Dear Mr. Schaap:
I would like to talk to you about baseball.
I have watched you on ESPN and find you to have a special way of seeing things. An insight that goes beyond most other sportswriters. You have the passion for sport of a fan, an exuberance that combined with your wisdom and knowledge bridges brilliance. Your colleagues have a tendency to incite. You inspire.
I'm starting to realize that this is a difficult place to begin. Obviously, I respect you tremendously. But you know absolutely nothing of me, and I am very uncomfortable telling you about me. I much prefer a dialogue to discuss passions like baseball. I am not a writer. The words on paper cannot convey my love for the game. I sit here trying to think of the prose to show you my passion. Trying to cull the images and feelings into sentences that prove… what? That I love baseball?
Let's leave it that I love baseball. Take this as a given. Someday I'll show you my baseball cards. That should go a long way.
Hey, big deal, right? There are lots of baseball fans out there, kid. What makes you so special that you waste a busy man's time?
I think I can help.
Baseball, I mean. I think I can help baseball.
Okay, so they put together a team of experts to examine the market problem, people with credentials from Yale and Harvard and PHDs and thirty years of practical experience, and I feel that I should be involved with that. Me. I think that I know better than them. I think that I can contribute. I know I can.
It's hard to explain, but simply, I solve problems. It's what I do. I study a problem and I see possibilities. Not necessarily answers, but I see options. This is impossible to explain. Even in person, I think I'd fail. I just get stuff. Did you see 'Good Will Hunting'? Mozart saw a piano, and it just made sense to him. Matt Damon got math. I get systems. Complex systems. I streamline. I re-invent. I create. They just make sense to me.
Now baseball is one complex system. Just defining the components is hard. Thirty owners, 650+ players, the league(s) office(s), umpires, media, minor leaguers, large markets, small markets, blah, blah, blah. Lots of factors with lots of agendas. And how about listing the problems. What needs to be addressed? Where should we start? What needs to be fixed? This is the real question because I think BASEBALL REALLY HAS NO IDEA.
Is it market based? Is it free agency? Is it escalating salaries? Is it out-of-control owners? The agents? Revenue sharing? Game length? The DH? Why is baseball losing market share, failing in proven baseball towns? Failing in towns that were just ten years ago strong, LARGE markets?
The big problem is unfortunately all these problems. There is no way to pinpoint the origin of the problems or even to quantify which is more important than the next. We need to fix all of them. And unfortunately, we need to fix them soon. This is the season of our discontent. This is the year of the free agent. Collective bargaining is up soon. Baseball in general probably is on a bit of an upswing. We need to capitalize on that upswing to push us through tough times. I don't know if I can survive another strike. If I can't, then the new fan surely can't. This should scare people. Ideally, we fix all these things before Junior and Arod and Mussina and everyone else jump into free agency.
Now I know I don't have all the answers. I'm not that cocky. But I look at this game and I know one thing. I know that every single one of these problems should be addressed with one mindset, one thought running throughout any and every doctrine in baseball.
Whatever we do, we do FOR THE GOOD OF THE GAME.
A simple premise. FOR THE GOOD OF THE GAME. Mr. Giammatti (sp?) understood this. The game would be a different place if he was still around. He knew it wasn't for the good of the owners, for the good of the players, the umpires, whatever. It was for the good of the GAME. This is how it should be. (If this translates to anyone, it is for the good of the fans-something else Mr. Giammatti understood).
Okay, I've rambled enough. I have ideas. Specific ideas on how to fix baseball. I would love to speak with you about these ideas. I hope that I have inspired you enough with my limited skills for you to get in touch with me. Maybe I piqued your interest enough for you to respond. I hope so. I truly know I can help.
Thank you for your time.
The NBA of 1984-present.
David Stern was a genius. Everyone said it. He turned the NBA into a real player on the global sports landscape. We saw how well he did things and we copied it. But what did we really copy? Do we realize the implications of copying a scheme that may or may not apply to the specific needs of the brand of MLB?
This is premature. Let's look at the genius of what David Stern accomplished, because we can learn from his model.
Very simply, the NBA looked to the players to build its brand. An obvious choice. Incredibly athletic icons that do incredibly athletic things. Dunks, no-look passes, long three-pointers, blocked shots. The game can be condensed into high-energy highlights and high-energy spots.
Couple this with the true superstars of the era-first Magic, Bird, Dr. J, Isaiah, then Jordan, Ewing and Shaq-and you have a first-rate marketing plan. Your brand has a high-impact image and can attach to it personalities that add to the excitement and drama to what amounts to 1/82 of a team's schedule. Networks like this. Big ad money. Think of any NBA promo over the past fifteen years and they all invariably say "Michael Jordan and the Bulls face Patrick Ewing and the Knicks, Sunday!" Odds are, one of those guys will be spectacular; one will do something that the viewer might not want to miss.
