POSTING ADVISORY - JUST A DRIVE BY TO DROP A FEW OPINIONS - DON'T GO AWAY HILLBILLY
UNDER THE "WHAT'S NEW-FISCAL RESPONSIBILITY-NO GUTS-NO GLORY" CATEGORY
It took about 5 hours or so to skim through all the posts. WoW! I just wanted to share a few thoughts starting with a couple of old articles from 2011 that I believe still applies today. Also, a recent article that probably defines my disappointment with this organization. I guess "disappointment" is a kind offering for what I really feel.
The first article really leads to the second both from "The Business of Sports"website:
13 Jul
Is Winning Everything?Posted by Russell Scibetti Published in Baseball, Ticket Sales
Today’s post is courtesy of guest blogger Dr. Kirk Wakefield and was originally published in Volume 7, Issue 1 of the Migala Report. The Migala Report was launched in October 2003 to create an educational and idea-sharing resource for sports executives pursuing revenue-generating concepts. For more information or to subscribe, visit
http://www.MigalaReport.com.
Is winning everything? When it comes to fan attendance and setting ticket prices, how much does winning matter? There’s plenty of anecdotal evidence and exceptions people like to throw out to prove the point one way or the other. That’s what you do when you don’t really know. At least that’s what I do. But, since this is a research column, we thought we’d look at some data. And, who has more data than they know what to do with? Major League Baseball.
The real question isn’t really just about winning. We cannot look at winning and losing in isolation, because context matters. What about the economy? What if the team has a new stadium? What if the team has a star player approaching a career milestone? What if there are other franchises in the same area?
Within the context of the factors listed below, which do you think has had the most influence on a team’s attendance for the past decade (2000-2009) in Major League Baseball? Even though they mirror the previous decade, the results might surprise you.
Influence on Attendance------- Data Available
Winning-------- Current and previous season’s winning percentage
Star players------- Payroll of players for each team
Stadium quality------- Age of stadium
Ticket and concession prices----- Fan Cost Index (
http://www.teammarketing.com)
The economy------- Annual per capita income for each MLB city
City population------- Population of Standard Metropolitan Area (SMA)
Direct competition------- Number of MLB and other pro franchises in SMA
When we include all of these factors together to predict annual attendance in MLB, we find that the stadium has the strongest effect, followed by star players, and then the winning percentage in the current season. Last season’s performance also has an influence on this year’s attendance. Statistical analysis shows that the order of the size of the effect on predicting attendance is as follows:
Stadium quality
Star players
Current season’s winning percentage
Last season’s winning percentage
Population-related factors (SMA population, number of MLB and other professional franchises)
Ticket and concession prices
The economy (per capita income)
The surprise may be that winning has less influence on attendance than the stadium and players, but also interesting is the fact that population-related factors and ticket/concession prices are positively related to attendance. Other economic studies have previously suggested that larger populations with more pro franchises hurt, not help, attendance in MLB. Further, because professional sports are more of a prestige good, higher ticket prices are associated with higher attendance.
Also interesting is the fact that as much as we hear people blaming the economy, reduced earnings of consumers across MLB cities has a very minor effect. We’ll discuss each of these shortly, but let’s start with the strongest influence on attendance.
The Stadium. When analyzing the effect of the stadium, it’s important to account for the fact that vintage stadiums such as Fenway Park and Wrigley Field attract just as well as new stadiums. One of the reasons that the stadium is so important to baseball is the length of the season. With 81 home games, the potential amount of time spent at the game for season ticket holders is far greater than for basketball or hockey (41 home games), soccer, and, certainly, for football. Other research shows that the facility is still important for those sports, but not as much as for baseball.
The advantage of investing in the sportscape is that it has a known, certain effect on attendance for at least ten years.
Investing in players and managers, while obviously important, produce less certain outcomes.
Investing in individual star players, however, may be worth it.
Star players. The reason that star players have such a strong effect on attendance is because fans identify with individual players on the team as much as with the team. Fans build psychological bonds with star players that positively reinforce their own self images. From management’s perspective,
this suggests that signing key players with attractive leadership qualities is a critical part of building attendance.
Winning. For those that thought that winning now is everything, apparently it comes in third. The results show that winning during the current season should attendance.
