Archive for Business of Baseball
Scranton/Wilkes-Barre Empire State Yankees will be stuck on a season-long road trip this year, playing “home” game in six different cities as PNC Field is renovated. Apparently the renovation is actually a total replacement, as Josh Leventhal reports that the current stadium will be torn down and replaced with a new $40M facility. That’s great, but the problem is that demolition must start on April 1st in order for the place to be ready for next season.
According to Leventhal, the $14.5M sale of the team from Lackawanna county to the Yankees and Mandalay Bay is still being finalized. Those funds are needed for the new facility, so construction can’t begin until a deal is hammered out. International League president Randy Mobley says the two sides are still negotiating, but “with this construction start deadline rapidly approaching, it is all going to become pretty evident, pretty quickly, what is or isn’t going to happen.”
There is no contingency plan in place if the stadium is not ready in time for Opening Day 2013. “This is a one-year arrangement, not to be repeated,” said Mobley of the team’s unfortunate 2012 plans. It’s bad enough that some of the organization’s best prospects will be stuck on the road all year with the Triple-A squad, doing something similar in 2013 would be a disaster. Everyone involved — especially the Yankees — has every reason to want to get a deal done so construction can start on time, and I suspect it will.
The concept of “face value” for a ticket to a baseball game is often an amorphous one. In our case, the Yankees price out their seats and sell tickets as part of a variety of packages at different place levels. Face value for one seat could be different for the face value of a seat in the same row or section by virtue of the associated season ticket package. By and large, though, face value as set by the Yanks is fairly constant.
Of course, as many fans recognize, face value isn’t the true value of the ticket. Baseball tickets are a finite resource, and only so many exist per game. If the tickets are priced at the right level and the team is good enough, the game will effectively sell out, and then the secondary market takes over. On the secondary market, people who buy tickets with an eye toward making a profit or those who can’t make it to the game are trying to find the true value of their seats.
Over the past few years, it’s been possible to buy many Yankee tickets at or even below face value on the secondary market. Demand isn’t high enough for all but the most sought-after games to warrant a high price, and discerning shoppers know that market value for a mid-week game against, say, the Royals or Orioles isn’t the same as a weekend affair against the Red Sox or Mets. Essentially, those of us who rely on the secondary market to feed our baseball needs have lived with dynamic pricing for years.
Despite innovation on the field, baseball teams have been slow to pick up on this dynamic pricing model. Some teams sell so-called premium games against good teams while others are content to price everything at the same level. That’s beginning to change though. As Kyle Stock wrote in The Daily this weekend, some baseball teams are set to embrace dynamic ticketing. The Brewers, for instance, will change prices on seats if it looks like Zack Greinke will face the Royals while the games in which he doesn’t pitch will see lower prices.
Stock reports on the way dynamic pricing came into being for baseball clubs:
In this case, the guy bucking the system was not a washed-up pro, but rather a 26-year-old fan finishing a Ph.D in economics at the University of Texas. In early 2009, Barry Kahn sneaked into a sports ticketing conference in Las Vegas. Armed with chutzpah and hand-cut business cards, he persuaded the San Francisco Giants to try dynamic pricing in about 2,000 of its worst bleacher seats.
“Basically, we saw that there was a huge price inefficiency here,” Kahn said. “Everyone was saying ‘StubHub is making all this money. How do I get a piece of that?’ My message was: ‘It’s your inventory. You have the ability to get the whole thing.’ ”
By the end of the 2009 season, San Francisco had a 20 percent attendance increase in its test seats and an extra $500,000 in ticket revenue. Three seasons later, Kahn is CEO of Qcue Inc., a profitable Texas-based company that will help 15 baseball teams set their prices this year.
As Stock notes, teams were hesitant to embrace this idea over fears of turning off fans. Some view it as institutional price gouging without realizing that it’s a lesson in Economics 101. Others are more willing to embrace it as it offers up a cheaper way to see more games at the expense of higher prices for the more generally desirable contests.
Here in New York, the Yankees haven’t yet embraced dynamic pricing. It may be slow in coming as the club would have to admit that their pricing models at the expensive new stadium haven’t been as rousing a success as they should have been. But they’ll get here. It’s unavoidable, and it’s a way for the team to tap into more revenue streams. After all, a cheaper ticket could lead to more people would should lead to more concession stands. The money somehow trickles up and into the Yanks’ pocket. For now, though, it’s the next great innovation in the business of baseball and one that should have made its debut years ago.
