To Borrow a phrase, one would imagine that the home run derby that's now in its second year would be berry, berry good to baseball. On the surface, anyway, it is. As Mark McGwire and Sammy Sosa again take their cuts at history, major league baseball attendance is up slightly from where it was at this time last season and the public's attention is being diverted from the labor hassles with the umpires and directed toward baseball's answer to Magic and Bird. The company line spouted by baseball execs is that the epochal duel between McGwire and Sosa has breathed new life into the sport.
If that's the case, it still would be wise to keep the defib paddles handy. Surprisingly, the economic impact of the home run derby is something short of miraculous. "The effect of McGwire-Sosa is more than transitory, but it's a lot less than long-term," says Stephen A. Greyser, who teaches sports marketing at the Harvard Business School. "It's one thing to have an exciting phenomenon like this and quite another to fully capitalize on it."
Start with TV revenues, the lifeblood of sports leagues. In spite of McGwire's and Sosa's historic sequel, national ratings are down 3% on Fox this season, and they are down on ESPN, as well. Can baseball expect a huge dollar increase when its TV contracts with Fox, NBC and ESPN expire? Unlikely. Not surprisingly, when neither McGwire nor Sosa plays, viewers tune out. Consider that the ratings for last year's World Series were the lowest ever. A home run chase might be a ratings bonanza, but baseball can't guarantee to networks and advertisers when—or if—another will occur. "It's not like when the NBA could promise Michael Jordan," says Neal Pilson, the former head of CBS Sports, now a television consultant. "The price of the next baseball contract will go up, but not way up." In other words, baseball might improve on its five-year deals with Fox and NBC and its seven-year contract with ESPN, which are worth a total of $1.7 billion, but it won't enjoy anything close to the 300% increase (to $17.6 billion over eight years) that the NFL extracted from the networks a year ago. ( ESPN may not even be in the bidding; it's suing to stop baseball from terminating its contract, originally intended to run through 2002, because the network wants to move its Sunday-night baseball games to ESPN2 during the NFL season.)
McGwire's and Sosa's effect on attendance is also questionable. Their presence in a particular city has the same impact on the gate that Oprah's endorsement has on book sales; though neither team is in the playoff hunt, the Cards and the Cubs regularly play to packed houses at home, and their road attendance is more than 5,000 fans per game above the league average. On the other hand, though overall attendance jumped 3.8% per game last year, it is up less than 1% this year and, even with an influx of expansion teams and new ballparks, baseball's average per-game attendance is still down almost 6% from the prestrike 1993 season.
Further, chicks may dig the long ball, but Madison Avenue is somewhat ambivalent. For years the endorsement incomes of baseball stars have lagged behind those of players in other sports. After last season McGwire might have been able to reverse the trend, but befitting someone who draws a walk every fifth at bat, his pitch selection has been unusually discriminating. Preferring to concentrate on baseball and save a shred of his privacy, he has rejected countless opportunities to shill. In this age of the rapper-action hero-pitchman who moonlights as an LA. Lakers center, McGwire's approach is admirable. Nevertheless, his paltry $3 million take from endorsement deals—which, for perspective, is less than tennis star Lindsay Davenport earns—has had the effect of blunting publicity for his sport. "It's unfortunate for baseball that its biggest superstar is a reluctant superstar," says Bob Williams, head of Burns Celebrity Service, a sports marketing firm in Chicago. "If he were more aggressive, he could be making between $12 million and $20 million in endorsements and giving baseball that much more exposure."
True to form, Sosa has taken a more free-swinging approach. Making pay while the sun shines, he has become a one-hombre cottage industry. To the tune of an estimated $10 million—which outstrips his Cubs salary of $9 million a year-he has deals with companies ranging from Kmart to little-known Native Eyewear; he's the eponym of Slammin' Sammy's Frosted Flakes cereal; and he plans to open a restaurant in downtown Chicago and host a variety show on Telemundo. Not too shabby for a guy whose endorsement income was less than $100,000 early last season.
Yet Sosa still isn't in the class of, say, Shaquille O'Neal or Grant Hill, who make around $28 million and $15 million in endorsements, respectively, per year. One thing undercutting Sosa's potential is that McGwire has generally been unwilling to do spots alongside Sosa, even though the sluggers are friendly competitors who play off each other well.
Home run fever has been a financial boon to both Chicago and St. Louis. George Rafael, an economist for the St. Louis Regional Commerce and Growth Association, estimates that McGwire generated $35 million in new income for the local economy in 1998. Cubs executives say that Sosa has made a similar impact in Chicago. But like most sequels not starring Mike Myers, Home Run Chase '99 has had a tough time matching the original. Even the celebration of McGwire's 500th career homer on Aug. 5 had a distinct been-there-done-that aura. "The worst thing that could happen to baseball is if McGwire's single-season record is broken this year," says Allen Sanderson, a professor of economics at the University of Chicago. "It will mean last season wasn't so special after all."
License! magazine estimates that sales of Major League Baseball merchandise—bolstered by Sosa and McGwire items—rose to more man $2.1 billion last year, far less than the NFL's $3 billion but a marked improvement over the $1.7 billion baseball took in during 1997 However, it's pretty unlikely that fans who purchased a $100 McGwire batting-practice jersey last season would have bought another this summer. Mike Steinberg, assistant manager of St. Louis's team store, the Cardinals Clubhouse, says that business is still brisk on McGwire apparel but not what it was a year ago. "It used to be 90 percent McGwire stuff," he says. "Now customers also ask for Fernando Tatis, J.D. Drew, Joe McEwing." Likewise, Mike Wisniewski, the director of merchandising for Cubs products, says that, whereas Sosa apparel was responsible for 65% of team sales last year, it currently accounts for 10% to 15%.
One ancillary product that took off during last year's home run race continues to benefit. You would think the sales of andro, the artificial growth hormone, were, well, on andro. McGwire may have weaned himself from the stuff, but sales have exploded by a factor of 10, to more than $50 million annually. Call it the doctrine of unintended consequences.