John Henry lies about ticket prices, is booed

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It’s not exactly new information that there is no correlation between MLB ticket prices and player salaries. Baseball Prospectus ran an article on the subject in April of 2003, nearly 20 years ago now. Early 2003 is so long ago in analysis terms that it was two years before I made my own debut at Baseball Prospectus, and three years since I became a regular there. It’s so long ago that the author of that piece, Nate Silver, was years away from being a divisive figure. It’s been known for some time that ticket prices and salaries don’t align like that, is the point. Here’s Silver on the subject:

There’s also an institutional reason why teams can be expected to make decisions that aren’t economically optimal. Economic theory suggests that a firm will seek to maximize its profits in the long run. But baseball executives, with their high turnover rates, may be disproportionately concerned with driving up profits in the near term. This may help to explain why ticket prices have increased dramatically as compared to inflation, but much less dramatically as compared to wealth. Catering to higher-end customers in a period of rapid economic growth may be a Faustian bargain, as it increases near-term cash flows but erodes support among working class segments of the fan base who may be important to a team’s success in the longer term. This is especially true given that baseball allegiances are often strongly determined by familial affiliations, and working-class Americans tend to have larger families. I believe the low early-season attendance figures in some traditionally strong baseball communities may partly be a result of this phenomenon. See also: professional boxing.

What is clear, though–both in terms of theory and data–is that teams don’t raise ticket prices as a result of higher payrolls alone. Inefficient decisions are one thing. But even in baseball front offices, irrational decisions are another.

Quite a bit has changed in the Major League Baseball landscape since 2003, of course, but none of it in ways that would support the idea that higher salaries require higher ticket prices. If anything, MLB’s revenues have become even more detached from the need for a revenue-generating gate. It doesn’t hurt to make money on tickets, parking, and such, no, and it still does make up a sizable percentage of the whole, but there is so much television money floating around, both nationally and locally, that the gate remains just that: a piece. It might be nearly 40 percent of the piece, but even that figure isn’t quite right, since it’s just 40 percent of what’s actually reported as revenue. Basically every team besides the Rangers, who reported the terms of their deal before everyone realized all you needed was basic math to know how much money was going to these teams annually, gets to keep their local television revenues a secret. And that’s just one form of revenue that’s hidden away in the very closed books of MLB’s teams.

Another Baseball Prospectus article on the subject was written by Rob Mains in 2018, which explained why ticket prices don’t go down: consider that, if ticket prices go up because a team is trying to sustain a higher payroll, they should go down when a team has decided to lower their expenditures and, presumably, their chances of putting a successful team on the field you’d want to pay to watch. That’s not what happens, however, as Mains explained:

Baseball teams have the best of both worlds. They don’t face competition. That’s partly because they have an antitrust exemption, but mostly because it’s not practical for investors to start a new baseball league that plays in MLB cities. Yes, they compete with concerts and movies and other spectator sports. But if you want to go see live baseball, each team is literally the only game in town. (OK, one of two in the three largest cities in the country.) Nobody’s going to undercut them on price.

But while they’re an effective monopoly, they’re not a regulated monopoly. There is not municipal or regional rate commission that approves ticket prices. They charge whatever they want.

And when you can charge what you want, the watchword is what the market will bear. Given the choice of charging $30 or $20 for a seat, teams realize that they’ll probably sell more seats at the lower price. But they might not maximize profits.

This is a long way of getting to the point of it all, which is that Red Sox owner John Henry was recently booed at a FanFest event because… well, alright, he was booed for a lot of things, but this one in particular was that he claimed Boston needed their high ticket prices in order to fund their high payroll. Which, if you read the 700-plus words that came before these, you know is simply untrue. And just as a reminder, Henry’s Red Sox raised ticket prices after their salary dump of Mookie Betts and David Price to the Dodgers before the 2020 season — they lowered their payroll, had a team that was definitely going to be worse ready for the season, and still raised prices. Curious!

As I wrote at the time of the deal, the Red Sox could afford Betts, but didn’t want to. Henry and Co. had the cash and the annual revenues to pay Betts whatever he asked for, but they decided that dealing him was the answer to their self-inflicted woes. General manager Chaim Bloom, who was hired specifically to run a version of the team where Henry could pretend to have less money than he does, tried to make excuses about how the Sox were not in a good position to contend when they had the chance to deal Betts, so they did so instead of retaining him, an argument that simply doesn’t work given a few things. Like, say, that they just signed Rafael Devers to a massive extension even though the team is significantly worse off today than it was at the time Betts was dealt, and that the farm system’s resurgence gives them hope that Devers won’t be a waste of money like Betts would have been.

Maybe there’s a situation where this point could work, but it’s not this one: for one, Betts, heading into his fourth season with the Dodgers, is just now entering his age-30 season. He was worth around 6.5 wins above replacement in 2022, and still plays stellar defense due to his incredible athleticism, instincts, and reactions. He’s not an old man by any means: Betts is still in the prime of his career, and the Red Sox in 2023, improved farm system or no, would be better off both this season and in the years to come with both him and Devers around, and you don’t need hindsight to recognize this. This is all just post facto justification bullshit that shouldn’t convince anyone who thinks on it for even a few seconds, but Bloom and Henry were really hoping it would be greeted with open arms by the FanFest attendees.

It’s pretty clear at this point that Boston’s management needs some work on the whole projected results thing. Maybe they should raise ticket prices some more to hire someone who can help them with that.

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