It’s not on the horizon. In fact, it could take up to a decade. But when Major League Baseball finally decides to expand, could it dry up?
That’s the question as the topic of creating two more teams — to expand MLB from the current 30 teams to 32 and perhaps restructure the league into eight divisions of four teams each — draws attention .
The problem would be the high price tag for any potential owner and any city looking to host an expansion team. As part of SporticoThe recent panel on MLB valuations, MLB Commissioner Rob Manfred spoke on the subject.
“If those assets are worth an average of $2.2 billion, I think that’s kind of a benchmark in terms of a starting point in terms of evaluating expansion opportunities,” Manfred said.
If expansion fees currently stand at $2.2 billion per expansion club, you have to consider that that’s about halfway to raising the total needed to land a franchise. The cost of a state-of-the-art baseball stadium for MLB would be nearly $2 billion, for a total of about $4 billion. Knowing that to properly pull off an expansion would require not one but two new clubs to balance the league, what Manfred appears to be doing is creating a near-impossible scenario for baseball’s markets and promoters, who would collectively have to muster around 8 billion dollars without losing. in the ranks of revenue takers in baseball’s revenue sharing system.
The following markets have been mentioned as possibilities for expansion or already have some form of baseball booster group: Charlotte, North Carolina; Las Vegas; Montreal; Nashville, Tenn.; Portland, Oregon; and Vancouver, British Columbia.
All of these markets – even Montreal, whose metropolitan population is estimated at 4.2 million – would be under intense debt service pressure for several years. This takes into account that in any case of expansion, an accessory mixed-use development would encircle the stadium in a “rough village”.
Even if a market were to somehow have some type of agreement on fan attendance and media rights to meet debt obligations, the franchise’s ability to have A competitive wage bill for players would be put to the test.
And that’s just the two growing markets. With two new clubs, central revenues would suddenly be divided into 32 shares, compared to 30 currently. Manfred addressed this question this week during the panel.
“Expansion is not purely additive, is it, from the perspective of existing owners,” he said. “There are huge shared revenue streams that are diluted by having 32 instead of 30 as the denominator, if that was in fact the expansion figure, and that needs to be taken into account as well.”
Manfred told me several times that he sees MLB as a growth industry. Indeed, the other three major sports leagues among North America’s Big Four have all experienced more recent expansion than MLB. But Manfred must sell the one-time injection of $4.4 billion in expansion fees to counter the long-term dilution of central revenues, which could approach a plateau around national media rights after the start of the next agreements in 2022.
So Manfred has a trap on his hands: League expansion will bring a one-time lump sum, along with two new, heavily indebted ownership groups and diluted centralized revenues. And none of this addresses the thorny issue of club encroachment on two or more current television territories. Do you remember when the Montreal Expos moved to Washington, D.C., and Baltimore Orioles owner Peter Angelos threatened to sue the league if there wasn’t some form? compensation? If the league needs 75% of owners to approve expansion, you can almost certainly start with owners who claim a particular expansion candidate market as part of their TV territory to vote no. In some locations, like Las Vegas, six clubs claim the market.
While there is a possibility that clubs will want to quickly take advantage of expansion fees to offset losses due to the pandemic, projections appear to indicate that stadiums will increase their capacities over the course of this summer as more people attend. will be vaccinated. This should minimize the financial hit, dulling the glare of this rapid cash drain.
Expansion will happen one day for Major League Baseball. But that doesn’t seem likely over the next five years – and maybe even longer. Whether it is Manfred or the next commissioner who tackles this issue, you can be sure that the thorny problem will persist.