Archive for the ‘Sports Business’ Category

Now that the All Star Game has passed, players from the American and National Leagues will go back to being strangers until the two circuits meet up again in the World Series. However, before we say goodbye to this vestige of interleague play, let’s wade once more into the never ending DH debate that has become so commonplace this time of year.

David Ortiz is one a few high-priced, full-time DHs.

Earlier in the interleague schedule, I examined the relative fairness of playing interleague games with two sets of rules and concluded that, in aggregate, the net impact was a wash (however, DH and pitcher performance at the plate does correlate to interleague success). More recently, Dan McLaughlin shifted the debate from the field to the board room by suggesting that economic impact of the DH is what creates the greatest conflict between to the two leagues.

Writing at Grantland.com, McLaughlin concludes that because the DH amounts to a full-time position, players filling the role require a higher salary, which in turn inflates the payrolls of American League teams. To prove his theory, McLaughlin points to the $13 million gap in each league’s average payroll over the last five years, a disparity that increases to $20 million when only considering teams above .500. Finally, to support the notion that the DH plays a role in this discrepancy, McLaughlin calculates an average “full-time DH” salary of $6.8 million, which is more than two times the league-wide average.

Anecdotally, the connection between the DH and payroll seems compelling. However, there are several flaws in the logic. For starters, defining a full-time DH can be an arbitrary process. McLaughlin identified 57 full-timers since 2006, but the baseball-reference play index shows only 46 who had at least 300 plate appearances as a designated hitter during one season in that period. Also, not every full-time DH was signed to fill the role. The Yankees’ Jorge Posada is a perfect example. His $13 million salary is one of the highest among all DHs in 2011, but he was signed to be a catcher. In many cases, highly paid DHs are usually winding down big money contracts signed when they played other positions.


Read Full Post »

After being backed into a corner by Commissioner Bud Selig, Los Angeles Dodgers’ owner Frank McCourt lashed out at Major League Baseball by filing for Chapter 11 Bankruptcy. That’s what rats do.

McCourt and Selig have seldom seen eye-to-eye of late.

According to a press release released by the Dodgers, McCourt justified his decision by claiming that Selig’s refusal to approve a tentative media rights deal with FOX Sports was detrimental to the team. “I simply cannot allow the Commissioner to knowingly and intentionally be in a position to expose the Dodgers to financial risk any longer,” McCourt stated. If anything, the reckless owner has proven more than capable of doing that all on his own.

Needless to say, no one around baseball is laughing at the irony expressed by McCourt, but, the bankruptcy filing could turn out to be a blessing in disguise. Although the filing’s motivation was likely to stave off an attempt by Selig to officially seize the team, it could eventually leave McCourt without an ally in the process. According to the Los Angeles Times, FOX has hinted that it would not be willing to have its proposed contract with the Dodgers consummated by a court ruling. If true, McCourt could find himself trying to scurry off his own sinking ship. That’s also what rats do.

Although the MLB bylaws seem to give the commissioner power over rouge owners like McCourt, it’s almost a given that enforcement would only come after a long and expensive legal battle. For that reason, baseball would be better off if the bankruptcy court is the entity that requires a sale. Even though that would give Selig and company less control over the next Dodgers’ owner, it would save them from costly litigation, further embarrassment, and the continued destruction of a flagship franchise. In the meantime, the bankruptcy filing does provide the Dodgers with enough liquidity to meet its short-term obligations, including payment of all salaries and benefits as well as funding of day-to-day operations.

As mentioned, the wild card in this latest soap opera is FOX, another irony considering many in Los Angeles believe the Dodgers began losing a grip on the city when it owned the team. To many, FOX and Frank McCourt are almost interchangeable, which is one reason the rumored media rights deal has been met with so much suspicion.


Read Full Post »

Daisuke Matsuzaka’s decision to have season ending surgery prompted a post comparing his signing to the Yankees’ ill-fated acquisition of Kei Igawa. The conclusion reached was that both Japanese imports turned out to be busts, but perhaps not so outlandish in comparison to the rest of the 2006 free agent class. So, instead of leaving that point dangling, let’s take a look at how the other mega free agent deals signed that off season have fared to date.

