My friends over at Qcue,who specialize in dynamic ticket pricing in professional sports, sent me over some interesting information on what they were able to do with their Major League Baseball clients in 2011. I think this is valuable to share, particularly for any organizations that are thinking about the pros and cons of implementing a dynamic pricing strategy.

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Qcue today announced the 2011 Major League Baseball (MLB) season was the most active season to date for dynamic pricing, resulting in significant gains for all clients, including increases in total revenues, full-price ticket sales and revenue per seat (excluding season tickets, which do not use dynamic pricing).

With the regular season now complete, Qcue conducted in depth analysis across clients, concluding that the frequency of price changes has a direct impact on incremental revenue. In fact, they estimate that a team can generate an additional $900,000 in incremental revenue over the course of a season by making one additional change to each of its section prices.

Results like this show why dynamic pricing is quickly becoming an industry standard with more than one-third of MLB teams, as well as teams across other leagues, implementing the practice. Qcue’s roster continues to grow, with the New York Mets and Seattle Mariners set to implement dynamic pricing for the 2012 season. Qcue clients now represent 95% of all dynamically priced baseball tickets.

On average, teams approached 2011 with conservative on-sale prices, often lower than previous years, providing substantial values for many fans.

Additional findings include:

• Average price change per seat: $1.55 increase
• Average percentage change per seat: 3% increase
• Average price decrease: -$13.63
• Average price increase: $3.27

“The market has definitely hit a tipping point, where teams are no longer wondering ‘if’ they should embrace dynamic pricing, but rather ‘how often’ to leverage the intelligence and flexibility a solution like ours can provide to drive incremental revenue,” said Barry Kahn, CEO of Qcue. “Our analysis demonstrates the relationship between the frequency of price changes and incremental revenue and the value of understanding real-time market dynamics in setting more accurate prices. Teams that adjust prices more frequently make more money that can be invested back into the club.”

In addition to regular season pricing, teams are finding ways to extend dynamic pricing to new scenarios such as spring training, which the San Francisco Giants successfully did this year in Scottsdale, Arizona.

Qcue’s turnkey software solution helps teams analyze sales data and other external pricing variables, providing sales and revenue projections, strong reporting capabilities, as well as market-based price recommendations. Additionally, integration capabilities remove the management burden teams often face by directly communicating price changes to the teams’ ticketing system and website.

Thanks to Cybele and Barry from Qcue for sending this over!

I was riding on a subway in New York last night and saw an advertisement that caught my interest. Take a look at the picture below…

If you are from the New York area, you might see this ad and “recognize” the font being used for the word “YES.” If it doesn’t look familiar to you, take a look at this logo:

Now, I know that they’re not exactly the same (e.g. there is a diagonal slant in the tips of the “E” in the YES Network logo that’s not in the Nestea ad), but you have to admit there’s a definite resemblance. The question I have is, was this font choice intentional? Considering the advertisement is running in a New York subway and the popularity of the Yankees and the YES Network in this area, this could be a strategic decision by Nestea or their advertising agency, especially if this is only a local campaign (the argument doens’t hold as much weight if this is part of a national campaign).

It costs a lot of money to use a team’s logo, but designing an advertisement in a way that can still trigger an association in the mind of the reader without including any actual team marks could be a cost-effective option. In many situations, a particular font or word choice can be enough to trigger that association. I’m not saying that’s what Nestea was going for here, but the font choice was definitely enough to make me think of the YES Network, and I’m sure I’m not the only one.

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 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.

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:

1. Stadium quality
2. Star players
3. Current season’s winning percentage
4. Last season’s winning percentage
5. Population-related factors (SMA population, number of MLB and other professional franchises)
6. Ticket and concession prices
7. 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.

In the NBA, the San Antonio Spurs and Oklahoma City Thunder have benefited from being the only game in town. But, these results from MLB indicate that having the in-town rivalries between the Cubs & White Sox, Yankees & Mets, Angels & Dodgers help attendance. Fans in these cities must intentionally choose allegiance to one of the teams, which should increase identification and passion for each team.

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.

- Click here for David Shoenfield’s ESPN article on “Baseball’s all-time train-wreck seasons.”
- Click here to go Dr. Wakefield’s TeamSportsMarketing.com website to read more research and sports marketing tips.

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 www.businessfinancemag.com. Thanks again to Peter Alpern for sharing this interview with us!

Last month, I was fortunate enough to receive an advanced copy of “The House That Ruth Built” by Robert Weintraub. The book chronicles the Yankees’ 1923 championship season, their crosstown rivalry with the New York Giants and the construction of Yankee Stadium. It’s an excellent book for any Yankees or baseball fan, but beyond that, I really enjoyed the sports business aspects to the story, particularly around the team’s ownership, the local media and the stadium construction.

Robert was kind enough to share some of his time for an email interview to provide additional insights from his research about these sports business topics of the day. In addition, after the interview you can read an excerpt from the book’s preface that helps set the backdrop of his story.

- Robert, most Yankee fans know the name Jacob Ruppert, former team owner when the stadium was built, but not many recognize Cap Huston. Yet, as co-owner of the team in 1922, he was instrumental in the construction of Yankee Stadium. How do you think things would have been different if Cap Huston wasn’t involved and should he have a bigger legacy in Yankee history?

Robert Weintraub: I definitely think Til should be better remembered today. His engineering background and knowledge of ballpark construction and the ways to increase revenue by preparing for multi-sport utility was a key element to the iconic nature of the Stadium through the years. Certainly, had he not been on the scene, Ruppert alone would have found a way to build a Stadium–it was his dream to have a park full of thirsty fans drinking the beer that his brewery churned out–but it wouldn’t have been the epic edifice it became.

- It’s always interesting to see how the media treated athletes differently in earlier eras, almost protecting them from the public and hiding some of their “inappropriate” behavior. What impact did the media’s protection have in shaping Ruth’s legacy?

RW: One of the great surprises I discovered in researching the book was just how hard the press was on Ruth for his on-field failings, contrary to the myth. As for his off-field endeavors, we are accustomed to talking today about a “different era” when stars weren’t dissected like today, and that’s true to a point–many of Ruth’s more notorious scandals were obscured or flat out ignored by writers that didn’t want to endanger their meal ticket in any way. But the idea that Ruth drank, ate, gambled, and whored to excess was certainly a part of the coverage, and his popularity, even at the time. But the fact that there was still some more room to go with the Babe was key in terms of his legacy. Many of the writers wound up writing memoirs or histories that enumerated Ruth’s scandalous adventures that went well beyond what had already been reported, and thus the legend that exists to this day was born.

- What parallels did you see between the construction of Yankee Stadium in 1922 to the construction of new facilities in the past 5-10 years?

RW: Not much, frankly. The trend today is to go smaller, to be sport-specific, and to be built with as much public funding as possible. None of that was true with the Yankee Stadium. Building such a huge, lasting arena in a mere 284 days is another aspect of the construction project that cannot be matched in modern times. Certainly the current trend is to build where the people are, not away from the masses like with the Stadium. The Bronx rose in prominence thanks to the Stadium. That hasn’t happened with modern stadia. No one flocked to live in Auburn Hills, Michigan or Landover, Maryland.

- In covering the 1923 season for the Yankees, the New York Giants played a very visible role as an opponent and business rival. If the Yankees and Yankee Stadium weren’t as immediately successful, do you feel that local popularity would have shifted back to the Giants, and would they have ended up staying in New York?

RW: Yes to the first part–the Giants were negatively impacted by Ruth’s and the Yankees’ success, and were it not for the slugger winning championships in the new Stadium would have remained top dogs in New York–but only if they continued winning as well. Remember, it wasn’t only that the Yankees got good. After 1924, the Giants didn’t win another pennant for a decade (1933). Then, the Giants regained some of their old glory. They get obscured by the mythology that surrounds the glory years of the Yankees and Dodgers, but the Giants with Willie Mays were quite popular in New York. Their move to California was less about declining popularity then following the money (and the Dodgers) out west–it wasn’t a direct line from the time they were supplanted by Ruth’s Yankees.

- What was the most surprising thing you learned about the behind-the-scenes dealings that allowed for Yankee Stadium to be built?

RW: Probably the involvement of Arnold Rothstein, aka “The Big Bankroll,” in the suspicious delays that held up the construction project, so that it wasn’t ready until 1923. Rothstein was an investor in the Giants, his insurance company underwrote the Polo Grounds, and he was tight with John McGraw and Charles Stoneham, the principal owners of the Giants. He was often seen in box seats at Giants games. The Yankees needed two small streets in the South Bronx to be closed in order for building to begin. They expected the city to OK the closings as matter of routine. Instead, thanks most likely to Rothstein’s influence with the Tammany machine that dominated New York politics, the waivers were lost in the bureaucratic haze for months. As a result, the Yanks had to crawl back to the Polo Grounds and play there in 1922, at an increased rent. There was profit in dollars and in the humiliation of the Yankees for Rothstein, McGraw, and Stoneham. The boys in the Bronx had the last laugh, however.

Thanks again to Robert for his insights.  Please click the link below to enjoy some of the book, or visit Amazon.com to pick up a copy!

Excerpt from the Preface of The House That Ruth Build by Robert Weintraub

The center of New York power, then, as now, remained downtown, in the Financial District. But uptown had the Giants, for the past two decades the nation’s most potent sporting brand. These two critical elements of New York’s cultural engine— sports and money—were merging rapidly. The ad salesmen at the big newspapers had taken it as gospel that baseball fans — an unserious rabble with little taste, in their eyes— didn’t constitute the buying public, but that changed in the ‘20s. Literary Digest noticed the new climate: “We have no hesitation in declaring that if an accurate poll were taken of the attendance at any big-?league ball game the ratio would be around 80 per cent of business officials, office employees and men of leisure to 20 per cent of the actual ‘laboring class.’” A little relaxation at the ballpark was expected after a day spent frantically selling or dealing in the rarefied air of high finance.

Stock and real estate speculation was the Big Thing on Wall Street, and the deal making continued in the Polo Grounds grandstand. As one player said, “I’d go to the ballpark and get stock tips from turnstile men and bootblacks and peanut butchers and newspapermen. Everybody was going to be a millionaire. It was a little confusing.” The Giants started home games at three thirty p.m. in order to better allow the moneymen to travel north after a day of wheeling and dealing to watch McGraw and his team dominate the National League.

But today’s contest was starting earlier, at two p.m., and it most certainly wasn’t a home game for the Giants. As McGraw turned toward the water on the 155th Street Viaduct, passing over the Harlem River Speedway, built for horse and carriage but now crammed with automobiles, the enemy’s fortress came into view. McGraw scowled. The building in front of him, just across the river in the Bronx, would be the scene of today’s game and the cause of much of the manager’s agita— the brand-?new Yankee Stadium.

Despite its proximity to Manhattan, the Bronx definitely had an outerborough feel to it (expressed neatly in a headline in that morning’s Daily News: “Bronx Landlords Count Dogs as Added Tenants”). Under ordinary circumstances, a sneering McGraw would have paid as much attention to a Bronx baseball park and its American League occupants, the Yankees, as he would to something stuck to the bottom of his shoe.