However, winning is unlikely to have a lasting effect without a good stadium and star players. The Florida Marlins proved this twice following World Series wins in 1997 and 2003. Fellow Floridians in Tampa Bay have witnessed similar problems.
The results from the MLB data show that last season’s performance has almost as much influence on attendance as the current year’s performance. Season tickets are sold primarily on the basis of the hope offered by last year’s performance on the field. So, teams that win from year to year are likely to sustain or maintain attendance.
Taken together, putting together a string of winning seasons should increase attendance. The problem is that compared to investing in the stadium and star players, winning is uncontrollable. Of course, signing star players may help winning, but that’s also hard to predict. From a marketer’s perspective, you are better off promoting what you can control and deliver—and winning is not one of them. If you’d like to read about some classic collapses by teams that thought they’d be big winners, see David Schoenfield’s article on ESPN.com.
Population and competition. Economists have studied these same factors in multiple studies dating prior to this past decade and have always shown that larger populations in cities like New York, Chicago, Los Angeles, and the Bay area with multiple teams have negative effects on attendance. Theoretically, teams located in these cities face more indirect and direct competition that might lure fan spending from MLB attendance. I don’t know if anyone’s noticed, but almost all of the teams in those cities (Yankees/Mets, Dodgers/ Angels, Cubs/White Sox, and Giants) have strong attendance. The only exception is Oakland. The stadium and lack of star players and winning explain why.
The reason these previous studies showed different results are likely due to two reasons. First, the introduction of AT&T Park in San Francisco and the repeated renovations to improve Cellular Field in Chicago have boosted attendance. It didn’t hurt that the White Sox won the World Series in 2005. Further, the new Citi Field will continue to help attendance for the Mets. Second, prior economic studies did not account for the fact that population size is correlated with having competing franchises in the same city and having multiple pro franchises across all sports. Statistically speaking, this causes errors in estimating attendance models that can produce misleading results.
Ticket and concession prices. The results show that teams with higher attendance have higher ticket and concession prices. We also conducted additional analysis that shows that you can closely predict next year’s prices with this year’s attendance in MLB. Increased demand for tickets of teams with good stadiums, star players, and winning teams in strong markets means higher prices. Put differently, teams with poor stadiums, no-name players, and losing teams are the ones that are forced to cut ticket prices.
The economy. For all the hand-wringing about the effects of the economy, we find that lower per capita income levels across MLB cities affect attendance, but much less so than the other factors we’ve discussed.
In the end, the fan’s objection is not so much to price, but to the value offered by the team in terms of the stadium experience, the players on the team, and the performance on the field.
Dr. Kirk Wakefield is the Executive Director at Baylor University’s Center for Sports Sponsorship & Sales, and serves as editor of The Migala Report published by the Center.
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Leading me to the second article from "The Business of Sports"website:
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22 Jun
Interview with Ken Stefanov, CFO for the Indians Posted by Guest Blogger Published in Baseball, Economics and Finance
Today’s post is an excerpt from an interview with Ken Stefanov, CFO for the Indians, conducted by Peter Alpern from BusinessFinance (businessfinancemag.com).
Anguish isn’t just part of the Cleveland sports fan’s culture; it becomes part of its very identity, seemingly embedded in the city’s very DNA. It is this tidal force that franchises such as the Cleveland Indians, Browns and Cavaliers come up against each season.
Ken Stefanov, CFO for the Indians, has to combat this on two ends: providing the financial and organizational foundation to build a winning team on the field while addressing the sober economic reality of competing in a market that draws roughly a fifth of the annual revenue of the New York Yankees.
As the calendar turned to June in this, the Indians 111th season in the American League, the Indians have become baseball’s biggest secret, racing to the top of the Central Division. But that success hasn’t equated to the turnstiles: Less than half of the seats at Cleveland’s Progressive Field are full and season-ticket sales are at their lowest since the Indians moved into their current stadium in 1994.
Stefanov discussed with Business Finance how the Indians, with all the organization’s small-market challenges, is really not unlike any other corporation: financial rigor and strategic insight need to be tightly linked; uncertainty demands flexible strategies and the development of alternatives for growth.
Business Finance: From a financial perspective, tell me a little bit about the economic landscape you’re working with and how that translates on the field and running the business?