Via Mike Ashmore, the Triple-A Scranton/Wilkes-Barre Yankees will be renamed the Empire State Yankees for the 2012 season. The club will play all of its home games on the road this summer because of extensive renovations to PNC Field, including 60 games throughout New York. The new logos can be seen here and here, and will be featured on the team’s caps this season. They’ll go back to being the SWB Yanks in 2013. Pretty neat, guess I have to buy a hat while they’re available.
I’d be hard-pressed to tell you the last time I had a real ticket for a Yankee game. It might have been toward the end of 2010 when a friend of mine scored a pair in a corporate giveaway, and before that, who knows? The tickets I get through StubHub are all of the digital variety, and the few I’ve ordered straight from the source come as PDF files as well.
These 21st Century e-tickets, though, bring with them a decidedly 20th Century problem: You need a printer. Usually, when I’m going to a game with some friends, we spend the afternoon figuring out who has access to a printer and who’s printing which ticket. These are some serious First World problems, I know, but it’s something technological innovation should have figured out by now.
Up in Boston, the Red Sox seemingly have but with some twists. For Upper Bleacher seats at Fenway, the Sox will now be offering digital tickets. Instead of scrambling to find a printer with ink cartridges, the Sox are going to allow entry via the swipe of the credit card that originally was used to purchase the tickets. No more printing — and no more selling these seats on the secondary market.
“Over the past 10 years, we have intentionally held the price of the Upper Bleacher seating category at $12 per seat in order to provide family-friendly pricing options for Red Sox fans,” Red Sox SVP/Ticketing Ron Bumgarner explained. “The downside of keeping these low price points is that these tickets sometimes end up on the secondary ticketing market at significantly marked up prices. By requiring the primary purchaser of the tickets to attend the game through this Digital Ticketing Initiative, our hope is to gradually eliminate those purchasing these specific tickets solely for the purpose of resale, and instead get these tickets into the hands of fans and families all over New England.”
On the one hand, this move adds a level of convenience to purchasing tickets. On the other, it may skirt scalping and resale laws by limiting what one who purchases a ticket is allowed to do with the ticket. They don’t, however, plan on offering these types of tickets for every game. Certainly, the Red Sox should be applauded for trying to keep seat prices at a reasonable level, and I would imagine more teams will follow suit if this effort is successful.
Ultimately, Major League Baseball should be eying a move toward digital ticketing that some airlines are using. Most people carry around Internet-enabled phones that can display scannable bar codes. With such technology in place, we’ll never need a ticket — printed or otherwise — again. We’re not there yet though.
Notes! Everyone loves notes!
For Yanks, first half features three three ESPN Sunday Night Baseball games
ESPN released yesterday its slate of Sunday Night Baseball games for the first half of the 2012 season, and the Yankees, obviously, will be a prime player. Shockingly, two Yankees/Red Sox games will air on the World Wide Leader. Those will be on April 22 and July 8 when the Yanks trek up to Boston. ESPN will also show the Bombers’ first Sunday night meeting with Albert Pujols and the Angels on April 15.
As ESPN reminds everyone, former Red Sox skipper Terry Francona will be replacing Bobby Valentine in the booth this season. It’ll be interesting to see how he handles broadcast duties during that April 22 meeting between the two long-time rivals. I enjoyed Francona’s work during the playoffs when he filled in for an ailing Tim McCarver during the start of the ALCS.
Dave Checketts to head Legends Hospitality Management
Long-time fans of the New York Knicks will remember Dave Checketts as the president of the team who oversaw their spate of deep runs into the playoffs in the early and mid 1990s. Now the chairman of the group that owns the NHL’s St. Louis Blues, Checketts will be joining Legends Hospitality Management, the joint venture amongst Goldman Sachs, the Yankees and Dallas Cowboys that oversees concessions and sports marketing. Checketts, according to The Journal, “envisions building Legends into an international sports-marketing and entertainment business that advises franchises on media strategy, financing and building stadiums, then helps sell tickets and suites and handles concessions.”
As long as he doesn’t pull the sports marketing equivalent of trading Patrick Ewing for Glenn Rice on Legends Hospitality, the company will be in fine hands.
