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This is a guest post by @williamnyy23 of the excellent The Captain’s Blog.

Even though the business of sports has evolved well beyond the realm of network television ratings, the national sports media still seems fixated on comparing the number of eyeballs watching playoff baseball to those tuning into the NFL’s regular season.

Every October, the narrative is basically the same. A primetime NFL game winds up significantly out-rating a baseball postseason matchup, leading to the conclusion that football has not only surpassed baseball as the national pastime, but rendered it a second class citizen on the sports landscape. After all, how could one argue with football’s supremacy when measly regular season games beat the baseball playoffs in five out of six head-to-head battles over the last month?

NFL, MLB Ratings Comparison, 2010

Source: tvbythenumbers.com

Adding insult to injury, this year’s World Series’ matchup between the Texas Rangers and San Francisco Giants drew the lowest rating and the second fewest viewers in the history of the Fall Classic. Leaving aside the FOX/Cablevision dispute that eliminated the New York and Philadelphia markets for the first two games, Halloween and a Sunday night NFL game, the ratings for the 2010 World Series were still somewhat disappointing, but does that mean MLB should be concerned?

In order to answer that question, we first need to take a look at how baseball generates its revenue.

When all the pennies are counted, MLB is expected to take in just over $7 billion dollars in 2010. Of that total, less than 10%, or approximately $650 million, comes from national television deals inked with FOX, TBS and ESPN. In other words, baseball’s economic health is not highly leveraged to network ratings.

Of course, as many might point out, it wasn’t always that way. Throughout the 1970s and early-1980s, the World Series would regularly attract a ratings share well above 50%, but with the proliferation of cable, the audiences started to decline. The knee jerk interpretation of that trend is to suggest a decline in popularity, but a more interesting dynamic seems to be in play.

Before the cable boom, teams had very little regard for their massive inventory of programming and made very little revenue from it. Once cable started to gain traction, however, teams began to realize how valuable the 162-game schedule could be to a superstation or regional sports network hungry for programming. Although this transition opened up many additional revenue streams to the clubs, the market saturation diminished the sport’s value as a national television product by lessening the incentive to tune in to the “game of the week” or even the postseason, which for many fans was a rare chance to watch teams from around the game. Nowadays, just about every baseball game can be watched on either the Extra Innings package or over the internet via MLB.TV, with highlights available around the clock in various mediums. When you add up the revenue from local television rights and internet-based distribution, the declining emphasis on national television has resulted in a profitable trade-off for major league baseball.

Instead of relying on network television deals, regional sources of income, such as local network rights fees (either from owned or independent RSNs) and stadium-based revenue, provide the economic lifeblood of the sport. In addition, baseball has also started to reap the benefits of several new media initiatives, such as the MLB Network, which launched to one of the largest audiences in cable history (unlike the NFL Network, which has failed to gain carriage on most cable systems), and MLB Advanced Media, which not only runs baseball’s many internet-based businesses, but also provides backend infrastructure support to hosted websites. Combined, these two entities are expected to generate approximately $900 million in annual revenue within the next five years, a sum that would far exceed the amount received from national television deals.

Without going into too much detail on the economic structure of the game, it should be easy to see that the business of baseball is pretty good. But, how does it compare to the NFL? According to Forbes estimates, both the NFL and MLB doubled revenues from 2003 to 2009, but unlike baseball, football’s largest revenue driver remains national TV contracts. Of the estimated $8 billion in revenue the NFL collected in 2009, over $3 billion, or about 38%, came from ESPN, NBC, CBS and FOX.

NFL, MLB Revenue Comparison, 2003-2009

Source: Forbes.com

When you consider how important network revenue is to the NFL, the sport darn well better draw a larger audience than baseball, even when the comparison involves a regular season game against a postseason contest. Because of its limited schedule, the NFL must maximize the number of viewers tuning in to each and every game. As a result, just about every rule adopted over the last 20 years has been geared toward making pro-football an attractive television product. As a result, we shouldn’t be surprised when the NFL beats baseball in the ratings, and we also shouldn’t read too much into it.

At this point, it becomes necessary to address a topic that the NFL doesn’t like: gambling. More than either sport (or both combined), placing a bet is probably America’s true national pastime. This is a sensitive issue for any sport, but particularly for pro-football because as much as the league would like to pretend otherwise, a significant amount of its popularity stems from its attractiveness as a vehicle for gambling. From required injury reporting to aggressive fantasy marketing to tolerance of point spreads in the programming of network partners, the NFL has successfully, and profitably, aligned itself with the country’s fondness for placing a wager.

Not only do most estimates place fantasy football participation at nearly twice the level of fantasy baseball, but a Pew survey on gambling in sports (published May 23, 2006) found that 23% of respondents bet weekly on pro football, while 42% placed at least one bet per month. Those numbers are astounding! As for baseball…the same survey found that only 5% of respondents bet weekly on baseball, with only 14% betting at least once per month. Not ironically, the only other sport that compared to pro football was college football.

With such a vested financial interest in the outcome of football games, is it any wonder that seemingly trivial NFL contests still attract a relatively large audience?

