Why an Iconic American Company Just Told MLB Owners to Drop Dead
Organizers of NASCAR and the UFC found ways to resume their schedules last month, the PGA Tour is back in business, and the NBA has sketched out its plan to continue its season. Executives at Coca-Cola apparently noticed; they just told MLB owners that they’re tired of dawdling on the part of baseball.
Coca-Cola is ending its MLB partnership
Coca-Cola is dropping its sponsorship of Major League Baseball faster than Claudell Washington used to drop routine fly balls. The soft-drink company released a terse statement:
“Following a review of all Coca-Cola North America marketing assets at the conclusion of 2019, we made the decision to end our national sponsorship with MLB.”
The $200 billion company, one of the best-known brands in the world, added that it would continue to work with the 16 MLB teams with which it has local contracts.
Coke outbid Pepsi in 2017 for the national tie-in with MLB, and the deal runs through the end of the 2020 season. The obvious concern for Coke executives is that there may not be much if any of a 2020 MLB season, despite commissioner Rob Manfred’s assurances Wednesday that there will be a regular-season and playoffs as the sport works its way back from the pandemic.
Coke’s statement referred to a review at the end of 2019, but current events are clearly at play. The company can’t wait around for a new season that might not happen and understandably has made the decision to move its marketing budget elsewhere.
Coca-Cola’s decision is a blow to MLB
MLB isn’t hurting for national sponsors. Its website lists 36 such partners, including Budweiser, Chevrolet, Gatorade, Google, Geico, Mastercard, and Taco Bell. Agreements with sports leagues that attract big in-person crowds and steady TV audiences can easily run into tens of millions of dollars a year for sponsors.
It’s not known how much Coca-Cola was paying MLB, but food and beverage categories are gold mines for major team sports like MLB, the NFL, and the NBA. Baseball’s owners will be able to line up Pepsi, which had the rights for 20 years before Coke came aboard in 2017, or another soft-drink brand to fill the void. But their position at the negotiating table will be weakened if they can’t use Coca-Cola to drive up the bidding.
As such, the inability to get the regular season started is just one more blunder by baseball owners, who appear content to settle for a token regular season and then expanding the postseason, which is the more significant source of its network TV money.
Baseball has both prosperity and problems
MLB owners are suffering from perception problems on two fronts.
Firstly, baseball falls further behind the NFL in fan interest and clout with the TV networks with every passing year. Worse yet, the NBA is gaining ground on baseball thanks to national TV exposure and basketball’s ability to market its players more effectively.
Don’t think so? Mike Trout is almost universally identified as the best player in baseball. How often do fans east of California get to see him play on TV?
MLB’s second issue at the moment is related to money. The owners have plenty of it but are warning of potential financial ruin from the COVID-19 pandemic. Then again, they have made a habit of seeing doom where none exists.
Forbes reported that the sport’s gross revenues reached $10.3 billion in 2018 – the 16th straight year of gains. This week, the magazine calculated that the sport’s 10 richest owners are worth $31 billion and that the average franchise value has been growing by 11% compounded annually for a decade.
At the same time that MLB owners were telling Forbes that their combined profits were just $208 million over the past five seasons, the magazine pegged the number closer to $5 billion while player salaries barely moved.
It’s one more reason why Coca-Cola might be reluctant to keep doing business with baseball.