This makes for big TV contracts. Basketball, like football, is a very TV-ready sport. Most of the action takes place in a small, easily defined space in the 4:3 ratio that is television, a ratio that improves with HDTV. Plus it's played in about two hours, which makes 7:05 start times over right around bedtime. Also, it's major exposure is on Sunday afternoons, prime game-watching time in February and March, when it's still cold out and there's no football. Big ad money.
This leads to prosperity. The league flourished. In the process, they installed a salary cap, expanded, revenue-shared, expanded, and rode Michael Jordan to an all-time high Q-rating.
Question: how well did the NBA prepare for life after Jordan?
The answer resulted in a lockout and ultimately a collective bargaining agreement that has some fore-thought in how to regain strength in a brand that was failing.
But it took a work stoppage. The marketing failed to realize that the brand strength was more than just the players. It was the 'Magic Johnson and the Lakers'. Magic was the Lakers. The Lakers brand is strengthened with it's association to Magic, and vice-versa. This in turn strengthens the brand of the NBA. With the free agent plague of the major sports, the NBA specifically loses brand strength when Charles Barkley leaves the 76ers or Scottie Pippen leaves the Bulls. Ewing, Olajuwan, Malone and Stockton, the Admiral-these guys are the exception. But they are also strong brand identity for their clubs.
Bottom line: the brand identity of the NBA is stronger if players stay in one place for the duration of their careers. This is a point that MLB needs to understand.
The result of the NBA lockout was 1) a victory for the owners and 2) a contract that gives incentives to players to remain with their original clubs. My understanding of the agreement is basically players can earn a higher salary than is possible on the free agent market. I'm not sure if it's a percentage thing, or if it applies in every case of a free agent-to-be re-signing (ala Stephon Marbury), but I know there are some sort of incentives for guys to stay put.
This provides are higher likely hood for continuity of a team's makeup from year to year, providing more stability to fans in those markets, in theory strengthening the brand in those markets. Some players transcend this theory (Shaq, McGwire, Ryan, maybe Griffey), some don't (Barkley, Bonds, Mo Vaughn, Clemens, maybe Griffey). If baseball needs proof continuity helps brands, look to Tony Gwynn, Ripken, Brett, Puckett, Yount, Mattingly, etc., and their relationship to their club's brand, and also imagine how different the A's are if they kept McGwire (who would've stayed at below-market value, because he did that with St. Louis).
Take this from the NBA. The players are the game. They are the ones the fans love to watch. But fans love them more if they feel like they are OUR players. Continuity allows a brand to build from year-to-year, because it strengths the bond between player and fan.
The players, and continuity. Sounds like a collective bargaining agreement.
AN EASY TRAP
The Brilliance of the NFL
The current sports marketing model that people are gushing over is the NFL. I guarantee that people talking about baseball's problems invariably ask, 'How can we be more like the NFL?'
This is kinda stupid. Football is the ultimate TV sport. The action happens within 25 yards of the line of scrimmage. Nearly every player is on camera at the start of every play. Replay and camera angles make the experience of watching a game on TV better in many respects than being at the stadium. TV and football are so compatible, TV is now involved in officiating.
And ease of coverage is only the beginning. Time of game is very defined. 1:00 starts are generally over in time for the 4:00 starts. Sunday afternoons. Kids can watch with parents. People are generally home, most of them have to go to work on Monday. And the coverage is of the local team in every market, on free TV.
And these are not prime-time games. Networks are not getting prime-time premiums on ad rates for the NFL. They get premiums because the NFL is a ratings guarantee of a certain amount of points in a well-defined segment of every major market in the country, virtually every weekend.
Now look at the effect of the 16-game schedule. Every game is important. In an average season, anywhere from five to ten teams have a shot at the playoffs in the last week of the season. Another five to ten may not be in it, but could be stoppers in another team's playoff drive. This means that at least 15 teams are playing meaningful games the last week of the season. DRAMA.
Add the inherent impact-nature of the game, and they've got marketing genius. Drama at high speed. Made for TV.
This transcends continuity. The NFL in general has the largest turnaround of players from year to year. It always has-player careers are shorter. Stars may only be around for ten years. One hit can end a player's marketability. The NFL had to overcome lack of continuity in order to flourish. Its TV nature and the length of schedule made this possible.
This is a problem for baseball. Baseball is not made for TV. The action can go in any direction after the pitch. It's not better than at the stadium. At the park, you can almost tell off the bat whether a ball is foul. You can see the arc, look at the fielder, watch the runner, all in an instant. You don't get that on TV. In replays, yes, but the game play itself is hard to cover. As opposed to football, only three players are in ninety percent of the programming. It's not made for TV.
The schedule is another problem. The NFL plays less than one-tenth of our schedule. Every game is not life or death. A loss doesn't dash playoff hopes. It's the accumulation that kills you.
