In the wake of the global coronavirus pandemic, the sports world has been turned upside down on a scale unlike any in recent memory. Baseball has especially taken a hit, given that it was only weeks away from the start of the 2020 season. The NFL had an entire season under its belt, and the NBA and NHL were able to complete and collect revenue for the majority of their seasons. Baseball, however, was at a much more unfortunate point on its financial calendar. It had already accrued a number of expenses in preparation for the season but was yet to have the luxury of playing games to cover those expenses. If the world's recovery time from the virus aligns with conservative projections, the entire baseball season would be lost.
While this prospect is clearly less than ideal across the board, Major League Baseball should have no problem recovering in the long run. The MLB has money in the bank, so to speak. When things presumably return to normal in 2021, the sponsors will still be there. The lucrative television contracts will still be there. It has been nearly a decade since one of the 30 existing MLB franchises has applied for bankruptcy. What's more, a number of fledgling plans to continue the MLB season in isolated locations with no fans in attendance have been gaining some traction.
It is plausible that we could see major league teams back in action at some point this summer. Minor League Baseball, however, will have a much more difficult time recovering from the impending financial setback. Minor league teams have much less liquidity than their major league counterparts. Minor league teams generally do not play in the same large cities as their major league affiliates. Instead, they play in smaller, more remote cities where they are the best baseball experience in town. Their games are broadcast only on local TV, if at all. Their revenue model is focused much more on ticket sales, concessions, and local corporate partnerships than that of the MLB. It is for this reason that the minor leagues will have a difficult time treading water even if baseball is allowed to continue without fans.
There is certainly a financial silver lining to a year without baseball. Costs of operation are all but eliminated. Any contractors (field maintenance, food vendors, etc.) normally hired by the team do not have to be employed for the entire season. Players, coaches and team staff will likely see a reduction in their normal wages.
In the case of the minor leagues, however, the money saved amounts to a very small fraction of the potential revenue lost in ticket sales and fan experience. On average, a minor league baseball club accumulates $5.4 million per year in gross revenue. Of that amount, $4.9 million (more than 90%) comes from ticket sales and in-stadium purchases. Each month that the club cannot welcome fans into its stadium, it stands to lose 15.6% of its expected annual revenue.
What's more, any commitments that a team has made will have to be honored when it is finally able to reopen its stadium to fans. Let's say, for example, that a restaurant has agreed to pay a sum of money to the local minor league team to place their logo on the outfield fence. Even is the season is being played without fans, the team has to renegotiate the deal with the restaurant since the advertisement will now be seen by far fewer fans. They will likely have to either accept less money from the restaurant or allow the restaurant to pull out of the deal and give a full refund. Take this scenario and multiply it by all the advertising throughout the stadium grounds, and the team loses yet another considerable amount of money.
Realistically, there is no way for minor league baseball to proceed without fans and avoid losing a huge percentage of their annual revenue. Across all industries, companies that rely on expected income are losing large sums of money, and the MiLB is no different. To gain some cash in the short run, many teams across all sports are selling merchandise, both game-used artifacts and standard team apparel. It might be wise for minor league clubs to print t-shirts featuring their logo along with a topical message: "Stronger than Ever," "Find a Cure," etc. They could partner with a local hospital, food pantry, or other charitable organization and pledge a percentage of proceeds to the organization. It would be a way to both raise some money for themselves and get people talking about them, all while making a positive impact in their community. Teams must also look towards the future. As soon as leagues resume and stadiums reopen to the public, their goal must be to fill as many seats as possible. This is where they must lean on their corporate partnerships. They can offer ticket discounts to patrons of their sponsors, sparking their fans' interest in the sponsoring companies and vice versa.
At this rate, there seems to be no hope for the MiLB to recover all of the money that they will lose from canceled games. But a few important business decisions can be made in the coming weeks to make the long-term stability of its teams more viable.
Sources:
1. Cooper, J.J. (2020, April 16). A 2020 Minor League Baseball Season Grows More and More Unlikely. Retrieved from https://www.baseballamerica.com/stories/a-2020-minor-league-baseball-season-grows-more-and-more-unlikely/
2. Tracy, J. (2020, April 13). Minor league baseball needs fans to survive the coronavirus pandemic. Retrieved from https://www.axios.com/minor-league-baseball-coronavirus-3784fac0-3494-4b9c-a158-856cd3f7ee62.html
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