Ken Stefanov: The local economy, obviously, is quite different from the one we were operating in during the 1990s and it’s quite different from even five to 10 years ago. The competition isn’t just with the local sports teams, like the Cavs and Browns. We’re an entertainment business and people have options.
We work based off where the team is in relation to the business cycle. You ramp up, develop players and hopefully make a charge on top of the business cycle for competitiveness on the field. Then, the way the economics of baseball work is that you’ve got to be fiscally responsible and maybe take it down because players leave for bigger contracts you can’t afford. So you learn to deal with the business cycle, and you learn to budget accordingly.
BF: Where is the team within that business cycle right now?
KS: The state of the [Indians] franchise is good. I say that in light of the whole Dodgers situation. We have to be very realistic about where the team is at and what the market will bear. While it appears we may be in the midst of a recovery economically, we have some very serious concerns about the Northeast Ohio economy and where it’s going. Statistically, we’ve seen unemployment is down. It’s dropped to 9.3% in Northeast Ohio. Last year, it was up 1.5%. So there are some glimmers of hope. But it’s my job to be realistic and take the emotion out of the baseball side of things.
BF: Where do you see the role of finance contributing to the success of a ballclub?
KS: Well, for us, the big picture here is, as an organization, to win a World Series. We’re also here to make the fans—the focus of our attention—entertained. We want to reinvest in our ballpark, and we want to have a positive impact on our community.
Those are our four goals.
To do that, though, we have to be creative, especially in finance. There may be very little difference between the finance departments at the Indians and the Yankees and a Fortune 500 company. But I think it’s my charge to make sure that the little difference that there is counts for a significant influence on the operations of the company.
BF: Within the confines of the finance department, how do you overcome that competitive disadvantage?
KS: We have to be that much sharper in our decision-making process day to day. We have to spend wisely. And it’s that pressure to be smarter that I think will make a smaller-market team successful or not successful.
One of the things we have made an investment in as a small-market team is in my IT department—which I oversee—we have developed our own proprietary software applications. We do not share these with other teams. One [application] focuses on scouting, another identifies metrics and trends and then another is a video coaching system for adjusting mechanics for the players.
This is where small-market teams really have to separate themselves. Maybe the Yankees have a comparable system, and maybe they don’t. But because our margin is so thin, we have to excel in other areas because we’ll never win the outbidding game.
To continue reading the full interview, visit
http://www.businessfinancemag.com. Thanks again to Peter Alpern for sharing this interview with us!
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This is where small-market teams really have to separate themselves. Maybe the Yankees have a comparable system, and maybe they don’t. But because our margin is so thin, we have to excel in other areas because we’ll never win the outbidding game.
[Sorry Ken! I have to strongly disagree on this one.
You can sign Nick Swisher to a four-year, $56 million contract that reportedly included a fifth year vesting option worth $14 million, making the total contract worth $70 million ($17.5 mil/yr) but you can't outbid Oakland for Yoenis Cespedes who signed a 4 year deal for $36 mil ($9 mil/yr) ?!?!?!
You can sign Michael Bourn to a four-yea, $48 million contract that reportedly included a vesting option worth $12 million for the 2017 season worth $60 million ($15.0 mil/yr) but you can't outbid the Dodgers for Yasiel Puig who signed a 7 year deal for $42 mil ($6.0 mil/yr) ?!?!?!
Now you are tentatively negotiating with the Cubs on dealing one of our top 4 rotation pitchers for a package that includes Jorge Soler who signed a 9 year contract worth $30 million ($3.5mil/yr). Are you kidding me? We couldn't outbid the Cubs on a $3 mil/yr deal ?!?!?!
I use Cespedes, Puig, and Soler as examples.
I spent a lot of time in the winter ball folder "scouting" Cuban baseball players. Why? Because these players compete in international tournaments, the classic, the Olympics (when baseball was still a sport), and their own Series Nationale (their Professional Baseball League) as well as the Series del Caribe ( they were re-instated in 2014). When these player come to America, they are major league ready. Those that are not spend 1-2 years at the minor league level. These players are "investments" !!!! I did the same for players along the Pacific Rim. I considered them "investments" also.
We can afford to pay players like Johnson to not play !! Things within the organization have to change. It seems that no matter how things change, they still remain the same.]