These incompatibilities with the main broadcast venue for our markets and our schedule differences are tough to overcome. There is not the huge money in baseball TV contracts as the NFL because of these reasons. The NFL's schedule is one-tenth ours, but their TV contracts are four and five times our revenue? With one-tenth the programming?
This is a problem for baseball. The boon for the NFL is a direct result of these TV deals. This is revenue sharing money. This gives teams additional resources to try and be competitive. Add this to the salary cap and you get parity, which spurns competitiveness from year to year on the prosperity of a draft pick (another NFL advantage over the minor leagues).
Baseball is not so lucky. The money under the current system does not exist to share. Revenue sharing is coming from individual teams. It is not a plan for the league to dispense revenue, it's good businessmen holding up not-so-good businessmen. I understand why George has a problem with this.
Question: How then can the league increase revenues?
Alright that's a silly question. Increasing revenues is not as simple as buying a free agent or a new ballpark. And we're talking about an infusion of funds of hundreds of millions of dollars A YEAR to revamp revenue sharing. Under baseball's current system the money just doesn't exist to share without taxing individual owners, which they don't like very much.
Not to mention the fact that the NFL and the NBA have already gone through the pains of a salary cap in collective bargaining, so baseball doesn't only get have to get its house in order, but the Player's Association has to approve it. And we have to do it without the fallback position of the NBA and lock out the players, because baseball might not survive another labor stoppage.
It all comes back to the bottom line-we need to increase revenues first and foremost. Continuity, parity, building of the brand, all of these are years away from being quantitative. We need to at least develop a plan to share revenues now, and hopefully benefit from all those other, less tangible ideas in the future.
If we need money, we need to look to television. There is a lot of money in TV. Individual clubs can gain anywhere from $20-100 million a year in TV revenue. Generally, most of these deals are for rights only-the stations pay the individual clubs for the exclusive right to broadcast. Some networks are only accessible in an ad-on cable option (like NESN and MSG) that the consumer must have cable in order to have access, and most of them have to pay extra for it.
On top of this the station has to produce the games. Guaranteed the biggest expense the station has is for the rights. Games are produced at a fraction of those rights fees. This makes the initial budget for carrying games rights plus production. The stations must be making money somewhere to cover these budgets. And they do, even on a local scale, in advertising rates.
This is quantitative money. The stations must make enough money to at least offset the cost of rights plus production, and they make it through the advertising revenues and subscription rates. You can research ad rates for stations over a three-and-a-half hour game and do the math. Say $1000 per :30 spot. That's $5000 a commercial break, with guaranteed commercial breaks every half inning, plus pitching changes. That's nearly twenty commercial breaks at $5000 a pop. That's $100,000 in revenue per game times the number of games the station agrees to carry. Say it's half the schedule, 81 games is over $8 million. And these are low estimates. Increase the number of commercial breaks during pre- and post-game shows, and revenue goes up at the cost of a small studio production.
Realistically, these stations-- specifically the cable stations-- are also getting money from Cablevision USA for the right to broadcast the station, plus a piece of the subscriptions. This 'advance' is probably enough to cover cost of production, making advertising revenue basically covers rights cost plus profit. This is where the money is coming from. The advertisers.
Advertisers look at reach and demographic when they choose media buys. Baseball, like all the major sports, has inherent interest from advertisers because of its popularity in huge buying target markets. They will spend lots of money to reach this target, no matter what time of day (NFL Sundays), and really no matter how poorly the game degrades, because there is a guaranteed reach. Outbidding another station for exclusive rights is usually a boon for the station-that's why lots of people want exclusive rights.
Here's the situation: Stations can afford to pay us exorbitant fees for exclusive rights and also produce a significant number of baseball games in a season. And they probably are still turning a profit. Imagine now a world where MLB broadcast its own games on a national level. They would not have to pay rights fees to themselves, so that number goes directly into profits. Plus, advertising monies then get paid to the league, and the cost of game production is still covered by subscriptions and Cablevision payoffs. So that ad money is mostly profit. This is a huge influx of revenue at fairly low start-upcosts-increasing profitability of the league and creating revenue to share.
It's time for The Baseball Network.
THE BASEBALL NETWORK
A Revenue Sharing Scheme
Now this is not The Baseball Network of five years ago. This is not a glorified Game of the Week. This is a new cable network that has exclusive baseball rights.
The Baseball Network is a national cable network that is carried on a basic cable package. A low subscription rate, say $2 a month, and our possible reach is everyone that has a cable box. For $2 a month, the local fan gets the local team, every game. We make every game affordable to the public. Unfortunately, it's not free like the NFL, but subscriptions are guaranteed revenue. Maybe we get to a time when we can make it free. That would be an ideal scenario.
