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The Financial Problems of Major League Baseball Essay

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Updated: Apr 24th, 2020

Problem Identification

Over the past, the Major League Baseball has been faced by several problems. These are mainly financial problems that have led to perpetual differences between the players and the owners. These problems have threatened the performance of this organisation. For instance, the organisation has been faced by several work stoppages (Blum 2002).

Such encounters affect its performance significantly. The organisation has been faced with financial situations which have threatened performance. Unsatisfied players will tend to be less productive and work stoppage will also affect the performance of the organisation. The organization has also been faced with the problem of low level of ticket sales.

Analysis

As already noted, Major League Baseball has been faced by a serious problem, which has threatened its performance. The organisation has found itself in a situation where its players have to miss their end of season final week’s salary (Blum 2002). This discourages the players hence invoking work stoppages. In most cases, work stoppages come along with huge costs to an organisation. This is because various processes are interrupted, which undermines the overall performance of an organisation.

When employees engage themselves in strikes due to dissatisfaction, their productivity levels will be significantly affected, negatively. This is because their morale will be reduced considerably.

The Major League Baseball has been attracting large number of audience compared with its competitors (Blum 2002). Therefore, the organisation has already developed a good image at the eye of the public. However, work stoppages and strikes may destroy its image at the eyes of the public. This may lead to a fall in its ticket sales significantly.

Meanwhile, as the players faced the problem of losing their salary for the last weeks of the season, the owners encountered a big problem since the World Series were wiped out for the second period (Anonymous, 2011). As a result, the ticket sales were notably reduced in 2003. This implies that the organisation will experience further reduction in its revenue. This posed a big blow to the organisation since this is one of the main sources of revenue.

The main cause of these problems was revenue sharing which led to increase in expenses. These extra expenses reduced the financial returns to the organisation. As a result, other expenses were similarly affected. The luxury tax also slowed down the growth of salary.

As already noted above, one of the major sources of the problem is the increase in the local revenue from 20% to 50%. This allocation raised differences between the players and the owners. If the increase had been initiated in 2001, it could have led to an increase from $167 to $298 million (Blum 2002). This figure is far beyond $228 which was proposed by the players. In other words, the owners wanted to implement policies that would promote flow of additional revenue from the high-revenue teams to the low revenue teams.

Meanwhile the owners were complaining that they were losing a lot of money during the period. This is because the attendance level was falling significantly. The season tickets were also not recording any growth. There was observable decline in the number of the fans. This posed a huge threat because it is difficult to win them back. The attendance level fell significantly.

There have been various negotiations in an attempt to solve the problem. However, most of them have proved impotent. For instance, there has been a heated debate with the owners proposing for an increase in the amount of locally generated revenue that is shared among the teams (Selig & Rose 2011). The owners also wanted a policy which would favor only those clubs with middle level of revenues and discourage those with the highest and lowest revenues. These views raised differences among the players and the leaders.

Recommendations

From the above discussion, it is very clear that there is a major financial problem in Major League Baseball. This problem has been characterized by the opposing views on how the revenue is to be distributed. This problem has gone to an extent of forcing the players to threaten with work stoppage and strikes.

There are several ways through which this problem can be overcome. To start with, it is clear that the major problem is the allocation of scarce resources. It is advisable for the opposing sides to come together in order to agree on the best proportions. The organization can also increase their revenues through some of these ways:

  1. Increase the number of playoff rounds. This will help in expansion of revenues.
  2. Launching marketing campaign in order to develop the reputation of the team. This will help in increasing the level of ticket sales.
  3. Diversification of the sources of the revenue. This will help to increase the total revenue hence solving the problem of scarcity. This can be done for instance through sales of the team’s t-shirts.

Reference List

Anonymous. (2011). MLB: Dodgers’ Financial Woes Are Frank Mccourt’s Making. Web.

Blum, R. (2002). Players, Owners Still Divided On Most Key Issues. Web.

Selig, B. and Rose, P. (2011). MLB Opinion: Selig’s Folly, Decision to Add Playoff Rounds. Web.

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IvyPanda. (2020) 'The Financial Problems of Major League Baseball'. 24 April.

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