Top-20 Contracts Signed in 2006 Off Season, by Total Dollars ($mn)

Player Team Years Total Value Difference Prorated Dif.
Mike Mussina NYY 2 23.0 35.7 12.7 NA
Jason Marquis CHC 3 21.0 32.8 11.8 NA
Gil Meche* KAN 5 55.0 47.0 3.0 NA
Ted Lilly CHC 4 40.0 40.6 0.6 NA
J.D. Drew# BOS 5 70.0 58.4 -2.3 -2.6
Aubrey Huff BAL 3 20.0 13.9 -6.1 NA
Juan Pierre# LAD 5 44.0 29.4 -8.7 -10.1
Aramis Ramirez# CHC 5 75.0 55.2 -9.8 -11.3
Alfonso Soriano# CHC 8 136.0 62.3 -11.4 -21.0
Vicente Padilla TEX 3 33.8 20.3 -13.5 NA
Miguel Batista SEA 3 25.0 4.3 -20.7 NA
Adam Eaton PHI 3 24.5 -0.2 -24.7 NA
Julio Lugo BOS 4 36.0 4.2 -31.8 NA
Jeff Suppan MIL 4 42.0 6.0 -36.0 NA
Carlos Lee# HOU 6 100.0 33.2 -39.0 -54.0
Barry Zito# SFO 7 126.0 31.7 -46.3 -74.8
Kei Igawa^ NYY 5 46.0 -0.8 -46.8 NA
Jason Schmidt LAD 3 47.0 0.0 -47.0 NA
Gary Matthews^ LAA 5 50.0 -3.2 -53.2 NA
Daisuke Matsuzaka^ BOS 6 103.1 43.9 -59.2 NA

*By retiring, Meche forfeited final year of salary. #Players still active and contracts still ongoing (“difference” based on pro-rated total to date; “pro-rated difference” based on estimated total value minus total contract value). ^Contracts still ongoing, but no further contribution from player assumed.
Note: Value is a WAR-based conversion into dollars.
Source: fangraphs.com and mlbtraderumors.com


Read Full Post »

As early as last June, the entity that owns the parking garages around Yankee Stadium was facing significant economic distress. Despite raising rates (off inflated prices in 2009), the Bronx Parking Development Company reported dwindling revenues for the 2010 season. As a result, it was forced to use its debt reserve to make interest payments on the $237 million worth of tax-free bonds that were floated by the city to build the now mostly vacant structures.

Declining parking occupancy at Yankee Stadium garages has put the management company on the verge of default.

Since that initial report, Bronx Parking Development has continued to experience financial difficulty, so once again, the company decided to raise its prices. This time, the rates jumped to a whopping $35 for self-parking and $48 for valet, an increase of about 50% and 33%, respectively. Now, two months into the new season, comes word that occupancy at Stadium-area parking garages has plummeted all the way to 31%, a sharp decline from the already low rate of 60% in 2010.

Fittingly, the company’s decision to raise self-parking rates by 50% resulted in a corresponding 50% decline in occupancy. Apparently, the executives at Bronx Parking Development have never taken an economics course. Or, maybe they were just absent the day supply and demand was covered?

What the powers-that-be at Bronx Parking Development don’t seem to realize is the price for parking is very elastic. With cheaper car lots and free street spots located within walking distance as well as improved public transportation infrastructure, consumers don’t have to pay through the nose for parking. Add in the increasing cost of tolls and gas, and an inflated parking price becomes only the last on a growing list of incentives encouraging Yankees’ fans to leave their cars at home.


Read Full Post »

The McCourts in happier times.

Move aside Barry Bonds. Fred McCourt is one of the most vile, reprehensible men in the history of baseball. At least that seems to be the popular sentiment expressed in the wake of Bud Selig’s decision to wrestle away control of the Los Angeles Dodgers.

It’s impossible to deny, not to mention excuse, the abuses that have pervaded McCourt’s tenure as owner of the one baseball’s flagship franchises. It seems likely that the organization and the city of Los Angeles will be much better off under someone else’s guidance, but that reality shouldn’t be exaggerated by fiction. Although McCourt may not be the best option to lead the Dodgers in the future, his past actions weren’t all bad for the franchise.

Before Frank McCourt purchased the Los Angeles Dodgers early in 2004, the team had passed from the longtime stewardship of the O’Malley family to the cold claws of News Corp. Even though there were some early reservations about having an out-of-towner take over the team in a highly levered acquisition, McCourt’s purchase was also seen as rescuing the Dodgers from corporate ownership.

The sale of the Los Angeles Dodgers to Frank and Jamie McCourt heralds the beginning of a new era of family ownership for one of the game’s most storied franchises. This transaction meets all of Baseball’s debt service rules and financial requirements in every way. We at Major League Baseball are confident that Mr. McCourt, as a rabid and knowledgeable fan and successful businessman, will devote the time and energy necessary to make the franchise a great success.” – Commissioner Bud Selig, quoted by MLB.com, January 29, 2004


Read Full Post »

Scenes like the one above have been more common this April.

Sparsely attended ballparks have been a relatively common sight at the start of this baseball season, which has inevitably led to the obligatory round of articles lamenting the sport’s decline.

Instead of jumping to a knee jerk conclusion, CNBC’s Darren Rovell actually took a look at the early season attendance figures and reported only a small 1% decline. According to more recent data from Baseball-reference.com, the drop stands at 2.5%, but still nothing indicative of a major negative trend.