An important facet of the Network is the schedule. It is a fallacy that we need to air the local games in prime-time to maximize ad revenue. Advertisers will pay because it's baseball. We should start games at a time that is right for our fans. These are our viewers. Now our fanbase is directly related to our profits. They become the ratings numbers that we charge our advertisers for. It is a defined, powerful market that lots of people will want to talk to. And we have it exclusively.
Game times directly impact our viewer-base. What demographic is good for baseball, not ad rates. This should impact our start times. Who do we want watching baseball, and what time is the best time to be on the air?
I have a gripe with PCT games. The Yankees are on at 10:30 and I have to go to work in the morning. I'll still watch, but I won't be happy about it. In a Baseball Network scenario, I'm paying for the Yankees but a good portion of my games will be on too late for me to really enjoy them. I am in a prime advertising demographic. Can we make the entire schedule more accessible to me?
What about making it more accessible to the demographic baseball should be worrying about? The strength of baseball's future lies in building its fanbase, and the first place you look is to the kids. If you love baseball at age seven, odds are you'll love it at twenty-five and seventy-five. That's the beauty of fans-we're lifers. If you keep us interested. It's easier to be interested if we're watching.
Look at current start times. 7pm is the earliest games start on the east coast. This makes games end somewhere after 10pm. This is past the bedtime of most seven year-olds (even during the summer). We should look at start times more as end times. Ideally we want games to end around 9pm, local EST. That puts our start time around 5:30. This isn't too bad. That makes games start PCT at 2:30, ending at 6:00. That's a hair too early for the west coast. 3:00 PCT to 6:30 is perfect-baseball during dinner. That would make EST starts 6pm running to about 9:30. Baseball during dinner. I smell a marketing scheme.
What about PCT games? We need to worry about EST kids, but also not handicap the ballparks with exclusively day games. Let's say we start PCT games at 4pm local time. That makes games end around 7:30. That's 7-10:30 EST. A little late for the kids, but not too late for the parents. The TV's still on. This increases our ratings in local markets no matter where the team is playing.
The beauty of The Baseball Network is that the majority of your broadcast time will be games. The game schedule will be dictated in part by the programming schedule. The local viewer will get the Cubs and Atlanta at 2:00, the local nine at 5:30, and the finish of a west coast start.. This makes for almost ten programming hours during the season as live games. Add a studio cost to produce a Baseball Tonight-type show to wrap up the night's programming and air consecutively in the morning ala SportsCenter, and all of a sudden you've got nearly 20 hours of programming daily. Throw in a 2:30am rebroadcast and we've got a full day, for nearly every day for over six months.
This is actually added revenue as well. Stations only get premium rates during games. The rest of the day they get less-but they still get paid during MASH reruns. The Baseball Network is the same. We'd get paid for every spot during a 24-hour broadcast day. And programming costs are minimal.
This is an unreal amount of revenue. We're talking anywhere from $20-$50 million PER TEAM. Think about the $5000 per commercial break. That's 20 per game, times 162-game schedule, times 30 teams. That's $486,000,000, or $16 million per team. Not to mention the Network gets paid that rate for up to ten hours-nearly three full games-every day at a national rate. Or the off-game ad rates of say, $200 a spot or $1000 a break, for seven breaks an hour over fourteen hours? The money is unbelievable.
Also, the technology exists today so that an individual fan in Boston could, through a special package, order the Yankees as his choice of teams instead of the Red Sox. As this case study, I do not currently pay for NESN and the Red Sox. I would pay for the Yankees, if I don't have to change my cable carrier to do it. This increases subscribers on a national level by basically adopting a glorified pay-per-view system. For a higher subscription rate, I order the Yankee package. It's a simple system to set up, and even easier to maintain. And the technology exists already.
To further generate revenue, let a local station pay for the rights of say 20 games, simulcast with the Baseball Network. This is found money, and allows fans without cable some access to the teams. I'm also pretty sure the individual cable systems pay for the rights to carry the Network. More incoming revenue.
Here's the kicker: the major networks will still pay huge money for the rights to Game of the Week, the All-Star Game and playoffs. This is not a net-gain of new Network profits minus current big national contracts. The net-gain is for the individual clubs-if we revenue share but take away the Yankees TV deal, we need to make a lot of money to make this attractive to George. Thankfully, we're talking about a lot of money, on top of money from the networks.
And if in conjunction with starting up the Network, we figure out how to build the brand, we make games more accessible, and all of a sudden we grow the fan base (like we should be doing), the ad rates go up accordingly, and so do profits. Production cost will vary minimally from year to year, ad rates could skyrocket.
One thing to consider is what to do in the off-season. Maybe we replay the season, replay old games, continue with the studio show a few times a week. We can start in spring training, so we at least gain a month, and we could also simulcast playoffs, etc. so we'd gain October. This leaves four months of dead space. Certainly a viable alternative would be to only operate February-October. This cuts operating expenses, but also decreases advertising revenues.