Roger Waters to play “The Wall” at Yankee Stadium
Finally, I’ve saved the best for last: The Yankees announced yesterday that Pink Floyd songwriter Roger Waters will bring “The Wall” to Yankee Stadium this summer. On Friday, July 6, Waters will perform at Yankee Stadium. Tickets go on sale on Monday, January 30 at 10 a.m.
The Waters performance though is almost an after-thought compared with the teaser in the press release. “In the near future,” the club said, “the Yankees will make additional announcements regarding other major acts that will be performing at Yankee Stadium in 2012. Information will also soon be available about other sporting events that will take place at Yankee Stadium during the summer months.”
Via RAB’s Twitter account, we speculated that the additional announcement could concern Bruce Springsteen. The Boss is on the road this year, and while he’s in Europe for much of May, June and July, the Yanks are out of town from September 3-13. It would be the perfect time for a concert, and it’s hard to find an act as major as Bruce on the road this year. We’ll keep an eye on this one.
The Yankees, baseball’s biggest spenders for the better part of two decades, may finally be eying something of a budget, according to a report by Joel Sherman. In a piece on Sunday, the New York Post scribe says that Major League Baseball’s Collective Bargaining Agreement and the other 29 teams’ attempts at keeping the Yanks’ spending under control may finally pay off in 2014 as the New York front office wants to bring its payroll below the luxury tax threshold. If the Yanks are truly intent on reducing costs, the club will not overpay for long-term deals in the near future and may focus on ushering in a new round of young players instead.
Sherman, who noted that this drive toward fiscal control has them lukewarm on top free agent pitchers Mark Buehrle and C.J. Wilson, explained the rational behind the Yanks’ thinking:
As an organization, they are saying they are driven to have a payroll of $189 million or less in 2014 when that becomes the luxury tax threshold. Because the incentives that come via the new CBA are just too great for them to ignore.
For if they are at $189 million or less for the three seasons from 2014-16, they not only avoid paying one cent in luxury tax, which would rise to 50 percent for them as repeat offenders, but they also would get roughly $40 million in savings via the to-be-implemented market disqualification revenue sharing program. However, only teams under the luxury-tax threshold get reimbursed in this program, which is designed to prevent big markets such as Toronto and Washington from receiving revenue sharing dollars, which in turn will lower how much teams such as the Yanks pay (as long as they are under the threshold).
And even if they just went under $189 million for 2014 before going over again in 2015, the Yankees would receive serious benefits. They would get about $10 million in the revenue sharing disqualification program. Also, by simply going under the threshold once, the Yankees would go back to having a 17.5 percent tax rather than the 50 percent that begins in 2014 for them if they never go under. Keep in mind that since the luxury tax went to 40 percent for them in 2005, the Yankees have averaged paying $25.75 million in tax annually.
So what’s going on here? How could the Yankees, who enjoy the edge of money with their new stadium, TV deal and various other revenue sources, suddenly become fiscally conservative? There are, in effect, three answers. First, the Yankee sources who are talking to Joel Sherman are being truthful. The Yankees know what they stand to gain by getting their payroll under $189 million in 2014, and they think they have the young pieces to do so. Plus, as Sherman writes, the Yankees say, “The big-name guys are a waste of time. We are not spending that kind of money.”
Next, they could be bluffing. Maybe they’re playing coy now to make a bigger move later in the year. If any free agent player wants to come to New York but the Yanks don’t want to meet that player’s asking price, it’s in the club’s best interest to put forward a plausible explanation for future that is fiscally conservative. Maybe they want to go big on Yu Darvish or Yoenis Cespedes but do not want to overplay their hand now.
Third, they’re laying the groundwork now in order to play it coy next winter. Right now, they have $72 million tied up in three players in 2014 — A-Rod, Mark Teixeira and CC Sabathia. They know that they’ll have to deal with Robinson Cano‘s, Curtis Granderson‘s and Nick Swisher‘s free agencies within the next two offseasons, and they will likely want to retain two of those three if not all three. Plus, the free agent pitchers could include Matt Cain, Cole Hamels and Anibal Sanchez while Mariano Rivera‘s current deal — and perhaps his career — is set to end after 2012 as well. That’s a whole lotta holes the Yanks are going to have to fill with an eye toward the 2014 luxury tax benefits.