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Finally, an article on Todd Frazier which I whole heartedly agree with. I think Graydon Fox hit the nail right square on the head !
Should the Cleveland Indians have bitten the bullet on Todd Frazier?
Graydon Fox
The IBI's Graydon Fox ponders whether the Indians should have gone the extra mile and paid the price to trade for Todd Frazier.
There is no question that Mike Napoli and Rajai Davis make the Cleveland Indians a better team in 2016. These are helpful additions to the teams’ current roster but I only see them as marginal improvements. At ages 34 and 35 respectively, Napoli and Davis cannot be seen as major impact players. The Indians smartly signed each of these players to only one year deals.
Napoli is coming off a season where he hit just .224 with 20 doubles, 18 home runs, 50 RBI and a .734 OPS. He struck out in over a fourth of his plate appearances in 2015. Davis hit .258 with 16 doubles, 11 triples, 8 home runs, and a .746 OPS. He walked only 22 times in 370 plate appearances. Davis, known for his speed, stole 18 bases in 2015 and were his lowest total since 2007. Both players hit left-handed pitching very well and grade out as plus defenders at their respective positions.
Without any additional major acquisitions are the Indians really built to win a World Series in 2016?
I’m still holding out hope that the Indians’ front office has at least one major move up their sleeve. The Indians were known to have been heavily courting Cincinnati Reds all-star third baseman Todd Frazier for weeks. Frazier was seemingly the perfect fit for the Tribe: A right-handed power bat with a modest salary capable of anchoring the middle of a lineup. On Wednesday afternoon Frazier was dealt to AL Central rival Chicago in a three team trade.
According to longtime Indians beat writer Paul Hoynes, the Reds wanted either Danny Salazar or one of Bradley Zimmer/Clint Frazier plus two of Bobby Bradley, Justus Sheffield, Mike Clevinger or Juan Hillman in return for Frazier. That would certainly be an extremely steep price to pay potentially mortgaging the future for just two years of Todd Frazier.
The question becomes, “Should the Indians have bitten the bullet and paid the steep price that Cincinnati was demanding?”
Indians fans are quick to remember the likes of Andy Marte, Matt Laporta, Trevor Crowe and many others who were once regarded as highly touted prospects. For every Francisco Lindor there are ten first round picks that didn’t make it.
Many of the Indians best core players are signed to long term deals but most of them are in their prime right now. I would argue that the Indians best opportunity to win is within the next three years.
Michael Brantley is under contract through 2018 then will become an unrestricted free agent. If Brantley continues his excellent performance he will easily command over $100 million on the open market. Many fans want to rag on Carlos Santana, but along with Brantley, he’s been one of the Indians’ best run producers for the last five seasons. Santana will be an unrestricted free agent after the 2017 season. So three years from now the Indians will likely be without their top two run producers.
Going into the offseason, Tribe second baseman Jason Kipnis was quoted as saying, “We're not far away. We've definitely got a good foundation here, we've definitely got good players and now, we could be just one piece away, one bat away, one pitcher away and I think it'll be important for us to go out and get it."
To land somewhere in last year’s $85 million payroll range it was estimated that the Indians had about $15 million to spend this offseason to improve the roster. Barring any major trades, the Napoli and Davis signings have eaten up the large majority of that. Are the Indians now good enough as is to win a World Series in 2016? I don’t believe so.
ersonally, I would have had no problem parting with one of Zimmer/Frazier in any deal with the Reds. I think both are excellent prospects and have the potential to be all-stars in the major leagues. With the Indians stellar pitching staff, they are built to win in 2016. They still lack that proven power hitting run producer in the middle of the lineup. I believe Todd Frazier could have turned the Indians into legitimate title contenders for the next two seasons under which he would have been controlled.
Even with the addition of Napoli, I still don’t see anybody on the current roster capable of hitting in the cleanup spot. I think this will continue to be a glaring weakness for the team until the front office addresses it or one of their star prospects eventually grows into the role.
I certainly hope that Bradley Zimmer and Clint Frazier evolve into excellent players for years to come, but did the Indians make the right move trusting in the strength of their farm system? Only time will tell.
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WoW! I guess I got my monies worth for being MIA these past months.