Although any decline shouldn’t be dismissed, such a low percentage can easily be explained by a variety of variables, especially when the sample size is only two weeks. For example, there have already been 12 rainouts, as noted by Maury Brown, and that doesn’t even take into account the unseasonably cold weather that has plagued much of the country.

Before the season started, Commissioner Bud Selig expressed optimism about baseball breaking its current attendance record of 79.5 million, which was set in 2007. Since then, however, the number of fans filling the seats has slowly declined. The slumping U.S. economy has likely played a significant role in this gradual pullback, but it seems as if another development over that time period may also be to blame.

Major League Baseball Attendance, 1901-1910

Source: http://www.ballparksofbaseball.com


Read Full Post »

Yankees’ manager Joe Girardi has been making waves of late…radio waves that is. Over the past two weeks, the Yankees’ manager has caused such a stir in radio circles that even Heinrich Hertz would be impressed.

Chris Russo frothed at the mouth after Joe Girardi canceled a scheduled guest appearance on his radio show.

At the beginning of March, WFAN afternoon host Mike Francesa announced that Girardi would be expanding his weekly appearance into an almost daily segment before each Yankees game. Getting the manager of the city’s most high profile team on such an extensive basis was seen as a major coup for Francesa, but the win was short lived because less than two weeks later Girardi reportedly backed out of the deal. Despite suffering a small embarrassment, Francesa was gracious in acknowledging that the rigorous demands of a daily segment likely caused Girardi to have a change of heart. When the popular manager backed out a recent segment with Mad Dog Radio’s Chris Russo, however, the reaction wasn’t as understanding.

As reported by the Daily News’  Bob Raissman, the doggie went off his leash when Girardi allegedly backed out of a scheduled segment on his radio show, which has been touring various Spring Training camps during March. Russo reportedly took his program to Port Charlotte on Monday with the expectation that Girardi would appear, but was later surprised when the manager canceled. Needless to say, the Mad Dog became rabid, slamming Girardi and his agent, Steve Mandell, for pulling the plug at the last minute.

After enduring Russo’s on-air tirade, a Yankees source told Raissman that Girardi canceled his appearance, which was never guaranteed, because the manager was in the process of negotiating a deal to appear regularly on Sirus/XM’s (the same company that owns Mad Dog Radio) MLB Channel. As a result, Mandell did not want Girardi to appear on another company station until the terms were finalized. Apparently, that reasoning didn’t mollify Russo, who continued to bash both Girardi and his agent as well as question MLB’s promotional tactics.

But look how bad things are. I’m the only guy doing talk shows [from spring training sites] and [Bud] Selig and the powers that be wonder why a Richmond-Morehead State basketball game gets a better [TV] rating than a baseball playoff game. If they promoted their sport properly that wouldn’t be the case.” – Chris “Mad Dog” Russo, quoted in The New York Daily News, March 25, 2011


Read Full Post »

Among baseball teams, the Cleveland Indians have been at the forefront in embracing social media. Instead of taking a combative position toward platforms like blogs, Facebook and Twitter, the Indians have actually gone out of their way to not only encourage, but support them. It’s time for the rest of baseball to follow their lead.

In 2010, the Indians established a "Social Deck" for bloggers to attend games at Progressive Field free of charge.

Last year, the Indians created the “Tribe Social Deck”, an information-age version of a press box with 10 seats reserved for bloggers and other social media users who create content about the team. As an encore, the Indians have chartered a more encompassing social media strategy for 2011, including the creation of Twitter accounts for several players, coaches and executives. Talk about “Progressive” Field…apparently, the Indians home ballpark is named for more than just a corporate sponsor.

Baseball has never shied away from integrating itself with prevailing social trends, and has certainly never turned away from adding new sponsors. Social media presents an opportunity to accomplish both, so Bud Selig and the rest of the power brokers in the game would be wise to follow the Indians’ lead and embrace the many possibilities.

The best place to start would be by holding a league-wide “Social Media Day”. Just imagine the possibilities. Every team could host its own selection of bloggers, perhaps by inviting them to take part in the game’s broadcast. What’s more, the last name on each player’s uniform could be replaced with a Twitter handle (the Yankees could use a patch on the sleeve), and in-game segments on the big screen could feature the Facebook pages of not only players, but randomly selected fans. The possibilities are endless, and so too would be the publicity surrounding such an event. What’s more, the benefit wouldn’t be a one-way street. Although social media has enjoyed impressive penetration, the addressable market remains much larger. Who knows how may baseball fans would be introduced to Twitter, for example, if they knew their favorite players were only 140 characters away? The time has come to find out.

