Some call it a sign of the times or the new “Revenue Era” in baseball. All major sports teams are in search of revenue streams or new ways to maximize current ones. Without a salary cap, Major League Baseball teams have been thriving with activity.
One piece to the new revenue is puzzle has been the obvious recent economic woes. Some markets have been harder hit due to more significant local job loss and some due to their increased dependence on corporate revenue streams that soon became rougher waters.
No matter the team or the market everyone is in need of additional revenue. In the last few years another large piece in new era revenue puzzle is current Collective Bargaining Agreement.
A brief explanation: Each year all 30 teams pay 31% of their local revenues into a pool every year. The sum of this pool is then distributed evenly among the teams. Thus teams from Chicago, LA & New York will add larger contributions than say Kansas City, DC or Tampa Bay. There is also a Central Fund, which is derived from league wide television contracts. Teams generating the lowest revenues receive the lion’s share of those cash flows. Thirdly, the always “New Yorkly” discussed Luxury Tax, which is contributed upon by exceeding the pre-set salary regulation. This money is absorbed by the teams with lower payrolls across the league.
The question then soon became how can teams increase their cash flows without that new found money being subjective to revenue sharing? Teams became to come up with their business solutions.
Back to 2004 when New England Sports Ventures established the Fenway Sports Group (which since June of 2008 has operated as a subsidiary of Sinn Fein, L.P.), to the San Francisco Giants Enterprises which began back in 2000. More recently in 2008, the Dallas Cowboys and New York Yankees teamed up with Goldman Sachs to launch Legends Hospitality Management LLC. The Chicago White Sox launching Silver Chalice Ventures. The Rays in Tampa have the Sunburst Entertainment Group LLC.
In Part 2: I’ll take an in depth look at these entrepreneurial shifts in Major League Baseball and see how they stack up in the near future, or at least relevant to this new “revenue era”.