Extended Layoff Could Force Some MiLB Clubs To Fold

JohnWallStreet

Major League Baseball issued a statement on Monday (3.16) acknowledging that the start of the 2020 season would be delayed until at least mid-May (in accordance with the CDC’s restriction on events with 50+ people for the next 8 weeks). The public comments did not specify how many games would be played once the season does begin, but the 30 clubs are said to be committed to playing “as many games as possible.” While hope remains that MLB teams can find a way to play a full 162-game slate, those on the minor league level know that any games lost in April and May - and the associated revenues - are gone for good. One MiLB team owner said “it’s not like [MLB] is going to load up the second half of the minor league schedule. [MiLB teams] are not going to make up those games.” That's because most believe there's "no reason" to put minor league players through the grind of a truncated full season (i.e. the record books and post-season are relatively inconsequential).

Howie Long-Short: For those associated with MiLB club ownership, the timing of the Coronavirus outbreak could not be worse. “[Team owners] spend money and earn none from October through March. All of the revenue generated comes in between April and September.” The CDC mandate is now going to cost them at least a month and a half of what is already a short earning window.

Unlike MLB clubs which are likely to see some television money over the next few months (even if there are no games), “the majority of MiLB club revenues originate from ticket sales and concessions at the ballpark.” So, if the schedule is dark there’s no money coming in to keep the business afloat. To put the potential losses in perspective, a large turnout at a MiLB game (think: Opening Day, Memorial Day, July 4th) could be worth upwards of $100K to the home team (think: 10K fans at $10/per).

Considering MiLB teams rely so heavily on ticket sales, it’s possible that an extended layoff could put some clubs out of business. Our source explained that “MiLB teams are small businesses. They’re not particularly well capitalized and they don’t generate a ton of revenue. If this [pandemic] lasts 6 months and the season is wiped out, all bets are off [on how many clubs would potentially have to fold].” Of course, MiLB (like everything else) consists of ‘haves’ and ‘have nots’. “There are some teams that could play half of the 2020 season and still break-even (perhaps generating as much as 70% of annual revenues during the second half), but many others would lose a lot of money.”

The strong relationships MiLB teams have with their local municipality should prove beneficial during this trying time. The owner we spoke to said he/she expected most teams to seek - and receive - rent relief on stadium leases until the games get started again.

Our source intends to continue paying his/her employees - including those who work on a part-time basis - but the longer the start of the season is delayed, the more likely it becomes that layoffs will occur across the sport. “[MiLB] teams are not printing money. Most [MiLB owners] are not making money hand over fist. [The lost revenue] is a huge financial hit and it’s going to result in a lot of teams experiencing uninsured losses this year.” There may clubs that simply get to the point where they can no longer afford to carry non-essential personnel. The players shouldn’t have to worry about getting paid, their paychecks come from the major league clubs. I say shouldn’t - not won’t - because while MLB teams certainly have money to carry the MiLB payroll in the interim, the league and union have yet to discuss “if and how to pay [minor leaguers].” MLB needs to do right by these guys.  

It’s fair to wonder if the fans will return once the games get going again. Remember, the country is facing a potentially deep recession and it seems like it's just a matter of time until people begin to cancel their summer vacations. But our source doesn’t believe that a down economy will impact future gate receipts. “History has shown that people still need to be entertained [during an economic downturn] and MiLB offers affordable family entertainment. The guy living upstate making $35,000/year might cancel the family’s annual trip to Yankee Stadium, but he will probably still take his kids to a MiLB game.”

Editor Note: Please note that joining our community (below) will entitle you to receive our free daily sports business email newsletter. 

Join the Community on John Wall Street
Enter your email address and press the Join Now button to sign up for updates from John Wall Street
Comments

Sports Business

FEATURED
COMMUNITY