The paper examines how Major League Baseball (MLB) generates $3.5 billion in
annual revenues and how the economic
turmoil the
sport has undergone recently has attracted a great deal of attention both because of its huge fan following as well as the fact that it's an integral part of American
culture. It evaluates how the range of different rates on return on investment for different teams is too large and blames it on competitive imbalances caused by a few very rich owners and a widening of what the industry classifies as "local revenues" . It shows how if MLB continues to see uncontrolled rises in its fixed and variable
costs, several teams may just have to raise
ticket prices, which will not bode well for an industry that is already witnessing demand elasticity and will likely, in future, experience
price elasticity as well if raised ticket prices lead to a resulting negative trend in total revenues. It concludes with how MLB needs to be thoroughly overhauled using basic fundamental economic principles of controlling variable costs and providing a level playing field so that the performance of the smaller teams picks up and the demand to watch them win also grows.