April 1, 2004
Yankees' Stadium Dilemma
Why They Need a New Park to Compete
In the wake of Commissioner Selig's latest declaration that the 36-year-old Oakland Coliseum "cannot produce enough revenue for [the Athletics] to be competitive," more attention should be paid to another perennial contender in a similar plight. If recent trends continue, the New York Yankees will soon need a new ballpark to remain competitive.
As shown below, the Yankees' Opening Day payroll has nearly doubled in the four seasons since their last world title:
Year Opening Day payroll Result 2000 $93 million Won World Series 2001 $112 million Lost World Series 2002 $126 million Lost ALDS 2003 $152 million Lost World Series 2004 $182 million ???
If this trend continues, by 2008 the Yankees' payroll can be expected to reach $350 million. That figure, an average of $14 million/player, is not out of the question when one considers the club's current commitments and management philosophy.
The Yankees already have three players under contract through the 2008 season. Thirty-seven-year-old Jason Giambi will earn $21 million; 34-year-old Derek Jeter will receive $20 million; and the Yankees will be responsible for $16 million of the $27 million due 32-year-old Alex Rodriguez, Carlos Delgado, Jim Edmonds, Darin Erstad, Nomar Garciaparra, Livan Hernandez, Chipper Jones, Ivan Rodriguez, Jason Schmidt, Ichiro Suzuki, Frank Thomas and Billy Wagner, each of whom could be expected to demand and receive "Giambi/Jeter money." Suddenly the $291 million left to spend on other players doesn't seem excessive, especially since between now and 2008, the Yankees are unlikely to receive any help at all from their farm system.
According to MLB's revenue-sharing formula, the Yankees' total revenue for 2003 was just $270 million. That figure can be expected to rise significantly as a result of the Yankees' recent arbitration win over Cablevision, but absent some major changes it is hard to see how the club's revenue could rise to the level, net of revenue sharing, necessary to support a $350 million payroll plus a likely luxury tax bill of $75 million or more.
The Yankees' best hope for that necessary revenue increase is through a new ballpark. Fortunately for the club, Yankee Stadium should be easy to replace. Although it is the majors' third-oldest stadium and has hosted a number of memorable games, it's located in a bad neighborhood and enjoys little fan loyalty. Moreover, extensive renovations in the mid-1970s robbed Yankee Stadium of its architectural integrity, as well as the charm that draws fans to Wrigley Field or Fenway Park, so preservationists are unlikely to object to its abandonment.
More to the point, modern baseball economics have passed Yankee Stadium by. Because three subway lines serve the Stadium, the Yankees lose the potential for millions of dollars in parking revenue. Bars and restaurants across the street from the Stadium cost the club valuable concession money. And Yankee Stadium's major-league-high capacity of more than 57,000 fans, in an era when 42,000-seat stadia are the norm, prevents the Yankees from raising ticket prices to their optimum level. The Yankees' average ticket price for 2004 is almost $16 per ticket less than the arch-rival Red Sox are able to charge.
Six years ago, New York City officials estimated that the Yankees' earnings would rise by $50 million per year in a new stadium. By now, that figure is probably closer to $100 million a year. If New York taxpayers can offer $600 million to construct a platform so the NFL Jets can build a stadium atop rail yards, surely they can offer as much to ensure that the Yankees can remain competitive for years to come.
Doug Pappas writes about the business of baseball for Baseball Prospectus. His deep respect for the current Commissioner has led him to start the Bud Selig Fan Club Blog.