Introduction
This project seeks to provide a critical analysis of sports of economics of the Yankees, which is the Major Baseball (MLB) team in New York State. In this study, one of the concerns will be to give a critical analysis of the market in which this team operates. The analysis will comprise, though not limited to, the aspects of the demographics, the value of television contract and its effects on the roster spending of the team, and the attendance levels and the prices of tickets of the team. Additionally, the analysis will focus on describing the financial information of Yankees, including the details of ownership group, major contracts that the team is obligate to paying, and the mechanism of funding of the team’s stadium. Also, it will be important to highlight any evidence of cultural significance of the team. If there is any unique market-oriented factor of the team such as single team-city and share a city, the paper will explicitly explain them as well as their effects on the team’s operations. As well, there will be the examination of way the current CBA for the league specifically and generally affects them (Heyman n.d.). Furthermore, there will be a need for looking into any unique any unique team-specific aspects of the roster like lengthy contracts, young players, and superstar players, which affect the team’s long- and short-term financial construction. The concluding statement will entail the description of the unique situation the team is in as well what they seem to be maximizing.
History of the Yankees
Researchers have seemed to combine historical evidence with the statistical and economic analysis to examine the New York Yankees specifically as well as the major and minor leagues generally from a context closely related to the business and economic history. The Yankees has recorded a continued economic success since 1957 where it had won 15 out of the 21 AL pennants. To achieve its competitive position in the sports market, the team focused on hiring fewer skilled players, where the club recruited the players and sold them on basis of the fame, fat shares, and fortune of am pot of World Series, which roster of the New York. Yankees was purchased by CBS in 1964, where 80 percent of it was bought for $11.2 million (Heyman n.d.). The remaining 20 percent was acquired by the television network, which was originally retained by Webb and Topping the two subsequent years. The construction of the new stadium in the recent years costing $1.5 billion has shaped current success of the team since it opened up new opportunities for growth. Additionally, Yankees has a long history of its franchise which has made the team valuable in baseball each year from 1998, and by 2016, it had recorded a franchise amounting to an estimate of $3.4 billion (Forbes n.p.).
The Description of the Market in Which Yankees Operates
In the analysis of the market in which the Yankees operates, it is important to examine with television contract as well as its impact on the league attendance or roster. It has been revealed the effect of the medium was different from one area to another within the United States. For instance, in the Southern of the state, the minor league teams which were folded by 1953 have countered no or little competition from television (Forbes n.p.). It is also worth identifying that less than one in twenty households in the region possessed a television at that time. Additionally, the Great Plains states region has been noted to have less than three percent of the households having televisions. Moreover, the North-eastern region of the state has been found to have some of the highest rates of television saturation. This data depicts that the contract that the team has with media has increased its popularity in the region by gaining a wider fanbase.
The current ticket pricing is $141 for the individual game pricing. The ticket policy only accepts the traditional hard-stock tickets and those issued through a mobile ticketing system. The Yankees Ticket Exchange (YTE) has been subject to a price flooring policy, which implies that the tickets may only be discounted up to a particular amount (Forbes n.p.). In this case, StubHub has been the official ticket resale partner of Major League Baseball, but the Yankees and the Los Angeles Angels and Chicago Cubs have not been part of this agreement.
The average event attendance of the team is approximately 31,000 fans in a single event as compare to other teams, where NASCAR has the highest attendance level of 98,000 fans as reported in 2013 (Eby n.p.). Other leagues like NBA, NHL, and NFL have average attendances of 17,000, 19,000, and 68,000 respectively (Eby n.d.). The team has attracted fans and players of different ethnicities or races, age, marital status, and household income among others. It has been reported the percentage of the black baseball players gone down recent years, with the Latinos dominating the Yankees. To this end, the percentages by ethnicity were 9, 83, and 9 for the blacks, whites, and Hispanics in 2013. The male players are more (70 percent) as compared to women (30 percent). The age with the highest number of fans for over 55 years (50 percent) while, ranges of 2 to 17 years, 18 to 34 years, and 35 to 54 years, accounted for 7 percent, 17 percent, and 26 percent respectively. The average incomes per household comprised 9 percent, 24 percent, 37 percent, 14 percent, and 14 percent for those earning less than $20,000, $20,000 to $40,000, $40,000 to $75,000, $75,000 to $100,000, and over $100,000 (Eby n.d.).
The Description of the Team’s Financial Details
Before going deeper into the financial details of the team, it is important to look into the funding mechanism of the arena or stadium which the team plays in. In the first place, the land in which the stadium was built was provided by the state in the Meadowlands, though the state legislature did not finance the construction of the baseball arena. The main source of funding for this project was from the taxpayers. The president of the state at that time made a proposal of spending $600 million in the public money for additional luxury boxes to the arena in 1998 (Forbes n.p.). This funding also aimed at the creation of the Yankee Village with restaurants, a museum, and shops, and as well improving the public transportation and highway access to the stadium. During the construction of the stadium, the taxpayer contributed over fifty percent of the whole budget of the project.
