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Despite 2020 opening, MLB future far from clear

Major League BaseballThere will be plenty of hoopla and raised spirits when the MLB season opens tonight, but even if we see a successful season culminating in an exciting World Series, the financial issues facing the sport and its partners for 2021 and beyond will still need addressing.

There is the assumption by many fans that MLB teams are owned by billionaires and are immune to the general economic woes facing so many businesses in a COVID-19 economy. But like every other industry reliant on performance (whether it be sports or arts) and fans, the baseball world is being hit hard by pandemic-related shutdowns, with several teams (Rangers, Rays, Pirates, White Sox, Diamondbacks) announcing layoffs in the last month.

Part of the reason for this year’s cutbacks is that no fans will be present this year. But a deeper reason, and one that’s not addressed too openly, is that despite MLB’s stated optimistic about the 2021 season (look, we’ve already released a schedule!), many MLB owners and C-suite execs are nervous about how a 2021 campaign will look, both in terms of continuing COVID-19 mitigation measures and fan attitudes about large gatherings. As we’ve been pointing out, just because fans can return to the ballpark doesn’t mean fans will return to the ballpark.

One owner hit hard is Jerry Reinsdorf, who lost a chunk of the Chicago Bulls season when the NBA shut down; virtually all revenue from the United Center when the NBA, NHL and music tours shut down; and 2020 gate revenue for his Chicago White Sox when the MLB season was scaled down to 60 games. All in all, revenue for all his buildings down down “in the nine figures.’’ And things may not be better next year, as he tells the Chicago Sun-Times:

“The two teams and the stadium all have expenses,” Reinsdorf said. “None have income. That’s a bad business model. The Bulls played 75% of the season, so the losses aren’t bad. We had a lousy season [22-43], so we weren’t going to be in the playoffs. But the baseball losses are tremendous.”

The Sox are one of the few MLB teams who have yet to impose salary cuts or furloughs, but Reinsdorf fears that day is coming. The pandemic is imposing a powerful threat to next year’s finances, too.

“I’m very worried about next year,’’ Reinsdorf said. “There are just so many unknowns.”

There are no teams with permission to have fans this year, and as the pandemic continues, teams are bracing themselves for a dramatic drop in attendance next year, too, even if fans are permitted.

The lack of fans in the stands won’t just hurt the likes of Reinsdorf and his fellow owners; also hit hard are the business owners who rely on game-day traffic to generate business. The irony here is that MLB teams (as well as some MiLB teams) have created economic ecosystems based on urban ballparks generating enough foot traffic to support a slew of businesses. No fans walking from the subway to Citizens Bank Park or Yankee Stadium and spending some money along the way; no folks hitting the bars and restaurants adjacent to Target Field. In the Bronx, the Yankees are a prime economic engine, so there’s a considerable impact when there are no fans at the ballpark. From The New York Times:

The usual hiring of workers to sell hot dogs, beer and jerseys did not happen this year: The unemployment rate in the Bronx in May was 21.6 percent, more than four times as high as the year before.

“There’s a feeling of dejection and a very high level of anxiety,” said Cary Goodman, who represents a group of neighborhood merchants. “Every day I’ve had a conversation with at least one of them who says, ‘I don’t know if I’ll be able to stay in business.’ ”…

The Bronx borough president, Ruben Diaz Jr., called neighborhoods near the stadium “the ground zero of ground zeros,” saying, “We’ve had sickness, joblessness, food insecurity, poverty.”

The average merchant in the area was at least $60,000 behind on rent by the end of June, Mr. Diaz said.

By our count, 20 of the 30 MLB teams play in an urban ballpark where the lack of foot traffic will have a huge impact on local vendors. We do count ballparks like Wrigley Field being in this mix; yes, there’s a solid base of business in Wrigleyville aside from baseball crowds, but the loss of baseball will still make the difference between a good year and an average year. Add COVID-19 mitigations like the closing of bars in Chicago and a weak economy to the mix, and you’re looking at a situation where average would be a success. The announcement that Wrigleyville’s Guthrie Tavern, one of those little hidden gems in the area, is closing, and it can be at least partly attributed to the lack of baseball this summer. So there’s no ballpark economy immune to the lack of fans this season.

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