Gennaro: The payoff for winning comes from the postseason, part 3

From SABR President Vince Gennaro at Diamond Dollars on August 13, 2012:

Building off of Part 1 and Part 2 on the relationship between winning and revenues, I’ll share highlights of my Revenue Opportunity Index—an analysis I began at the end of last season to get a better sense of the which teams could expect the greatest financial gain by improving on-field performance for the 2012 season. I initially used this to gauge who might be the most active players in the free agent market, but modified it to give an indication of the opportunity for revenue upside for this season.

The index combines “raw” revenue opportunity with the expected competitiveness of the team. Raw revenue opportunity—an analysis of a team’s unrealized and potential revenues—includes a team’s ticket revenue upside, based on the current (previous season’s) attendance, ballpark capacity and average ticket prices. If a team’s average ticket price is far below the MLB average, they are deemed to have more ticket pricing upside than teams like say, the Yankees, Cubs, and Red Sox, whose prices are already far above the league average. The combination of empty seats and ticket pricing upside determine the potential for attendance revenue growth. I combine this with overall market size and an estimate of “brand strength”, which is intended to get at a club’s likelihood of realizing the attendance upside.

Next, I give points for the attraction of a new stadium (Marlins). It’s been shown that the synergy of a competitive team and a new ballpark can accelerate revenues. Finally, I factor in a team’s recent postseason history—both their success in the postseason and the time since their last appearance. A recent deep run through the playoffs suggests a portion of the revenue opportunity has already been realized.

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Originally published: August 13, 2012. Last Updated: August 13, 2012.