In the Yankee’s ownership history, George Steinbrenner is longest-tenured owner in the team, serving as a principal owner between 1973 and 2010 (Banner 4). The current ownership of the team is under Hal Steinbrenner, who is believed to be owning the team with his brother Hank Steinbrenner, and the GM Brian Cash. The team was also obligated to paying some major contracts, giving another aspect of heated debate in the sports economics. The two contracts that the team pays to are CBA and NBA. The teams have developed two players in the D-League based on the two-way contracts, constituting a big step forward in pursuit of creating a true minor league, for every Vertical’s Adrian Wojnarowski. Such a change has been expected to bring about the increased maximum size of the roster to seventeen. The latest contract policy concerning payments has made it possible for the franchises to maintain the control of the expectations the team’s development when ensuring the players get a salary increase as they make contributions to the parent team. Furthermore, the contracts consider the salaries of D-League which are growing bigger. At the moment, the top-rated Development League players earn $26,000 and the lowest gets a net of $19,000. Notwithstanding, the salaries of D-League for players on the two-way contracts are expected to excess double the range of $50,000-to-$75,000 for each of the Marc Stein of ESPN, and thus leading the league’s added competitiveness with salaries offered overseas (Forbes n.p.). Furthermore, the team has paid to the contracts which have the positive Net Present Value (NPV). For instance, these conditions have been applied where the players who have been given contract have higher NPV (O’Donohue 5). On such players, the biggest value is placed and thus the team needs to be willing to pay them.
Cultural Significance
Notwithstanding the fact that the baseball has become the most popular professional sport in New York baseball, it has been believed that it has stirred the most passion and interest in the cultural perspective. Indeed, it has been the culture of the Americans to win championships by any major sports team, considering it to be an aspect to be highly celebration such as a ticker-tape parade for the team that attains victory (Banner 5). This situation is contrary to the past when past, the ticker-tape parades were conducted for the Mets, Yankees, Rangers, and Giants. However, New York people now seem to be rallying around any of the local teams who win any championship because of the cultural grounds of the state in sports. Therefore, such a culture of winning has been of significance in the operations of the Yankees.
Any Team’s Unique Market-Oriented Aspects
The unique happening the sports market revolving around the Yankees is that the team’s long-term success of the franchise as well as a large fan-base has caused other many fans supporting other teams hate the Yankees (Banner 12). This club has mostly been known by detractors as “the Bronx Zoo,” which echoes the title of Sparky Lyle‘s book or rather “the Evil Empire” (Forbes n.p.). Indeed, it has been a common behavior for the home fans of other teams to chant “Yankees Suck”, whenever the Yankees are on the road, and also many bumper stickers and T-shirts among other items sold bear this phrase (Forbes n.p.). This kind of animosity against the Yankees emanate f from the fact its high payroll for its players than any American sports team. This situation indicates that the market orientation is on the basis of the share a city, which has seemed to impede the operations of Yankees. Additionally, the CBA for the league has been affected by the team’s attempts to increase the money it pays to its players, which would attract higher tax imposition (Provenzano 1). It has also been believed the team gets financial support from CBA, and thus making the fans have a notion that a line-up would involve the stars in the offing.
Team-Specific Factors of the Roster
It is crucial to note that there are unique team-specific aspects of the roster such as the superstar players, lengthy contracts, and young players which has impacted the way the team is financially constructed in both short- and long-term basis. Notably, players have been changing from one team to another based on which team offers the best pay for the most talented and skilled players because of the idea of the fee agency. In the recent years, the ban on the reserve clause as well as the advent of free agency has allowed each team to raid the rosters of its opponents (Forbes n.p.). This scenario has led to higher rates of the roster turnover affecting Yankees the most because of the high demand of its players, who are the superstars in the region.
Concluding Analysis
There is a necessity to examine the unique situation revolving around team and as well what the team is maximizing. In the past few years, there have been increasing concerns with regard to the way the Yankees carried out its operations. Most importantly, the evaluation of the performance of the players and how much the team can pay them based on the CBA requirements and market (Heyman n.d.). It has been essential to consider financial and econometric practices in the determination of the player’s true value on the basis of their contracts. The analysis depicts how the team has applied the Capital Asset Pricing Model (CAPM) in the determination of the net worth of the players of the Major League Baseball (O’Donohue 5). It is worth to note that most of the analysts have make predictions of the long-term rate on one-year Treasury. In this case, the valuation of players vary from one team to another based on their budgetary needs and as well how much value that player would add to the organization. With this understanding, Yankees has offered profitable contracts to well-paid players like Robinson Cano, whose Net Present Value (NPV) in 2013 was a positive value of over $198 million (O’Donohue 12). This situation has an indication that the team offers contracts to the players it believes will add value to it and makes maximum use of their talents to win the league.
Work Cited
Banner, Stuart. The Baseball Trust: A History of Baseball’s Antitrust Exemption. Oxford University Press, 2013.
Heyman, Jon. “Cano asks for $300 million contract from Yankees”. CBS Sports, 26 September. 2013, http://www.cbssports.com/mlb/news/cano-asks-for-300-million-contract-from-yankees/. Accessed 8 June 2017.
Eby, Danielle. “2013 Sports Fan Demographics.” Opendorse, 27 Jan. 2013, opendorse.com/blog/2013-sports-fan-demographics/. Accessed 8 June 2017.
Forbes. “MLB Team Values: The Business of Baseball”. Forbes, March. 2016. Accessed 8 June 2017.
O’Donohue, Jamie. “Using Finance to evaluate Baseball Contracts”. 21 April, 2014, https://economics.nd.edu/assets/134105/o_donohue_betaball_using_finance_to_evaluate_baseball_contracts_.pdf. Accessed 8 June 2017.
Provenzano, Matt. “The New CBA Benefits the Yankees, but Don’t Expect Them to Spend More.” Pinstripe Alley, 4 Dec. 2016, www.pinstripealley.com/yankees-editorials-opinions-analysis/2016/12/4/13829170/yankees-cba-hal-steinbrenner-payroll-harper-machado-harvey-donaldson. Accessed 7 June 2017.
