The Monetary Benefits Of An Expanded MLB Postseason

The MLB has expanded the playoffs from 10 teams to 16, but is the new format here to stay?

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Friends,

Similar to all other major professional sports leagues in 2020, Major League Baseball lost a ton of money.

How much?

Since teams & the league don’t open their books, it’s not very clear - but most estimates settle within the $4-6 billion range.

(Image / MLB)

Here’s a quick primer on how the math shakes out (Source):

• Gate Receipts - Typically a ~$2.8 billion line item for the MLB, is non-existent this year without fans - literally zero, unless Commissioner Rob Manfred somehow finds a way to sneak some fans into the World Series.

• Concessions/Parking/Merchandise - Same as above, zero revenue in 2020.

• National TV Deals - This one is super interesting, because it appears to be staying at it’s typical $1.7 billion level - even though the season was cut short.

  Here’s what fivethirtyeight had to say about it:

  The national TV money is guaranteed through deals negotiated years ahead of time, and the majority of it is focused around the playoffs, so we can assume that $1.7 billion will be roughly intact barring a “force majeure” clause being invoked, or some kind of “reduction rights” that may be written into the network contracts if certain content isn’t delivered. (This is something we don’t know for sure, but it’s hard to imagine a large reduction unless playoff games are lost.)

• Local TV Deals - Local TV deals are a little tricker than the national level, as contracts aren’t guaranteed and many teams also own stakes in their networks. Overall, it’s expected to see a decline of about $1 billion.

• Licensing & Sponsorships - The smallest piece of the pie, licensing & sponsorships is expected to be cut by about 25% - or a ~$200M loss.

With a $4-6 billion loss in revenue, MLB owners weren’t the only ones missing cash. Players made about 37% of their typical salary in 2020.

Here’s how the salary reduction looked for some of the games top players.

1. Mike Trout (Angels) - From $37.6M to $13.9M

2. Gerrit Cole (Yankees) - From $36M to $13.3M

3. Max Scherzer (Nationals) - From $35.9M to $13.2M

4. Stephen Strasburg (Nationals) - From $35M to $12.95M

5. Nolan Arenado (Rockies) - From $35M to $12.95M

So why does it all matter?

Because the 2020 MLB Postseason has officially arrived, bringing another unique set of financial implications for the league.

Before we dive in, here’s the official bracket for October baseball - Hope your team is on it :)

(Image / MLB)

Even through everything mentioned above, Commissioner Rob Manfred must be happy. The league weathered the storm and finished the season, albeit with a few hiccups - I’m looking at you Miami Marlins and Cleveland Indians - but now we’ve arrived at their biggest fiscal event of the season, the playoffs.

So without fans in attendance, what’s the easiest way to make more money if you’re the MLB?

Play more baseball, which is exactly what they’re going to do.

Commissioner Manfred, in conjunction with team owners and player representatives, wisely chose to expand the playoff format to include 16 teams, rather than the typical 10. This decision will bring an extra 22 games to the table, causing an increase of about $100M in revenue - or about $4.5M per game (source).

Where’s the money going?

Surprisingly, about half of it is going to the players.

For those that aren’t aware, not only are MLB players not paid during the postseason but they also don’t receive service time. To make up for that, they have a pre-arranged deal through their collective bargaining agreement, called the “Postseason Share”, where they receive a percentage of gate receipts for certain playoff games. This revenue is then distributed based on playoff success, with the champion getting the most and the wild card loser getting the least.

For example, in 2019 the postseason share pot was more than $81M. The World Series Champion Washington Nationals took home $29M and the Houston Astros received $19M - which is then voted on privately and distributed to players, management, team personnel, clubhouse employees, and more.

The 2020 postseason share pot will dip from $81M last year to $50M this year, but players must be happy with the outcome. Sure the playoffs got expanded, which means more time in the bubble and a longer road to the championship, but with salaries being reduced over 60% - I can’t imagine they were expecting anything close to this.

On another note, now that the playoffs have been expanded through a once-in-a-lifetime scenario, don’t be surprised when team owners and the league office try to make it permanent - because when it comes to their pockets, they always want more in em’.

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