George thinks if he teams with the Nets he covers the entire year. Very true, but they also overlap. If pretty sure a Yankee game would pre-empt Nets-Clippers in April. Truly the ideal partner for baseball and the Network is NCAA hoops. Their schedule begins in November and ends in time for spring training. Add the Tournament, and we're up to Opening Day. That's the ideal year-round programming partner, and it would make our 'off-season' ad revenues substantially greater. Not that the NCAA necessarily would be a partner-now we need to think of this as a Network-we could certainly afford to pay for rights and make money the old-fashioned network way. Or we talk about partnership. Hymen Roth was a smart man.
There are tough sells. The money is there from the advertisers, and reality is the market of New York will get a higher ad rate than Milwaukee. That's the nature of advertising-the reach is most important. How much should the Yankees support the Brewers? Large markets might not like this.
But everything's negotiable. Maybe we give local clubs a higher percentage of ad revenues purchased in their markets? Or for their national subscribers? Or maybe they get a generous cut of the subscription money for their team? Lots of points to negotiate, but all are negotiable, and at some point, there is a bottom line that will make everybody smile.
If we can generate enough revenue through all of these schemes to give, say $30 million per team, we go a long way toward Montreal being competitive. If we get $50 million per team, even the Yankees are coming out even ($60 million from FOX minus $10 million to revenue sharing). And the money is there.
So now all we need is a salary cap to prevent the revenues of the Network from being exceeded by the greed of the owners. Now we need to talk to the players.
How to Institute a Salary Cap with the Strongest Union in the World
Or The Legacy of Hymen Roth
This is the fun part. No way the Players Association wants a salary cap. Hey, the owners are the idiots signing the checks. We need to create a system that the players can't say no to.
That starts with a cap figure of at least $100 million. No way they accept less than the current high mark. But only a handful of teams are even close to that number. It will take at least a year or two to get it to ten. Probably more like five, under current revenue standards. And this figure does nothing to ease the disparity between Montreal and New York. And there is no real incentive to the players to go for a cap.
So we institute a minimum. Let's say the minimum starts at $30 million. This is an influx of cash to the players of millions of dollars. The cumulative gain is the Hymen Roth Effect-he always made money for his partners. Like it or not, the players are partners. And they as a group will accept the money. Over a certain amount of time, we increase the minimum. We offer incentives and cap loopholes that help to further, ta da, continuity and in turn we strengthen the brand.
Example: the Yankees get cap exemption for keeping Bernie Williams. Say, 80% of his salary is counted against the cap, a bonus for keeping your players. The cumulative effect on the Yankees after Derek Jeter and Rivera and Ledee all have 80% against the cap, the true salary of the Yankees could exceed $100 million. This is a further incentive for the players.
Example: the Expos get 120% of Rondell White's salary against the minimum. Say the Expos can afford $10 million in salary. Add $15 million in revenue sharing from the Network and they're at $25 million, $5 million shy of the minimum. Add 20% of that salary if all the players are home grown, and the reach the net-minimum. This will come in handy when the minimum increases.
Revenue from the Network could be enough to institute a minimum of $40 or $50 million-that's the amount of money we're talking about-but a cumulative increase of each team to $30 million is $50-100 million for the players association A YEAR. This might be easier than we think.
We also need to have incentives for players to stay in one place. The brand of an individual player is also stronger with continuity. Mo Vaughn's brand is stronger in a Sox uniform than in an Angel uniform. This should be incentive enough for the players, but an individual 'brand' is not quantitative enough.
It's funny to think that when most players sign they say things like 'for the stability', and 'for my family'. This seems to be another advantage in continuity. How can a player move his family all the way across the country and do it for stability? It would seem they would ultimately want to stay in one place. But again, this isn't quantitative. It's a feeling. We need to think about money.
A great rule is the home team has the opportunity to match a contract. This maintains the integrity of the free agent process, but still gives the club an opportunity to maintain continuity. The NBA rule of a player being able to re-sign with his own club for more than the rest of the market can pay is an obvious incentive for players to stay put (they can make the most money where they are), but it also puts definition on individual salary limits. The match rule is much better.
A nice wrinkle here is what I call the Retirement Clause. We can allow special incentives in contracts for players that remain with one club. If Derek Jeter retires a Yankee, a clause kicks in for post-retirement payments of dollars, a piece of the team, stock options in the Network (this is a GREAT idea-disperse stock options per team as a way of revenue sharing… oh, man there's a lot of money out there). The Retirement Clause gives the home team an advantage of dispersing $140 million over thirty years as opposed to ten. Maybe the entire salary counts against the cap-we don't want to have cap money taken by Jeter after he retires. Maybe this can become a cap loophole-balloon payments, less money now, more when you're done, to allow the $100 million cap more flexibility. But all the incentives have to be exclusive to single-team players.