But this was no ordinary time. Thanks to the deep pockets of the men who had bought the team in a deal brokered by McGraw himself, the Yankees had emerged as dangerous rivals to the Giants for the hearts and minds of New York baseball fans. And thanks to the team’s superstar— to McGraw, a mighty ape with intellect to match—the Yankees had not only challenged the Giants on the field but outstripped them at their own gate. Since 1912, the two teams had shared the Polo Grounds, with the Yankees as tenant and the Giants as landlord, so this development hit the Giants and McGraw, who owned roughly a quarter of the team, right in the wallet. But it was a situation McGraw and Giants majority owner Charles Stoneham had thought they could rectify— by evicting the Yankees.

They did, kicking the Yanks out of the Polo Grounds and essentially forcing them (daring them) to build a home of their own. So the bickering Yankees owners, Jacob Ruppert and Til “Cap” Huston, responded by going all?in. They put aside their own differences long enough to construct this gigantic palace of sport within shouting distance of the Polo Grounds. It had opened six months earlier on April 18, to enormous fanfare and great critical and popular reception.

Money was at the heart of this competition, and the Yankees suddenly had more of it — and with the Stadium they now had the means to increase revenue exponentially. But McGraw and the Giants could still win where it counted most— on the field.

Separated by a thin slice of the Harlem River, Manhattan and the South Bronx look like jigsaw pieces left slightly apart. At 155^th Street, McGraw traversed the gap by means of the four-?hundred-?foot swing span of the Macombs Dam Bridge. And as he made landfall in the Bronx, the boisterous crowds hoping to attend the first World Series game ever at the Yankee Stadium came into view. This new monstrosity held an enormous number of fans, upwards of sixty thousand, and it seemed like twice that number were milling outside the Stadium on 161st Street, on River Avenue, and on the unpaved section of Doughty Street (to be renamed Ruppert Place in 1933) near the Elevated train, hoping to buy tickets. McGraw despaired momentarily, wondering how he would get through the logjam, when a policeman recognized him and organized a flying wedge, leading McGraw to a side entrance.

Once inside, McGraw wrinkled his nose and stepped into the visiting clubhouse. His players were inside, quietly awaiting batting practice. Unused lockers surrounded the team— and they’d remain empty. Such was McGraw’s distaste for the Yankees and their new home that he had refused to allow the Giants to change inside the Stadium. Thus the team had met at the Polo Grounds, put on their uniforms, and headed over the river. McGraw might have to play the World Series here, but he didn’t have to spend any more time as guests of the Yankees than absolutely necessary.

Much has changed on the Manhattan side since the days when McGraw strolled through the area. Next door to the former site of the Giants home field is Rucker Park, where the fabled summertime Rucker Tournament attracts the best playground basketball players in the city and beyond. One Hundred Fifty-?fifth Street abuts the northern edge of another park, one named for a New York baseball player— Jackie Robinson, who played in Brooklyn! Eighth Avenue today in this stretch of Harlem is now called Frederick Douglass Boulevard. But perhaps the greatest change, at least from a baseball perspective, is that the Polo Grounds no longer exists. A large public housing project stands where the diamond and seats once did, and the entire area is in thrall to the great new Yankee Stadium across the river. Everywhere one turns in the summer months, the familiar Yankees “Top Hat and Bat” emblem (which didn’t exist in 1923) winks out from memorabilia stores, makeshift parking lots, and pre-?and postgame watering holes. It is a turn of events that would have eaten at John McGraw.

The New York Yankees are the preeminent sports franchise in the United States, if not the world, and the club’s resume is well known to most fans — twenty-?seven World Championships (as of 2010), by far the most of any team in any sport. But in 1923 this dominance didn’t yet exist. As that year’s World Series opened, the Yankees had yet to win a single championship. And in the previous two seasons, it had lost the Series, decisively, to its mighty rival—the New York Giants.

By now, you’ve probably already seen the news that Major League Baseball has taken control of  day to day operations of the Los Angeles Dodgers away from current team owner Frank McCourt. If not, you can read more about it over at ESPN.com and on Darren Rovell’s SportsBiz blog.

Instead of trying to weigh in on whether MLB’s decision in this case was right or wrong and what McCourt should or shouldn’t do, I’d like to take a philosophical look at the concept of a league-owned or league-operated franchise. This situation has come up a few times in professional sports over the past decade, including the Texas Rangers, the Montreal Expos/Washington Nationals, the New Orleans Hornets, the Phoenix Coyotes and now the Dodgers. While the circumstance behind each situation is different, there are some fundamental issues at hand any time a league steps in to manage an individual franchise.

If a league owns or operates an individual franchise, in essence the other 30+ owners within that league are now in charge of that team, since the league itself is owned equally by all of the separate team owners. While each owner is primarily concerned with their own franchise, even having a 1/30th stake in another team is a significant investment. This additional “ownership” can represent a unique conflict of interest for those put in charge of the team’s operations.

The owners want this franchise to be run profitably, but what is the best way to do that? Often times, the best way to generate a short-term profit is through reducing costs, whereas long term profit is more sustainable via investing in the team’s operations. If the other owners care more about the short-term, which could easily be the case since they theoretically won’t own the team for long, then those in charge may be forced to cut costs. In addition, the specific approaches the team takes in their operations could be dictated by that league’s revenue sharing system. If more revenue is shared from ticket sales that local media, will those in charge be forced to focus more on that specific revenue stream to the detriment of the other.

This problem is even more significant when looking at the on-field operations of the team. Those in charge should theoretically continue to do what they can to help the team win, since that will in turn lead to more revenue. However, if that team wins more games, logic dictates that other teams will lose more games, which can decrease revenue for those team owners. This question came up last year with the Texas Rangers. The team was doing well, but until new ownership was in place, the team seemed unlikely to make any roster changes. A more recent example took place this year with the Hornets, when those in charge of the team did make a significant trade in an attempt to improve the team. Mark Cuban spoke out vehemently against this trade in particular because the team took on additional salary, which mean as a partial owner of the Hornets, Cuban could end up losing more money. He didn’t seem upset about the team’s attempt to improve (he said that he wouldn’t mind the trade if they hadn’t taken on additional salary), but I wouldn’t be surprised if behind the scenes, other owners were angry about this aspect as well.

Finally, you also need to look at the context under which the league steps in. One of the most unusual arrangements was when MLB decided not only to “purchase” the Expos, but also arrange for the sale of the Marlins to former Expos owner Jeffrey Loria, and in turn the sale of the Red Sox to former Marlins owner John Henry. While I will not attempt to analyze the various motivating factors behind these deals (how often do you see owners “trade” their team?), there’s no doubt that Henry and Loria benefited greatly from the situation, while the “rest” of the league ends up owning the orphaned Expos, which surely had a negative cash flow until the time they were sold as the Nationals. Again, there does seem to be some conflict of interest when other owners end up having to support the operations of an additional team as part of another owner’s franchise purchase and sale.

Even putting that unique situation aside, other events will continue to arise where a league has no choice but to step in and own or operate a franchise. It is clearly in the best interest of any professional sports league to make sure all of its teams can operate successfully. The conflicts that these situations present are real, and must be delicately managed by all parties involved until operations can be turned back over to the team, hopefully as quickly as possible.

With the NHL Playoffs starting today, it’s a great time to look at how the NHL differs from other major American sports leagues in crowning their champion.

National Football League (NFL)

Only 12 of 32 NFL teams make the playoffs each year. At 37.5%, the NFL has one of the lowest percentages of teams allowed into the postseason. Four division winners from each conference automatically qualify, plus two Wild Card teams (non-division winners with the best record). At times, this can make for interesting seeding. In 2011, for example, the Seattle Seahawks won the NFC West with a 7-9 record. They were slated to host the first round matchup against the 11-5 New Orleans Saints, the non-division winner Wild Card out of the NFC South. There was quite an uproar about whether Seattle deserved to host that game, but they quieted  (most of) the critics when they pulled out a 41-36 win.

National Basketball Association (NBA)

In the NBA, 16 out of 30 teams (a whopping 53.3%), make the playoffs. Once those 16 teams are seeded, the bracket will never change, regardless of any upsets that occur.

Major League Baseball (MLB)

MLB doesn’t refer to their tournament as the ‘playoffs.’ For baseball, it’s the ‘postseason’ that determines the champion. Only 8 of the 30 MLB teams (the lowest of all major American sports leagues at 26.7%), make the postseason, often coming down to the very last game, and occasionally needing an extra game as a tiebreaker.

Major League Soccer (MLS)

The youngest of the major American leagues, MLS advances 10 of their current 18 teams (55.5%) to the playoffs. Five teams from each conference are seeded, and while the first three seeds get byes, the #4 and #5 seeds play each other for the right to face the #1 seed. Once the bracket is set, no changes are made to account for upsets.

National Hockey League (NHL)

The NHL may just be the most fair when it comes to their playoff system. While they do allow a large percentage of their teams in (16 out of 30 – 53.3%), teams are re-seeded after each round. What this takes into account, that no other major American league does, is the regular season. A lower-seeded team that didn’t perform as well over the course of the 82-game season, doesn’t get an easier path to the Stanley Cup Finals just because they upset the higher seed. Kudos to the NHL for keeping the regular season more relevant than the other four leagues.

What is your favorite playoff system? Do any of these five leagues get it right? Should MLS consider going to the European-style of crowning the regular-season champion and forgoing any regular season?

Image courtesy of NHL.com

Earlier today, I saw an interesting post on AllFacebook.com that discusses Major League Baseball’s decision to end their free livestreams on Facebook. You can read their take on the decision here.

In case you didn’t know, MLB was providing a live game feed to select spring training games that could be watched directly via the MLB Facebook page. I thought this was a pretty big step for the league, which generally maintains very tight control over all of their digital content, which under most circumstances has to be viewed via MLB.com. From MLB’s perspective, this service could have several benefits:

• It would be an opportunity to promote their MLB.tv product, which I think is the industry standard for a web-based, live streaming service
• It would be a great social media engagement tool to get better value from their Facebook page
• It would generate increased interest in spring training games, which generally have very low viewership

According to Bob Bowman from MLB Advanced Media (MLBAM), the service was successful in generating interest in baseball, but it was not a great conversion tool for generating MLB.tv subscribers.

So, MLB has since stopped the live streaming service, which to me seems a bit short-sighted.  If the program was having a positive impact on promoting and generating interest in baseball, then instead of ending the program, maybe fine-tune it. As Jackie Cohen from AllFacebook.com pointed out, maybe the main reason for the low conversion numbers was because the only games being shown were spring training. It would have been very interesting to see if the conversion data jumped based off a opening week trial run (I believe the NHL offered their GameCenter Live product for free during the first week of the regular season to generate new subscribers). Unfortunately, we have no way of knowing this now.

