Quote: MLB Exec on Budgets, Tix and NYC

In the last week or so, I’ve had A LOT of people ask me why the Phillies allow themselves to spend more money than the Mets, given that they play in a smaller market and charge less for tickets.

I have no answer to this, because I don’t have access to either team’s books.  So, I asked a team executive in a similar market to explain how this might work, knowing the teams and budgets involved, and he told me:

Ticket prices are a direct reflection of the demand for your product. Supply is static, but demand goes up when you win, which gives you more cash and justifies an increase in payroll. Fans want it to work the other way around, but it doesn’t. There are very few cases where a team first increased their budget (by a lot) and then won. Instead, usually while losing and demand is low, the team will work to develop talent; then eventually, hopefully, that group starts winning and fans get excited; at which point demand goes up; and then – and only then – will they increase the budget and essentially double down; and when it works you get today’s Phillies. This is a team that was terrible, but did it right, now they’re winning, selling out, spending and basically ‘going for it,’ but mostly on the backs of players they developed. Chase Utley is the byproduct of patience. Cliff Lee is the byproduct of Utley. It’s easy to assume that you can jump-start demand by exciting fans with free agents. It can happen, but it’s usually short-lived and might not even get you through the summer. It’s just too risky – especially in this economy and in New York – to do that, to raise your budget without an increase in demand, because if it doesn’t work out you’re left with a massive hole that can take a decade to fill.”