Hidden Vigorish

Detailed Analysis of The Pittsburgh Pirates

Estimation of the Pirates 2013 Postseason Revenues

The Pirates have come under fire this winter from some critics for a perceived lack of spending on the major league payroll. I have not been shy in sharing my opinion on this topic. I don’t think the Pirates have done enough to push a borderline playoff team forward. Any discussion on payroll should always lead back to the revenues a team is generating. To judge the payrolls of MLB teams fairly it should be done relative to revenues. It is simply not fair to expect a low revenue team like the Pirates to support the type of payrolls that high revenue teams like the Yankees maintain. I’m sure any reasonable person would agree with me. The problem is we aren’t 100% sure what the revenues of a given team are. However, there do exist some fairly accurate estimates of most revenues sources such as media rights and ticket sales. Forbes and Bloomberg issue revenue estimates every year, and often individual teams confirm the accuracy of those estimates. One area where some mystery exists is postseason revenues. I’m going to take a crack at estimating the Pirates 2013 postseason revenues by using some of the methodology Wendy Thurm used to estimate 2012 postseason revenues for all teams in a blog post on Fangraphs last year.
 
Let me first explain how my methodology differs slightly from Wendy’s. Wendy looked at the average attendance for each series, the pricing tiers, estimated percentage of the ballpark for those tiers, and then calculated total sales. From there she worked out the splits that go to the players pool, the league office, and finally the cut that each team made. I took a simpler approach given three known pieces of information: Average regular season ticket prices for non-premium seats, the markup on face value of postseason for one specific section of seating, and the published prices to season ticket holders for premium seating. Unfortunately, I only had this information for the Pirates. So for the Cardinals I simply multiplied their average regular season ticket price by the same rate of increase as the Pirates once an average postseason ticket price was calculated. Then just like Wendy I subtracted out the revenue splits for the league office and players. So lets dig into the numbers.
 
I started with the Pirates regular season average non-premium ticket price of $17.21. From there I tacked on a 59.3% increase as referenced by the Kansas City Star. That works out to $27.41 for the average price of a non-premium ticket at PNC during the Wild Card and Division Round games. But non-premium seating only accounts for approximately 35,000 of the tickets available. Another 6500 in premium seating needs to be accounted for. The Pirates actually list the number of seats included in most of their premium seating locations, and playoff ticket pricing for season ticket holders is still available on the team’s website, so tabulating the sales for those sections seems straight forward. I then added up all those numbers in addition to the 35,000 non-premium tickets to come up with total sales for a single playoff game. I then divided by the average attendance of 40,490 to get an average playoff ticket price of $37.28. That represents a playoff ticket price that is 2.17 times greater than the regular season ticket prices. Calculating for the games in St. Louis was more challenging because the ticket information was no longer public. So I improvised by multiplying the Cardinals average regular season ticket price of $33.11 by the same rate of increase as in Pittsburgh. The result was an average ticket price of $71.84 for the games in St. Louis. Using these numbers we come up with following estimated sales per game:
 

Venue avg ticket price avg attendance est. sales
PNC Park $37.28 40490 $1,509,467
Busch Stadium $71.84 46308 $3,326,767

 
Now that estimated sales for each game have been established we just need to pull out shares for the league office and players pool. Here is how the sharing works:

  • 15 percent of the paid attendance receipts of every postseason game is contributed to the Commissioner’s Office.
  • 50 percent of the paid attendance receipts from the Wild Card games is contributed to the Players Pool.
  • 60 percent of the paid attendance receipts from the first three games of each Division Series is contributed to the Players Pool.
  • All paid attendance receipts not paid to the Commissioner’s Office or contributed to the Players Pool is shared equally between the two teams in each Series or Wild Card game.
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    When I calculate and subtract all the shares that go to the league office, the players, the Reds’ split of the Wild Card Game, and the Cards’ split of the Divisional Series, the Pirates are left with $3,763,871. I’ll be honest, I thought it would be higher. Part of the reason I thought it would be higher is Wendy Thurm estimated the Orioles with a share of just over $7 million for the 2012 playoffs. And just like the Pirates, the Orioles played a Wild Card game and a Divisional Series that went the distance. But Wendy did state she felt her estimates for the players’ pool were high. The league eventually does release those numbers. It appears Wendy overshot the mark by 25%. Adjusting the estimates accordingly, the 2012 Orioles estimated postseason revenues would fall to around $5.6 million. The benefit of being matched up against the Yankees obviously would be a financial boon for the O’s. Therefore, I think it is safe to say my estimates for the Pirates seem reasonable. Had the Pirates advanced to the NLCS they likely would have tripled their postseason revenue. Ticket prices increase for the NLCS, and being paired up with the Dodgers who have among the highest ticket prices in the league would have generated significantly more money.
     
    One other important point of note on playoff revenues. Teams keep 100% of their ancillary revenues such as concessions and parking. So that could add a sizable sum of cash to the team’s coffers as well. When Deadspin leaked the Pirates’ financials from the 2007 and 2008 seasons it showed the team made about $5 in concessions per each fan in attendance. I’m going to assume that number would be significantly higher during these playoffs. Prices have gone up quite a bit since 2008. I can’t prove this, but I also believe large happy crowds are more likely to be spending money at the ballpark. Making a modest assumption that concessions were worth 50% more than five years ago, $900K in concession revenue for the playoff games at PNC Park seems reasonable. So all told my estimations show the 2013 playoffs created a $4.7 million windfall for the Pirates. That isn’t a whole lot more than the money spent on the late season acquisitions of Marlon Byrd, Justin Morneau, and John Buck, or about the cost of free agent Edinson Volquez. It is interesting to note how two other teams that bowed out in Division Rounds might have used their playoff windfalls. The Rays signed free agent James Loney to a contract that included a $5 million signing bonus. The A’s signed free agent Scott Kazmir to contract that included a $4 million bonus. Front loading contracts with signing bonus is smart way to provide payroll flexibility in future seasons.
     
    This is the last post I’m going to do on the business side of baseball for a while. Writing about payrolls, revenues, and win curves just isn’t fun. I’d much rather be discussing strike outs and home runs. Opening Day can’t get here soon enough. Let’s play ball!
     

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