Why Moving the Tampa Bay Rays Makes Economic Sensehttp://www.fool.com/investing/general/2013/11/20/why-moving-the-tampa-bay-rays-makes-economic-sense.aspx Jake Mann
November 20, 2013
Throughout the history of Major League Baseball, franchises have changed stadiums plenty of times, whether around the corner or across the country. Recently, one of the game's biggest personalities has called for the Tampa Bay Rays to relocate 1,100 miles north to New Jersey. That man is Scott Boras, the meteoric sports agent responsible for dozens of high-profile, high-dollar contracts, including the record-setting deals for Alex Rodriguez and Stephen Strasburg.
While many brush off Boras' claims as short sighted and irrational, the truth is anything but. There are a few, perfectly sensible reasons the Rays would be smart to at least entertain the idea of leaving the Tampa Bay area.
The economics of the situation
First off, it's important to understand that Boras is a very rational man. Given the weight of his accomplishments—his net worth is estimated at $175 million—any insight into how he views the MLB shouldn't be overlooked.
In the league's GM meetings last week, Boras told The Star-Ledger that the quality of the Rays' on-field play deserves more than the sorry attendance figures it receives. In suggesting that New Jersey might be a better home for the franchise, Boras likened his sentiment to "the Tale of Two Cities," calling Tampa Bay "the one they're in" and the Garden State "the one they should be in."
The sports agent's argument really can't get any more commonsensical. Tampa Bay finished 30th of 30 teams last year in terms of ticket sales, with an average of just over 18,000 fans attending each home game. Since the team's birth in the late '90s, it's routinely seen about half of its seats go empty on an annual basis.
Poor fan support was expected in the early years, when Tampa Bay finished last in the AL East six consecutive seasons between 1998 and 2003, but it's extraordinary that lousy ticket sales have persisted. In 2008, the Rays won their division for the first time and reached the World Series, yet finished 26th in total attendance; matching that on-field success in 2010, they ranked 22nd.
This past season, the Rays fielded a talented, exciting team that won 92 games and reached the ALDS. And Tampa Bay finished dead last in attendance.
In economic terms, the supply of good, quality baseball in Tampa Bay far outstrips the demand for it. But let's think about it another way.
Imagine that this is a graph of the aggregate demand curve of a normal MLB team's fanbase, featuring the relationship between wins (w) and ticket sales (t). If a team wins more games than they have historically, we would expect that fans' demand to experience those wins would increase, and they would purchase more tickets (t). A season with more wins (point 2) than historical averages (point 1) implies that higher ticket sales would result.
Obviously, by now you probably understand that the Rays don't fall under the "normal" category.
Above, by contrast, is a hypothetical graph of the wins-to-ticket sales relationship that appears to be occurring in Tampa Bay. No matter how many above-average seasons the Rays experience in terms of wins, ticket sales don't budge significantly. This phenomenon is known as inelastic demand. Fans' need for an MLB team in this region appears to be largely inelastic, likely due to factors such weather, the presence of another pro baseball franchise in-state, and perhaps most importantly, plenty of alternative entertainment options in the Tampa-St. Petersburg area. Tampa itself consistently ranks as one of the country's most livable cities due to its overabundance of attractions, which include an NFL team, an NHL team, multiple minor league franchises, various waterfront amenities, festivals, and just above everything under the sun (literally). Oh, and the Rays.
Even if the Rays are on the brink of the playoffs, fans in the Tampa Bay area have plenty to do.
How this hurts the Rays
Of course, a lack of ticket sales has other negative effects on the Tampa Bay Rays franchise as well. The team has consistently ranked in the bottom of the MLB in payroll since its inception, and in 2013, only Miami's and Houston's 100-loss squads were paid less.
Additionally, the Rays' facility is generally regarded as one of the most dilapidated in the league. The team has played in Tropicana Field, which Pepsi (NYSE: PEP) and its Tropicana orange juice hold naming rights to for just $2 million a year, since 1998. The domed stadium was built in the early '90s to attract a new team to the area, so it's even older than the Rays themselves.