Thursday, September 10, 2020

Does Winning Baseball Boost the Bottom Line During a Pandemic?

The Oakland A's are having a great season and boast one of the best records in MLB. However, no one is there to see the action: this begs the question, if a team wins the World Series and no one can come to the games, what does it mean for its financial health and long-term future?

In any other year, A's fans would be reading stories about how winning was translating to some degree of increased attendance at the Coliseum. The A's are drawing well/not drawing well enough are the two usual narrative threads. This year, all teams are tied -- at exactly zero fans. Win all you want, you can't sell more tickets, beer or jerseys (at the stadium stores anyway). While gate attendance is a measure of fan interest, it is a revenue driver -- even if not a huge one.

The financial loss from a shortened, fanless year is unknown. MLB pegged the A's loss in a May report at $115M. However, the report assumed an 82-game season and the final figures did not take into account distributions from the league's national media contracts. We're in the midst of (hopefully) playing 60 regular season games, meaning a greater loss seems likely.

Provided the A's make the playoffs -- extraordinarily easy this year and likely given their current pace -- one can assume that in some way this will be beneficial financially. However, like all items at the intersection of finance and baseball, the league and its teams are virtual "black boxes," revealing little to nothing. 

One aspect of the A's fiscal health that shouldn't be glossed over is who owns the team: John Fisher. Fisher is heir to the Gap fortune and, like much of brick-and-mortar heavy retail, the chain isn't doing well as the pandemic rolls on. The San Francisco-based company since mid-March has closed 200+ stores, including its flagship one in the city. Fisher is a billionaire, but how much of his fortune is tied to Gap's performance and stock value? A downturn at Gap may lessen the already slim tolerance A's ownership has for not being profitable.

Beyond the financial implications of the bizarro year, there are psychological ones to think about as well. The A's have done a better-than-most job of making the empty Coliseum look and sound more normal. But, how is the winning spirit being converted into fan enthusiasm? One measure is TV ratings. The Athletic reported on August 22:

NBC Sports, which owns RSNs that broadcast the Chicago White Sox, Oakland Athletics, San Francisco Giants and Philadelphia Phillies, said ratings are up double-digit percentages in each case.

Good news, right? Actually, increased TV ratings probably don't mean much for the A's. They are great for NBC Sports California and Comcast as they sell ads. The A's have no ownership in the channel (unlike the Giants) and have a set (and modest) annual contract with the network.

If the A's can't sell tickets now, are they trying to sell them for 2021? I haven't noticed a single ad touting A's Access plans for 2021. Other teams -- including the World Champion Nationals -- are not only actively advertising '21 plans, but also offering discounts and credits for new accounts. The A's only overture is providing a 5% discount to '20 All Access members who rollover their plan for tickets in '21. Of course, even if the A's rollout an aggressive '21 strategy, COVID reality or lingering unease may significantly dampen enthusiasm.

The goal, of course, is that an exciting A's team engages the community through winning it all, putting public sentiment squarely in favor of a new ballpark. Being World Champs or AL Champs even significantly raises the team's community profile. It sells tickets, hot dogs, jerseys and the public and its policymakers. With no fans and no parade (or at least traditional one), will winning the World Series materially translate the way the A's want and need it to?

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