Minor League Baseball Under Siege From COVID Impacts, MLB Reforms
Today’s guest columnist is Larry Botel, president of Alliance Sports LLC.
The shift to start the Minor League Baseball season from April 1 to May 4, one month later than originally scheduled, was another blow to the already beleaguered 120 minor league franchises. Losing a month of the season by the delayed opening, after last season’s cancellation, only adds to the financial uncertainty facing owners of MiLB teams across the country.
Understand that there was no Minor League Baseball season at all last year because of the pandemic, and that meant zero revenue. Unlike the big leagues, we couldn’t play in a bubble, or limit our travel schedule, or rely on a television audience.
COVID had a dramatic impact on our business plans for 2020, and beyond. In all likelihood, teams will not fully recover in the 2021 or even 2022 seasons, even with the hope that fans become more comfortable returning to stadiums as restrictions are eased and more people get vaccinated.
Amazingly, the complete shutdown wasn’t even the biggest story for the MiLB business in 2020. In September 2019, the longstanding agreement between Minor League and Major League Baseball expired. For more than 30 years, renewals of that agreement involved minor tweaks and a reliable status quo for another 10 years, with the principal terms including MiLB’s independence and MLB teams’ agreement to provide players to their MiLB affiliates. In 2020 that changed.
MLB decided to take over the minor leagues and at the same time contract the lowest level of development, eliminating 40 teams. This major step in commissioner Rob Manfred’s “One Baseball” plan resulted in a permanent change to the MiLB business model that won’t come back once we reach herd immunity from COVID. While many owners believe change was long overdue and that the long-term benefits of being a part of MLB will result in a better revenue model for MiLB, the new agreement added exponentially to the uncertainties the remaining 120 affiliated minor league teams are currently facing.
Let’s talk numbers. On average, a Minor League Baseball team’s top line revenue is about $5 million a year. With cost reductions, PPP loans and some minimal revenue creation through non-baseball outdoor events, teams were able to get the net loss down, but it was still in the multi-million dollars per team. In addition, part of MLB’s initiative for MiLB is to improve player development through health and wellness and modernizing facilities. Each MiLB is expected to meet certain criteria within the next two to three years or risk losing their franchise agreement. Based on initial projections, the amount of capital required to meet these new standards will be $1 million to $3 million per team. Add it all up, and the average MiLB owner is going to need millions of dollars over the next few years just to survive.
So there is a large need for operating funds and the need for money to invest in facilities. And that’s why Alliance Sports LLC (owners of the Omaha Storm Chasers, the Triple-A affiliate of the Kansas City Royals; the Richmond Flying Squirrels, the San Francisco Giants’ Double-A affiliate; and the Montgomery Biscuits, the Tampa Bay Rays’ Double-A affiliate), in partnership with funds managed by Oaktree Capital Management, L.P., is now providing loans to Minor League Baseball teams in need. These loans are critical. As the owners of three minor league teams, we’re in a unique position to help.
First and foremost, we need to get back to playing games and welcoming our fans to the unique family-friendly minor league baseball experience, which has been the cornerstone of many communities for over 100 years. Opening Day in 60 of these communities was May 4, with another 60 starting their season over the following few weeks. After being closed for 610 days, our greatest hope is that we provide just one more light at the end of the tunnel of what has been a devastating experience for so many families and businesses. We count ourselves as one of the fortunate survivors as we open up the gates, ready to confront the challenges ahead.
Now, it’s a season on the brink, perhaps the first of several.
Alliance Sports owns and operates three minor league baseball franchises: the Omaha Storm Chasers, the Richmond Flying Squirrels and the Montgomery Biscuits, as well as the USL soccer team Union Omaha.
More from Sportico.com
