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In: Economics

13) Why do some baseball teams have many wins, but are not as profitable as some...

13) Why do some baseball teams have many wins, but are not as profitable as some teams who do not have as good of a win-loss record?

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Expert Solution


13.

There are different reasons to it. The teams who have many wins, have higher costs in terms of salaries of the players, cost of operations, size of the team and other overhead costs, but some teams not having such a win record, are more cost efficient and have smaller and close knit team to operate with. It makes these teams to be more profitable as they have lower costs. It is the reason that the teams with not so many wins, are more profitable than the teams with more wins. The other reason is the higher impact of an equitable approach in advertising and broadcasting revenue income distribution among the teams, than the advertising and broadcasting revenue income distribution to be based on performance. It means, all the baseball teams are sure of getting a specific minimum income and afterwards, it is their efficiency in cost and revenue management that makes them more profitable. So, the profit earning does not rely heavily upon the wins.  It also causes teams with more wins to be less profitable than the teams with less wins.


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