Few industries were built to ride out the havoc wreaked by COVID-19.
Minor League Baseball is emphatically not one of those businesses.
As baseball fans reckon with no minor league baseball for the first time since 1901, the pandemic has brought the MiLB industry to its knees.
“We are in dire straits,” said MiLB president Pat O’Conner when the season’s cancellation became official this past week. “I still have grave concerns.”
MiLB spokesman Jeff Lantz described the plight in the bleakest of terms.
“If we don’t play any baseball this summer, we’re going to need a tourniquet instead of a Band-Aid,” Lantz said prior to the announcement there would be no minor league season in 2020. “It’s a very difficult situation for our teams, because they rely on the gates being open, the people being in their seats, and people having a beer in one hand and a hot dog in the other. That’s the source of revenue for our teams. When you can’t have the gates open, it makes it really, really difficult.
“If we don’t have a baseball season this year, most of our teams are going to be looking at 18 months of no revenue. I couldn’t think of any business that’s built to withstand that, so there’s certainly going to be some teams that are going to have to make some really tough decisions here pretty soon.”
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The financial impact could linger because of bankruptcy, foreclosures, and asset transfers. The attrition rate, said O’Conner, could reach “north of half” of the 160 affiliated minor league teams.
“I think there’s a very good chance that some current owners are not going to be able to retain their teams,” said J.J. Gottsch, chief operating officer of the Ryan Sanders Group, which owns the Astros’ Triple A club, the Round Rock Express, who play near Austin, Texas. “I think that there may be some folks who didn’t go into this season as financially stable as others, and for those clubs, there may be a need for some of those owners to sell to different groups.”
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Stephen Greyser of Harvard Business School painted a similarly desolate picture.
“There’s going to be a real serious blow. My prediction and projection would be that there will be a meaningful contraction that will happen because of economics that are not a function of MLB declaring that MiLB needs to be contracted,” said Greyser. “I think there will be a ‘Darwinian contraction’ — not necessarily huge because teams still have their ballparks and they still have their fans who, if they’re doing the right marketing job, they’re trying to stay in touch with and trying to do things.”
According to MiLB, the average annual gross revenue of one of its clubs is approximately $5.4 million. Multiply that by 160, and you have an industry with gross revenues last year of $864 million. The vast majority comes from game-day operations, with 60 percent from tickets and concessions sales. Add in souvenirs and in-game advertising and the figure grows to 85-90 percent.
On average, an MiLB club earns approximately $70,000 of gross revenue per home game.
Minor League Baseball also makes tangible economic contributions to its surrounding community. Those are gone now.
According to MiLB, more than 32,000 part-time seasonal workers find employment at their local ballpark each summer, with 3,300 employees working full time for the minor league clubs. The latter group’s paychecks, including benefits, total in aggregate around $204 million annually. More than 100 teams, including all of the Red Sox’ affiliates, applied for and received Paycheck Protection Plan loans from the federal government this spring to help keep those full-timers’ paychecks coming.
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“That was a Band-Aid on a hemorrhaging industry,” said O’Conner, who points toward pending legislation before Congress that could provide extensive and essential loan assistance for clubs.
According to MiLB, teams pay combined annual rent of $65 million-plus to local governments, and the sport’s philanthropic efforts meant a combined donation of more than $50 million last year in cash and in-kind gifts to charities.
A look at the prices an average minor league team charges offers a pertinent peek into how small of a margin teams live on, especially when compared with their major league brethren.
The average adult ticket price for a minor league game last year was $8.36, according to MiLB. For a big league game, it was $32.99, according to the MLB Fan Cost Index.
For a family of four to attend a game, buy four hot dogs, two beers, two sodas, and park the car, the average cost across the minor leagues was $69.67, said MiLB. In the big leagues, where the MLB Fan Cost Index throws in two more sodas and two souvenir caps, the average family cost was $234.38.
“Minor league baseball is a relatively resistant form of entertainment,” said Jeff Goldklang, president of the Goldklang Group, which owns four teams — two affiliated, one independent, the other the Pittsfield (Mass.) Suns from the Future Collegiate Baseball League of New England. “When the [2008] recession hit, it was, ‘This is how much money we have, to spend as a family, what can we do with that amount?’ And minor league baseball was at the top of that list. I think we’ll always be that.
