Baseball close to catching NFL as top $ sport
Major League Baseball's sales will surpass $6 billion for the first time this year, double the amount from 2000, and putting the sport closer to passing the NFL.
NEW YORK (CNNMoney.com) -- When it comes to sales, the National Football League used to dwarf Major League Baseball the way a defensive lineman towers over a batboy.
Not any longer. Baseball will finish this year with just over $6 billion in revenue, according to Bob DuPuy, Major League Baseball's president and chief operating officer.
To put that into context, that puts baseball right on the heels of the more than $6 billion in revenue reported by the National Football League in 2006.
Yes, baseball has a lot more games from which to generate sales than the NFL, but that has always been the case. Simply put, baseball has done a much better job in the past few years of boosting its revenue beyond traditional sources, i.e. ticket sales and television broadcasting.
Baseball's sales have increased 50 percent from 2004 and have doubled since 2000. The NFL's sales grew at roughly half of baseball's pace during the same time period.
DuPuy told me the level of growth this year surprised even him and Commissioner Bud Selig. He attributed the gains to more competitive balance in the game, which has helped improve attendance for teams in smaller markets such as the National League champion Colorado Rockies and Milwaukee Brewers, which was in the race for a division title up until the final week of the season.
The growth of the online ticket resale market has also spurred more season ticket sales, DuPuy said. It also helped cut down on the number of no-shows, which increase sales at the concession stands. That's one of the reasons that the MLB signed a deal with eBay (Charts, Fortune 500) unit StubHub, which lets people buy and sell tickets, in August.
Online ticket sales is the perfect example of why baseball revenue has grown so dramatically. The sport has been able to take advantage of several sources of revenue that could hardly be imagined as baseball was coming out of the 1994-95 strike.
The MLB.com Web site, satellite radio broadcasts, an out-of-market television game package and much better than expected international growth have all boosted sales..
"We have seen a healthy increase in every one of our revenue streams," DuPuy said. "We saw about a half-billion (dollars of sales) from sources that really didn't exist 10 years ago."
DuPuy said he expects revenue growth in the single digit percentage range in 2008 and an even bigger jump in revenue in 2009, when two new stadiums are set to open in New York. The Baseball Channel is also due to start operations that year.
"It's a good story. It's one of the reasons we think that healthy rise will continue," DuPuy said.
The league-owned Baseball Channel is likely to receive close to $100 million in subscriber fees from cable and satellite television operators right off the bat, making it cash-flow positive in its first year of operations.
As for the new stadiums, the Yankees have already disclosed in filings that they expect ticket and luxury suite revenue from the new stadium to be nearly $100 million a year more than it brought in two years ago. The Mets are likely to see similar increases helped by selling the naming rights for the new park to Citigroup (Charts, Fortune 500) for a record $20 million a year.
But perhaps the biggest surprise here is baseball's willingness to talk about the fact that it's doing so well financially.
"You can't be afraid to succeed," DuPuy said when I asked him about baseball being reluctant to talk about its economic success in the past. "The game is popular. Clubs have done a good job in marketing their product and developing stadiums that are destination points. Everyone recognizes there is an appropriate balance between revenue and expenses. It's a good story, and one I think we should trumpet."
Baseball leadership used to be All-Stars at talking about the grim economics of the game, in hopes of holding player salaries in place. Remember, the league was threatening to "contract" two teams as recently as 2002.
But the five-year labor deal reached with the Players Association a year ago took away some of the motivation to bad-mouth the economics of the sport.
More importantly, changes in revenue sharing rules provided teams more incentives to increase revenue than in the past since the changes allow teams to hang onto more of the gains.
In the coming weeks, some of baseball's top stars such as Alex Rodriguez are likely to sign huge contracts with which they could buy several small countries. There will be plenty of folks ready to bemoan those deals. One thing to keep in mind when you read that is this: