I totally agree with you that the league should expand internationally, and some of the smaller market teams should be cut. I’m going to be a little contradictory here and point out the Florida Marlins as an example of a team that should be cut. Teams like the Red Sox and Yankees are essentially subsidizing the Marlins as they benefit from the revenue sharing system in place. Michael Lewis, the author of Moneyball, wrote an article about the poor structure of the revenue sharing system. He argues that since the system offers no incentives for small market teams to increase attendance, they are simply reducing their payrolls and costs to increase profits while slowly killing their fan base. If teams like the Marlins, as well as the Kansas City Royals and Pittsburgh Pirates, perennial losers, should be folded and moved to international markets in the future. I’m sure there are many cities in Latin America that could easily support a team. Asia should be looked at as an option in the future for expansion. I could easily see a structure that would have an American League which includes teams in the U.S., Canada, and Latin America, and an International League that has teams from Japan, China, Korea and Southeast Asia. They could function very similarly to the American and National leagues work now, including interleague play.

@Norm: You raise some excellent points about the ownership structure of the league. However, despite what you think (and it came as a big surprise to me too) owning a MLB team is actually surprisingly profitable. This Forbes report breaks down the value, revenues, and operating incomes of all 30 teams, and only 3 teams had an operating loss in 2007. Surprisingly, those teams were the Yankees, Red Sox, and Blue Jays. As the article explains, even those losses are a little misleading. The Yankees and Red Sox both receive huge dividends from their unconsolidated cable networks and Rogers, like Ted Turner, gets lots of cheap content for his channel Sportsnet. The Florida Marlins, despite being the least valuable team in the league, generated an operating profit of $35.6 million. It probably helps that their entire team payroll is less than what the Yankees are paying A-Rod. Also, the team benefits greatly from the revenue sharing program that the league uses. By utilizing Wikinomics principles, which in general are low-cost, the owners should be able to increase their margins even further.

@Jacob : I agree that baseball, as well as all businesses need to adopt new technologies to move forward and grow their business. The biggest problem for many businesses, like MLB, is that they are sometimes entrenched in old traditions. Businesses need to find the right balance of sticking to what made them originally profitable, and adopting changes for the future. Personally, I think MLB is a little too far on the tradition side by not having video review, and relying on umpires. One of the goals of my blog is to examine older businesses, and see how they have adopted to this new business paradigm.

P.S. Your website is really cool.

The American consumer will be looking for ways to save money by eliminating many non-essential expenditures, which unfortunately include paying expensive ticket prices at the ball parks as well as overpriced beer and food within the stadiums. Advertising revenues will also shrink as it becomes less cost effective for advertisers to pay for expensive commercials directed towards broke American consumers. Americans will also be less willing to pay a premium to buy MLB apparel and products. All of the major sources of revenue of MLB will decline (in real terms) as the collapse of the American economy accelerates.

Within the next few years, Americans are simply not going to be able to afford to pay to see a baseball game at a stadium. They may not be able to afford the gas to drive to the stadium, let alone the price of the ticket or the food once they get there.

If major league baseball is to remain profitable, they will have to substantially reduce their costs in order to lower prices so that their product will be more affordable. Teams in small markets and in areas particularly hard hit by the recession should be folded, as it will be especially difficult for these teams to remain profitable. When the American economy was booming, many expansion teams were added to the league, so it only makes sense that these teams should be purged from the league now that the boom has turned to a bust.

The operating costs across the board will have to be sharply reduced. Salaries for baseball players are astronomical and will be forced down by free market forces as owners look to cut costs. Non-essential personnel such as trainers, scouts, management, etc. can also be reduced. If owners refuse to cuts operating costs, they will be unable to cut the prices of tickets, food and drinks. If these prices remain at these levels, the broke American consumer will no longer be able to afford to see a baseball game at the stadium and revenues for MLB could dry up rapidly.

Modernizing the game by implementing video replay, additional statistics or reducing negative publicity from steroid scandals will do little to combat the macro-economic forces that doom the industry as a whole.

As you correctly pointed out in your blog, the solution it to act globally. Small market teams should be moved to countries in Central and South America since their consumers will be benefiting from the increased purchasing power that will result from a collapsing dollar. A substantial effort should also be made to further popularize MLB in the prosperous Asian nations, especially Japan, and secure contracts to broadcast games in these countries. MLB merchandise and apparel should also be marketed towards the global consumer who will become wealthier as the dollar crashes.

P.S. I really enjoyed your blog post… looking forward to reading your next one.

Overall Grade: A+