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January 22, 2015

Pitching Backward

The Cost of Being on Baseball's Bad Side

by Jeff Long

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Background

Back in July 2013, news leaked that Baltimore was interested in hosting the 2016 MLB All-Star Game. The O’s had discussed internally the idea of hosting the multi-day event with the hopes of showcasing Camden Yards during its 25th season. The last time the O’s hosted the Midsummer Classic was in 1993, and early media reports noted the stars seemingly aligning in Baltimore’s favor:

The site generally alternates between National League and American League cities, and with Cincinnati hosting in 2015, the AL would likely be up the following year.

With the Minnesota Twins tapped for 2014, the only other AL teams that haven't hosted the game since 1993 are the Toronto Blue Jays, Oakland Athletics and Tampa Bay Rays. It's not clear whether the Blue Jays have expressed interest. Neither the A's nor Rays play in stadiums that baseball officials likely want to showcase.

Childs Walker – Orioles Hope to Host 2016 All-Star Game

The city and club seemed so set on hosting the event that they asked a group planning to book the convention center during that weekend to hold off and/or re-schedule to accommodate the game. After the O’s made their interest public, all was quiet on the All-Star Game front for many months. Then, in early 2014 a local beat reporter tweeted a quote from MLB Commissioner Bud Selig that got hopes high in the city:

There’s a big difference between wanting to host the game and actually being a viable candidate. It now seemed that hosting the game had gone from a pipe dream to a realistic scenario for the club and city. The excitement was, predictably, palpable. A recent run of on-field success coupled with the idea of hosting one of MLB’s premier events made Baltimoreans giddy with baseball fever. Facebook pages advocating the city’s bid were created. Articles noting the “boost” the game would provide for the team and city were written. The city’s mayor publically called out how the 1993 game hosted in Baltimore was an “amazing experience”.

Still, there was an elephant in the room. The Orioles are embroiled in a massive dispute with the Washington Nationals and MLB about the TV rights and fees associated with MASN, the regional sports network co-owned by the two clubs. There were major concerns that MLB would hold the O’s position in the MASN dispute against them, as the O’s are essentially in a lawsuit against the Nats and MLB. Selig said that the suit and the All-Star game decision would be treated as separate issues, though, so hope continued to spring eternal:

As recently as mid-December, the O’s were still seen as the leading candidate for the game. This time, national writers were chiming in, which seemed to give a little more substance to the reports that had been coming out of Baltimore.

Then, things changed. One week later reports surfaced that the 2016 game would in fact be going to San Diego. Jonah Keri pointed out the seemingly obvious connection between the O’s being snubbed for the All-Star Game and the ongoing MASN dispute which shows no signs of ending anytime soon.

It has become widely speculated that the MASN dispute is at the heart of the issue. Finally, it was explained that the Orioles reportedly did not submit the required documentation in order to be awarded the game. This explanation seems far-fetched for a team that is run by one of the most successful lawyers in the country.

To add insult to injury, reports suggest that the Washington Nationals, the O’s neighbor and opponent in the MASN dispute, are reportedly being awarded the 2018 All-Star Game (despite 2017 not having been announced yet):

The MLB All-Star Game almost certainly will come to Nationals Park in 2018. In baseball, one man essentially decides such things: the commissioner. And one man can change his mind. But before Bug Selig retires at the end of this month, people with reason to know tell me Washington will be announced as the 2018 All-Star Game host and that the Nats already have been told.

Thomas Boswell - Signing Max Scherzer makes Washington Nationals better — right now and beyond

There is still a chance that the Orioles are awarded the 2017 game, and all of the hand-wringing over losing the game would be moot. There’s also a distinct chance that the Marlins and their new stadium will play host, meaning no All-Star game in Baltimore until at least 2019 if the reports out of Washington DC are true. But it’s worth noting that since 2000 New York is the only major metropolitan area to host multiple All-Star games, with no adjacent metros hosting the games in near chronological proximity to one another. If that pattern holds—if MLB avoids going to the same region twice in short order—it would seem that the O’s are out of luck for at least three or four more seasons, since the Nats have seemingly been awarded the 2018 game. We would also be remiss if we didn’t consider the idea that the commissioner used this same logic to decide between Baltimore and Washington D.C., with the two cities in an either/or scenario that Washington won—and that Baltimore is merely the victim of unlucky timing. Regardless of the methodology though, the simple truth remains that Baltimore seems likely to miss out on hosting an All-Star game in the near future. So what exactly does this all mean for the Orioles and the city of Baltimore?

Economic Impact

Estimating the economic impact of an event like the MLB All-Star game is incredibly difficult. Much of the economic value comes from positive public relations for the host city as a whole, which is an elusive thing to measure or calculate. An economist noted this exact phenomenon in a Baltimore Sun report on the potential impact of the game:

Anirban Basu, the chairman and chief executive officer of Sage Policy Group, Inc., an economic and policy consulting firm in Baltimore, believes it's hard to put an exact dollar figure on the economic impact of the All-Star Game, but he said the event would have a lasting effect for the city.

"Much of the impact would not be quantifiable," Basu said. "I calculated before that the impact of a sellout at Camden Yards generally in the range of $3 million of net economic impact. Of course, this game will have far greater impact. Most of that impact would be in the form of publicity for Baltimore."

Dan Connelly - Hosting baseball's All-Star Game in 2016 would boost the Orioles, city of Baltimore

These issues were examined in Baltimore specifically as local economic groups analyzed the impact of the Orioles’ playoff runs in recent seasons. While some PR experts suggest the economic impact is tremendous, economists note that quantifying the impact of an event is incredibly difficult.

Still, the economic impact is likely to be larger than the investment required. For example, the 2014 game in Minnesota was expected to bring $75 million in economic value to the city. Now, that number was probably hooey. Follow-up reports found that the early reports were overstated, with actual impact somewhere between $20 million-$55 million, which would mean several million in increased tax revenues for the state/city and a boost to local economies, especially those around the stadium.

Minnesota wasn’t a significant outlier either. MLB's estimates for the economic value of All-Star games in recent years have been comparable, though you might be prudent to reduce by the 27 percent to 72 percent found in the Minnesota report. The average economic value of the past 10 All-Star games—again, according to MLB—is nearly $85 million for each game. That does include two games in New York which are outliers with economic values over $140 million, but even removing those games gives us an average of $64 million in economic value per game.

The commissioner’s decision to award the 2016 game to San Diego represents a potential eight-figure swing in economic impact for the cities of Baltimore and San Diego. Granted, it’s not as if the commissioner is taking money out of the team and city’s pocket, but it is lost potential revenue. This is especially true given all the indicators that suggested Baltimore might be the pick as much as 12 months in advance of the decision.

Attendance

There are other factors to consider that are specific to the club. In 2013, when the Mets were preparing to host the game, the New York Times ran down the reasons these assignments are so cherished. Even if you're skeptical of some of the squishier reasons offered—the "morale boost" for office staff, the building up of a team's "brand"—there are tangible factors, too:

"For us, the big plus is you expand your season-ticket base going into that year,” said Kevin Uhlich, the senior vice president for business operations for the Kansas City Royals, who were the hosts for the All-Star Game in 2012. "While our play on the field didn’t change, our season tickets were up 25 percent because the only way to guarantee All-Star tickets was to buy a ticket plan."

The Angels cited a similar number, in a roundabout way:

The Los Angeles Angels, hosts of the 2010 All-Star Game, said it helped cushion the blows they might have sustained during the recession. "Season tickets for that year held steady compared with 2009, “when most teams were dropping about 20 percent,” said Molly Jolly, the team’s senior vice president for finance and administration.

How much that matters is debatable—a corresponding decrease in single-ticket sales muted the Royals' overall attendance boost, for instance. One season ticket package doesn't necessarily mean 81 tickets sold; it could be a 16-game plan, or an eight-game plan, or even a deposit that was never followed through on. But the season tickets do give the club cost-certainty, and it's clear that hosting the All-Star game pushes a large number of fans to lock in these packages to the club's benefit.

***

The simple truth is that we don't really know what goes into these decisions—and that's the problem. The selection process is largely at the whim of the decision-makers, making it far too easy to conclude that this MASN spat is to blame for a city losing perhaps tens of millions of dollars in potential economic impact and a club perhaps losing thousands of season ticket deposits. Whether that's accurate is almost irrelevant now; what's done is done, what's suspected is suspected, and Baltimore won't soon forget.

Jeff Long is an author of Baseball Prospectus. 
Click here to see Jeff's other articles. You can contact Jeff by clicking here

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