This article is an update from a Biz of Baseball article that ran in Sept of 2010
When financial documents for several MLB clubs were leaked to Deadspin last year, two pieces of information that were a source of curiosity for many fans was somewhat revealed. With the Rays and Angels documents showing how much the respective clubs made in the postseason, a window was opened into how much extra revenues a club can make by reaching the postseason.
But, from that point, little detail was provided. A postseason revenue figure does not cover how MLB’s rules dictate how much a club can pull in.
With the 2011 postseason here, discussions around clubs that are reaching that goal are surfacing in the media. Last year, when the Minnesota Twins made the postseason, John Vomhof Jr. of the Minneapolis/St. Paul Business Journal contacted me to discuss postseason revenues for the club (see Playoffs add millions to Twins’ lucrative season). As reported:
The Angels reported $12.1 million in revenue from hosting five first- and second-round playoff games in 2009 and nearly $4.4 million for hosting two first-round games in 2008, according to the reports published by Deadspin.com.
The Rays made almost $17.7 million in revenue on the six postseason games they hosted in 2008. Having two home games in the World Series helped boost those results.
The Twins might not be able to expect as much revenue from early-round games as the Angels made last year, but they should be able to surpass the Rays’ results, said Maury Brown, founder and president of the Business of Sports Network, which includes the Biz of Baseball website.
“It’s in the millions of dollars,” Brown said of the financial impact the Twins will receive from making the playoffs this year. “And depending on how far they go, it could be upwards of $10 million.”
Vomhof does a good job of digesting the key aspects of MLB’s Rules document, that details how the revenues are to be split between players and the clubs that make the postseason. The logic, however, is simple: the further you go into the posteason, and the more games you host, the more revenues a club can make.
To begin with, one needs to understand that with the postseason, clubs actually lose seating capacity. How? Here’s the demands placed on clubs making the postseason to provide ticket and seating. And remember… this doesn’t cover the seats chewed up by overflow media seating considerations which can many times go into the hundreds over what a normal regular season game demands.
(e) TICKET PRIORITIES. The order in which requests for reserved seat tickets for the World Series shall be filed is as follows:
(1) Visiting Club. Five hundred reserved seat tickets for each game to the visiting club, for accommodations of its officials and guests, the same to be paid for by the visiting Club.
(2) Players. Five tickets for each eligible player of the visiting team, which shall be delivered to and paid for by each player through the business manager of the player's Club.
(3) Commissioner's Office and Club Officials. Requests filed by the Commissioner's Office and Major League Club officials or parties of prominence with the Commissioner.
(4) Major League Clubs. Major League Clubs (other than the visiting Club), 100 reserved seat tickets, 16 of which shall be box seats. Eight of the 16 box seats shall be grouped together in the lower deck between first and third base, and 20 of the remaining 84 reserved seats shall be so situated.
DIVISION OF POST-SEASON RECEIPTS
The gate receipts from the World Series, from the first four games of each League Championship Series, and from the first three games of each Division Series (which shall be remitted by the participating Clubs to the Office of the Commissioner within 24 hours after the completion of each game) shall be divided as follows:
(a) COMMISSIONER. Fifteen percent from all World Series games shall be paid to the Office of the Commissioner. A percentage set annually by the Commissioner, and approved by the Major League Executive Council, in accordance with Rule 26(b) (Assessment of Paid Attendance Receipts), from all League Championship Series games shall be paid to the Office of the Commissioner.
(1) Creation of Pool. One players' pool shall be created from the World Series, the two League Championship Series and the four Division Series. Contributions shall be made into the pool as follows:
(A) Sixty percent of the total gate receipts from the first four World Series games;
(B) Sixty percent of the total gate receipts from the first four games of each League Championship Series; and
(C) Sixty percent of the total gate receipts from the first three games of each Division Series.
So, as the rules show, a sizeable chunk of revenues for the clubs that make the postseason get lopped off the top before owners get their cut. You’ll note that the owners don’t get to reap the full benefits of the playoffs unless a game goes past deciding games. The reason for the players getting the large percentage is to keep them from throwing games.
The slicing a dicing of the revenues gets detailed further:
(1) World Series. After the fifteen percent payable to the Office of the Commissioner and the sixty percent which forms the players' pool in the first four games of the World Series, as required by Rule 45(b)(1)(A), the balance of the gate receipts shall be equally divided between the two participating Major League Clubs.
(2) League Championship Series.
(A) After the percentage payable to the Commissioner's Office pursuant to Rule 45(a) and the sixty percent which forms the players' pool in the first four League Championship Series games in each League, as required by Rule 45(b)(1)(B), the balance of the gate receipts from said four League Championship Series games of a League shall be equally divided between the two Clubs participating in the League Championship Series of that League.
(B) If the League Championship Series games in a League shall exceed four, the gate receipts of such playoff games in excess of four shall be divided as follows: first, the Commissioner's Office shall be paid the percentage described in Rule 45(a), and then the remaining receipts shall be equally divided between the two Clubs participating in the League Championship Series of that League.
(3) Division Series.
(A) After the percentage payable to the Commissioner's Office pursuant to Rule 45(a) and the sixty percent which forms the players' pool in the first three Division Series games in each Division Series, as required by Rule 45(b)(1)(B), the balance of the gate receipts from said three Division Series games in each Division Series shall be equally divided between the two Clubs participating in such Division Series.
(B) If the games in a Division Series shall exceed three, the gate receipts of such playoff games in excess of three shall be divided as follows: first, the Commissioner's Office shall be paid the percentage described in Rule 45(a), and then the remaining receipts shall be equally divided between the two Clubs participating in such Division Series.
So, the one true benefactor that cannot fail to receive gate revenues to the maximum extent is the Commissioner’s Office, who gets their percentage ahead of all others. The players are next, and then any deciding games after the series minimum is reached, those revenues are split equally.
So, in the sense that there is pure parity when it comes to gate receipts. If the Pirates and Yankees were to make a World Series, the Pirates would get the same cut as the Yankees, even if for some reason the Pirates weren’t to pull in the same amount of gate revenues as the Yankees were to. Of course, there revenues from parking, suites, concessions, etc. that are outside the gate that increases a club's bottom line for every game in the postseason, but the gate -- the revenue stream that most everyone focuses on -- is a moving target based on how a series goes.
So, for owners, there is money to be made even if your club were to get swept in a given postseason series, but they reap even greater rewards if a series goes beyond the minimum, not just because of the extra games, but because the two teams get 100% of the gate after the Commissioner's Office takes their slice off the top.
And we’re just talked the direct revenues for the postseason. Clubs that reach the playoffs get a slingshot effect into the following season in the form of increased season ticket and suite sales due to a good showing in the standings. Everyone loves a winner, and the belief that a team that is in the playoffs one year, should be a contender the next. An owner, his GM, and staff can always hope.
Maury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey, and is a contributor to Forbes SportsMoney blog.. He is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network (select his name in the dropdown provided).
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