels. While MLB teams are forced to share a portion of their locally generated revenues, they keep 85 percent of the profits from their gate receipts, so a significant spike in attendance from adding Pujols could put more dollars in the team’s pockets, offsetting some of the cost of his contract in the process. The problem here is that there simply isn’t much evidence that these kinds of contracts actually drive sustained long-term increases in attendance. The most comparable deal to this contract is, of course, Alex Rodriguez’s $252 million deal that lured him to Texas during the winter of 2000. Tom Hicks made similar financial arguments at the time of that deal, arguing that Rodriguez’s name value would cause a drastic increase in attendance, which would also allow him to make large gains in revenues from developing the land around the Rangers ballpark. However, that simply never materialized. Here’s a graph of the Rangers attendance from 1996-2005, which gives us a 10-year window that includes their ability to draw fans before Rodriguez arrived (’96-2000), during his time in Texas (’01-’03), and the first two years (’04-’05) after they shipped him to New York for Alfonso Soriano. The Rangers were drawing well in the mid-1990s as they were perennial contenders in the AL West, but were seeing the fans come to the park less often as the team’s fortunes on the field took a turn for the worse. Rodriguez’s arrival turned that tide, and in 2001, the Rangers saw their attendance jump by 242,620 fans over the prior year. That nice little spike got them back near the attendance levels they were experiencing when the team was winning, but it was a short-lived boost, as fans quickly realized that they weren’t overly interested in watching Rodriguez play for a losing team, and they avoided the park en masse in 2002. In fact, the loss of 478,624 fans between Rodriguez’s first and second season was twice as large as the gain they got from the spike of bringing him in, and then they lost another 258,003 fans during Rodriguez’s third and final season in Texas as well. By the end of his stay with the Rangers, the team had actually seen a net loss of 494,000 fans compared to their final year prior to signing him. Having not realized any real financial gain from having Rodriguez on the roster, the Rangers gave up on the idea of keeping him in Texas and shipped him to New York for Alfonso Soriano and some salary relief. They cut payroll, re-built the roster, and managed to turn a 71-win team from 2003 into an 89-win team in 2004. And, in perhaps the greatest demonstration of what actually causes fans to decide to go to the ballpark, the Rangers saw an attendance spike of 419,291 fans. The attendance spike that occurred in the year they got rid of Rodriguez was 73 percent larger than the spike that they got when they acquired him. And, unlike the short-lived boost that came from bringing Rodriguez onto the roster, this spike actually held, as the team was able to maintain those attendance levels in 2005, actually adding another 11,536 fans in the second year after Rodriguez’s departure. If one were to simply look at the facts regarding attendance in Texas surrounding Rodriguez’s arrival and departure, it’d be hard to conclude anything other than that having him on the team had no real impact on drawing fans to the park, nor did he create anything close to the extra revenue that Hicks may have anticipated. Of course, this is just one player in one city, and while Rodriguez was a phenomenal talent, he wasn’t quite the established superstar that Pujols is currently. So, let’s look at another example where the sport’s marquee player changes cities with a deal that looked to lock him up for the remainder of his career. Cincinnati Reds attendance, 1996-2005. Year Attendance Note 1997 1,785,788 1998 1,793,649 1999 2,061,222 2000 2,577,371 Ken Griffey Jr. Acquired 2001 1,879,757 2002 1,855,787 2003 2,355,259 Great American Ballpark Opens 2004 2,287,250 2005 1,943,067 The Reds saw a 25 percent attendance boost the year after they acquired Ken Griffey Jr, the most recognizable player on the planet at the time he was traded from Seattle. However, one year later, they saw a 27 percent decrease, as the novelty aspect wore off and fans realized that they simply did not want to pay to watch Griffey play on a losing team. Attendance continued to hover at pre-Griffey levels until the Reds new ballpark opened, which created an attendance surge of similar proportions to acquiring Griffey. Again, though, we see that having Griffey as a gate attraction didn’t lead to any kind of sustained revenue growth for the Reds, despite the fact that he was a local hero and his father had been a star for the franchise previously. Given Griffey’s marketability and his connection to the city, he’s perhaps the perfect storm of circumstances that should conspire to bring fans to the ballpark. And like with Rodriguez, the team did get a boost in year one, but once again attendance returned to prior levels in year two. At best, there appears to be a short-lived gain associated with making this kind of investment in a player who you expect to draw fans to the park, and even that effect has a minimal financial impact on the organization. If you look at other big money free-agent signings over the last 10 years, the pattern is the same. Teams might see a small bump in year one, but if the team doesn’t win, the fans don’t stick around. If Albert Pujols is going to earn his contract, he’s going to have to do it by producing wins on the field. A team’s record is the driver of attendance, and if Pujols makes the Angels contenders, they will benefit from the extra revenue associated with drawing more fans and earning potential windfalls from playoff appearances. However, there’s simply not much evidence that Pujols will produce revenue for the Angels above and beyond what he’ll add through helping the team accomplish those goals. Wins create revenue, not star-attraction players.