December 6, 2014
Since the implementation of Round Robin (RR) in 1986, the Dominican winter league baseball had not seen both teams of the capital city, Leones del Escogido (LE) and Tigres del Licey (TL), disqualified from this stage of the tournament. This event has been much debated in specialized sports reporters and analysts. However, due to the DNA of Adam Smith (1723-1790) common to most economists, our interest revolves around the potential economic impact of the fact that Quisqueya Stadium turned off its lights since early December.
Before throwing numbers, we must say that analyze the economic impact of an event is a difficult task for even the most experienced economists, since the analysis is based on a series of assumptions that usually are seriously questioned. Furthermore, the choice of the elements affecting the event study is at the discretion of the analyst and, at the same time, he should omit, either because of lack of information or difficulty of measuring other relevant elements. Finally, the analysis becomes much more complex when there is an almost total lack of information, as with figures of attendance, ticket sales, payroll and wages, among other things, of the agents involved in the Dominican baseball. Despite these difficulties, this continues to be a funny and interesting exercise.
To analyze the economic impact of the disqualification of LE and TL we focus on estimating the income loss resulting from four main sources: (1) income from the sale of admission tickets for both Round Robin (RR) and Final Series (FS); (2) revenues from sales of items inside the stadium (food, beverages, promotional materials, equipment, etc.); (3) income from wages of temporary staff who could be hired for games; and (4) revenues from advertising contracts.
To estimate the income loss from the sale of admission tickets, we assume that the Quisqueya Stadium is the third-largest sports stadium in the country, with a capacity for 11,379 fans (after expansion), preceded by the Cibao (18,077 fans) and Julian Javier (12,000 fans) stadiums. Based on the distribution of seats and prices of each section, we calculate a weighted average ticket prices for the games of Escogido and Licey.
During the regular season, the weighted average ticket prices of so-called “premium games” of Escogido was RD$584 pesos, almost 20% more than RD$489 charged by El Licey (Table 1). Assuming an 50% increase in the ticket prices for the Round Robin (a figure similar to increased ticket prices by Los Gigantes del Cibao when they passed this stage of the tournament), the average ticket prices could reach RD$876 for El Escogido and RD$733 for El Licey during the RR, and up to RD$1,022 for El Escogido RD$856 for El Licey during the FS. (At the time of writing this essay, Los Gigantes del Cibao had announced that they would maintain the same prices for the first two games of the Finals, so we have no reference).
Assuming an average attendance at Quisqueya Stadium of 80%, the losses per game could average between RD$5.3 million and RD$6.4 million pesos during the RR, and RD$7.1 million and RD$8.5 million for each game of the FS. These losses could reach peaks between RD$12.0 million and RD$14.3 million per game of the RR, and RD$16.0 and RD$19.1 million per game of the FS (Table 2).
In the case grocery and promotional items sales at the stadium, losses depend on both the attendance and average spending per fan inside the stadium. Being conservative and assuming an average cost per fan of RD$400 pesos, the sales losses could be of RD$3.6 million pesos per game, both the RR and the FS. Such losses could reach a maximum of RD$5.5 million pesos per game with a full attendance of fans (table 4). Obviously, this calculation assumes that prices and/or average spending are not increasing with the highest attendance of fans, which is questionable.
To estimate the income loss of temporarily hired staff during the games, we had to use a little imagination due to the absence of official statistics. Doing a quick search, we found the Yankee Stadium in New York, whose capacity is 50,291 fans, employs about 775 temporary workers during the season, which is equivalent to a worker for every 65 fans. In the case of San Francisco Giants, whose stadium holds 41,915 fans, one worker is employed for every 53 fans. Assuming a similar ratio between stadium capacity and employees, and an average payment of RD$750 pesos per employee per game, then losses for this item could total RD$37,500 pesos per game (table 5).
Finally, it remains to estimate losses from investment in sponsorship and advertising contracts. According to data from audience measurement firm Nielsen IBOPE, in the 2013-2014 season the firms invested in advertising by radio and television RD$149.3 million pesos with LE team (of which 35% was for the Round Robin Series) while invested RD$246.6 million pesos with Licey team (47% invested corresponds to Round Robin). Based on these figures, assuming an investment growth in advertising of only 5% during the Round Robin stage with respect to last season, the total losses for this item in the winter season from 2014 to 2015 could reach about RD$176.4 million pesos.
In conclusion, the economic losses for the disqualification to Round Robin of LE and TL teams could be of significant magnitude. According to the four revenue sources analyzed, losses per game could be between RD$5.3 and RD$6.4 million by tickets of the Round Robin, between RD$7.1 and RD$8.5 million by tickets in the final series, RD$3.6 million from product sales at the stadium and RD$37,500 pesos for salaries of temporarily hired staff. Considering a total of 9 games per team during the RR and a total of 4 games in the FS, these losses total between RD$128.2 and RD$134.9 million for the remainder of the season (with peaks between RD$183 and RD$195 million). If we add the losses from advertising, according to data from Nielsen IBOPE, total losses for the disqualification of LE and TL teams could range between RD$307.9 and RD$365.8 million for the 2014-2015 playoffs.