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Wednesday, January 9, 2019

Tribe's Offseason Belt Tightening Really Does Come Down to Attendance

Posted By on Wed, Jan 9, 2019 at 10:59 AM

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The Cleveland Indians are in the midst of an offseason belt-tightening, if you haven't heard.

Hitting the road are Yan Gomes, Yonder Alonso, Andrew Miller, Lonnie Chisenhall, Michael Brantley, Edwin Encarnacion, Yandy Diaz and Erik Gonzalez. The only big player added is Carlos Santana. There is also talk of trading Corey Kluber or Trevor Bauer before spring training. Not much talk of adding anyone that costs much.

As Terry Pluto noted in his Sunday column, the projected outfield as it stands: a platoon of Jordan Luplow and Tyler Naquin in right, Greg Allen and Leonys Martin in center, and some combination of Carlos Santana, Jake Bauers and somebody else in left (and DH and first base).

You can hear the team's ticket sales line burning up as we speak.



Anyway, this could mean about $15-20 million in payroll savings this year over last. That is odd because the Tribe has had the best record in the American League in the last six seasons, and it is in good times like this that teams usually add payroll, not cut. The defining assumption in that sports management thinking, however, is that people buy more tickets and load up on high-priced beers and hot dogs if the team is winning, increasing the cash flow.

The first part of that is happening (winning) but the second part isn’t (fans spending). The reality is that Tribe fans are not going to games and spending their cash in Cleveland like other fans do when their teams are good, and that is what is driving this payroll downsizing. (Yes, there's also valid arguments that the team as it was constructed last year, specifically with regard to the bullpen and some bats, simply can't hope to compete against the Astros, Yankees and Red Sox, and that changes needed to be made. But the argument here is the tools with which the team is able to make those changes, and the economic realities of the Dolan ownership.)

When you draw about 5,000 less fans each game than the league average last year — or about $250,000 less per game in tickets and concession sales — it affects the finances.

There are many ways to look at this, but let’s keep it simple. The Indians drew 1,926,701 in 2018, a bit less than the 2,048,138 in 2017. In both of those years, they were in the bottom-third of all teams in attendance (#22 and #21). Of the ten playoff teams last year, seven of them were in the top ten in league attendance.

Team payrolls are about half of the revenues baseball teams take in. (MLB took in record revenues last year, largely based on income outside of attendance, and there's a good read on why that might be a long-term problem for the game as a whole here. Mentioned in there and elsewhere: payrolls across the league dropped for the first time last year since 2010.)

So last year (according to the best estimates), the Indians brought in about $300 million and spent about $150 million on player payroll. It is estimated that the average team gets about 35% of the team revenue from tickets and concession. This much is certain: they seem to be in the neighborhood of expenditures exceeding revenues with the current attendance numbers.

To see how this plays out, look at the payroll increase and the attendance increase from the past few years. The Indians had a payroll of $68.9 million in 2012 and a payroll of $150 million in 2018, an increase of 117%. But attendance hasn’t kept up. In 2012, they drew 1.6 million, and in 2018 they drew 1.9 million, an increase of just 20%. Both way below league average.

This isn’t a recent turn in Cleveland baseball attendance being low. In the last six seasons, the Indians have had the best record in the American League – with four seasons with playoff appearances – but have ranked 26th out of 30 MLB baseball teams in attendance. Historically, when a team gets to the World Series (like the Indians did in 2016), the attendance moves into big draw numbers for a few years afterwards, but that hasn’t happened here.

How does that compare to other teams? Let’s throw the big market Boston Red Sox and New York Yankees and Los Angeles Dodgers out of the mix. How about comparing the Indians to similar sized markets, like Kansas City and Milwaukee.

In the past ten years, the Milwaukee Brewers have been to the post-season twice. The Kansas City Royals have been to two World Series, winning one in 2015. And again, the Indians have been to the post-season four times in those ten years.

The Brewers have ranked 11th in league attendance in that time period, the Royals have ranked 21st, and the Indians 26th. That means, during the cumulative attendance from 2009 to 2018, the Brewers have outdrawn the Indians by 10 million fans, while the Royals are up by 3 million.

Based on the $30 ticket price average during that period, the Brewers have brought in $324 million more than the Indians and the Royals $95 million more in ticket sales alone. That is not a small amount, especially for smaller market teams.

If the Indians had drawn 300,000 more last year (and finished 15th in attendance), they could have an extra $15 million to spend on payroll (based on the Fan Cost Index). If they had drawn what Milwaukee drew last year (about 1 million more than the Indians), they would have about $50 million extra cash.

Would that have a big effect on free agent signings or decisions on trades? Hard to tell. But it would mean that they would be in a better spot to keep their own players, or sign a few free agents. Can’t ignore that financial fact.

The baseball attendance excuses in Cleveland are that the spring was cold here and that the games are too long and the ticket prices too high. But that type of thinking doesn’t work, because the springs are cold and the games too long and the prices too high in most MLB cities. No one wants to admit that good teams in MLB usually draw well, but the Indians haven’t.

What this does mean, however, is that if you continue drawing fans in Oakland A’s territory – in the bottom third of the league – the payroll needs to come down to balance the books. Often, that is the first sign that the end of the sports good times are close. That is what is happening now.

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