by Bruce Johnson

Created on: August 18, 2009

The current economic downturn has pushed almost every other story off of the front page for the last 12 months. Sales are slow. Layoffs are rampant. And no industry is immune to the effects, not even baseball. However, the impact on professional sports leagues are fairly unique among corporate America.

Let's consider how baseball teams generate revenue. The most obvious way is through ticket sales. Tickets represent the largest source of revenue and, as of May, was down almost 5% from 2008 to 28,835 per game (source:

http://www.sportsbusinessjournal.com/article/62485). But actual revenue is down even more than 5%. The reason for this is discounting.

The purchasers of most baseball tickets are regular people like you and me. But baseball, like any sporting event, is what's known in economic vernacular as a discretionary purchase. That is to say that none of us (well, most of us) don't NEED to go to a baseball game in order to survive. And as money gets tight, people reduce the amount spent on unnecessary purchase, such as baseball games. To entice people to come out of the ball game, teams have introduced innovative packages. All you can eat tickets. Discounted ticket packages, such as 'the Stretch Run' (buy tickets for all remaining games), Military night (discounts for military and their families) or "Family 4-packs", are now commonplace. The result, as baseball attempts to put bodies in the seats, is a deal for anyone who wants to go out to the game.

But the impact of the recession does not stop with lower attendance. Another significant source of revenue is concession and merchandise sales from within the stadium. Now while the team only gets a percentage of these sales, having fewer people come to the park means fewer people to buy hot dogs, beer and styrofoam fingers. Not to mention that many of these purchases are also discretionary and therefore subject to being avoided by fans who are just happy to be at the game.

One of the bright spots in the baseball revenue landscape is found in television revenue. This revenue comes in two forms. Most teams have agreements with local networks to televise many of their games in the local viewing area. From the team's perspective, this helps to generate the fan base from which actually game attendees is taken. But it also provides a steady stream of revenue. The broadcasting agreements tend to run multiple years in length, which means that they are not impacted greatly by the current recession (unless, of course, you had to negotiate your current agreement at the end of 2008.).

But beyond the local contracts, Major League Baseball launched MLB Network, the largest cable channel launch in history. MLB Network is available in over 50 million homes and, while ad revenue is not as robust as would be liked, according to Bud Selig, the channel was doing well (source: http://bizofbaseball.com/index.php?option=com_conten t&view=article&id=3271:despite-chilly-economy-signs-pointing-to-mlb -having-better-season-than-initially-projected&catid=26:editorials&Itemid=39)

The net result of all of these revenue sources is actually more positive for MLB than you might think. At the moment, the project for league-wide revenue is over $6 billion for the 2009 season. While this is down from 2008, it is running slightly ahead of 2007. So don't lose any sleep for the MLB owners. They seem well-positioned to get through the current economic malaise unscathed.

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