In his statement, Bob Bowman mentioned that most people ended up clicking over to the MLB website to watch the games, rather than use the embedded player on Facebook, and this contributed to the decision to remove the live stream. However, I think this behavior can be more attributed to the short trial window. If a company is going to provide a brand new way to consume content, they need to provide enough time for the corresponding consumer behavior to change. And in this case, since MLB doesn’t have the same numbers of Facebook users as the other four major U.S. leagues and most MLB fans have been trained that content is only available on MLB.com, I think a longer trial period would definitely be needed and could generate much better results.

I hope to see MLB try this again during the season, maybe during another 1-2 week trial period, or better yet, all throughout the year via a free “Game of the Week.” At least then, I think they’d have a better idea of what impact this can have, and meanwhile, they’ll continue to get a benefit through increasing exposure for their product.

UPDATE: I was contacted by someone at MLB Advanced Media who informed me that there is still a free “Game of the Day” available via Facebook, but instead of using Facebook’s embedded video player, it takes the user to the high-definition MLB.tv video player. See the image on the right for an example from a recent post.

I love that they have decided to still offer a bit of free content to their Facebook fans, but I wonder how requiring the user to leave their Facebook page will impact viewership. If the video was embedded right there specifically for fans of their official page, their level of fan engagement on Facebook would jump, but would they maybe miss out on some new MLB.tv subscribers.

In honor of today being opening day for MLB (and with the Yankees/Tigers game on in the background), I wanted to share one of my favorite local sports sponsor commercials. Watch this Avis ad that runs in the New York market on the YES network:

www.youtube.com/watch?v=pOnoJVJZDSw

Avis is a national brand that has sponsorships with many sports organizations, so they could easily stick to their overall brand message in their Yankees in-broadcast commercials. However, that would not maximize the value of their sponsorship. They recognized that connecting with a fun, local tradition in Yankee Stadium while simultaneously poking a little fun at Boston will let their advertisement resonate more with the local viewership.

In addition, on their closing screen, they feature the statement, “Not Just Corporate Sponsors. Fans.” This seals in the notion that Avis really knows what it means to be a Yankees fan. This helps break down the barrier that can exist between a standard corporate message and the fans that the sponsor is trying to reach.

Avis has several of these ads, which you can find on YouTube, and I’m sure other local sponsors in different markets use similar tactics. If you have a particular example that you really like, share the link in the comments. Thanks!

I normally don’t post job openings here, but Robert Campbell, the Digital Media Coordinator for the Cleveland Indians, sent me an email about new openings with their organization that I feel are worth sharing, especially for those of you looking for great entry-level opportunities.

The Indians have three “Executive Development Fellowship” openings, one each in marketing, business analytics and finance/accounting. Here’s a quick overview from the job descriptions:

“The EDF will be exposed to all facets of the Indians business operations during this intensive, structured 12-month immersion into the organization. The EDF will participate in comprehensive orientation program, regular feedback meetings and take part in a cross-functional mentorship program to facilitate enhanced organizational and career development. The outcome of this work will assist with current and future strategies and practices.”

According to Rob, “The Executive Development Fellowship program was created by Indians President Mark Shapiro and he is very active in contributing to each fellow’s growth as well as providing feedback and opportunities. For example, as a fellow last year I received the latitude to manage all social media communication for the organization as well as the entire PR and marketing campaign for Indians Snow Days.” His experience as a fellow has led to his full-time position with the organization.

People often ask me how they can gain experience working with a professional team, and positions like this are easily one of the best ways you can do that. Not many organizations have “rotational” style positions that can provide a wide range of experience in just one year, which makes these types of openings so valuable. For more information, visit the Cleveland Indians Job Opportunities webpage here, and click on the “View job postings” button. Good luck!

Update: As of 1:30PM (about 3-4 hours after this post went up), the MLB YouTube page has been fixed so that the error does not appear. I do not know if the mistake came from MLBAM or YouTube. In general I hope that MLB continues to use this channel and increases the amount of digital content released outside of MLBAM managed websites.

Normally I don’t like highlighting anything negative on this site. My preference is to share best practices and success stories that others can take and apply to their own organizations. However, I saw something this morning that I need to share.

Most of you probably know about how all of MLB’s digital content is managing through MLBAM, and as such, you won’t find videos involving MLB content on YouTube or other video sharing sites. Whether you agree or disagree with their position on this is a topic for another time. However, one small exception to this is MLB’s official YouTube channel (youtube.com/MLB).  There are only eight videos up there right now, but it’s a start.

Well, this morning I went back to their official YouTube channel and saw this…

If you can’t read the text, it says “This video contains content from MLB Advanced Media, who has blocked it in your country on copyright grounds.” So if I understand this correctly, MLBAM is blocking a U.S. resident from watching MLB video content on the official MLB YouTube channel. I really hope this is just a temporary mistake. Otherwise, is there really a point to having an MLB YouTube page at all?

A few weeks back, I noticed that Kristi Dosh (@SportsBizMiss) was tweeting a bit about what sports leagues are the “healthiest.” This was in response to some comments from others saying that MLB was in trouble, to which she vehemently disagreed. This seemed like a great topic to discuss for all four of the major U.S. sports leagues, and who better to discuss them with than Kristi herself (you can learn more about Kristi at www.KristiDosh.com).

For each league, we’re going to use the following five criteria to determine an overall grade:

• Labor Stability
• Financial Success
• Media Coverage
• Fan Affinity
• Competitive Balance

Russell: First off, I want to thank you for participating and sharing your thoughts on this topic. I really appreciate it.  Let’s start with MLB, which I know you’re particularly passionate about.  I have to say that ever since the 1995 season, I’ve been very impressed with the relationship between the league and the players association, at least when it comes to keeping the product on the field (I’m going to put aside their roles in PED usage for now).  They’ve bested themselves year over year when it comes to total revenue generated, and I believe their attendance numbers have stayed fairly strong in spite of the economy.

To me, the biggest challenge to be in grading MLB comes from the tremendous impact of the local market on media exposure, revenue and team performance.  Revenue sharing has helped, but as we learned earlier this year, some teams don’t apply their share of the pie to improving the team, and that impact on competitive balance hurts the league as a whole.

With all that said, my initial inclination is to give MLB a solid B.

Kristi: I agree with you on the great working relationship we’ve seen between the league and the players association since the strike.  Not only have they reached new collective bargaining agreements without the threat of another work stoppage, they’ve done it without going to the media to make threats and grandiose statements (which is more than I can say for the other three leagues).  For that reason, I recently wrote they are the healthiest of the four major professional sports leagues.  While the other three leagues take to the media to throw around accusations and demands, MLB will quietly come to a new agreement following the 2010 season.

You’re right about the growth of revenue sharing, and I think we’ll see some modifications made to the provisions in this next agreement.  Overall, however, I think the model is working in terms of the amount of money being moved around between teams.  MLB now moves upwards of $400m a year between teams, which is massive compared to the NBA, which barely moves around $50m a year.  I’m not sure any major tweaks need to be made to the formula for revenue sharing, but the leaked financial statements we all saw a few months ago prove that there need to be rules regarding the use of funds, or some sort of consideration given to how teams use funds to improve on the field performance.  It could even be modified to take into account how well the team is run.  For example, the NBA’s formula takes into consideration certain market performance standards, such as the value of the team’s media deal in relation to its market size and the value of sponsorships in relation to the size of the corporate base in the market.  The bottom line is that revenue sharing is going to need a little bit of a face-lift this time around, but there’s no reason to believe that won’t happen since the revenue sharing provisions have been modified with each new collective bargaining agreement.

The real coup for MLB is MLB Advanced Media.  MLB is head and shoulders above the other leagues when it comes to their media content.  No numbers have been released since 2007, but MLBAM grew from $36m in revenue in 2001 to $450m in revenue in 2007.  MLBAM not only manages MLB.com content, including live game packages, it also manages content for the NCAA and tennis’ French Open.

The last thing I thought about in terms of health of the league as a whole was attendance.  MLB got some negative press for decreased attendance in 2009, but I believe it was deceptive.  Attendance was down 6% in 2009, but it was the fifth highest attendance in MLB history.  When you take into consideration that 2008 was the second highest ever, and the fact that smaller stadiums for the Yankees and Mets opened and accounted for nearly 30% of the decline, MLB had nothing to be ashamed of in terms of attendance.  The season that just ended saw only a 0.42% decline, which isn’t really disappointing considering the economy.

I would give MLB an A-.

Russell: Great thoughts. I think the amount of revenue sharing shows both MLB’s strength and weakness. The teams willingness to agree to this system that supports teams in smaller markets shows a deep commitment to health and sustainability of all teams. However, the size of the revenue number shows how skewed those numbers are across the different markets, much more so then the other three major U.S. leagues. Unless specific structures are put in place to make sure that money goes back into the game, it’s too easy for small market teams to take the profit and run. And with such differences in local media revenue between small and large market teams, I can’t see that revenue sharing number dropping without other significant changes in league structure.

MLBAM is also a very valuable asset, but has its own set of limitations. One of the grading criteria was fan affinity, and some of MLBAM’s control measures when it comes to sharing and distribution of content can be frustrating for fans, and in my opinion, hinders their ability to engage with fans. My hope is that they will eventually find a better balance between ownership of content and shared distribution through non-MLBAM channels to stay better connected with younger audiences.

I completely agree with your take on their attendance numbers. With the current economic landscape, I was actually very impressed with how MLB has maintained their level of attendance the past couple of seasons.

The only other potential “problem” I wanted to bring up was with television ratings, specifically the World Series. This year’s ratings could be a sign of baseball fans being too fragmented across markets. Without the presence of a major market playing for the title, too many sports fans just didn’t tune in. I know that the time adjustment for this year’s games and the conflict between Fox and Cablevision also contributed to the low ratings, but I hope baseball hasn’t become too dependent on the success of major-market teams like the Yankees and Red Sox.

While I see why you’re giving them an A-, I don’t think I can go any higher than a B+ at best.

It was reported earlier this week that Barry Bonds wants to come back as a hitting coach for a MLB team.  Bonds is probably still the most controversial figure when it comes to performance enhancing drugs in the modern baseball era (you can also make an arguments for Roger Clemens).  I’m sure he’s somewhat inspired by Mark McGwire’s recent return to baseball, which has to be viewed as somewhat of a PR and media success.

This story reminded me of one of the earliest posts I wrote for this site, back in August of 2008 when Bonds was still looking to sign with a pro team (To Bonds, Or Not To Bonds). Several friends of mine in Arizona were arguing back and forth over why a team like the Diamondbacks should or shouldn’t sign him. Ultimately, it came down to some short-term positives (on-field performance, and revenue associated with improved results) vs. the long-term team culture, PR and fan relationship negatives.

Fast forward two years, and the same arguments exist today. Why would a team risk long-term brand damage by associating themselves with Bonds? Even the San Francisco Giants’ recent decision to have Bonds throw out a first pitch was seen by some as controversial, and that is about as inconsequential a role that someone can have with a team. You also have to wonder a bit about the timing of his comments. The Giants are back in the World Series, which is wonderful for the city of San Francisco. Why not let the current team get the headlines and wait until after the Series to try and grab the attention?