The beauty of this plan thus far is the negotiating factor inherent in each phase of the agreement. Is the salary minimum $30 or $32 million? Or $25? The ad numbers are real. There could be $50 million per team out there in found money. Maybe $100 million. Don't you think the players would be more likely to endorse a plan that made everyone some money?
LEVELING THE FIELD
The Game as Product
The theoretically instant influx of cash from the Network will be ample enough to get most of this done. But from this revenue we must also invest money as a league into the game. We will make money because we're baseball, but because we're baseball we could make LOTS of money, if we market ourselves right.
This has truly been baseball's weakness over the past fifteen years. Even the boon of McGwire/Sosa has a negative effect. Baseball has taken the homerun as the main reason fans watch. This is our only consistent, impact moment, and we have consistently made it easier to hit them. Scoring is what makes fans watch.
This is a horrible misconception. What makes baseball great? Watch a 1-0 pitcher's duel and tell me it's scoring. The drama is inherent in the game itself. By making it easier to score runs, the drama is weakened, because it's played out over a longer time. The flow of the game is interrupted more. 3-2 is a great game. 5-3 is a great game. 9-8 not so good. 16-7 is awful, if there are a bunch of them (and there have been). We've been screaming about game times, yet we lower the mound, install the DH, tighten the baseballs, shrink the ball parks, shrink the strike zone, all things that make the game tougher on the pitchers, consequently making managers have to change them, making games longer. All for a marketing scheme that totally obscures the essence of the product we're trying to sell.
Let's look at the history of the brand. A team like the Cubs can lose for years and still have an amazing fanbase. The Red Sox. The Brooklyn Dodgers. They were bums, but they were Brooklyn's bums. Let's look at baseball's Golden Age. The 1950's have to be the Golden Age because of segregation. Continuity was inherent in the system. The reserve clause virtually guaranteed the fan that their guy would be there next year. Trades were HUGE. You had to develop superstars, and as the superstars develop, the fan's attachment to the superstar strengthens. And the fan's identification of the team is directly affiliated to the players. As Mickey Mantle did, Derek Jeter becomes the Yankees.
Our collective bargaining agreement will make this more of a probability. Continuity builds the brand. What else can we do to build the brand? What about improving the product? What can we do to change the product to make it more interesting to fans?
On a day-to-day basis, we want every fan to feel like their team can win today. It's a long season, and really, a winning streak starts with an at-bat. This is the hope of baseball. Every fan's dream is hitting a grand slam in the bottom of the ninth with two outs. Think about that. But even with a new agreement, the disparity of salaries diminishes that hope. The Yankees could still spend up to $70 million more than the minimum, and there will be teams at the minimum. So we need to make the game more competitive independent of the salary issue.
One thing we have is the ability to change the rules. It is a virtual guarantee that every major league team would improve significantly if we improve their pitching. If we improve everyone's hitting, we'll get longer games, higher scoring, less drama-you, know, all the things that are problems right now. We tried to help pitching this season with the 'new strike-zone', but that plan was doomed from the start because it had to deal with a union. We can change the rules of the game without the approval of the umpires; specifically we can change the dimensions of the game at our discretion.
This obviously leads to raising the mound. We have a lot of major league pitchers and all of them get better if they were 4"taller. We don't have to go all the way up to the 20" or whatever it was, but let's level the field a bit. Or un-level it, actually. A very simple solution that makes teams more competitive. This will help the brand, because it translates to the fans feeling they're more competitive. This is part of our essence: we could win today.
On a larger scale, and something that I believe baseball is doing, is to change draft policies. Year to year, the Yankees will still make more money than the Brewers, and will be able to afford more Caribbean bonus babies, so we need to make this part of the field even, too. If everyone is draft-able, this makes the Yankee money irrelevant. This also helps the brand, and makes the draft a much more competitive (maybe even broadcast-worthy) event. It helps to give the fan hope that not only today do we have a chance, but maybe we are a Cuban defector away from being real good.
So now, through collective bargaining, revenue sharing, changing start times, raising the mound and adapting the draft, we have a strong product. More teams will be competitive. More fans will feel competitive. More teams will make money. We have enough good PR to take a lot of money from advertisers, just from putting our house in order.
And we haven't even talked about traditional marketing.
For the Love of the Game
This is the hardest part to explain. Brand Essence is the chic advertising term for what a product feels like. Baseball's brand essence covers a wide range of emotions-the Red Sox are as strong a brand in their market as the Yankees, the ultimate dichotomy of feelings that a team can bring out in its fans.
But it's all based in love.
