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March 5, 2012

Bizball

Baseball Cashes in with Expanded Playoffs

by Maury Brown

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Love it or hate it, Major League Baseball is about to have 10 playoff teams in 2012. The deal to add the fifth seeds from each league into the playoff mix this season, as opposed to next, was something that was collectively bargained for as part of the new CBA. The question was only whether it would happen this season or next. The owners wanted it. Selig wanted it. The players were concerned about the schedule and travel, which was valid given that the 2012 schedule had already been finalized. The issue had been how to deal with any potential regular season tie-breaker games, squeeze in the new Wild Card games the day after the regular season ends, and still allow time for rainouts during the League Division Series and League Championship Series while fitting it all into a three-week window from Oct 3 to the start of the World Series on Oct. 24. Those concerns by the players were addressed as part of the discussions, although the risk is still there if Mother Nature (read: rain) wrecks the party.

There are (and will continue to be) debates about whether adding in the extra Wild Cards will be good or bad for the game. Certainly, Game 163—those potential tiebreakers in the regular season—may be diminished. But this much is certain: there will be millions of dollars reaped from the additional playoff teams being added. And, if stars align, the haul could amount to hundreds of millions. Here’s why.

While they have not yet been fully negotiated, the broadcast rights to air the two sudden death games will be announced later this year. Along with that, there will be the additional revenues amassed by the fifth-seeded clubs at the gate and the ability to slingshot the “see your playoff team” marketing element for season ticket sales the following season, which parlays into added sponsorship opportunities, etc.

For the league, the arrival of the expanded playoffs this year as opposed to next is an added chip to use as national television rights deals come up for renewal. MLB’s deals with FOX, ESPN, and TBS are set to expire at the end of 2013, so negotiations to renew will begin sometime shortly after the 2012 season or shortly after the 2013 season begins. If the added play-in games increase interest and/or ratings and viewership, that will help the league tack even more on top of what is sure to be an eye-popping set of deals.

Currently, MLB takes in approximately $660 million annually in national media rights revenue. The current Angels and Rangers deals reportedly pull in $150 million annually. The NFL, which just renewed its relationships with FOX, NBC, and CBS, landed a whopping set of contract extensions that total approximately $28 billion over nine years. Baseball is not going to get anywhere near what the NFL is pulling in, but if it enjoys anything close to the 63 percent growth rate of the NFL deals, baseball could possibly see its $660 million annually jump to as much as $1-$1.5 billion annually. The added Wild Card teams factor into that.

Consider this. If the added Wild Cards had been in place last season, the Red Sox and Braves, while still in an epic slide to end the season, would have made the playoffs. The Red Sox, especially, are a ratings win for the networks. But beyond stories and name brands, the additional teams going in add a broader regional palette with which to reach audiences. The league is going to use that to its advantage with the new media rights deals.

Some observers have expressed concerns that the game will be diluted due to the additional teams making the playoffs. However, even after going from eight playoff teams to 10, MLB will see the lowest percentage of teams make the postseason of the Big-4 sports. The following table shows the number of teams that make the postseason for the NFL, MLB, NBA, and NHL, along with the percentage of total teams:

League

Total Teams

# in Playoffs

% of total

NBA

30

16

53%

NHL

30

16

53%

NFL

32

12

38%

MLB

30

10

33%

If MLB can sell the drama of the one-game play-in, and that drama extends into the LDS, LCS, and World Series, the potential is there for hundreds of millions of dollars to come MLB’s way thanks to the additional playoff teams. One thing is certain: this year will mean more in terms of pushing the revenue needle up for the league than most seasons prior.

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

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