Go crazy, folks. Go crazy.
OK. So perhaps I shouldn't use one of the most famous calls in St Louis Cardinals history to commend the historic post-season achievements to date for the Kansas City Royals.
The 2014 American League Champions.
A squad that is 8-0 in one post-season, a first.
With their first home World Series Game in 29 years just a few days away, it seems appropriate to marvel at their current accomplishments in light of their financial place in the sport.
The Economics of the 2014 Kansas City Royals
According to Forbes 2014 MLB franchise valuations, the Royals ranked 29th among 30 teams with an estimated value of $490 million ($5 million less than Oakland and $5 million greater than Tampa...teams with arguably the worst stadiums in all of baseball). Forbes reported that the team realized operating losses of roughly $6.5 million in 2013, though they clearly benefited from revenue sharing with gains of $29 M and $16 M in 2011 and 2012.
According to USA Today, the Royals opening day payroll was $90.5 million. This was 18th largest, about $11 million below the league median payroll, roughly $150 million less than the league-leading L.A. Dodgers, and 3rd-lowest among the 10 MLB playoff teams. Proportionately, and according to Team Marketing Reports, the Royals were the 10th cheapest team for a family of four to watch in 2014 with a Fan Cost Index of $192. Their average ticket price for non-premium seats was $24.73, compared to league-leading Boston's $52 average. The league mean was $27.93. The Royals average premium seat prices were $96.55, or about $3 higher than the league average.
Though Kaufman Stadium has been rocking during these playoffs, that wasn't necessarily true during the regular season. Perhaps because fans didn't expect their Royals to make this October run. According to ESPN's MLB attendance data, the Royals 2014 attendance as a percentage of capacity was 63.7%. This ranked 20th, and the league median attendance was 68.5% of capacity. Certainly, a marked improvement over the 57% realized in 2012 and 2013...not to mention that this figure was below 50% for the better part of the last 15 years of Royals baseball.
Future Expectations of the Royals Economics
Obviously, the 2014 playoff run will pay dividends in the short run. Ticket prices will increase, though in a market like Kansas City where past demand has not been especially robust, this will likely temper the size of the increase. Additionally, season ticket purchases may increase by double-digits in percentage terms. Furthermore, expect sponsorship revenues to increase.
Ultimately, a 2014 World Series victory will boost the team's revenue streams and franchise value. Perhaps the 2015 valuations will have Kansas City as high as $550 million, which would still be some $100 million from the league median value of $650 M. But given Kansas City's market size and the age of their facility (Kaufman is great, but just doesn't have the volume of luxury suites and premium seats like the newer parks), they will always be a franchise languishing in the bottom half of baseball's franchise values.
Thankfully for the team, revenue sharing has never been more powerful in helping smaller market teams remain financially solvent and competitive on the field.
Thankfully for the team, revenue sharing coupled with skillful general managing and timely play-making is helping Royals baseball approach a pinnacle last reached 29 years ago.
The Way It Use To Be in KC
For a 10-year stretch from 1976 to 1985, the Royals made baseball's postseason (which then consisted of only 4 teams) 7 times out of 10...twice reaching the World Series, and taking home the crown in 1985.
From 1986 until baseball's 1994 strike season, the Royals didn't make the playoffs but at least finished above .500 in 6 of 9 seasons. From 1995 through 2014, the Royals had a winning record 3 of 20 seasons...and two of those three were the last 2 years.
As this review of the team's historical attendance shows and starting with their World Series year in 1985, the team experienced 7 consecutive years of more than 2 million fans. After the 1994 strike through the present, the Royals have yet to eclipse 2 million fans in a given season.
Financially, Kansas City's payroll for their 1985 championship season ranked 9th among 26 teams at $10.3 million...only $5 million less than the league-leading N.Y. Yankees at $15.3 million.
Times have changed, and the Royals may not ever enjoy the sustained on-field success they had in the past as larger markets with wealthy local TV deals can constantly place pressure on small-market teams to ante up with their young talent or risk losing them to richer teams.
But for these last two weeks in October, the Royals have traveled back in time to rekindle the still-beating baseball hearts and passions of a town better known these days for great barbecue, rapid football fans, and one of America's best soccer fan bases as well.
For the last two weeks, the Royals have proven that small market teams with below-average payrolls can still thrive in baseball's postseason.
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Dr. Rishe is an Economics Professor at the Walker School of Business at Webster University in St Louis MO and CEO of Sportsimpacts. For the 2014-15 academic year, he is a Visiting Economics Professor at Loyola Marymount University in Los Angeles. Follow him on Twitter.
