MLB Teams Score Big in the Suite Market

Editor’s Note: Suite pricing across a multi-variant landscape is further investigated in this article, the last of a four part series. The low and high cost of a suite for each team is sourced from the ALSD Reference Manual; however, the research does not take into account how many suites are priced at each price point, slightly misrepresenting accurate averages, but still providing a credible means of comparison. Addressed fourth in this issue is Major League Baseball, following up our NFL, NBA and NHL analyses from previous issues of SEAT. Check back in the summer issue for a summary of the findings across all leagues. 

This final installment of our series on how professional sports teams in each of the four major leagues stack up to each other in the suite market takes a swing at MLB. The data provides useful information that should be considered when pricing a suite; however, it is important to realize that this is only a gauge, and the research does not take into account variables that have not been reported. For instance, the number of suites at each listed price or if teams are offering all-inclusive food and beverage with the purchase of the suite. But it does provide teams, venues and sports business professionals a tool to make more informed decisions concerning suite ownership and marketing.  
 
The MLB 2011 season is underway, and soon the San Francisco Giants will try to defend their World Series title. While they could find themselves as the best performing team again this season on the field, they have a long way to go to challenge for the Forbes crown of most valuable MLB team. Forbes values the Giants at an impressive $563 million, which includes an increase in financial “score” of $80 million, stemming from winning the 2010 World Series. But the top honor continues to be held by the New York Yankees at $1.7 billion. At the bottom of the list is the Pittsburgh Pirates at $304 million.
 
All sport franchises are not equal, but the reasons for the imbalance vary considerably. They could range from a team’s success on the field to the age of a team’s facility or even their geographic location. Some might analyze the variables and see no relationship at all to team value. Or in years such as the current one, unique variables associated with two of the league’s highest revenue generating clubs – the Dodgers and the Mets – are impacting those teams and trickling down to others, affecting the league as a whole. Frank and Jamie McCourt, owners of the Los Angeles Dodgers, are fighting a custody battle for the franchise as part of a bitter divorce proceeding; while the New York Mets ownership is in financial trouble as a result of investments involved with the Bernie Madoff fraud scandal. The value of the Mets dropped $111 million from 2010 to 2011.
 
As reported by industry leaders, the variables taken into account impact the demand for suites and are likely to change by geographic market. The game plan for this article is to organize data across many variables in tables, allowing trends to emerge that shed light on why some teams can charge more than others for a seemingly comparable product.
 
The following list includes the variables chosen with the sources in bold type.
 
Forbes – Team value of the total franchise
Forbes – Team value ranking among all 30 MLB teams
Arbitron – Population of metropolitan area
Arbitron – Market ranking compared to other metropolitan areas
Fortune – Listing of the top 1,000 companies in the United States and listing of Fortune 500 worldwide
Full House Entertainment Database Marketing – Breakdown of the number of Fortune 1,000 companies by metropolitan area
MLB – American League or National League
ALSD – Low and high cost of a suite
ALSD – Maximum suite seating capacity for all suites
ALSD – Suite seating percentage of the total facility capacity
 
Similarities are found among teams when studied across these criteria as well as some large discrepancies. As an example, with the help of Full House Entertainment Database Marketing, we see disparities in corporate presence by market. The markets surrounding the Seattle Mariners and St. Louis Cardinals include only 12 and 18 major corporations, respectively, as defined by the number of Fortune 1,000 companies. Given these smaller corporate presences as well as metropolitan populations and number of suites available, one might assume the overall value of the Mariners and Cardinals to be toward the bottom of the pack, but that is not the case. The teams are in the top half of the list for overall team value despite the factors that might lead you to believe otherwise. The Mariners do fall below the mean for the American League (AL), and the Cardinals are virtually right at the mean in the National League (NL), but the Yankees in the AL at $1.7 billion and Dodgers in the NL at $800 million strongly skew the data upward, the Yankees at a rate of three times the average value for a team.
 
Leading the pack of corporate powerhouse cities is New York. The Yankees and Mets metropolitan area includes 126 major corporations. This fact contributes to team value; they are two of the top-five valued franchises on the Forbes list of valuations. Tables 1 and 2 show team standings, broken down by league, on all criteria.
 
Presently, the most affordable suite can be found at Angel Stadium of Anaheim and Oakland-Alameda County Coliseum. Both charge $50,000 per season for one of their suite offerings. In contrast, the New York Yankees have a suite offering that commands $850,000 annually. 
 
In terms of population, New York was also ranked highest by Arbitron in 2010 with 15,669,500 people. The smallest MLB metropolitan area was Milwaukee with 1,453,300 residents. As a whole, the NL plays in a smaller marketplace, averaging 4,846,331 people, versus the AL, which averages 5,216,569 people in its cumulative regions.
 
The American League is still referenced as the Junior Circuit, because it was elevated second to Major League status in 1901, 25 years after the formation of the National League. However, the data shows that it is the AL that currently casts a shadow over the NL.
 
How does the American League manage to command more value? Is it the fact that the AL has won the World Series 62 times and the NL only 43 times? Or is it because one team drives this wedge between the league averages? The Yankees $1.7 billion valuation largely contributes to the fact that AL teams are worth on average $47 million more than teams from the NL. It is interesting to note while the AL wins out on most every metric considered, their average highest-cost suite is not as high as in the NL. It stands to reason that they could command more. Table 3 displays the lead the AL has over the NL in most variables. 
 
The insights, taken from all tables, show how teams stack up against each other in terms of suite pricing in MLB. A great deal of energy goes into the business side of suites and how teams justify setting their suite prices. Many factors contribute to the final pricing structure that teams employ. Teams do not want to leave potential untapped revenue, but how do teams know how they compare unless they consider the variables and how they stack up against others in the league?
 
This concludes our study of leagues within each of the four major professional sports in North America. Next we will evaluate marketplace as the primary differentiating factor and not limit consideration to a single sport. 
 
 CLICK HERE to see how the 32 NFL teams stack up against each other in the suite market.
 CLICK HERE to see how the 30 NBA teams stack up against each other in the suite market.
 CLICK HERE to see how the 30 NHL teams stack up against each other in the suite market.
 
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