The history of baseball’s revenue streams

We have known for years that Major League Baseball has wanted to increase the number of playoff teams in this Collective Bargaining Agreement. Rather than looking at the incredible playoff chase that happened this year — the AL Wild Card spots came down to the final day and had a fairly large chance of requiring multiple tiebreakers — and acknowledging the success of the 10-team playoff format that has been in existence since 2012, the league has fought to add four more teams to the postseason.

Over the past few days, we have taken a look at the history of two important issues that drive the current lockout, the Competitive Balance Tax and player movement. Surrounding both these topics, we found that Major League Baseball has very often used such arguments as “competitive balance” and “for the good of the sport” to defend rules that keep expenses down. Today, we’re going to look at the rationale behind the insistence on expanded playoffs, which actually has nothing to do with the playoffs themselves and everything to do with — you guessed it — money.

The first baseball organization in the United States was the National Association of Base Ball Players, founded in 1858. The association’s dedication to amateurism began to crumble early on with the opening of the Union Grounds in Brooklyn, the first enclosed ballpark. By enclosing the ballpark, William Cammeyer (owner of the grounds) was allowed to generate revenue by charging admission to spectators. The expansion of this practice allowed teams to pay players under the table (as a league of amateurs, this was technically against the rules), leading to the eventual abandonment of the association in favor of its professional successor, the National Association of Professional Base Ball Players.

This player-dominated league was in turn replaced by the owner-dominated National League of Professional Baseball Clubs (i.e., the modern National League). Ticket prices were standardized at 50 cents, or roughly $11.50 today. This was slashed in half when the NL merged with the rival American Association in 1891 (read: bullied them out of existence), although any lost revenue was more than accounted for by the new rules permitting teams to schedule games on Sunday and sell alcohol to fans — not to mention the immense benefit to the bottom line that a monopoly on professional baseball represented.

Ticket sales, concessions, and stadium merchandise: for most of the history of Major League Baseball, these were the main sources of revenue for baseball teams, all of which relied on attendance. That said, since the 1890s, teams have forged strong relationships with local media companies — first telegraph companies were called on to send play-by-play data across the telegraph wire, then radio stations began to broadcast games live in the 1920s (with the first World Series broadcast nationally in 1922). Everything changed, however, when television entered the scene.

The New York Yankees sold their television rights to WABD (modern-day WNYW) in 1947 for $75,000 — the modern day equivalent of $937,674.89 — setting the stage for the modern-day regional network rights that have become lucrative investments for teams today, particularly in large markets. These deals have become so lucrative that when the Yankees purchased FOX’s share of the YES Network in 2019, that share cost $3.47 billion.

Individual teams were not the only ones that got in on the television action, as Major League Baseball sold the right to a Saturday Game of the Week to ABC in 1953, a network that was desperate for programming to compete with CBS and NBC. Despite a rocky start — ABC abandoned the Saturday games after only two years — the amount of money involved quickly increased: in 1965, NBC paid $30.6 million (equivalent to $265 million today) for the rights to 25 regular season games, the All-Star Game, and the World Series for the 1967 and 1968 seasons. By 1976, NBC and ABC combined to pay $92.8 million (equivalent to $450 million) for assorted broadcast rights.

Over the course of the 1980s, NBC and ABC continued to be the biggest names in baseball broadcasting, bringing in immense amounts of money to the league. The 1990s would revolutionize the market by expanding it, as the league made deals with CBS and ESPN, the latter of which brought about the advent of Sunday Night Baseball. Then, in 1994, MLB decided to get in on the action themselves and teamed up with NBC and ABC for a joint venture called The Baseball Network. When this failed, partially due to the players’ strike and canceled World Series, FOX jumped in, earning the rights to broadcast Saturday afternoon games over the summer, while NBC spent $400 million to share broadcast rights for the playoffs with FOX and ESPN.

The new millennium once again changed the entire playbook. First, FOX drove NBC out of the baseball business by spending $2.5 billion for rights to the All-Star Game and most of the playoffs in addition to their regular season games. Then, the league once again entered the broadcasting arena, this time through MLB Network, an enterprise primarily owned by the league but also involving AT&T and NBC. More significantly, streaming services entered the arena, starting with MLB.tv in 2002 for out-of-market games; in the last few years, the league has cut deals with Facebook, Twitter, and YouTube, to which is added their appearances on ESPN+, Fox Sports Go, and Peacock as part of their deals with ESPN, FOX, and NBC. At this point, the league has national broadcast deals with ESPN, FOX, and Turner Sports, in addition to relationships with NBC, ABC, and the streaming services — these deals bring in billions of dollars to the league annually.

That’s all great, you may be wondering, but what does this have to do with expanded playoffs? The thing is, the big money comes not from the regular season games, but from the postseason rights, as can be seen by ESPN jumping on the opportunity to buy the broadcast rights to a round of the playoffs that currently does not exist. More playoff games means more money for the league — money which they will receive whether every single game is filled to capacity, or if they stadiums are as empty as they were in 2020. It is on the back of these deals that Major League Baseball was seeing record revenues prior to the pandemic, and will certainly rally back financially much quicker than Rob Manfred would like everyone to believe.