Baseball Industry is Disruptive | Sees Record Revenues

January is a great time to look back on the previous year. For the baseball industry, looking back over 2019 should bring many smiles. In December 2019, Forbes reported that the MLB’s revenues continued to grow. Baseball equipment sales continue to rise as well. Any betting man would say that now is a wonderful time for the baseball industry. 

But, what are the reasons for this jump in revenue? The rest of this article explores those questions. We also examine the market changes that have created a surge in bat sales in addition to a rise in the revenue of other baseball equipment.  

MLB Record Numbers

The increase in the MLB’s revenue from $10.3 billion in 2018 to $10.7 billion in 2019 may not seem like much. It is, however, and extremely significant jump. The first time the league exceeded $10 billion was 2017. That they have now almost topped $11 billion just three years later is extraordinary. 

Experts suggest that there are a number of reasons for this rise in revenue. Most importantly, the MLB profits greatly from its media rights deals. Many of these have extensions well into the new decade. Media deals with ESPN and Turner Sports will expire in 2021; although, extensions are likely. Last year, the MLB agreed to an extension with FOX that will last until 2028. 

Another reason for the increase in revenue is likely the MLB’s competitive balance. The 1994 rules that created a sharing structure and luxury tax have contributed greatly to the overall parity. While this is not a perfect system, and there is still a dichotomy created between large and small-market teams. But, the rules have added to the perception of parity, if nothing else, which increases viewer engagement with baseball. 

One thing that can mitigate revenue for the MLB is the rise in expenses and other investments. These cost $9.7 billion in 2019, which is up from $9.4 billion in 2018. As costs rise, overall profit falls. However, since profit and revenue are separate concepts, expenses and investments do not affect the overall totals and projections. 

Equipment Market Changes

A rise in revenue for the MLB indicates growth for the baseball market as a whole. Another market area with a rise in revenue in 2019 was baseball equipment. According to Batsfinder.com Bats, especially, has been seeing a surge in sales since a rule change in 2015. 

The 2015 rule essentially created the need for players and teams in every level of USA baseball to purchase new bats. The new bat standard came into effect for the 2018 season. There was some controversy about the decision. Some saw it as a crass money-grab. 

Money-grab or not, the bat rule change contributed to a surge in bat sales in 2017 and 2018. While experts do not expect this level of growth to continue, it did contribute to the revenue increase in the U.S. baseball industry. Once bat sales level off it will be interesting to see whether the baseball industry revenues continue to grow. 

Unlike for bats, the rise in the baseball equipment market overall is projected to continue. A forecast for the baseball equipment market in the U.S. from 2019-2023 came up with these results: “This popularity for baseball game [sic] will lead to the expansion of the baseball equipment market in the US at a CAGR of over 4% during the forecast period.” Baseball is the second most popular sport in the U.S. and its popularity is only growing with the youth market. 

Additional factors for the rise in baseball equipment revenue could be the growth in sports and fitness products. These products are broken into four categories: sports equipment, fitness equipment, apparel, and footwear. All four categories experienced growth in 2018. That growth is expected to continue indefinitely—most projections show growth until the end of the projected period, typically 2025. 

The SFIA’s (Sports and Fitness Industry Association) yearly Manufacturers’ Sales Report, which provides revenue numbers for the sports and fitness industry, has not yet released its 2020 report. But, the 2019 report, which examined 2018 revenue, found a .8% increase in sports equipment, a 3.6% increase in fitness equipment, a 1.2% increase in apparel, and a 4.6% increase in footwear. Stay tuned for the 2020 SFIA report to see if projections remain consistent. 

Competition among manufacturers and an increased interest in sports and fitness are the main contributing factors to the sports and fitness products industry growth. This trend only helps the baseball industry revenue. As a sport with a more surmountable barrier to entry, baseball will likely continue to remain popular. 

Conclusion

While it is too early to have all the information about the baseball industry in 2019, there is much to celebrate. All signs point to record revenues across the board. The popularity of the sport, the MLB’s multiple revenue streams, and an increase in the sport and fitness industry’s revenue have all combined to create this record revenue. While all signs point to increased revenue for the baseball industry, only time will tell if the projections hold up. 

Written By Mike Epson: I’m a real estate investor, author, and an all-around sports fan. I love that the great American past time is making a comeback.