Jays, Mets, Royals Reaping the Rewards of On-Field Success

Television deals get a lot of publicity when it comes to looking at Major League Baseball finances. National television deals that went into effect in 2014 give MLB $1.5 billion per year through 2021, and local television deals have increased over the years providing more money to clubs to provide their product to those not physically witnessing the games. Despite those big figures, all teams still see a large portion of their revenues from doing business the old-fashioned way — putting butts in the seats.

Television revenue, particularly locally, is one way that the large-markets have a big advantage in revenues. Those same teams in New York, Los Angeles and Boston also have some inherent advantages in creating local revenue due to a larger base of potential ticket-buyers, in theory leading to higher prices and greater revenues. Teams in smaller markets likely cannot bridge that gap entirely, but they do have one option in an attempt to bridge that gap, and that is to win baseball games. The Kansas City Royals saw a surge in the standings from the get-go this season following their playoff success last year — and teams like the Pirates have also benefited from winning — but small markets are not alone in their ability to increase revenue through wins: both the Blue Jays and Mets are also seeing increases in attendance, and in turn, revenue.

On the season, the Dodgers, with their massive stadium and fanbase, are once again leading the league in attendance, per Baseball Reference.

Some usual suspects (St. Louis, San Francisco, the New York Yankees) follow in line behind the Dodgers with the Tampa Bay Rays and Cleveland Indians drawing roughly one-third the fans of league leaders. Attendance for all teams generally moves upward as the season wears on. The weather is better, and for many teams the games are more important. The last time I took a look at attendance was near the beginning of June. Here are the differences between the average attendance from the beginning of the season to June and the seasonal totals as of the eighth of September.

As the graph shows, almost all teams have seen increases from the beginning of June. If comparing just the attendance from the first two months to the attendance during the last two months, the figures are virtually double the amounts shown above. Likely not too surprising, the teams that have actually lost a decent amount of attendance are all having disappointing seasons. The Oakland A’s struggled out of the gate and have never been in the race. Seattle generated some preseason buzz, but the team failed to deliever. Philadelphia and Milwaukee had low expectations and they generally have delivered on their lack of promise. Three of those four teams, with the A’s as the exception, have undergone significant changes at the top of their respective organizations.

While most teams have seen increases — even some of those which haven’t played so well — the top five teams on the list have all produced successful 2015 campaigns on the field. Four of the five teams would be in the playoffs if they started today, with the Twins still surprisingly in the Wild Card race. Perhaps not coincidentally, four of the five teams that have seen the biggest in-season increases are teams that were not necessarily expected to compete this year. The Astros were thought to be at least a year away, with Toronto pulling off big moves at the trading deadline on their way to a surge to the top of the American League East. Expectations were not high in Minnesota, either. As for the Cubs, they were thought to be close — and, actually, much of the increase in Chicago can be attributed to the completion of the bleachers which were not ready at the beginning of the season. The Pittsburgh Pirates had high expectations, but having one of the very best records in baseball has kept positive attention on the club.

Some of the teams in the middle of the graph above — like the Dodgers, Giants, and Cardinals — are not higher simply because they did not have much room to move up due to already high attendance. Other teams are in the middle because they realized their attendance gains from close to the beginning of the season. The graph below shows gains made over last year’s attendance.

Of contending teams, only the Rangers (who disappointed for much of the season), Yankees (who are in their first Jeter-less season), and the Angels (who have had their share of PR blunders) have experiences significant decreases from last season. The Royals, following up the enthusiasm of their World Series appearance with another fantastic season, are the clear leaders here. Kansas City’s gains this year are bigger than the Astros’ and Mets’ combined. Seattle and San Diego are still seeing the benefits of making noise in the offseason while the Cubs and Toronto are using their big recent increases to move higher in overall attendance.

Seasonal attendance has a big effect on a team’s bottom line. Using the average ticket prices from Team Marketing, we can estimate the difference in revenue from 2014 to 2015 solely from changes in attendance. Team Marketing lists two prices for tickets: the average ticket price and the average premium ticket price. For the purposes of this estimate, I assumed that the stadium is 90% regular tickets, and 10% premium. On top of this assumption, we also must assume that the increase in ticket sales is an average one across all price levels. Team Marketing has a Fan Cost Index that includes some incidental costs that typically increases the price of the average ticket by 50%-100%, but those costs are not included below. The revenues below are based on an 81-game home schedule. The added benefit of the playoffs is not included. As would be expected, the Royals come out on top.

While the public funding of new stadiums is controversial, the benefit to their teams is less so, as getting attendance up in Tampa and Oakland by just 5,000 fans is likely worth more than $10 million per season with the potential for much greater gains. The teams in the middle of the graph are often still making a lot of revenue on tickets as some of those teams have had very high attendance over several years. Teams like the Phillies, Yankees, and Rangers, have all come from a fairly high perch, leaving room to fall and still generate a lot of ticket sales. In terms of bringing in new revenue this year, we see the new-ish contenders (Royals, Astros, Cubs, Mets, Blue Jays) all making eight-figure gains over the previous season. Those gains are likely to last into next season as winning creates more fans in the next season, barring a disastrous offseason. Teams that had higher expectations, like the Mariners, Padres, and White Sox, will have to recharge this offseason if they want to make their gains sustainable. Fans like to see a better product, and for teams like the Blue Jays, Mets, Cubs, and Astros, putting a winning product on the field is a mutually beneficial decision.