Think about it. Love is the ultimate emotion. Within love, as I'm sure we all know, nearly every other emotion exists as a subset of love. Hate. Envy. Joy. Gluttony. Love can provoke all of them. This is the beauty of the game. Love is inherent in its makeup. You can grow to love your team. Nearly unconditionally. Even if they stink, you can grow to love them.
And we are going to make it easier to love us. We are going to make the necessary changes to make the product irresistible to a large market. We are going to provide the fan a feeling of security and continuity in his team, while at the same time making them more competitive in the dream of winning a championship. We are going to provide an atmosphere that nurtures the love of our fans and grows them into lifers. This also propagates the brand because love is generational. It gets passed down from parent to child and is shared, bridging lifetimes. I will be a grandfather teaching grandchildren about the great DiMaggio and I was born twenty years after he played. That's brand strength.
We can do more to nurture this love. One of our concerns should be the deterioration of Little League and the virtual extinction of the sandlot. We want kids to play this game. That helps to build love. It's a great game. How can we help get kids to play? We're going to make a lot of money with the Network. A far-reaching idea would be to plunk some of those profits into helping youth leagues, committing significant sums of money into local resources to provide more opportunities for kids to play. If they play, eventually, they'll watch. And with the boon of softball, it's something that they can play for 30+ years.
Another easy thing is make it mandatory for players to spend a couple of weeks in their off season visiting schools in their markets, teaching gym classes and signing autographs. This is an easy way to build fans. It makes the players more human-again, harkening back to the days of the Dodgers riding the trains with the fans. It makes them more accessible, especially for the kids that can't afford going to the stadium. This is an easy thing. Lots of players, lots of schools, lots of kids. Two weeks of the off-season signing autographs and playing catch with kids. We'll probably only get a week, but everything's negotiable. It definitely builds the fanbase, and it's a pretty cool thing to do.
As for specific marketing schemes, continuity makes for wonderful advertising. Derek Jeter and the Yankees versus Vladimir Guerrerro and the Expos is a big matchup in five and ten years. Teams individual advertising should be customized for each team-the Yankees are more likely to use history than the Diamondbacks-but all will be based in part on the players. Carlos Beltran in fifteen years could be George Brett, at least in terms of brand identity for the Royals. If players stay in one place, the marketing becomes elementary. I also really like the 'baseball with dinner' angle-- something a bit more generic, but borne out of the changes we are making for the good of Major League Baseball. This means good PR, and as a whole, baseball's PR is pretty awful (but that's a whole other story).
That's a lot of stuff. And a lot of people that need convincing. It's not going to be easy, but it doesn't have to be hard. Imagine if everyone we talk to looked at these ideas from the perspective of what's good for the game. Imagine everyone on board, getting things moving so that we can avoid the pitfalls of our past, and put ourselves in a position to make baseball great for the next 100 years. And we're going to make a lot of money doing it.
All of us? Really?
It might be easier than we thought.
An Exercise in Foresight
All this realignment talk is making me crazy. Yet again, Major League Baseball is trying to make changes to the game without considering the true effects of their actions. They're talking about changing to a format (AL 4-6-4, NL 4 x 4) that is very hard to understand.
At 30 teams, the obvious breakdown should be six five-team divisions over the two leagues. As we look forward, inevitable expansion will change the makeup of the divisions again. MLB looks to be preparing for this by adding both clubs to the AL in the future, and breaking the East and Central up into three divisions. Probably NY, Boston, Toronto and Baltimore as the East; Cleveland, Detroit, Chicago and Minnesota in the Central; KC, Texas, Charlotte, and Tennessee in the South. The West is Seattle, Anaheim, Oakland and Arizona.
This structure will makes the East by far the toughest division, and without increasing the number of playoff teams, means that only one of those teams can make the playoffs. In many projections, the second place team in the East could have a better record than two playoff teams, which is the scenario the wildcard was supposed to avoid. If George ends up sitting for the playoffs with 96 wins, and Texas and Arizona get in with 94, he is not going to be happy. And neither will lots of fans. The wildcard ensured that the second best team in the league made the playoffs. Four division winners do not.
So what's a good way to fix this? Expand the playoffs? NO. Going from eight of 30/32 to 12 or 16 to increase the 'brackets' gets ludicrous. That's what we play 162 games for. Let's assume keeping eight playoff teams. What's so horrible about three divisions? Each 'region' gets represented, plus at least the fourth best team in the league makes it. Four of the top clubs in each league get in. This is a good playoff situation.
So why not keep three divisions? It makes our math easier in the short term (30/6=5), and long term allows us flexibility in expansion. If we add six teams to baseball in the next 15 years, we add one to each division according to region. If we add Charlotte, AL or NL East. Add Tennessee next, whichever East is left. This allows our focus on expansion to be market based; i.e. the midwest, south and west should be a top priority when adding teams. A team in Washington just adds to the clutter in the northeast, where our brand is already strong.
