WHAT CYBER MONDAY RECORD SALES MEANS FOR SPORTS ORGANIZATIONS

BY ADAM GROSSMAN & ROSS CHUMSKY

Houston Astros second baseman Jose Altuve won the American League MVP Award this year while posting the highest batting average in the sport and leading his team to its first World Series title in franchise history. But from an economic standpoint, baseball’s most valuable player is Aaron Judge, who finished second to Altuve in MVP voting. Judge drives the most revenue for his team according to the Revenue Above Replacement (RAR) model developed by my firm Block Six Analytics (B6A).

Revenue Above Replacement examines how an individual player generates revenue for a team based on his on-field, off-field and personal performance:

On-field performance examines the impact of winning on a team's ability to generate revenue and the player's individual contribution to winning using WAR.
Off-field performance examines how a player’s star power drives ticket sales, television ratings, social media engagement, partnership agreements and merchandise purchases.
Personal performance looks at a player's ability to generate earned media time that increases a team's exposure to its fans in the channels in which they are most likely to consume content.

B6A applied its RAR model to the NFL and NBA in the past, but MLB results differ because of the way teams generate revenue in baseball. More specifically, the most important revenue stream for MLB teams is usually the local media rights deal with a regional sports network (RSNs) while NFL and NBA teams generally receive more revenue from their league’s national and international media rights deals.

That is one key reason that Judge is so valuable to the Yankees. As part of the Yankees deal to sell YES to News Corp: “The club got $85 million in fees from YES for [2012], and the sale includes a 5 percent increase annually in that rate for 30 years.” Given that the team generates so much money from its television deal, YES Network needs strong ratings to maintain its carriage fees (the price it charges cable and satellite networks to carry the channel) and sell advertising.

Star power plays a big role in driving people to watch games, and there was no bigger star in baseball last year than Judge. However, that is not just because he had one of the most dominant seasons for a rookie in MLB history on the field. Judge generated $145.1 million in RAR for the Yankees in 2017 with $97.5 million of his value based on his off-field and personal performance. Factors driving this number include Judge jerseys as the best-sellers in MLB this year (and most ever for a rookie), a highly engaged fan base on social media and the highest amount of earned media exposure of any player in baseball.

Even better for the Yankees, Judge generated his $145 million in RAR for the Bronx Bombers for the rookie minimum salary of $544,500. Judge is not the only star that drove significant value for his team. The top-ten players in RAR are detailed in the table below.

One notable absence is the Miami Marlin’s Giancarlo Stanton, who hit 59 home runs and won the National League MVP. Stanton has been the featured star in many reports about the annual MLB winter meetings, which take place next week and mark the “unofficial beginning for teams to make their big moves.” Stanton generated $33.2 million in RAR value for the Marlins.

While this is a significant amount, it is likely Stanton would be more valuable on a team that could maximize his star power in similar ways to what the Yankees have done with Judge. B6A’s RAR model actually quantifies this impact because it is able to demonstrate the value that each player has for a specific team. Understanding the economic impact that each player has on each team should be an important part of the free agent conversation this winter.