Tigers attendance and TV ratings plummet, but revenues will be fine

As the Detroit Tigers dropped in the standings, their attendance dropped at the turnstiles and their local television ratings dropped sharply as well. While the club does not like to see attendance and television ratings falling, their revenue picture remains as bright as ever.

First the bad news

Attendance was down from 2,493,859 fans in 2016 to 2,321,599 in 2017, the lowest mark since 2005. That’s 172,260 fewer fans, or 2,500 fans per game. The Tigers have out-paced the major league average in attendance every season since 2006. The MLB average was 2,290,907 in 2017.

There is a direct correlation between losing on the field and losing at the box office. Detroit can expect a further decline in attendance until the team improves on the field. Winning cures declining attendance. Winning in October pays immediate and continuing dividends.

Now the good news

Detroit is a great baseball town. While ratings plummeted by 36 percent in 2017, and are down by 53 percent since 2013, the long term revenue picture remains very bright. Here are five reasons why that is the case.

1. TV ratings are relative: Despite the big drop in television ratings, the Tigers still ranked sixth among MLB franchises with an overall 4.46 rating. MLB teams averaged a 2.91 rating this season. The Tigers have ranked at or near the top of MLB teams in the local television ratings in recent years:

• 2017: 4.48 (6th)
• 2016: 7.01 (3rd)
• 2015: 6.21 (4th)
• 2014: 7.72 (2nd)
• 2013: 9.59 (1st)
• 2012: 9.21 (1st)

More importantly, the Tigers’ ratings lead the Detroit market which has 1.85 million households with television. Advertisers can reach more customers through Tiger games than any other program. Considering how poorly the team played, their ratings are relatively strong.

2. A new television contract promises to be a financial boon for the Tigers. While attendance fluctuates with the team’s performance on the field, local television revenues depend only on the contract between the club and the network broadcasting their games.

The Tigers signed a ten year, $500 million contract with Fox Sports Detroit in 2008, believed to expire after the 2021 season. Most clubs have inked new television deals since then, but the Tigers have yet to cash in on their lofty television ratings. Local TV revenues could double, to around $100 million per season. Half of MLB clubs have taken an ownership stake in a regional sports network.

Bill Shea, (follow @Bill_Shea19) writing for Crain’s Detroit, put things in perspective.

After a decade of contending, this year's woeful on-field performance isn't expected to affect how much the network pays the team under the next TV deal because both sides will take the long view, industry insiders say. It behooves both sides to lock in terms that shield them from immediate audience fallout from what happens on the field.

3. Baseball teams have six primary sources of revenue:

• Gate receipts (30%)
• National television contracts (22%)
• Local television contracts (21%)
• Sponsorships/ advertising (11%)
• Licensing and merchandise sales (10%)
• Concessions/ parking (7%)

These percentages are MLB average estimates according to Forbes. $1 billion annual revenue from MLB advanced media is not included, although every MLB owner is greatly enriched by it.

Forbes reported last April that the Tigers had gate receipts of $73 million out of $275 million in total local revenue. Detroit ranked 15th of the 30 MLB clubs in revenues in 2016.

Detroit is the very definition of a mid-market team, ranking very near the median in market size, revenues, attendance, and franchise value. Yet, the team had the second highest payroll in MLB in 2017, and out-paced 24 other teams in television ratings.

The Tigers receive $50 million per season from Fox Sports Detroit, which will soon increase sharply. Teams receive at least $52 million apiece ad their share of national television contracts with ESPN, TBS, and Fox Sports.

4. Revenue sharing: Even local revenues are not all kept at home. Clubs must contribute 34 percent of local revenues into a pool, and that money is divided unevenly with roughly half of all clubs receiving revenue sharing.

This is not a large factor for the Tigers, since they are in the middle of the pack and will receive a relatively small amount — if any — through revenue sharing, but it provides some stability.

5. Cord cutting has been trending among television viewers recently, and this takes a toll on television ratings. However, former cable or satellite subscribers don’t just disappear. According to Crain’s, almost 1 million fans streamed Tigers games online in 2017.

For at least the short term, data shows that the two primary audience metrics for Tigers baseball — game attendance at Comerica Park and ratings on local TV — are declining. Offsetting some of that TV decline is digital audience growth for Tigers games on computers and mobile devices, and the fact that the Tigers still dominate local TV viewing when they're on.

Aside from local cable and satellite providers, FSD's Tigers games are available on an expanding number of platforms such as Hulu, Sling TV and Sony VUE.

Forbes estimated in April that the Tigers’ franchise was worth $1.2 billion. Mike Ilitch purchased the Tigers in 1992 for $82 million. As franchise values continue to skyrocket, MLB revenues have increased more than five fold since 1993, from $1.9 billion to over $10 billion annually. Nobody is hurting.

The Tigers showed an operating loss of $34.6 million in 2016, worst in MLB, mainly due to having the second highest payroll at $200 million. In 2018, payroll is projected to be about $130 million without any more trades or signings. The $70 million payroll savings will be partly offset by further declining attendance as the team rebuilds.

Baseball is an entertainment business. Success is measured by people watching games. Attendance fluctuates with wins and losses, but overall revenues will continue to increase by more than enough to put a winning team on the field.