MLB’s International Expansion
Thomas Cyhan
June 25, 2012
Nina Campanicki
The Major League Baseball team, Houston Astros was founded in 1962, known as the Colt .45s. However the process in creating this team took nearly a decade before they were able to throw out their first pitch as a MLB franchise. MLB refused consideration on multiple occasions to expand the National League from eight to ten teams until other potential owners would form a new baseball league called the Continental League to compete against the National League. Starting baseball operations in 1962, the Colt .45s changed their name in 1965 to the Houston Astros when Judge Roy Hofheinz became sole owner of the team. Houston was renamed the Astros to honor the city’s location as the nation’s space station. Since the Astros were created they have played in three stadiums; Colt Stadium from 1962 to 1964, the Astrodome from 1965 to 1999 and in their current home Minute Maid Park from 2000 to present time. Houston has only made it to the World Series once back in 2005 by defeating the St. Louis Cardinals, but lost to the Chicago White Sox in four games. The Astros have had some success in the late 90’s but still have not won a World Series. The team was sold in 2011 to Jim Crane for $610 million dollars. Originally the price tag for the franchise and 45% of the team’s new regional contract was $680 million but the team was discounted because in 2013 the team will be moving from the National League to the American League. Even though the team was purchased at $610 million the team was valued at only $474 million. This recent purchase has said to be the ushering in of a new, more successful era in Houston Astros history.
As a group we feel that the Houston Astros can be a more successful and prosperous franchise if the team is moved from Houston, Texas to Mexico City, Mexico and continues its operations there. As of right now the Astros are 13th out of all 30 Major League Baseball teams when it comes to revenues, however some people think that the move of the team from the National League to the American League will hurt the team’s financial success. A major reason for this belief is the fact the Texas Rangers play roughly 260 miles from the Astros, and in recent years have been much more successful making it to the World Series the past two seasons. This recent success has placed the value of the Texas Rangers 7th out of 30 teams and valued at nearly $125 million more than the Houston Astros. This separation will only begin to grow as the less successful Astros are moving to the American League West Division in 2013, the same division the Texas Rangers play in.
During the past four years the overall ticket sales have been down for the franchise and the Ranges being so close to the Houston market is not helping. A solution to the recent down turn of ticket sales and overall profits of the team is to move the team to Mexico City, Mexico. Moving a team to a new city is a long and strenuous process however through research the move is more affordable than most would think.
There are currently 30 Major League Baseball stadiums, 29 are spread out through major United States cities, and one in Toronto. The average age of MLB stadiums is 22 years old, and as these ballparks grow older, it becomes more expensive to keep them running and looking like new. In the past decade there have been 9 new ballparks built, which has created more jobs and helped draw more people to the ball games, something the Houston Astros have been struggling to do for most of the teams existence. Looking deeper into the statistics for MLB ballparks, the average cost to build a new stadium is just under $445 million, however this number is somewhat distorted due to the extremely high price of land in major cities such as New York and Washington DC. The cost to build the current home of the Houston Astros was $337 million, and Minute Maid Park is only 12 years old. Due to the relatively new stadium, some questions may be brought up, the main one being, “Why move the Houston Astros?” Houston only draws in 80% of the National League’s average attendance per season. And their average attendance continues to drop every year the Astros perform poorly on the field. In reality a MLB team does not make a majority of its yearly revenues on ticket and merchandise sales, most of the money comes from television and radio contracts.
In 2011, Jim Crane and the Houston Astros signed a new television contract with Comcast SportsNet Houston totaling $3.2 billion, to be paid out over the next 20 years starting in 2013. This contract was split up between the Houston teams; the Astros will receive 45% of the $3.2 billion which is $1.44 billion over the next 20 years. Between this new contract and their current radio contract the Houston Astros are expected to make $80 million a year for the next 20 years, just on media contracts. These numbers do not include the MLB’s revenue-sharing contract agreement. The revenue-sharing agreement equally divides the total revenues from ticket sales throughout the season and distributes the earnings to all 30 teams so no team has an advantage. These numbers show that the Houston Astros can be a prosperous team however the no one wants to come and see a below .500 team play, especially when the two time Texas Rangers are within relative distance from Houston. With moving the team to Mexico City the Houston Astros will be able to tap into an untouched television and radio market. Since there is no other Major League Baseball teams in Mexico they will not have to compete with other teams for television rights and for higher contracts. In addition to the Comcast SportsNet Houston contract this new additional contract will only make the team more money and attract better players. As seen with the Phillies, when a team gets more wins, more people come to the game, which in return the team makes more money from concessions which is used to sign better players and coaches. All of this will in return help the team get larger media contracts and make more money for the owners.