Another way to look at this is to see what has changed in the three years since Bonds left baseball. I think the simple answer is, almost nothing. He expressed interest in playing in 2008, and even in 2009 I believe, without any teams showing an actual interest in signing him, clearly not a good sign. There is still the pending perjury trial, which will only bring back negative attention. During this time, he could have attempted to generate some positive PR through social media and community outreach, but for all intent purposes, he’s mostly just stayed out of sight.

Let’s compare this to the time between Mark McGwire’s retirement and his return as a coach.  First off, there were more seasons in-between, which can only help – there is a reason why “time heals all wounds” is a cliche.  Also, McGwire became eligible for the Hall of Fame, but received less than 25% of the vote each of the four years he was eligible. In an odd way, this can actually create some sympathy for him, since he may well never reach the Hall in spite of his tremendous statistics. Finally, the biggest difference is that McGwire admitted his steroid usage. From what we’ve seen, fans seem quite willing to forgive those that have made mistakes, but continue to harbor resentment towards those athletes that appear to have used PEDs but still publicly deny it.

I’d like to say that if Bonds came clean about PED usage, then a major league team would be willing to take a chance on him as a coach, the way the Cardinals took a chance bringing back McGwire. But in his case, with the cloud of  criminal charges and a history of insistent denial, it may be too much for him to overcome. Bonds needs to start from the ground up in rebuilding his image and reputation, and maybe a position with a minor league or independent league team could be the right path for him. A smaller team may be willing to take on that risk.

Major League Baseball’s 2010 Fall Classic starts on Wednesday night, when the San Francisco Giants host the Texas Rangers. You can catch all of the games on Fox…unless, of course, you are a Cablevision subscriber. In that case, you’ll have to find a friend or local bar with an alternative TV package (DirecTV, Verizon FiOS, etc.)…or pick up a pair of rabbit ears.

The standoff between Cablevision and News Corp has been going for more than a week now, and it does not appear that there’s a quick end in sight. In total, Cablevision has just over 3 million subscribers throughout the NY, NJ, PA and CT areas, making them the top television service provider in that region. So it’s pretty significant when an audience of that size ends up having the World Series essentially “blacked out.” I can’t imagine any of the parties involved (Fox, Cablevision and even MLB) are particularly happy about this result.

However, how much bigger would this story be if either the Philadelphia Phillies or the New York Yankees had made it to the World Series? Now instead of worrying about the casual sports fans getting tuned out, you’d be looking at a large part of the team’s home market being denied the chance to watch the games. What impact would that have had on the negotiation between News Corp and Cablevision? I asked that question on Twitter, and Michele Steele from Bloomberg Television replied back: “3 sep analysts say yanks in the WS wouldn’t have mattered; blacking out the national pastime is a big deal irrespective of teams.”

While I do agree that losing access to the World Series is quite important even with the Rangers and Giants involved, I have to believe that the negotiations would have taking a more aggressive path if the Yankees were playing. The impact on ratings and revenue that comes with a NY market team’s presence would be significant, not to mention the long-term, negative impact it would have on local sports fans, which are a very passionate, loyal audience. In fact, if the Yankees were playing and the standoff did not end, the biggest winners in this situation would probably have been DirecTV and Verizon FiOS, as it could have led to a large spike in new subscribers desperate to watch the games.

What effect do you think the lack of local market teams making the World Series had on these negotiations? What do you think would have happened if the Yankees or Phillies were still playing?

The Tampa Bay Rays have been in the news for two reasons this week: for clinching a playoff spot and for players complaining about low attendance. Specifically, Evan Longoria and David Price commented on how “disheartening” it is to play in front of such a small crowd when they are playing for a playoff spot.  Longoria said “…for us to play good baseball for three years now, and for us to be in a spot to clinch again and go to the playoffs, we’re all confused as to why it’s only 15,000 to 20,000 in the building.”

Rays management decided to respond to the players’ concerns by giving away 20,000 tickets for Wednesday’s (tonight’s) game, with the hope of creating a great atmosphere in the stadium before the playoff begin.  You can read the details on this promotion on tampabay.com.  I have a few thoughts on both halves to this story.

Let’s start with the players’ statements regarding the low attendance. My former classmate Eric pointed out that this is a potentially risky position for the players to take in “calling out” the team’s fans.  On the most basic level, the attendance for a baseball game is based on supply and demand, and over the past years, I think we’ve seen that the demand for regular season baseball games in this market isn’t there, at least not on a level that would fill Tropicana Field.  Outside of the physical venue itself (which I understand that people are not very fond of), the team has done pretty much all they can to increase demand. They clearly have a great on-field product, they offer tickets at all different price levels for a wide range of buyers, and they actively promote the team in the marketplace (marketing, PR, media, etc.).  With their current situation in that stadium and with all the alternatives that their have when it comes to time and money, the team may simply have reached their economic equilibrium.

With that in mind, the players’ decision to comment on the low attendance has little chance of actually increasing ticket sales. In fact, there’s a chance that their comments could actually hurt fans that do choose to watch on television but for some reason choice not to purchase tickets. These fans are still very important and should not be discouraged.

As for the team’s ticket giveaway, there are definite good and bad points about it.  On the positive side, it shows that the team cares about the players’ opinion and are willing to take action.  The giveaway has the chance of getting some fans in the building that typically choose not to buy tickets, and if they have a good experience, it could lead to future sales and increased attendance.  It can also be a positive PR move in the Tampa community.

On the negative side, openly giving away large numbers of tickets devalues the product that other customers have paid for, especially your season ticket holders.  The team is trying to account for this the best they can, by only giving tickets in certain sections and allowing paying customers to upgrade their seats at no cost, but you still create a divide between those that had to pay and those that didn’t. In addition, the team decided to hand out the tickets at the stadium starting at 4:45PM instead of allowing for an online redemption process.  There is a big trade-off here. With this method, their redemption rate will by close to 100% for however many tickets are distributed. However, in trying to distribute 20,000 tickets in roughly 2 hours, I can’t imagine that they’ll be able to collect contact information on these fans, which can be a lost opportunity for future sales and marketing efforts.

It will be interesting to see how many tickets they end up giving away tonight.  I wish the team a lot of luck with their offer and their future ticket sales!

A constant challenge that faces teams and venue owners is how to generate revenue from your building once your season has passed. The company has this valuable entertainment asset, but without events to host, it can sit dormant for weeks or even months at a time (outside of the occasional stadium tours, which can provide a small incremental revenue bump).  This isn’t as much of a problem for indoor arenas and weather-independent (i.e. domed) buildings, where you can always bring in concerts, family shows and other traveling entertainment groups. But what about a baseball stadium in the middle of winter? What can you do with that?

Well, the Indians have decided to take a very creative approach to this dilemma with their “Indians Snow Days” program. They are literally turning Progressive Field into a winter theme park. According to today’s news release, they will have a snow-tubing hill, a quarter-mile ice skating track, a kids’ skating rink, a snow play area, and a fire-pit area featuring seasonal food and drink options – a veritable winter wonderland on a baseball field. Their “snowpening day” is November 26, and it will be open through at least January 2.

From Bob DiBiasio, the Indians’ VP of Public Relations:

“No question, this whole thing is based on how can we make ultimate use of this facility for 12 months, not just six months. We’ve done that indoors. Now, we’re taking one more major step outdoors.”

Now this particular strategy won’t work for all teams and venues, but this is still a great example of an organization coming up with creative ways to make their facility a year-round, revenue-generating, fan-friendly destination.

The leaking of multiple MLB team financial documents to Deadspin this week has been a big story in the industry. In case you haven’t seen it yet, here are some quick links to catch up to speed:

• Deadspin Part 1 – Financial statements from the Pittsburgh Pirates, Tampa Bay Rays, Florida Marlins and Los Angeles Angels
• Deadspin Part 2 – Financial statements from the Seattle Mariners
• Deadspin Part 3 – Financial statements from the Texas Rangers
• Darren Rovell’s post – “Why MLB Financial Leak Matters”
• Analysis from Maury Brown at BizOfBaseball.com

I wish I had time right now to dig into the details of the statements (brush off those MBA accounting and finance brain cells), but Maury Brown is doing an excellent job of that over on BizOfBaseball.com. I highly suggest reading up on the multiple posts he’s written (and is continuing to write) over there.

My quick focus in this post is on the choice to run a successful business vs. running a successful team. One of the biggest takeaways from these leaks is demonstrating how a small market team that is not very competitive (yes, I’m talking about the Pirates) can be very successful financially without creating a quality product because of the revenue sharing money provided by teams that are spending money and resources to provide a top-tier baseball team. From a purely business perspective, there isn’t anything actually wrong with this. The team owners have a business to run and are entitled to generate a profit for their work. They have identified a system that works for them and does not violate any agreements that the team has with Major League Baseball. Any customers/fans that have a problem with this approach can demonstrate their displeasure by simply ending their relationship with the team (stop buying tickets or merchandise, stop watching games on TV, etc.). However, if this doesn’t significantly alter the team’s current revenue streams (the majority of which are league-generated), it might not change anything.

The biggest problem with this approach is that there are making their business overdependent on a source of revenue that could change. One of the red flags I was taught to look for when analyzing a company’s financial well-being was generating revenue from a single item or service. If anything in the business environment changes that impacts the company’s ability to show a profit via that single item or service, their entire business model can collapse.  While the Pirates do generate revenue via multiple channels, you can argue that their profitability is very dependent on the current revenue sharing model. In light of these leaks, if MLB changes the “business environment” surrounding revenue sharing in a future CBA, the Pirates and other small-market teams that aren’t successful “on-the-field” could easily be in trouble.

The question now is, will anything change because of these leaks? Will MLB want to add a salary floor (a minimum amount of money a team has to spend on player salaries)? Will higher-revenue teams make a push to adjust the revenue sharing system, knowing that their funds could be going into other owners’ pockets instead of supporting the best interests of the game itself? Will fans stop supporting a team that they know isn’t spending money to create a successful on-field product? These documents definitely open up a lot of possibilities.

Today’s post is courtesy of Brian Gainor, Founding Editor of PartnershipActivation.com. This article was featured in the July 2010 Partnership Activation monthly newsletter. I highly encourage everyone to sign up for it – always a great source of sponsorship news and marketing best practices.

Are You Providing Truly Exclusive Experiences for Fans?

Miller Lite and the Tampa Bay Rays recently teamed up to execute a “Ray for a Day” promotion that truly offered one (1) lucky winner the ultimate Rays game day experience. Miller Lite called on agent Drew Rosenhaus to host the winner, Andrew Marante, and represent him in negotiations with Rays SVP Mark Fernandez, President Matt Silverman, and GM Andrew Friedman that officially made him a “Ray for a Day”.

