Tampa Bay Rays: Examining the Business Side of the Problem

Eli Marger@Eli_MargerCorrespondent IApril 7, 2011

Author's note: Most of the data and concepts presented in this article are not figures that I created or discovered. I credit Jonah Keri and the St. Petersburg Times for a vast portion of this article's content. I simply am putting it all together in my own words.

With a poor start to the 2011 season, words are being thrown around in the context of the Tampa Bay Rays. Disappointment. Failure. Ineptitude. Relocation. Contraction.

It could be reasonably expected that the Rays' performance would fall off in 2011. After all, they lost a good portion of their offense along with, essentially, their entire bullpen.

In addition, as much as Rays fans will say Carl Crawford isn't missed due to Boston's similar 0-5 start or that Carlos Pena was expendable because of his sub-.200 average, the Rays are feeling the effects of losing their stars.

Now, with five home games under their belt, the Rays are averaging 19,731 fans per game. That puts them third-to-last among teams who have played home games. That puts them behind Washington, Oakland and Florida. That puts them ahead of only the Royals and Indians.

At this point, one can't simply put the blame for poor attendance on the baseball product that the Rays deliver. Despite their early struggles, this is still an excellent team with elite pitching and an underperforming-yet-talented offense.

So what gives? I'm no Jonah Keri (author of The Extra 2%, an excellent book on this topic), but here's what I see.

I grew up in St. Petersburg on 62nd Street, a mere 46 blocks and 10 minutes away from Tropicana Field. My family never had season tickets. But every summer, without fail, I've gone to 15 to 20 games. I get tickets from my grandparents, friends, off the street and off secondary markets. Last year, I spent upwards of $200 (keep in mind I'm a college student, so that's a big number) on Rays tickets.

Yet every time I go to the Trop, save the Red Sox and Yankee games, it is one-quarter full. The crowd at first pitch looks like it should be two hours before the game.

The 2009 estimate puts the regional population of Tampa Bay at just under 2.75 million. That is not by any means the smallest number of any pro baseball market. Cleveland, Cincinnati, Pittsburgh, Milwaukee, Baltimore and Denver are all less populous. For a market of this size to be averaging just under 20,000 people per game (0.7 percent of the regional population, in case you were wondering), there has to be a fundamental problem.

Is it the stadium location? That probably has something to do with it. Tropicana Field is not the only downtown stadium in Major League Baseball. That's not the issue. The issue is where downtown St. Petersburg is.

There are two arteries that are crucial to getting people to Rays games—I-275, an offshoot of I-75 that goes from North Tampa down to Bradenton (south of St. Petersburg), and US-19, a major highway that runs north-south in Pinellas County.

At peak hours, these are very congested roads. It takes approximately 45 minutes to get from Wesley Chapel (north of Tampa) to the stadium in the middle of the night. That ride may be doubled during rush hour. On a weekend afternoon, one can get to Tarpon Springs (the northernmost city in Pinellas County) from the stadium in that same 45 minutes. But at 6 PM on a weeknight, you'll be lucky if it takes under an hour.

The point is this—there is no quick route to Tropicana Field. From any point in north Pinellas or Tampa, you will be driving an hour round-trip to go to a Rays game. With gas at $3.70 per gallon and parking running at least $10, working- and middle-class families from these areas are finding it increasingly expensive to go to the most affordable stadium in baseball.

The population within a short drive of the Trop is baseball's lowest. So it's no wonder that a 12:35 game on a Wednesday afternoon will draw no more than 15,000 fans.

So do you move the stadium? Maybe. It's a sticky situation. The current stadium lease with the City of St. Petersburg does not expire until 2027. It goes without saying that the Rays will not be playing at the Trop at that point. In all likelihood, the Rays might be gone with 12 or 13 years left on that lease. The Rays are struggling to stay afloat financially.

In a business sense, it is generally advisable for the variable costs of running the company to be less than its revenue. Put in baseball terms, the revenue from revenue sharing, ticket sales, TV deals, merchandise and concessions should usually exceed the amount paid for player and employee salaries, promotions and marketing efforts. Obviously, this ignores the fixed costs of the organization—the stadium, for example.

