Kobritz: Players’ salaries don’t dictate ticket prices in baseball
BEYOND THE LINES
If your favorite MLB team has recently signed a free agent or given a star player an extension, you may be concerned about the future price of tickets. Don’t be.
Manny Machado was the first big name free agent to sign, a 10-year, $300 million contract with the Padres. The Phillies followed suit by signing Bryce Harper to a 13-year, $330 million contract.
Third baseman Nolan Arenado passed on free agency to sign an eight-year, $260 million extension with the Rockies.
Those numbers were dwarfed when the Angels rewarded Mike Trout with a 10-year, $360 million contract extension that will pay the best player in baseball a whopping $430 million over the next 12 seasons.
Paul Goldschmidt of the Cardinals and Chris Sale of the Red Sox also signed extensions for high average salaries, but given their ages, not the length of the other four contracts.
The deals prove there’s plenty of money in baseball and teams are willing to spend it on the right players, despite continuing complaints from the rank and file, unsigned free agents, and union headquarters.
It supports a principal I have always lived by: You never overpay for quality. It’s the high cost of mediocrity you will come to regret.
Fans of teams that will be signing mega-checks well into the future are excited about the acquisition or retention of star players, but many of them also anticipate higher ticket prices.
That concern is misplaced. While little academic research has been done in this area, what exists didn’t find any correlation between higher salaries and increased ticket prices.
History and observation confirms that conclusion. If anything, it’s the reverse: higher ticket prices gives teams greater financial resources which can lead to higher salaries, or at least it did in the past.
That position was espoused by no greater authority that former union executive director Marvin Miller, an economist by trade. But even that correlation no longer exits.
There are several reasons why increased salaries don’t lead to higher ticket prices, most of which have to do with two factors.
One involves the current business model prevalent among MLB teams, which values players differently than they did even a few years ago. No longer do teams lavish high dollar, long-term contracts on middling, aging veterans, opting instead for younger, cheaper talent.
Teams are also less reliant today on fan attendance, which fuels ticket and concession sales. Central Fund revenues, which includes national and international media contracts, licensing fees, and most recently, internet revenues, are shared equally among all teams.
On field success and the size and financial wellbeing of a team’s market impact supply and demand, thereby affecting ticket prices much more than player salaries.
A number of teams also generate considerable revenue from non-baseball activities, exemplified by the Atlanta Braves’ real estate development surrounding SunTrust Park.
All of which leads to the conclusion that fans can enjoy the exploits of Machado, Harper, Arenado and Trout, knowing ticket prices are likely to rise, but not because of the players’ new-found riches.
Jordan Kobritz is a non-practicing attorney and CPA, former Minor League Baseball team owner and current investor in MiLB teams. He is a professor in the Sport Management Department at SUNY Cortland and maintains the blog, sportsbeyondthelines.com. The opinions contained in this column are the author’s. Kobritz can be reached by email at firstname.lastname@example.org.