Baseball already has a very successful arm that is heavily involved in social media: MLB Advanced Media. In addition to running websites, fantasy services and a blog platform, MLBAM also provides streaming and archived media as well as real-time information across various platforms, including Apple’s iPhone and iPad. MLBAM has already enjoyed immense success, but additional lucrative opportunities could be created if it was even more heavily integrated with the likes of Facebook, WordPress and Twitter.

Baseball is a very traditional institution. It doesn’t take to new ideas very quickly, but the time has come to hop fully aboard the social media bandwagon, even if for no other reason than there’s a lot of money to be made along the way.

MLB and Social Media

Team Likes on Facebook Players on Twitter
Yankees 3,373,852 5
Red Sox 2,176,824 6
Cubs 1,083,096 1
Giants 864,058 4
Phillies 804,291 2
Cardinals 650,515 2
Braves 617,229 4
Tigers 559,524 4
Dodgers 554,156 1
White Sox 546,569 4
Twins 535,513 10
Rangers 518,650 2
Mets 355,534 3
Brewers 335,159 2
Reds 311,000 4
Indians 305,037 7
Mariners 281,749 5
Rockies 259,230 2
Rays 256,697 7
Astros 255,669 4
Athletics 247,274 3
Angels 231,264 9
Blue Jays 227,785 6
Padres 219,420 3
Orioles 210,281 3
Royals 184,509 3
Pirates 157,066 5
Marlins 141,782 9
Dbacks 115,561 4
Nationals 78,110 7

Note: Data as of March 24, 2011. Twitter accounts are for players verified by @MLB and consenting to be listed in the directory.
Source: Facebook.com and twitter.mlblogs.com

Read Full Post »

(In addition to appearing at The Captain’s Blog, this post is also being syndicated at TheYankeeAnalysts.)

Ever since “Moneyball was published in 2003, authors have been lining up to tell the next best tale of mind triumphing over money when it comes to building a winning baseball team. Michael Lewis’ controversial look inside the front office of the Oakland Athletics not only spawned needless controversy and endless debate, but also inspired a litany of books, essays and articles about how various teams had broken the mold to uncover the keys to success.

According to Lewis, the Oakland Athletics were successful because GM Billy Beane had adopted a philosophy that embraced non traditional means of player evaluation. Contrary to the initial reaction, it wasn’t so much a tale of scout versus calculator, or a treatise about the value of OBP, but really a story about how a small market team could compete without the same financial resources of the monoliths in the bigger cities. In other words, the book wasn’t really about a particular stat or means of player evaluation, but a more traditional tale of David versus Goliath. Since Moneyball, books like Tom Verducci’s “The Yankees Years” and Jonah Keri’s “The Extra 2%” have presented similar arguments for how the Red Sox and Rays, respectively, were able to compete toe-to-toe with the Yankees, although in Boston’s case, their sling shot was much bigger.

Did the Athletics considerable success in the early part of the 2000s stem from the realization that drawing a walk was an undervalued talent, or because Beane relied more on statistics than scouting reports? Were the Red Sox successful because they employed the sabermetric formulas of consultant Bill James? Could the Rays have risen from the ashes without the Wall Street strategies used by the team’s new ownership group? Although all seem like very simplistic assumptions, let’s leave those debates for another day. In the meantime, I am more interested in the story of how Goliath got to be so big.

The Growing Value Gap Between the Yankees and the Average MLB Team

Source: Forbes.com


Read Full Post »

Before buying a majority stake in the Houston Astros, John McMullen was a limited owner of the New York Yankees. When asked to describe his role with the team, McMullen once famously said, “There’s nothing so limited as a limited partner of George Steinbrenner.” In truth, the same could be said for just about any sports franchise.

Over the last two seasons, Jeff Moorad has been a minority owner of two different major league baseball teams, both of which happen to compete in the same division. After resigning his post as CEO of the Arizona Diamondbacks in 2009, Moorad led a group that purchased 35% of the San Diego Padres from majority owner John Moores. In 2010, Moorad’s group increased its stake in the Padres to 49%, but Moorad himself retained a not insignificant 8% share of the Diamondbacks.

Fortunately, that’s another issue I don’t have to worry about.” – Commissioner Bud Selig, speaking about the sale of Jeff Moorad’s minority stake in the Diamondbacks

In a recent interview, Bud Selig confirmed that this odd conflict of interest was finally resolved when the Diamondback’s current ownership group purchased Moorad’s 8% stake. According to a MLB.com report, the Ken Kendrick-led partnership paid $21 million to absorb Moorad’s stake in the Diamondbacks. Considering Forbes recently valued the team at $379 million, the price received by Moorad amounts to an over 30% discount (a price that basically amounts to value net of debt). Although it’s possible that the Forbes’ valuation was inflated, the low-ball price paid by Kendrick’s group makes you wonder if Selig exerted pressure on Moorad to divest before another season began.


Read Full Post »

« Newer Posts - Older Posts »