On Monday, I published a lengthy article going into the value of MLB Advanced Media and the new MLB Network (see Understanding the Real Value of MLBAM and MLB Network) delving into how these two centralized pieces bolster MLB’s bottom line.
Shawn Hoffman of the excellent Squawking Baseball adds even more to the conversation on Baseball Prospectus (see Cut Out: Why Players Won't Be Getting a Piece of the MLBN Pie). As Hoffman writes:
Based on the individual team data from 2002-2008, there is a .71 r-squared coefficient between a team's gate revenue in one year and its Opening Day payroll the next. This means that 71 percent of the variation in Opening Day payrolls can be explained by gate receipts alone. Needless to say, this is a very significant number, although it shouldn't come as a surprise. Spending money on player payroll generally helps teams win, and when a team wins, its attendance and ticket prices will rise. The two are inextricably linked, both in theory and in practice.
He then adds:
Don't be surprised if this turns into a collective bargaining issue at some point down the road. [MLB Network] and Advanced Media will likely bring in $700-800 million in revenue this year, and the players are mostly being shut out.
Commenting on this, MLBN and MLBAM are not aspects of collective bargaining. Deals have been brokered between the MLBPA and BAM, most notably the 2005 deal valued in excess of $50 million that extends beyond the expiration of the last collective bargaining agreement between Major League Baseball and the MLBPA. That deal gave MLBAM the exclusive rights to use, and to sublicense to others, Major League Baseball player group rights for the development and creation of on-line games, all other online content, including fantasy baseball and interactive games, as well as all wireless applications including cell-phone enabled games. The deal became the center of what was deemed the Fantasy Stats case, which made its way all the way to the U.S. Supreme Court where they declined to hear the case and favored the Fantasy Sports industry.
Still, Hoffman is correct that the two centralized media holdings are valuable assets to MLB and their owners. Something needed to offset possible losses at the local level as the downturned economy continues its grip on revenues across all industries, MLB included. Great article that I highly suggest reading.
Maury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is contributor to Baseball Prospectus, and is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network.
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