Ultimately, then, baseball’s long-term effort to rein in the Yanks’ spending may be coming to a head, at least temporarily. Baseball has incentivized the Yanks to drop their payroll under the luxury threshold for at least a season. In 2007, the Yanks spent $189 million and won 94 games. They’ve spent over $200 million every year since then and will likely do so again in 2012. Change may be on the horizon though, and if it comes, it could benefit the Yanks’ bottom line tremendously as they gear up for another half decade of exorbitant spending.
Via Paul Sokoloski, the Yankees have informed their minor league affiliates in Scranton/Wilkes-Barre, Tampa, and Staten Island that they want them to drop “Yankees” as their nickname. “There’s only one team they want as the Yankees,” said Jim Timlin, chairman of the Lackawanna County Stadium Authority board in Northeast Pennsylvania. “And they live in the Bronx.”
“It was a recommendation,” added Timlin. “We don’t have to listen to them. But it would be a good idea to go along with them. The Yankees, when they come back [to Scranton] in 2013, may have a different name. Scranton/Wilkes-Barre-something. The naming rights are up for grabs.” The Triple-A Scranton franchise will play all of their 2012 home games on the road as PNC Field undergoes $40M worth of renovations.
There’s something fishy going on here, no? The Yankees just offloaded their stake in the Staten Island franchise, and now asked them to change their name. Meanwhile, they’re purchasing the SWB franchise … and are still asking them to change their name. I’m sure there’s some weird legal reason behind it, but it just seems off from where I sit.
Ray Bartoszek, a commodities trader with a net worth estimated at $5 billion, purchased a minority share of the Yankees today, according to a variety of sources. Forbes says Bartoszek’s investment values the Yanks at nearly $1.7 billion. As ESPN New York detailed, Bartoszek allegedly purchased another minority share from one of the team’s limited partners who wished to sell. The sale will not impact the day-to-day management of the ballclub.
Bartoszek has recently been interested in breaking into the MLB ownership club. He was a runner-up to purchase a stake in the Mets earlier this year, but his offer fell short to David Einhorn’s proposal. Instead he gets the Yanks. Once upon a time, John McMullen said of owning a small piece of the Yanks, “Nothing is more limited than being a limited partner of George’s.” These days, though, it’s a badge of honor and apparently a sound investment indeed.
Update (Sept. 15th): More from Pimpsner. Apparently Mandalay doesn’t want anything to do with the Staten Island franchise after the sale if the Yankees are not involved. They will likely look to purchase another team, and their are several on the market. Important thing to remember: SI will remain the Yankees affiliate.
In other news, Mandalay and the Yankees are teaming up to buy the Triple-A Scranton/Wilkes-Barre Yankees for $14.6M. Much of that money is going towards PNC Field renovations, which will force the team to play all their games on the road next year.
Original Post (Sept. 14th): Via Robert Pimpsner, the Staten Island Yankees are being sold to a NYC hedge fund manager for $8.3M. It’s the second time the franchise has been sold in the last five years, but the first time it was the Yankees and Mandalay Sports Entertainment that did the purchasing. Average attendance has been dropping in recent years, and the sale was financially motivated. It’s unclear if Mandalay will remain involved with the team, but the franchise will remain in Staten Island and affiliated with the Yankees. An official announcement is expected soon.
When Yankee fans return to the stadium tomorrow after nearly two weeks away, they will be greeted by a new set of sandwiches in the Great Hall. As The Post reported, Rich Torrisi and Mario Carbone, the braintrust behind Mulberry St. hot spot Torrisi Italian Specialities will be opening a branch of their new sandwich shop Parm tomorrow in the Great Hall. The branch of the sandwich shop will sell the Torrisi and a new meatball parm offering. No word yet on the prices, but the turkey sandwich goes for $11 at the downtown restaurant.
One of the investment partners, Jeff Zalaznick, spoke about the challenges facing the team as they prepare to expand their business. Usually, they sell 200-300 sandwiches per day, but with over 40,000 fans per game heading to the Bronx, their volume will increase. “For a small restaurant group, we have a lot on our plates,” Zalaznick said to The Post. “We’re probably the first restaurant of our size to do something like this. It’s a totally new market, who we hope will have an equal appreciation for our sandwiches.” Having a Torrisi sandwich outlet in Yankee Stadium greatly improves what I believe are lackluster food options in the new stadium; these sandwiches should be quite good. The bricks-and-mortar version of Parm will open later this summer.