Major League Baseball’s Expansion Paradox

If 2001 to 2005 taught us anything about Major League Baseball, it was that the league has considerable demand. At a time when then-commissioner Bud Selig and the owners floated the folly of “contracting” the league to 28 teams by shuttering the Montreal Expos, and possibly the Minnesota Twins, whether it was legal action to thwart it, or the idea that relocation was a more favorable option, markets around the U.S. suddenly jumped up and said they’d take a team.

In 2005 that culminated in the Expos moving to Washington, D.C. where they were rechristened the Washington Nationals. The rest, as they say, is history.

Since then, Rob Manfred took over as commissioner, and MLB – with reoccurring labor deals with the players the possible exception – settled into a steady groove. Revenue continued to climb. The one thing that has grown is the number of clubs in the league.

In October 2015, I interviewed Manfred where the topic of expansion surfaced. I had considerable interest in how MLB had approached relocation and possible expansion dating back to that time 2001-2005 timeframe given I had worked with baseball boosters and the city of Portland to try and make a pitch for a team.

Manfred has repeatedly said that he sees MLB as a growth industry. The idea of 32 clubs in the league is something that repeatedly surfaces. Whether it’s been The Athletic, with a recent series on markets that have shown interest, or me back in 2012 for Baseball Prospectus, or 2019 for Baseball America, MLB expansion has more than its fair share of information as fodder for fans and those looking to lure clubs to their home markets.

Removing who would be a favorite. Removing what market is “the best”. If one looks across the U.S., Canada, and Mexico several markets could support a club providing a decent market size to fill ballparks 81 dates a year. They all have varying levels of corporate entities for local and regional sponsorships. And there are more than enough boosters to fire up, “Hey! Look at us!” campaigns of varying maturity.

Baseball is healthy. The markets can support an expansion team. So, why is MLB stuck in a paradox that makes the idea of expansion at this point may be its most challenging?

To start, unlike relocation, where clubs have owners in place that has already been approved by the league, whether it’s former MLB pitcher and player agent Dave Stewart in Nashville, former NikeNKE
executive Craig Cheek in Portland, or William Jegher and Stephen Bronfman in Montreal, the biggest wild card for baseball boosters looking to lure an expansion team is whether they ultimately wind up more than a minority owner. A modern MLB ballpark, with a retractable roof, could approach $2 billion to construct. And with the model for MLB owners to build “ballpark villages” like the Battery around Truist Park for the Braves becoming more the norm, the costs vault into more than double that. Throw in expansion fees of $2 billion-$2.5 billion, and pulling together the capital stack to make a project fly, is exceedingly difficult.

Even still, the money issues could be overcome. The return on investment for clubs in the major sports leagues is staggering, as the Forbes valuations show each and every year, along with revenues that grow and are seemingly impervious to recession factors. The issue is one of pulling it all together – the investment money, the public funding, and the support from local, regional, and state politicians based on, “It might happen.”

None of the baseball boosters or political leaders, or for that matter, Rob Manfred and baseball’s 30 owners, have an idea when the trigger will be pulled on expansion at this point. And even if Manfred and the league do decide to open markets to officially explore, no one during the process is picked before the funding for a ballpark site and facility are in place. The league will always encourage markets because the reality is, what each market learns; or what each booster group puts in place, does help. What the league isn’t going to say is, “You’re the one. If you keep going this way, the selection process is wired for you to win the day.”

This isn’t MLB being coy, although political leaders will tell you on background or on record, that that’s what they believe. The reality is, there are 30 owners, and that means 30 different points of view. Whether there is 75% of them to approve a market – and remember, there would need to be two to balance out the league – is the question.

While there are absolutely markets in the U.S. that can support a club, the reality is all the big markets have been gobbled up. That means the possibility of an expansion club being part of revenue sharing. And even if it weren’t, it’s taking the centralized revenue pie that’s consumed by 30 owners, and adding two additional mouths eating it.

But maybe the biggest issue is more recent.

Sinclair-owned Diamond Sports Group, which is branded the Bally Sports regional sports networks, is on the verge of bankruptcy. While the league would like to see contracts fully fulfilled, it’s possible in Chapter 11 restructure, negotiating lower rights fees could be in play. But even if clubs take on equity of all or part of them. Or, if a direct-to-consumer model is put in place, regional sports network revenues are likely to decline, not just for Bally Sports, but as other RSN deals come up for renewal given the shedding of subscribers for traditional linear television as consumers move to streaming options.

Expansion markets in the U.S. would need to carve out media deals in which every bit of the country is already claimed by one or more MLB franchises. The idea of cannibalizing media rights for existing franchises at this precarious point in the media landscape is bound to push many owners away from the idea of expansion at this time.

And so, MLB has its paradox. It is a multi-billion dollar industry that sees it exceptionally healthy at the enterprise level. On the surface, expansion would be a no-brainer. But looking deeper, expansion – with its media rights challenges, and exceptional costs – seems a bridge too far right now. At some point, it happens. Now…? Almost assuredly not. In a decade… maybe.