Another thing to think about regarding expansion is television market size. The Baseball Network generates regional ad revenue based on the size of the markets involved (see Cost Breakdown attached). We will be available to the fan in those markets on basic cable television, with every local game, plus two more baseball games a day all season. We are going to give the fan the opportunity to find baseball, and the advertisers will pay us accordingly. If we grow those markets, we get more money. If the population numbers already exist, we get paid just for being there.
But I digress. Realignment. Six divisions. Five teams in each. The AL East and Central remain the same as current. Add Arizona to the West. That makes five teams in each AL division. In the NL, we took Arizona from the West, so the NL West has four teams. The NL Central has six teams. Obviously, one team from the Central moves West.
Regional rivalries say Houston should go West. The rest of the NL Central is basically in the midwest. They should stay together. Then Houston and the Rangers would both be in the West of their respective leagues. Symmetry is good.
Not to mention the fact that Houston and LA have more rivalry based on the early 80's than Houston and Pittsburgh (unless you count football). Houston was in the West as late as 1993, right? And it had been there since it's inception, right? Then it can go West now.
Six divisions, five teams each, with room for expansion. Realignment with foresight.
THE BASEBALL NETWORK:
A Day in the Life
This synopsis of the Baseball Network is predicated on MLB taking the rights of their broadcasts and combining its resources to form it's own cable network.
Obviously, this is a tough sell to the Braves, Yankees, Red Sox, etc., teams that greatly benefit from their current TV contracts. This exercise is to help persuade those clubs that a conglomeration of their broadcast rights will increase league revenue to a point where sharing as it exists now will no longer be needed.
A sample day for the Network:
6am - noon Baseball Studio show (re-broadcast)
Noon - 1pm Baseball Studio pre-game show (live)
1pm - 5pm Early game
5pm - 9pm Local game
9pm - 1am Late game
1am - 2am Studio wrap-up (to be re-broadcast)
2am - 6am Local game (re-broadcast)
The studio show is easy. Just like ESPN, almost a third of our programming day is a studio show, and the entire morning is a rebroadcast of the previous night's wrap-up. This is a low-cost endeavor.
The other 16 hours is game broadcasts, 12 or so live, 4 hours a re-broadcast. It would be relatively easy to massage the schedule to accommodate two national broadcasts and the local nine over a twelve-hour period.
Let's assign some advertising values to these time slots:
6am - noon $5,000 national spots/$600 local spots
36 spots per hour = 216 spots
Noon - 1pm $8,000/$1,000
1pm - 5pm $20,000/$5,000
22 breaks per game x 5 spots = 110 spots
5pm - 9pm $30,000/$8,000
9pm - 1am $20,000/$5,000
1am - 2am $5,000/$600
2am - 6am $2,000/$300
The national spot buy would include every market on cable carriers. Approximately half of our spots will be sold at the national level, the other half sold as local or regional buys. These dollar values are based on current figures for ESPN, and the local market value is based on a mid-sized market. We will adjust this number later.
Let's do the math.
6am - noon national (108 spots) = $540,000
local (108) = $65,000
Noon - 1pm national (18) = $144,000
local (18) = $18,000
1pm - 5pm national (55) = $1,100,000
local (55) = $275,000
5pm - 9pm national (55) = $1,650,000
local (55) = $440,000
9pm - 1am national (55) = $1,000,000
local (55) = $250,000
1am - 2am national (18) = $90,000
local (18) = $10,000
2am - 6am national (55) = $110,000
local (55) = $16,000
On a national level, the Network would generate $4.6 mil A DAY for the 180 days of the season. Let's say 162 days, just to low-ball. That's $745 mil in revenue to the league.
On a local level, the numbers total $1.07 mil. To further allow for market sizes (we started with a mid-sized market) let's cut this number in half. That's $500,000 A DAY, adjusted to be lower than the average MLB market.
Now take $500,000 times 162 games. That's $81 mil in local revenue per market. These local numbers inflate when we deal with secondary markets that do not currently house a major league team, like Buffalo, Providence, Portland, etc. Advertisers pay per market if they aren't buying nationally, so there are additional funds available.
Let's stick with the $81 mil per market and apply this towards 30 teams. We're looking at $2.4 BILLION in cumulative local advertising revenue. All told, gross revenue is up over $3 billion per season.
Let's say it costs us $300 mil to produce games, plus another $200 mil for startup costs, putting our initial cost at about $500 mil (this number is WAY too high, but for argument's sake). That gives us a net gain of $1.9 billion dollars in net revenue to be shared amongst the clubs.
These numbers boil down to $63 mil PER TEAM in Year One, and they increase as our startup costs are absorbed over the first season. Even if these numbers are double what they should be (and they aren't), we're still well over $30 mil per team in revenue sharing in Year One.
Now that's a spicy meatball.