The Economics Of Postseason Baseball

By Tim Parker | October 18, 2012 AAA

How big is the business of baseball? The estimated value of the New York Yankees is $1.7 billion, according to Forbes. The minimum salary for a major league player in 2012 is $480,000, and the total regular season revenue for the 2012 regular season topped $7.7 billion. The business of baseball is big. Once the postseason arrives, it gets bigger.
The 2011 average price of a ticket for the World Series was nearly $900, according to Business Insider. That's down from a high of $1,650 in 2009. From 1999-2008, the New York Yankees hosted 42 games and brought in an extra $81 million, an average of more than $8 million each year. Although each season varies, more than $22 million is up for grabs in ticket revenue alone, but how is that money divided?

The League
Before the players or the clubs split the post-season proceeds, Major League Baseball takes 15% of the gate receipts from the World Series and a percentage from the League Championship Series. Each year, the commissioner sets the percentage and requests approval from the Major League Executive Council.

The Players
Under the collective bargaining agreement, the players only receive revenue from the games required to be played in a series. In the divisional series, the first three games are required for one team to win a majority in a best-of-five series. In the League Championship and World Series, four wins are required for a team to win the best-of-seven series. Players receive 60% of the revenue from these games and nothing from the additional, non-required games. This keeps players from intentionally throwing games in order to increase their paychecks. They also receive 50% of the revenue from wildcard games.

All of the player funds are placed into a pool and distributed as follows:

  • World Series Winner: 36% of the total pool

  • World Series Loser: 24%

  • League Championship Losers: 24%

  • Division Series Losers: 13%

  • Wild Card Losers: 3%

Each participating club has a players' meeting to determine how to distribute its portion of the funds to players and staff. The agreement also calls for the league to pay into the players' pool if the above percentages don't equal the minimum amounts specified in the collective bargaining agreement. The winner of the World Series is guaranteed a minimum of $4.6 million.

The Clubs
The final 40% from the required games is split evenly between the clubs. If non-required games take place, the clubs evenly divide 100% of the gate revenue. Each hosting stadium retains any additional income that comes from concessions, parking and souvenirs.

Big Money
The direct income that comes from a team participating in the playoffs is substantial, but the indirect benefit is much larger. Clubs that make it to the postseason will see more interest from advertisers, a larger fan base and higher ticket prices the following year. The actual amounts vary widely by team, but even a small increase in the price and number of tickets sold can mean a substantial revenue boost.

Other Factors
A postseason berth doesn't guarantee a sold-out stadium. The New York Yankees reported thousands of empty seats at Yankee Stadium during some of its postseason home games. There were so many empty seats at one game, the ushers directed fans into the lower level seats so the stadium would appear full to television audiences.

The Bottom Line
During the postseason, everybody wins. Fans enjoy the extra energy that comes from a do or die series, players enjoy the excitement and extra money that comes from their playoff berth, and the clubs know that the postseason pays dividends.

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