Following the negotiations and official press conference, Marante was presented with a collection of prizes, which included a one-year supply of Miller Lite, a one-day rookie salary, an authentic, customized Rays jersey and hat, (4) pre-game field passes to watch batting practice, (4) game tickets in Row 1 – directly behind the Rays dugout, an on-field meet & greet with Rays Manager Joe Maddon, a box of authentic Miller Lite-branded Rawlings baseballs, a Miller Lite/Rays neon sign, a Miller Lite beer fridge, a commemorative press release issued by the Rays, and the opportunity to throw out the first pitch prior to the game.

The promotion, managed by GMR Marketing from ideation to execution, was picked up by a host of media outlets and the Rays organization featured a (1) minute clip of the press conference on the jumbotron during pre-game warm-ups and at the bottom of the 4th inning.

Miller Lite leveraged relationships with several retail partners (Publix, Total Wine and More, Buffalo Wild Wings, Winn-Dixie, ABC Liquor, Hess, and Beef O’Brady’s) to execute the Ray for a Day sweepstakes, which tasked consumers ages 21+ with filling out entry forms between May 1– June 6 for a chance to win.

Editor’s Note: This type of ultimate fan experience provides the best level of exposure and activation for a team sponsor. This particular program was able to combine point-of-sale messaging, customer data collection, prime in-venue activation and media exposure, not to mention providing this lucky Rays fan the experience of his life. Great job between the team, agency and sponsor in executing all of the elements involved in this promotion.  ~RS

In light of the “Non-Perfect Game” controversy from last night’s Detroit Tigers game (game recap here), I went back to the vault for this post on technology and instant replay that I wrote last November. I felt strongly about increasing the use of replay then, and it will be interesting to see if the fans’ reaction to last night’s events leads to any new action by MLB. I know that fans will continue to disagree about whether replay is “good for the game”, but how do you think those 17,000+ fans feel about being denied their chance to witness history? How does this impact their decision to attend future games? What about the fans that watched on television? Is their fan experience “good for the game?”

Putting aside the fan elements, my post below primarily focuses on how the business of sports really needs to be the influencing factor in how leagues increase their use of replay and technology in general.

—————

Normally, I don’t like talking about events that take place on the field, but today I’m going to make an exception. On Wednesday night, a World Cup qualifying soccer match was decided by one person who made a mistake that was easily identifiable by a simple video replay. However, because the sport was dependent on an archaic system of in-game governance that was developed decades if not centuries ago, the result of the game and any number of future events has been permanently altered.

This same situation has happened in multiple major sporting events over the past few months, including several prominent errors in the MLB playoffs, but for the most part, the governing bodies for these organizations prefer to stand by and depend on their “traditional” means for making all in-game decisions. This system may have made sense was professional sports was more of a casual pastime, but now it is a multi-billion dollar global industry, and each one of these incorrect decisions can have serious repercussions. A team that misses the next round of playoffs because of a bad call loses out on millions in ticket revenue. A player that is invalidly judged by an official’s decision can lose the chance at significant endorsement money. An entire league can suffer (or benefit) because of an officiating decision that impacts what teams are playing and the television ratings that come with those teams.

Meanwhile, sports organizations have embraced technology in almost every other form, from evaluating the players statistically to refining their business processes. Clearly everyone recognizes the importance of technology as sports have evolved, but yet for some reason, they refuse to let the technology onto the field in the form of instant replay. Would any other industry operate in this manner? Can you imagine if Walmart decided that they needed to use a more “traditional” way to run their checkout lines and made the staff type in each number, because “that’s how they’ve always done it.” The errors that would occur would ultimately have a significant impact on their business, ruining their other technological advantages that they’ve developed in their inventory management processes.

I understand that trying to add instant replay into sports is a complicated process with many potential pitfalls. This is why I give a lot of credit to the NFL for their work in this area. They acknowledged the problem, created a replay system, and constantly work to refine it based on the needs of the sport. I would hope that more sports, like soccer and baseball for example, eventually decide to follow the NFL’s lead and develop their own comparable systems. Putting aside the game for a moment, there is simply too much money riding on what happens on the field for everyone to overlook these issues.

After reading about Dallas Braden’s perfect game, which was also the 2nd no-hitter in Major League Baseball this year, I realized that this type of accomplishment could easily be associated with a sponsor in a positive way for the sponsor, the sport and the player involved. Think about it for a moment – we already have presenting/naming sponsors for several major awards (NBA MVP presented by Kia, the Rolaids Relief Man of the Year, etc.), but there are so many great individual accomplishments beyond awards that brands would benefit from associating with. Here are a few quick examples that I thought of:

• Baseball:  N0-hitters, hitting for the cycle, triple plays
• Basketball:  Triple-doubles, 40/50 point games
• Hockey:  Hat tricks
• Football:  Kickoff return TDs, 200 yards rushing/receiving, perfect passer rating

I think my baseball examples probably work the best for this idea. I know some people may feel that this tarnishes the purity of the game, but sponsors have been such a present part of the game for so long now, I believe that argument has lost it’s merit. Take Braden’s performance yesterday – how damaging would it be for the media broadcast to congratulate Braden on behalf of a premium brand like Lexus. Then in his next game, Lexus could present him with a brand new car to congratulate him for his “perfection”, an idea that Lexus would happily associate with their brand. Or at the end of the season, there could be a special event or ceremony hosted by Lexus to recognize all players that achieved the accomplishment. The sponsorship would be at a league level, and trickle down to all the teams. Since these events are rare, I’m sure other elements could be incorporated to provide more value in both directions.

So what do you think of my idea?

The folks over at The Goldklang Group have been running a marketing campaign called “Be Your Own Fan” across the four professional baseball organizations that they represent. To support that initiative, they’ve created a great website called “Be Your Own Fan TV” (byoftv.com). Every two weeks, they release a new video that provides an inside look at a different element of sports business. So far, they’ve produced seven videos that cover topics such as reporting, television production, public relations, baseball operations and more.

I’ve included two of their recent videos here to give you all a preview. They do an excellent job in creating both entertaining and informative content. You can visit their website, byoftv.com, to view additional episodes.

First off, I need to congratulate the New York Yankees on their 27th World Series championship (I will admit, I am a Yankees fan, but I always try to keep my views here neutral and unbiased). Anyway, with their victory, I was thinking about what type of economic impact there will be from their 27th title. Then low-and-behold, I see this video on my daily Wall Street Journal email:

Now in all seriousness, this “statistic” about a 5% growth in GDP during the year after a Yankees victory is just a correlation. And as any statistician will tell you, a correlation does not tell you anything about causation (another famous example of this is the statistical correlation between the results of the final Washington Redskins game of the year and the U.S. presidential election). Thus, even if this growth has been seen in the past after Yankees’ championships, there’s no evidence to say the victory itself has a direct impact on economic improvement.

This isn’t to say there will not be some impact from the victory – it just won’t be on the scale of the national GDP. Here are some results that you can expect to see:

• Merchandise Sales: The Yankees are still the most prominent and popular brand in baseball, and New York is the largest market in the country. Combine this with nearly a decade between titles, and you can probably expect the largest World Series merchandise sales numbers since the first Boston Red Sox title in 2004.
• 2010 Ticket Sales and Prices: The Yankees had to overcome some bad publicity and poor initial sales with their original premium seat ticket prices, leading to an early-season price cut. Even with this victory, I’d be surprised to see anything beyond a basic 3-5% annual increase to the adjusted prices, and in turn, I think the team will see a nice uptick in these premium locations next year (especially if the economy does improve by 5%!)
• Postseason Secondary Market: The secondary market started off a little slow this postseason, with several weather-related issues keeping prices on the low side. However, having the World Series in New York and Philadelphia ended up being a big boon to StubHub and other ticket resellers, with tickets being sold for 5x to 20x the face value. In fact, since less tickets were available for resale in Philadelphia than New York, prices for games 3-5 were driven even higher than games 1-2.
• Team Spending: After a few years of “relative” struggle, the Yankees have proven that a large payroll can lead to the title. Will other teams try to up the ante next year to compete with the Yankees? Baseball experts have written that this year’s free agent list is one of the weakest in a while. In addition, the Yankees themselves have a few key players that could test the market. If the economy really is on the upswing, maybe team payroll could increase again next year.

Again, congratulations to the Yankees. I already can’t wait for the 2010 season to get here!

Update: I also just saw this article on Bloomberg.com that reports the Yankees postseason run generated almost $60 million of economic impact for the city of New York, primarily based on increased spending at local business by out-of-town residents.

I think most people have probably seen this already, but just in case, I’m going to share it here as well. Macy’s made a little mistake with an advertisement they ran in Monday’s Philadelphia Enquirer. Take a look (thanks to the AZCentral.com FanBoy Blog for the photo).

In case you weren’t following baseball, the Phillies are currently down three games to two in the World Series, and in fact, they were down 3-1 when this ad actually ran. While I like the idea of having confidence in your team, I think this is taking it a bit too far. The newspaper has since apologized for running the ad. In situations like this, I’m a big proponent of trying to turn a mistake into a gain, so maybe Macy’s can offer a special discount on other Phillies merchandise for anyone that brings in a copy of the unfortunate advertisement. They could gain some goodwill for the mistake and generate some new sales. Do you think this would work?

According to Sports Business Journal, the New York Yankees will become the first team in professional sports to offer streaming video coverage of their games online in their local market.  This is part of an agreement between the YES Network and Cablevision (the service will only be available to Cablevision customers for an additional fee). 

MLB has had a lot of success with streaming their games online via MLB.TV, and their model was copied by the NHL this season.  However, because of regional media contracts, these services cannot show local games online (both services use the viewer’s source IP address to black out anyone that should be able to watch the game via local television). 

Most local media outlets have resisted the idea of making their video content available online as it provides direct competition for their television broadcast.  However, with more and more consumers choosing to consume video content online, it was just a matter of time before someone decided to make this plunge.  Ultimately, with the large variety of sports content options both on television and online, the most important this is making your content available to as large an audience as possible, rather than trying to force your audience to use a specific channel.  YES and Cablevision will still be able to generate significant advertising revenue through this new option, which should more than make up for any loss in value (if any) that this causes to their television advertising revenue.  It will not be long before other teams in baseball and other sports pursue similar options.

It looks like even New York isn’t immune to the current economy.  News came out yesterday that the Yankees have decided to cut the prices of their premium field-level seats (New York Times, 4/28/09).  Front row tickets that had cost $2,500 each have been cut in half to $1,250, and tickets along the first and third base lines have been cut from $1,000 to $650.  Anyone who had paid full price previously will be compensated with free tickets to future games, and additional complimentary tickets are being distributed to premium season and partial plan ticket holders.

In the days leading up to this decision, there had been some heated comments going back and forth between Don Garber, the Commissioner of MLS, and Randy Levine, the Yankees team president.  Garber criticized the Yankees for having so many empty seats behind home plate, which did not look particularly good on television.  Initially the team defended their pricing, but after reevaluating they admitted that some seats “might be overpriced.”  Even with cutting these prices in half, the Yankees will still have far and away the most expensive ticket prices in baseball, and they’ll still be the league leader in ticket revenue.