Leaked financial documents last year revealed that in 2008, the Rays had an operating income of $4 million. That may seem like a lot, but consider that in 2008 the Rays had a payroll of $43.82 million. That number increased 64 percent to just under $72 million in 2010. If they made $4 million in '08, how in the world did they make enough money to cover the nearly $30 million payroll increase? Chances are they didn't.

The Rays are masters of the contract. Evan Longoria and the newly renewed Wade Davis both received contracts loaded with club options. The Rays save an incredible amount of money by doing this. But in a sense, it is a no-win situation. As much as they can penny-pinch and try to get the most out of their dollars, a payroll too low will give the team zero chance to compete in the AL East.

The Orioles ramped up their roster this offseason, and they blew the Rays out of the water in the opening series of the season. The Red Sox, despite their 0-5 start, will go on to 90-plus wins. The Yankees will too.

But with the Rays, there is little room for error. Signing mistakes will kill the team. If Manny Ramirez and Johnny Damon do not pan out, the Rays will have spent over $7 million on non-factors. That is a figure they cannot afford to waste. Despite their minimalist spending, the Rays are at risk of wasting money.

That's when the other teams become involved. Revenue sharing allows small-market teams such as the Rays, Pirates or Marlins to receive a cut of money from the likes of the New York, Boston, Chicago and Los Angeles teams. Though these huge markets do get a fair share of their revenues from ticket sales, much of their big money comes in the from of TV revenues. Where Boston has NESN and the Yankees have YES, the Rays have...what?

In the leaked documents, the Rays were reported to have made $13 million per year in TV and radio revenues. This is an incomprehensibly low number. The Pittsburgh Pirates' figure was $39 million. What's worse is that the Rays' TV ratings (that is, the percentage of households in the area that watch games) are fifth-best in baseball. But under the current contract with Fox Sports Florida, the team will not receive a majority of the television revenue.

So despite a fairly large viewing market, the Rays are not reaping the benefits. With no significant TV revenue to fall back on, the Rays cannot make up for the losses due to poor attendance.

Because of the Rays' relative infancy and lack of national prominence, merchandise sales are also not a major revenue stream. Whereas the Yankees have established themselves as an international brand, the Rays have barely established themselves as a statewide brand. Tampa Bay has little to no selling power. They have no world championships, one or two household names and a poor reputation as the team that can't sell tickets.

So now, we reexamine what I said earlier. Can the Rays cover their costs with how much money they bring in? Absolutely. But can they Rays cover their costs and be competitive? No. This is not a situation that Bud Selig and the rest of Major League baseball want to see.

At this point, Rays owner Stu Sternberg has caught on. He has shown interest in buying the Mets and has long indicated that he could very easily move the Rays out of St. Pete, Tampa Bay or even the state of Florida altogether.

Baseball is a free market. Mr. Sternberg has every right to do this. He is a Wall Street man, after all. He has gained big on his investment in the Rays, but now, it is time to liquidate the Rays' assets in St. Petersburg. Because the team is presumably losing money, it is only logical that he seek a new solution for returning the Rays to profitability.

This solution could be one of many. There could be a new stadium that is more convenient to the population base. There could be a move to downtown Tampa, east Tampa or Orlando. There could be a move to another major U.S. city. Or, in the worst case, Bud Selig could pull out his magic wand and make the Rays disappear.

Hopefully, fans of the organization recognize by this point that baseball in St. Petersburg simply can't work. Residents of St. Petersburg and the Bay Area will lose this franchise both by their own doing and by factors beyond their control. Baseball gambled by putting a team in this market, and the gamble has, for the most part, fallen through the floor. 

As the 2011 season progresses, this will become an increasingly hot topic, and if the Rays continue their offensive ineptitude, this topic will be come hotter sooner. There must be a solution reached soon. If the Rays cannot find a long-term home that will be profitable, contraction becomes a viable option.

This team needs another bat. They need some bullpen depth, a new hitting coach and for Evan Longoria to return to the lineup.

More importantly, they need a new home.


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