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“With that in mind, we will never raise prices near major league levels, or raise them to the extent of ‘Gosh, I love those Renegades or I love those River Dogs, but, ach, they’re expensive.’ ”
The price difference is vast, yet the quality of minor league baseball can be high, with fans sitting much closer to the action in small ballparks where the wins and losses are far less important than the entertainment factor.
It’s true that franchise loyalty can be built for the young baseball fan who can say she saw, for example, an 18-year-old Xander Bogaerts play in Greenville, S.C., during the summer of 2011.
“A minor league sports team is a community asset, and that asset is a place for families to go,” said John Allgood, executive master of science sport business at Temple University, as well as the former executive director of the Triple A Oklahoma City RedHawks. “It’s a quality-of-life aspect for the community. Sports teams always increase the quality of life in a city, that’s why sponsors sponsor, to show they’re part of the community.
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“When you don’t have that and it gets taken away, there’s a hole in the community. That asset was there and now it’s not — it’s a negative psychological impact on the community itself. It’s also a financial loss not only for the team but everyone on the team and that’s supported by the team.”
Even before the pandemic wiped out this season, MiLB was already grappling with an existential threat to next season. Talks with MLB over a new professional baseball agreement turned contentious more than a year ago when MLB proposed a contraction plan that would de-affiliate 25 percent of the 160 teams. Recent momentum had been building toward contraction becoming an inevitability.
Now, the prospect of having roughly half of the remaining 120 teams facing a fight for their financial survival might throw a curveball into MiLB’s confrontation with the Grim Reaper.
One of the biggest unknowns is if ballparks next season will have to operate at reduced capacity. If capacity drops too much, economic survival remains tenuous without outside help.
“I would say, as our current operating plan lays out, it would be very difficult to succeed at one-quarter capacity,” said Goldklang. “When 2021 comes along, and if that reality exists, we are going to need to go back to the drawing boards with our municipalities, with government officials, and determine how best we move forward. I do think there may be a path forward long term.”
Finding alternative revenue is a formidable challenge of engineering and corporate creativity.
Minor league owners are already trying to think outside the box, making parking lots or outfields open-air restaurants, using the parking lots for drive-in movies, hosting a prom — you name it, minor league owners have already thought about it.
And when games return, the leagues and teams will have to present their players in a brand-new fashion.
“It’s about pulling the curtain to the side, where before you didn’t have access to a clubhouse or locker room, the player usually left the ballpark and you didn’t have access to him anymore — now, you have to create access,” said Allgood. “You may be in the clubhouse before the game starts and we’re going to stream what the manager is telling the players. Or, it may be that we’ll have a camera in the dugout and we’ll hear the players, good or bad, what they’re saying.
“Players may not like it, but it should be the type of system where we get to know the players beyond on the field, and beyond going to the website and reading about them. In order to keep this going and drive revenue, there’s going to be either subscription-based platforms or sponsored platforms that are streaming and interacting on a daily basis.”
It’s that kind of new-reality thinking that’s going to separate the minor league survivors from the victims.
“Folks are going to have to get creative internally,” said Gottsch. “If it becomes a reality that we’re not going to be able to host baseball and not going to be able to host these other events, there’s almost the mind-set of it’s like you’re buying a new franchise — you’re moving them to a new city and you’re ramping up for your first season, which is going to be the next year.”
How hands-on will MLB be? Will Congress provide enough of a workaround with loans or will MLB have to ride to the financial rescue of teams who duck the contraction list but can’t avoid bankruptcy in the new baseball economy?
“There will be changes — I hope MLB doesn’t mess with the community feel of the team or strip it down to where it’s a G League — just developmental and experiment with the rules and kind of screw with the game a little bit. It would just be a shame,” said Allgood. “It’s worked so well for so long, franchise values have gone up consistently for 20 years.
“You throw in the pandemic and the pressure that puts on franchises to survive, the combination will be that MiLB won’t be the same and it never will be again. I hope eventually MLB will work with minor league baseball teams and try to figure out how to put the best product out there for the fans.”
Michael Silverman can be reached at michael.silverman@globe.com. Follow him on Twitter: @MikeSilvermanBB
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Minor League Baseball as we know it may be gone - The Boston Globe
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