I’d be curious to know what type of price sensitivity analysis the Yankees did before setting their new stadium prices. I’d have the same question for all New York teams that are opening new facilities and substantially raising their prices. A lot of teams still set their ticket prices by feel, which cannot be a very effective method.  If the team’s did run some sensitivity analysis, when did they do it?  The Yankees and the other New York teams announced their price increases quite a while ago, before we knew the extent of the current recession.  If they do the same analysis today, their results would no doubt be quite different.  Some type of advanced dynamic pricing models might help the teams handle this type of situation more efficiently.

In case you haven’t heard already, the Washington Nationals made some news the other day because a couple of their players were wearing jerseys that said “Natinals” instead of “Nationals” – see the picture on Adam Dunn on the right.  While this story is a little embarrassing for the franchise and the jersey provider, there are two ways the team can respond:

1.  They can try to find someone to blame (an employee or the jersey manufacturer) and then do their best to pretend the incident never happened, or…

2.  They can embrace the mistake and use it to their advantage!

How can they do this?  Here are some simple ideas that could turn a mistake into an opportunity:

• Auction the misspelled jerseys for charity and have the team match the money raised with a donation of their own.  Because of the rarity of this incident and the public exposure, these jerseys could sell for a nice price, and the charity aspect provides wonderful PR.
• Hold a “Bad Spelling Day” promotional day, complete with other players wearing misspelled jerseys, games on the video boards and unique prizes.
• Along the lines of the NHL Winter Classic contest to find the missing Reebok logo, have a contest where fans need to identify the jersey that is missing part of the logo, a letter, etc, and then have them enter an online contest.
• Create a funny viral video with players from the Nationals participating in a spelling bee.  This video would be sure to get a lot of buzz online and shows that the team has a sense of humor.

The basic idea is to put a positive spin on mistakes when they happen.  Anything is an opportunity if you look at it in the right light!

We are about 6 days away from the start of the 2009 MLB season.  Last year was a great year for Major League Baseball, with the league setting records for attendance and revenue.  But the economic landscape has changed a lot over the past few months, so I don’t think anyone expects to see a new record this year.  Regardless, here are some stories that I want to watch closely this year.

• MLB’s use of social media: Other sports have seen a large spike in league, team and player usage of social media tools, particularly a recent Twitter craze.  MLB is traditionally very conservative and controlling regarding their digital content, which does not mesh well with the concepts behind social media.  I’d like to see MLB and MLBAM adjust their position in this area this year, but I don’t know if that would actually happen.
• New York stadiums: There are many things to watch here.  There’s all the publicity (and revenue) that the new ballparks generate. There are still potential naming rights issues with Citi Field. There are the skyrocketing ticket prices with fewer people willing to buy tickets, both season and single-game.  And all these stories are magnified because they are in New York.
• League-wide attendance: Coming off the success of last year, will people spend money to come out to the games this season? MLB is the first top-4 U.S. league to start a new season in this recession, so everyone is watching to see the impact at the gate.
• High-profile contracts: This off-season featured high-priced and high-publicity contracts for C.C. Sabathia, Mark Teixeira, Ryan Howard and Manny Ramirez. Meanwhile, other teams are trying to trim payrolls, expecting a drop in revenue this year. Will these players produce enough to justify their hefty paychecks, or will the teams regret their big spends?
• MLB Network: The network had the most successful launch of any sports-related network in terms of the initial number of homes carrying the channel. But the other league-backed channels have had some early struggles to gain adoption and viewers. Can the MLB Network carry the momentum from their launch over the course of the year?
• Television ratings: Beyond the MLB Network, sports ratings have continued to trend downward over the past 2-3 years, and last year’s World Series had some fairly low ratings, which hurts advertising revenue. Can the ratings rebound this year, on both a regional and national level?
• Alex Rodriguez and steroids: We cannot forget the continuing storyline regarding performance enhancing drugs, which got even bigger with the A-Rod news this spring. Will other names from the list of 104 get released? When Rodriguez comes back from his injury, can he perform under the additional scrutiny and repair his image? MLB desperately wants this story to go away, but it keeps coming back.

This is a big year for Major League Baseball, and I’m sure there are many storylines that I’ve missed. What stories are you most interested in following this year?

Here are my quick picks for this week, “Commercials Edition”:

Baseball: The latest ESPN advertisement for the World Baseball Classic:

This isn’t actually the version of the commercial I was hoping to find.  There is another one that includes Jeter, Ichiro, and Rodriguez, where Jeter says he’s played for world champions, Ichiro says he’s played for the WBC champions, and Rodriguez says he’s played for “division winners.”  The commercial seemed odd that it almost highlighted A-Rod’s lack of a championship compared to the other two.  Also, with his latest controversies, the Dominican Republic’s impressive roster and the fact that A-Rod played for the U.S. last year, I wonder if they could have picked a different player to be in his spot.

Golf:  The latest Nike advertisement with Tiger Woods:

The thing that impressed me with this spot is the willingness for the other golfers to openly admit they play second fiddle to Tiger now that he’s back.  I think this is a very funny and creative way to announce his return, and in a way, it still does highlight the success of some of the recent winners, which actually could help them build their names more in spite of Tiger’s return.  I’m sure the PGA was hoping that Tiger would last a little longer in the Accenture Match Play, but just getting him back out there was a huge lift.

Do you have a good “pick of the week?” Use the Contact Us link at the top of the page and send me your picks!

Clearly, the Alex Rodriguez steroids story is the biggest sports news story of the week.  Without dedicating too much time to the topic, I wanted to share a few quick thoughts:

• Rodriguez learned from Bonds’ and Clemens’ mistakes by confronting the situation directly and honestly.  This gives him the best chance at “redemption.”
• If they wanted to, Rodriguez and the members of the MLBPA have a massive potential lawsuit against the MLBPA for violating their privacy and breach of contract.  Those tests from 2003 were guaranteed to be private, and MLBPA completely dropped the ball by not destroying those results immediately after the season ended.  I doubt this will actually happen, as the results would be disastrous for the MLBPA.
• On that same note, Gene Orza’s career is (or should be) over.  The decision to not destroy the results falls squarely on his shoulders.  Even if his intentions were good (checking for false positives), the privacy and security of the players needed to be his top priority.
• The idea that only one name out of the 104 players was released is troubling. Rodriguez was singled out because of his success, while other equally guilty players get to pretend nothing happened.  This part of the story is not over, and since the government does have the complete list, I expect those names will eventually get out.
• Rodriguez has about $30 million in his contract tied to breaking MLB records, including the career home run record.  Some people, maybe even the Yankees, will question these results and financial incentives.  If I was in charge of his PR, I would have him promise to donate any of those bonuses to charity, specifically programs dedicated to steroid education in youth sports.

News was released today about a new partnership between the NHL and MLB.  Starting next week, fans of both leagues will now have the opportunity to purchase a combined membership to MLB.tv Premium and NHL GameCenter Live, the two streaming video products produced by each league.  The package will be available for purchase at both NHL.com and MLB.com, and will cost $139.95.  This is a very nice price for fans, considering the MLB product costs $109.95 and the NHL’s “Race for the Cup” video package costs $79. 

Along with their typical selection of regular season games, both products have added to their product packages.  MLB.tv will include over 100 spring training games and the first two rounds of the World Baseball Classic, while NHL GameCenter will include select playoff games.  This deal will probably be more beneficial for the NHL in improving adoption of their GameCenter product.  MLB.tv has been around for a few years now and is more well-known by sports consumers, while this is the first year for GameCenter Live.  

“We couldn’t be more excited about this tremendous opportunity to introduce our groundbreaking NHL Game Center LIVE experience to an even bigger audience,” said John Collins, COO for the NHL. “MLB.com has built a great business by engaging their audience with a best-in-breed product. This partnership is all about our mutual commitment to deliver world class digital sports experiences to sports fans everywhere.”

I don’t know what their expectations are in terms of total sales numbers, as I’m sure there are some questions about how much crossover there is between MLB and NHL fans.  But even if the numbers are small, any increase in NHL viewership by sports fans as a whole is a very positive thing.

It’s been a busy week in sports business, which is a little unexpected since things tend to die down a bit after the Super Bowl.  I’ve already written about the potential Ticketmaster/Live Nation merger, but here are some quick thoughts on other news items from the past few days:

- Michael Phelps:  So the golden one was caught on film with a bong, not exactly a good PR move.  If this was his first “offense,” then I think it would be less of a story, but he also had a DUI incident a couple of years back.  Some people are sticking by him, most notably the USOC and Speedo, while others like Kellogg are ending their relationship with Phelps.  USA Swimming is withholding their training money, which for some Olympic athletes would be significant, but this will have little impact on Phelps. 

To me, this story is pretty straight-forward.  Some brands are much more sensitive about any potential negative PR, so they will decide to stray away from Phelps.  He’ll still make plenty of money from other partnerships.  The best thing for him to do is simply stay out of the news for a while and concentrate on a strong performance in July’s world championships.  Nothing helps blow away bad PR like championship performances.

- Spurs Sit Their Stars:  Imagine being a Spurs fan living in Colorado, and buying tickets to see your team when they come to town to face the Nuggets.  The game starts without Duncan, Ginobli, Parker or Finley in the lineup.  No big deal at first, maybe Popovich is trying something out.  But then the quarter, half, and entire game ends without them ever stepping on the floor.  I know this was a strategic decision by the team, but those fans have to be ticked off.  This is an example of a unique conflict between the business side and the team side.  Since the game took place away from San Antonio, the implications are not as significant, but what if “Pop” wanted to do this at a home game against a weak opponent?  What do you tell your fans that expect to see the stars play?  I don’t have the answer to this, but it is an interesting dilemma. 

Also, a friend of mine asked me about the gambling implications of this event.  Think about how much money was wagered on this game in advance, and then the best players for one team just don’t play.  Clearly Popovich is a well-respected and ethical coach, so no one is questioning him along these lines  But imagine if this was a Pete Rose type of character making this decision.  Then what would you think?

- Who Needs $25M?  Apparently Manny doesn’t need it, or at least feels he’s worth more.  For the public, it is hard to imagine someone turning down $20-25 million per year in this economy.  I believe that Boras is overestimating what the teams are willing to commit to, considering the teams don’t know how the recession is really going to impact ticket sales and other revenue streams.  I would not be surprised for Manny to come back to the original two years, $45M offer that the Dodgers started with (or something close to it).  Boras has caved before when deadlines get close (Matsuzaka’s negotiation comes to mind).

- How About $18M?  Bud Selig might not hit like Manny, but he gets paid almost as well.  News came out about Bud’s salary from last year, which I don’t feel is inappropriate considering he’s the senior leader for a company that generated over $6 billion in revenue last year.  The unfortunate thing is the timing – it looks bad for MLB for this salary to come out when others are losing their jobs.  I think this story blows over pretty quickly, and maybe Bud could generate some good PR by donating a part of his salary next year to charity.  Maybe he could start a league-wide initiative that other owners and players could support.  That would make for some positive PR.

Jason Peck also has a good weekly recap on his sports business and social media blog.  His site is a great resource for social media content in sports.