We shouldn’t need scientific surveys to understand this relationship because the signs are everywhere. After all, in what other sport is the point spread one of the most widely discussed element of each game? Also, think about your own social interactions. Fantasy implications and office pools seem to dominate football talk, whereas in baseball, statistical analysis, up-and-coming prospects and historical/social reflections are more common. Clearly, there is a different element of interaction involved with each sport.

The point of this exercise is not to impugn professional football or discount its popularity. The NFL has been very successful at leveraging its attractiveness as a television property and the ratings bear that out. Because ratings are at the very core of what the NFL is all about, it makes perfect sense to judge the sport on that basis. However, for the reasons mentioned above, using ratings as an instrument of comparison to baseball places the latter at a distinct disadvantage. Would it be fair to compare both sports on a metric like total attendance? Of course not…so why do so many keep judging MLB on terms that clearly favor the NFL?

Baseball’s strength is its 162 game schedule. Following a team throughout the season comes with an ebb and flow, much like life itself. There are very few short bursts that absolutely demand attention. Although some may think that’s a bad thing, it’s actually baseball’s greatest asset. The number one reason baseball has exploding revenues is because the sport finally learned to leverage the 162 game schedule. Baseball’s massive inventory of games is a boon in a time when media outlets are starving for content. From satellite radio to local RSNs to MLBAM’s on-line initiatives, baseball’s growth has been fueled by its ability to fill the airwaves and the internet. Just like the NFL, MLB needs to play to its strengths, and chasing network television network ratings is not one of them.

For whatever reason, baseball executives, writers, fans, players, etc. suffer from excessive hand wringing when it comes to evaluating their sport. Baseball is a wildly popular game that takes a back to seat to no other. Just because the NFL has found a formula that combines reality TV, gambling and athletics doesn’t mean MLB should resort to similar gimmicks. After all, ratings do not necessarily translate to quality. Just ask the millions of viewers who tune in each week to watch Jersey Shore.

10 Responses to “Guest Post: MLB v. NFL Ratings Issue”

  1. You’re kind of missing the point here. The answer to your original question is: YES, MLB should be worried that nobody cares about their most important games and the overwhelming majority of the rest. Plus, the economics of the game are out of whack.

    It’s also silly to claim the massive drop in regular season baseball ratings is SOLELY due to saturation and not a decline in popularity (there was a work stoppage and steroids scandal in that period, by the way). You’re also looking at macro revenue numbers which are essentially a black box. And while MLBAM is a marvelous money-maker, it’s also insane to claim that was part of MLB’s long-term plan to put less emphasis on national TV deals. They really just got lucky because their sport was slow enough to stream in low quality and the ability to license that technology says nothing about the popularity of baseball. $900 million over the next five years from MLBAM and MLB Network sure sounds like a lot… until you realize the NFL will make more than that on Super Bowl ad revenue alone during that period. That’s why ratings matter.

    With the revenue sharing setups, the NFL has a far healthier business. Many teams can cover their payroll based on the revenue share from the national TV deals alone. That’s not the case with MLB. The shared national TV revenue is very small and split up in an insane manner. For this reason, teams that try to win the World Series but don’t are the LEAST PROFITABLE TEAMS in baseball. From 2003-2005 the Yankees LOST MORE MONEY THAN ANY OTHER TEAM (the Brewers were top 10 in income each of these years) in baseball. At the same time, it doesn’t include money from YES because that’s owned by a holding company. That’s because the RSN/attendance revenue streams that you are lauding as a “change of business plan” really just force each owner to run their team independently. They are nearly 100% dependent on their individual franchise operations/revenue. And not every team owns YES, the most valuable regional sports net in the country. Each team has a vastly different approach — so making a blanket statement about league revenue means very little.

    I also don’t understand the point of your tangent about fantasy sports and gambling. But you clearly state that more people care about football for this reason. The “legitimacy” of the reason doesn’t really matter.

    MLB can’t compete with NFL. NFL is more popular. NFL will make more money. Baseball is treading water for now. It’s really that simple.  (Quote)

    [Reply To This Comment]

    Williamnyy23 Reply:

    With all due respect, you’ve completely missed the point and presented nothing to support your claims. There are so many things wrong with your response that it would require another post to list them, so I’ll just point to the absurdity of your last statement. You claim that baseball is treading water, but the sport will take in over $7 billion in 2010, a 17% increase in the midst of an economic downturn. I think that kind of says it all.  (Quote)

    [Reply To This Comment]

  2. Well, Game 5 just beat Monday Night Football in TV ratings…that just goes to tell you that baseball is a healthy popular sport. NFL attendance is dropping, the MLB too, but less than 1% this year. NFL is popular for now, but it will come down fast.  (Quote)

    [Reply To This Comment]

  3. Despite his statistical backing, and his eloquent arguments, i only need to look at TWIB to understand the guest blogger’s point regarding MLB saturation. Pre-cable, TWIB and the MLB game of the week were two of few ways to enjoy national baseball coverage. With Internet, MLB tv, 24/7 sports highlights, MLB should never outrate a more rare and more bet-upon football game. Yet for the reasons described above, baseball continues to be a money maker, showing the futility of ratings as a measure.

    http://m.youtube.com/index?desktop_uri=%2F&gl=US#/watch?xl=xl_blazer&v=tBeD74f5_6w  (Quote)

    [Reply To This Comment]

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