In order for the Houston Astros to move to Mexico City, they will need to build a new stadium to play in. Originally the plan was to have the lease on of the stadiums down in Mexico City, however Aztec Stadium was not built to accommodate baseball games, and Foro Sol, the home of the Mexico City Red Devils is too small. Foro Sol’s maximum capacity for a baseball game is 26,000 and the attendance for the Houston Astros is 22,749. Now his number is below the maximum capacity for Foro Sol, however it is believed that bringing a Major League Baseball team to Mexico City will draw larger crowds. In order to build a MLB stadium the team will need at least 25 acres to build the stadium and all its amenities that it will have to offer. The 25 acres does not include room for parking, however the public transportation system in Mexico City is one of the largest in Latin America. Mexico City Metro is the second largest subway system in North America behind New York, which makes it an optimal way of getting to the ball game.
Due to the population of Mexico City being over 8 million people, the Houston Astros will need to have a large stadium to meet the demand of fans and customers. The league average stadium seats roughly 43,287 plus standing room. Due to the size of Mexico City, the new stadium should seat 50,000 people for a ball game with additional standing room. On the next page is a list all 30 MLB stadiums and their seating capacity to help grasp the size and price the average stadium cost to build. Some of these numbers are going to be skewed due to the price the New York Yankees, Toronto Blue Jays, and Seattle Mariners paid to build their stadiums. Highlighted in blue are all the MLB teams that built new stadiums over the past decade, and how much it cost to build them. With these numbers and optimal price for the Houston Astros to build a new ballpark is roughly $378 million. Compared to other stadiums this number is relatively less than most ballparks. A major reason for this number being lower compared to other ballparks is the price of land per acre in Mexico City is less than most major cities in the United States and Toronto. A plan to attract more people to the stadium is to have a strip mall attached to the stadium with popular restaurants and stores. This idea is similar to the Miami Marlins and New York Yankees new stadiums that have restaurants attached to the stadium, such as The Hard Rock Café and Pin Strips Steak House. The Miami Marlins also have a nightclub and bar attached to their new ballpark, these tourist attractions make these two stadiums a city landmark that people go to whether it’s the stadium is open for the baseball season or not. In order for the stadium to be built the team is going to need to raise roughly $300 million through new contract deals with sponsor, and Mexico City. Major League Baseball will also be able to kick in funding due to the fact they have wanted to bring the MLB to Mexico for at least two decades. Now some concerns people and players will have with moving a MLB team to Mexico City is safety. It is already know that Mexico City is not a generally safe city however there is a solution to limit the risk to players living there. The Astros are considering buying 200 acres of additional land within relative distance to the ballpark, to build a compound for housing the individual players, coaches, and families. This compound will be based off of the Saudi Aramco Residential Camp in Dhahran. The compound will hold all amenities that a person may need, while keeping them safe from criminals, and putting them in less of a risk of danger. The estimated price to purchase and build one of these compounds is $100 million plus the price players and coaches will pay to build customized homes. Through recent research this move to Mexico City will not be possible until at least 2020. A problem the team will face though is they have a least with Houston to play in Minute Maid Park until 2029 with the lease costing the team roughly $7 million a year. Either the team will need to find a way to get out of the leasing contract with Houston, or pay the remaining $63 million. Another reason it will take the better part of a decade to move the team is because as an organization the team needs to find the land to build a new ballpark. This is in addition to the average time of 3 years it takes to break ground and complete the new stadium. With the move from Houston to Mexico City being nearly a decade away the team can build up the hype of the move to Mexico City by playing exhibition games during spring training against Mexican Baseball League. These games will help start the process of building a fan base in Mexico City, as well as be an ambassador of Major League Baseball in a new country. In conclusion the immediate move of the Houston Astros is not possible however in the not so distant future this move will not only help the team financially but also help build the market for Major League Baseball in Mexico.References
Forbes. #14 Houston Astros. Forbes.com. Retrieved on June 9, 2012, from http://onforb.es/NsUBg6
Ozanian, M. (2012, March 21). The business of baseball. Retrieved from http://www.forbes.com/sites/mikeozanian/2012/03/21/the-business-of-baseball-2012/ Sanchez, J. (1/7/2004). Ambassador to Mexico a Big Fan. MLB.com. Retrieved on June 10, 2012, from http://atmlb.com/KZg3Jp
Staff Writer. MLB Attendance Report – 2012. ESPN MLB. Retrieved on June 1, 2012 from http://espn.go.com/mlb/attendance
The official site of the houston astros. (06/0). Retrieved from
http://houston.astros.mlb.com/index.jsp?c_id=hou&sv=1