Here is a email that I received first thing this morning.  The subject of the email was “Start Your Day with Better-For-You Choices.” 

The question is, who do you think sent me this email?  The logical response would be Dunkin’ Donuts, but even though I like their coffee, I have not subscribed to their email list.  Anyway, this email was not sent by Dunkin’ Donuts, and it wasn’t from some other mass-marketing list or spammer.  It was actually sent by a top-tier professional sports franchise, one that I did request emails from.  Any guesses? 

This email was sent by the New York Yankees, which is amazing because I do not see a single reference to the Yankees anywhere in this content, not even in the subject line.  The only things in the email that refer to the Yankees are the from-address (“From yankees.com”) and appropriately enough, the unsubscribe message at the bottom.

I know I’ve written in the past about the challenges of involving your sponsors in your email marketing.  My main point has been that the email needs to connect with the fan because of their relationship with your brand (team/league/etc) and deliver a sponsor message that builds off that connection.  This email here is borderline spam – in fact, this is damaging to the fan relationship because the primary action it will drive is opting-out.  The Yankees might have the ability to get away with things that other teams can’t, but abusing your customer database with an irrelevant sponsor-based, mass-marketing email is always a bad decision.

Lots of sports business news over the last week that I haven’t had a chance to comment on yet, so here it goes:

C.C. Sabathia signs with the Yankees for $161M – You can argue back and forth over whether the Yankees should spend so much on him, but there is little question that the Yankees are the only team who could afford to do this considering the economy.  However, I have one other take on this signing.

Everything that Sabathia said and did before signing pointed him away from New York – he wanted to hit, he wanted to live on the west coast, he liked small markets. Yet when the Yankees upped their offer from $140M to $161M, I wonder if Sabathia felt he had to accept on behalf of his fellow players. Traditionally, the first marquis free agent signing sets the market for the rest of the players that follow, especially since agents like to use comparable players and contract values to set their own demands. If he had left a significant amount of money on the table (as much as $40-60M if he stayed in Milwaukee), that could have significantly impacted what other players could earn this off-season. I almost wonder if the MLBPA encouraged him to accept the deal (I am completely hypothesizing – I have not seen any actual news to suggest this).

For the second year in a row, the Arizona Diamondbacks are running their “Season Ticket Scholarship Program.” I think this is one of the best initiatives that I’ve seen a professional franchise run. The basic premise is that any fans (usually previous season ticket holders) who are experiencing a financial hardship can apply for this “scholarship” by telling the club about their current situation and their love of the Diamondbacks.  Then the team will go back and select a few winners who will received completely free lower-level season tickets for the upcoming season (winners may also receive parking passes and/or concessions vouchers).  Fans can be nominated by a friend, or they can send self-nominations and include references.

Last season’s scholarship winners included:

• A family of seven that hit rough times financially and asked for two tickets to share among the entire family…the Diamondbacks gave them seven season tickets.
• An older married couple who were charter season ticket holders (since ’98), but whose medical bills had risen too much for them to afford season tickets anymore.
• A grandmother who raised two grandchildren on her own and who used baseball to help teach math to her grandchildren.
• The family of one the victims from Arizona’s 2006 “Serial Shooter.”

The Diamondbacks are one of those teams that is truly committed to their fans, and this program is the perfect example of that dedication.  Derrick Hall has done an incredible job since he was named team president a couple of seasons ago.  I pay close attention to the team to see what new fan-friendly initiatives they come up with each season, and I would suggest that others do the same.

I know a lot of my recent posts have been related to the economy, but there is no arguing that it’s a hot topic in sports right now.  How leagues and teams handle the economic issues today could have a significant long-term effect on their stability and financial performance down the road.  Because of that, Bud Seling and MLB invited Paul Volcker (former chairman of the Federal Reserve) to talk with MLB owners and executives this week (NYT, 11/20/08).

We would all presume that these wealthy owners know how to handle an economic downturn, but that might not be the case.  Team owners and execs have varying degrees of experience and knowledge about the national economy (some are self-made, some have “family money”, etc.) so this was a great idea from Selig.  As the New York Times articles points out, the timing is perfect since baseball is about to enter the free agency period, when some teams will throw around millions of dollars without always understanding the ramifications of those contracts.  We don’t know any of the details of Volcker’s talk, other than it wasn’t very optimistic.  If I was in that meeting, here would be some of my suggestions:

• Set a more restrictive personnel budget and stick to it.
• Do not spend more than 15% of your personnel budget on any one player.
• Avoid any contracts that are longer than four years, particularly to players over 30.
• Move towards incentive-laden contracts over guaranteed money wherever possible.
• Freeze or even drop ticket prices, particularly premium inventory where the market is the toughest right now.
• Keep marketing costs down by focusing more on alternative (social) media.
• Find new ways to leverage facilities (concerts, conventions, corporate events) to reduce the impact of these massive fixed costs.
• Consider looking for short-term (5-15 year) loans to help get through the next couple of seasons, especially in small-markets.  Teams should be able to obtain great rates because their large asset values.

What would your economic advice to MLB owners be?  Leave a comment!

Yesterday the Seattle Mariners named Don Wakamatsu as their new manager, the first Asian-American manager in MLB history.  This is a great story for MLB, as the league has really tried to enhance their international presence over the past few years.  The number of foreign-born players continues to increase, including from outside of North and Central America.  The World Baseball Classic was viewed as a big success and the next WBC is coming up in March.  The league also ran the China Series in Beijing this preseason and actually started the regular season in Japan.

MLB is not the only league making large strides in reaching an international audience.  The NHL started their regular season in Prague and Stockholm this year.  The NFL has had a regular season game in England each of the last two seasons.  The NBA had preseason games in China and Europe this year, and has an international department dedicated to developing the game and leagues in Europe and Asia.  I’m not even going to talk about soccer, which is the most international game of all (although I do believe that there were more international exhibitions with MLS teams this year than ever before).  Clearly the U.S. sports leagues have a global focus.  My question is, for which sport(s) does it make the most sense, and are the leagues doing it the right way?

I think that the NBA has the best international plans of four major leagues, at least at this point in time.  Their dedicated global offices have done a great job in promoting and developing the game internationally, and the increase in popularity has been tremendous.  We are not too far away from seeing NBA-managed leagues in other countries.   The NHL has more work to do, but they took a good first step this year with the Prague and Stockholm games.  The U.S. audience has not embraced hockey as much the last couple of seasons, but the game is very popular in Europe and Russia, so tapping into this audience is very important.  MLB has done a pretty good job with the first WBC, but there are still some kinks to work out logistically.  They also haven’t been able to really spread the game much beyond Asia and Central America. 

The NFL has probably done the worst job of the four, and the game just might not translate well internationally.  After all, every other country has their own game of “football.”  The regular season game in London is just a novelty at this point, and the NFL Europe was a complete failure.  The more interesting markets for the NFL to look at might be Mexico and Canada.  They had a great audience with their preseason game in Mexico City, and Canada has a long track record in football with the CFL. 

What do you think of the various international efforts the leagues have made recently?  Which sport has done the best/worst job?  What sport has the biggest needs internationally?  Let me know what you think in the comments, and please answer the poll question on the right.  Thanks!

Congratulations to the Philadelphia Phillies on winning the 2008 World Series.  Even after all the extra weather-induced drama, the team closed out the series at home in front of all their crazy fans.  Philadelphia is going to be crazy tonight – hopefully the arrest count won’t be too terrible.  The championship merchandise sales will be through the roof, maybe even the highest since the Red Sox in 2004.

We all know that last night’s horrendous weather caused the suspension of Game Five of the World Series.  The potential impact of this is tremendous, with many business implications:

• At the most basic level, the Rays get an extra inning or two of NOT facing Cole Hamels, who has been the most dominant pitcher this postseason.  There is a lot of advertising money riding on whether or not the series goes back to Tampa Bay for 1-2 more games, so avoiding Hamels could be the difference!
• Beyond advertising money, there is also the potential gain/loss of ticket, concessions, and merchandise revenue that is dependent on the Rays winning the suspended game.
• While the World Series doesn’t have nearly the same economic impact as the Super Bowl, there is definitely a spike in the local economy, most notably for hotels and restaurants.  An extra day (or two) in Philadelphia is quite valuable for local businesses.  The opposite side of this is also important, with Tampa Bay hoping to get this additional economic impact if the Rays force another game.
• Other sports are now affected.  If the game is pushed back another day because of weather, which is a distinct possibility, it would overlap with the home opener for the Philadelphia 76ers and hurt their ticket sales and per-caps.

I’m sure there are many other fallouts from this delay, but these are the ones that immediately come to mind.  If you think of others, please leave a comment!

After many months, we have reached the 2008 MLB World Series.  Congratulation to the Tampa Bay Rays and the Philadelphia Phillies – clearly, there were the two teams that everyone expected to reach the series when the season started!  Regardless, now that they’ve made it, here are some of my World Series thoughts:

• As I’ve mentioned once already, this is definitely not the matchup that MLB wanted from a ratings perspective.  The league should be going PR-crazy this week to really sell the story of the underdog Rays and diehard Philly fans to drive some additional media interest.
• Philadelphia has come alive the past couple of weeks supporting the Phillies.  The city is desperate for a major championship (they haven’t had one since 1983).  Every local business should be trying to capitalize on the team’s success.  Big spikes in merchandise sales and even tourism should be expected.
• Speaking of merchandise, the Tampa Bay Rays picked a great year to change their look and should also see a big spike in merchandise sales.  I don’t think the city of Tampa will show as much of a financial windfall as Philadelphia.
• The Rays (team salary = $43M) are built on young, low-cost players in multi-year contracts. Without holdouts, they are in great shape to manage their salary costs into the next couple of seasons while keeping the core of the team together. 
• The Phillies($95M) the other hand have some expensive vets and stars.  Some of these salaries will come off the payroll next season (Burrell for $14M), while others are locked in at a premium (Utley at $15M per) or even worse, are eligible for arbitration (Cole Hamels).  The Phillies will have many payroll/roster issues to maintain this team.
• MLB and its teams do a great job with game presentation, especially on the biggest stages (this year’s All Star Game comes to mind).  I am excited to see what the pregame festivities are like for game 1.
• All the games are schedules for 8PM starts.  I guess it could be worse, but knowing how many commercials there are going to be, the games are going to easily hit midnight.  Since both teams are on the east coast, 7PM starts or maybe even a weekend afternoon game would be great, but I don’t think we’ll see that happen ever again.

That’s it for now.  I think this series has a lot of potential for great storylines and great baseball.  I just hope that the national public turns on the TV and watches!

There are some great storylines in this year’s MLB playoffs.  We’ve had the continued disappointment of the Chicago Cubs, the revival of the Los Angeles Dodgers, the continued success of the Boston Red Sox, and the surprising presence of the Tampa Bay Rays.  But there is a dark lining to this puffy white cloud – the ratings for the Division Series games on TBS were down over 20% from last year (Atlanta Journal-Constitution, 10/7/08).

There are several reasons for this drop, the first of which is the fact that the Yankees are not playing in the Division Series for the first time since 1994.  However much people like to root against the Yankees, you have to believe that the folks at MLB secretly wish the team to at least make the postseason for the benefit of the entire league.  The quick demise of the Cubs and White Sox is also important, as Chicago is arguably the 2nd biggest baseball market.  Having the Brewers as the wild card team also caused a ratings drop because of their small market size.

The final factor to note is the presence of the Rays in the playoffs.  Even as a Yankees fan, I’m very interested in their story and supposedly many other are, but no one is watching the story unfold.  From what I’ve heard, the ratings have started to shift upwards slightly for the ALCS and NLCS, but if the World Series comes down to the Rays vs. the Phillies, MLB is going to close out a great season on a surprisingly quiet note.

Here are my recommendations and quick picks for this week:

Book: Bleachers by John Grisham – This may not be a business book, but it is my favorite sports fiction book.  The story revolves around the passing of a legendary local high school football coach, and people coming back together to celebrate his life, even those who hated him.  The book does a great job showing how big an impact sports can have on people, even at such a small scale.

Website: Business Week’s Power 100- I wrote about this 2 weeks ago, and they have just released this year’s list.  I thought that David Stern (3rd) or George Bodenheimer (4th) would top the list this year, but they selected Tiger Woods.  It’s still a great choice – the only reason I didn’t think he’d be #1 was because of how long he’s been away from the public stage this year with the injury, but it wasn’t enough to keep him out of the top slot.

Team: The Chicago Cubs – You have (maybe) another year of disappointment for the most loyal fans in baseball, combined with the continuous process of the Tribune Company trying to sell the team.  The Cubs are an prime example of brand power – no matter how many times the team falls short, the fans keep coming back, and as a result, the team is one of the most valuable franchises in all of professional sports (even with the potential cost of renovating Wrigley Field).

Other: I’m going with a podcast this week – Marketing Edge by Provident Partners.  There are new episodes of this podcast every week, and while it’s gear towards traditional business, the content is just as applicable in sports.  They cover some great topics, including how to leverage new media, market research, social networking, and more.

Do you have a good “pick of the week?” Use the Contact Us link at the top of the page and send me your picks!

Here are my recommendations and quick picks for this week:

Book:  Money Players: The Amazing Rise and Fall of Bob Goodenow and the NHL Players Association by Bruce Dowbiggin - This book was recommended to me by a former classmate of mine in the ASU Sports Business program, and it’s a must read for anyone who has ever been interested in hockey.  Dowbiggin does a great job going through the history of the relationship between the league and the players, the development of the players association, and the final conflict between them that led to the 2005 lockout. 

Website: Forbes Business - SportsMoney (www.forbes.com/business/sportsmoney) – I can’t believe that I didn’t know this site existed.  There are some great articles from Forbes about a wide variety of sports business topics, including naming rights, team valuation, and more.  Most of the articles focus on economics, finance, and revenue, which makes sense since it is from Forbes.

Team: Tampa Bay Rays – For the first time in their franchise history, the Rays will play in October.  From a business perspective, it will be interesting to see what the response is from the Tampa community.  The team has always had trouble selling tickets, so will they be able to sell out their playoff games?  The assumption is that playoff games always sell, but the Diamondbacks had trouble with this last year, so there is no guarantee.  Also, what will the local and national television audience be like?  You can be sure that MLB will be watching this.  (Edit: I’m a bit late on this one – ESPN.com reported earlier this week that the first two games have sold out already.  I hope they can keep this up and sustain the interest into next season (they were 12 out of 14 in the AL in attendance this season, even with one of the best records in MLB).

Other: The BCS – With USC’s loss to Oregon State, people are already talking about all the situations that will complicate this year’s BCS Championship Game.  Beyond the traditional arguments over which teams deserve to play, there will be plenty of discussion about the system itself again this year, and more people calling for an actual playoff system.  The bowls will resist any significant changes, but I have to believe that ultimately the system will change.  The negotiations between all the parties involved (conferences, bowls, colleges, television stations) will be interesting to follow.

I think I’m going to do a “picks” post each weekend, starting today.  So here are my recommendations and quick thoughts for this week:

Book:  The New Rules of Marketing & PR by David Meerman Scott- This is a great book for people that know they need to expand their use of the web and new media in marketing (blogs, podcasts, etc.) but either don’t know how to start or don’t understand how to connect these channels to their traditional marketing efforts.  Lots of great examples from the business world and very easy to read.  David is generally regarded as one of the leaders in online and viral marketing.

Website:  Sports Biz Feed (www.sportsbizfeed.com) - This site brings together feeds from some of the best sports business blogs on the web into one easy-to-read website.  Its a great site to visit every couple of days to see what other sports business bloggers on the web are writing about (including me!)

Team:  New York Yankees – I’m not just picking them because I’m a NY/NJ guy.  This is the last weekend of games at Yankee Stadium.  This is the first time since 1994 that they will not be in the playoffs, which even for the Yankees will have an impact on their revenue (especially considering their payroll costs).  There is more controversy over the new stadium financing (ESPN.com, 9/18/08) and their high ticket prices (CNBC, 9/17/08), and they’re close to a deal with Bank of America (BizJournals.com, 9/8/08). There is a lot going on in New York, and unfortunately, most of it is pretty negative.  Hopefully they will at least close the stadium this weekend on a good note.

Other:  Hockey – NHL teams open their preseason in the upcoming weeks, and I’m excited.  The question is, will others also be?  The league closed the 2008-09 season with a lot of momentum, capped by their “perfect” finals match-up between the Penguins and Red Wings.  I actually predict that the NHL will show a strong uptick this year, in ratings, revenue, attendance, and general fan interest.  It might be the last year for sponsors to “buy low” in deals with the league and NHL franchises.

For most teams, making the playoffs is not an everyday occurrence.  So when that day does come, you need to take advantage of it as much as possible.  The Arizona Diamondbacks are doing just that right now.  While most teams wait until the postseason to start the next year’s season ticket push, the Diamondbacks are offering an advanced option on 2008 postseason tickets to anyone who purchases season tickets for the 2009 season.  For a team like the Diamondbacks, which play in a tough market and do not have a history of postseason performance, it is critical for the team to leverage any on-field success into guaranteed revenue.  Other teams in similar situations, such as the Milwaukee Brewers, Minnesota Twins and most of all, the Tampa Bay Rays, should follow the Diamondbacks’ lead and offer a similar promotion to their fans.

While attending the Yankees/Red Sox game on Tuesday night (the Yankees unfortunately lost), I was looking around the stadium at all of the corporate signage.  There is quite a lot, from the smaller, backlit signs between decks around the stadium to the massive flat signs behind the bleachers.  However, there were a couple that specifically stood out that I thought were more effective in getting fans’ attention.  These signs went beyond displaying a company logo or tagline – these signs connected with the game in some fashion, giving the fans a reason to notice them:

1.  The Kyocera K counter.  This is a logical sign for any baseball stadium, and a great opportunity for a company to draw attention to their brand after any strikeout.

2.  The Duane Reade Pitch Speed sign.  This digital sign always displays the Duane Reade logo, but after every pitch, it also displays the pitch type and speed.  Again, a great reason for fans to notice your sign, especially if there’s a high-caliber pitcher on the mound.

3.  The MetLife Countdown sign.  This sign is actively counting down the last few games of Yankee Stadium.  MetLife has done a great job of using tying the stadium countdown into their marketing and promotion efforts (I recently received an email about winning a chance to pull the countdown lever).

I’m sure there are other companies using their in-stadium signage in similar fashions.  For a team that is performing well, you can have a “magic number” countdown.  How about displaying the current pitch count?  It is more and more important to give your audience a reason to notice your brand at the game.  Don’t just settle for another billboard – connect with the fans and give them value.  They will return the favor by remembering your brand and hopefully buying your product!

There is a constant struggle between the on-field and off-field performance of a sports franchise.  Spend a lot of money on player salaries and hopefully improve the on-field performance (see the New York Yankees), but risk trapping the team in bad contracts (see the New York Knicks) or actually start losing money (see multiple NHL franchises).  This brings me to the topic of Barry Bonds.

There is little doubt that Barry Bonds is one of the most talented players in the history of MLB.  And yet, even though he has clearly not retired (here’s the video proof), no team is willing to sign him.  Several of my friends from school have been discussing this, specifically talking about why the Arizona Diamondbacks should or shouldn’t sign him.  Let’s take a look at this option, from a performance and business perspective.

 Pros:

• Significant improvement to the team’s offense (which is needed), potentially leading to the playoffs, which would definitely lead to more revenue for the organization.
• Potential attendance spike from people interested in seeing one of the most prolific players in baseball history.
• Potential increase in merchandise sales (a Bonds DBacks jersey would have some buyers).
• Definite increase in media exposure (free advertising, if you will).

Cons:

• Definite increase in media exposure.  Even though it is free advertising, there is a high risk of backlash.
• Risk of alienating some of the core fan base.  Season ticket holders are a team’s most important ticket-based revenue stream.  Since Bonds would only be a short-term player, is it worth damaging next season’s potential revenue?
• Conflict with the team’s culture.  In this case, the team has made a clear commitment to developing their young players.  Signing Bonds goes against this, and could have a ripple effect both in and out of the clubhouse.
• Risk of driving away corporate sponsors, that would not want any association with the controversial figure.

I know there are more reasons on both sides of the coin, but this is a quick summary.  From my perspective, it comes down to short-term gain vs. long-term stability.  The Diamondbacks have been making great strides over the past 2-3 years in building a stronger fan base, which helps ticket sales and corporate sponsorship revenue.  Even with the spike they’d get financially over the next two months, both on the field and off, they’ve made a strategic decision to stick with their youth-oriented plan.  It will be unfortunate if they don’t make the playoffs and lose out on the additional revenue this year, but they seem to believe that the short-term risk is still much safer than the long-term one.

Major League Baseball is possibly the premier league in terms of identifying new revenue opportunities through the Internet.  MLBAM is raking in money for the league and teams, and they are on the forefront on live media through MLB.TV (which got even better this year with the higher quality stream now available…for $5 more a month, of course).

Considering this fact, I’m surprised that they have left an obvious revenue stream untapped.  As of now, if you watch games through MLB.TV, whenever there is a break between innings, all you see is an image that says there’s a break in the action and stay tuned.  They do not play any commercials or show any advertising.  To me, this is a wasted opportunity!  In a time where more and more companies prefer to focus on regional, team-based sponsorships, here is a prime opportunity for a league sponsor to get additional exposure with MLB.TV customers, individuals that have willingly identified themselves as having a deep connection with MLB.

I know the MLB.TV does use the local affiliates for their video streams, so there may be some concerns about devaluing the advertising that those stations offer.  But with the blackout rules that the site has implemented, this should be of little concern.  Other websites with streaming content, like NBC.com, have already leveraged this opportunity for their station’s major advertisers to gain more exposure during “commercial breaks” in the television shows.  The opportunity is there for MLBAM…I just wonder why they haven’t taken advantage of it yet.