Archive for Business of Baseball
Report: Yankees Global Enterprises carrying $2 billion in debt
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The Yankees’ holding company is currently carrying nearly $2 billion in non-stadium-related debt and $1.2 billion in stadium bond debt, according to a report in the Sports Business Journal. Despite these seemingly staggering numbers, though, Yankees Global Enterprises enjoys a cash flow high enough to make the debt, in the words of one baseball source, “very manageable.”
Daniel Kaplan has more:
The enterprise value of the companies composing YGE is roughly $5 billion, and cash flow at YES alone is expected to hit $208 million this year, sources said. YGE has been using the bulk of YES’s cash flow to reduce the regional sports channel’s debt, which is $1.448 billion, the sources said…
Neil Begley, a media and entertainment analyst at Moody’s Investors Service, which rates the stadium bonds, said ratio of debt to value for YGE was in line with other companies of its kind. “It is a significant amount of debt for a sports enterprise, probably among the biggest there is,” he said. “But if they cleared 2009, I would be hard pressed to think they would have economic pressure more significant than that.”
What also stands out about the debt is how little of it, $97 million, actually resides at the team. MLB’s debt regulations are applicable to the league’s clubs, but not to the clubs’ affiliates. It also underscores how the Yankees have shifted revenue to affiliates like YES and Legends, limiting the already steep revenue-sharing and luxury-fee payments, about $100 million, the club pays to MLB. The team also deducts about one-third of its $64 million annual stadium interest payment from its revenue-sharing commitment.
What makes this story so interesting isn’t necessarily the high debt total but rather the overall picture we get of the Yankees. This is a company that is financially healthy enough to be carrying $2 billion worth of debt, and the on-field product — the New York Yankees themselves — are responsible for just $100 million. By shifting debt to the other YEG holdings, as Kaplan notes, the Yankees are not subject to MLB’s debt regulations.
Going forward, it seems clear that money isn’t much of an obstacle to the Yankees. The team will have a budget, higher than anyone else’s, for the on-field roster because it will make them operate more efficiently, but as, say, Derek Jeter‘s contract comes due, the difference between $15 million and $18 million a year is negligible to the Yankees.
It’s worth also keeping an eye on how the team comes under attack when the collective bargaining negotiations begin next year. The original luxury tax/revenue sharing schemes were instituted to reign in the Yanks’ spending, but the team has kept on spending while making use of smart accounting and corporate practices that allow them to shift the revenue and debt to other affiliates. If the owners again go after the Yankees’ millions, I expect the Steinbrenner family to fight hard against it.
Spending the Steinbrenners’ dollars on the field
Posted by: | CommentsOver the past few weeks, those who follow the Yankees — from the beat writers to the bloggers and everyone in between — has grown concerned with the team’s dollars. From the perspective of a well-run organization, the Yankees are bleeding cash. They’re spending millions on A-Rod for far too many years; they are doling out checks to A.J. Burnett that his pitching can’t cash. They’re going to re-up with Derek Jeter for many millions more than he would get on the open market, and they seemingly want Cliff Lee as this winter’s shiny new toy.
It doesn’t take an economist to understand that the dollars behind these deals are tremendous, but we can see in all of its Spreadsheet-y goodness just how many bucks the Yankees have committed already. Via Cots, we learn that prior to this winter’s anticipated spending spree, the Yankees already have $107 million on the books for 2012, $94 million in 2013 and $73 million in 2014, the season after the free agencies of Joba Chamberlain and Phil Hughes. The Yankees may have a budget, but don’t expect that number to shrink below its current $213 million level any time soon.
But the real question is the one with which I opened this post: Should we be concerned? If we were looking for the next Moneyball, the next financially-constrained team to exploit an inefficient market, we might be worried that the Yankees aren’t fulfilling that criteria. We aren’t, however, engaged in that chase. Instead, we root for the Yankees and accept them for what they are: a financial behemoth that has the spending power and market ability to tower over the baseball landscape. What good is playing in New York City if you can’t take advantage of the fact that you’re playing in New York City?
Apparently, though, a few folks are worried. In the wake of the release of the MLB financial documents, some Yankee writers decided that, in light of Derek Jeter’s and Mariano Rivera‘s contract extension and Andy Pettitte‘s willingness to go year-to-year, Cliff Lee would not be a good investment. The Yankees might have — GASP — a $240 million payroll in order to compensate for the fact that their long-term aging players aren’t living up to their peak numbers.
Yet, the idea that the Yankees would raise their payroll by 10 percent over the next few years is hardly a revolutionary one. In fact, the Bombers’ payroll has risen by over 10 percent since 2007 and by nearly 100 percent since 2000. If I didn’t know any better, I’d almost believe the Yankees are printing money at will behind the marble of their new stadium in the Bronx.
In fact, that’s what Phil Birnbaum at Sabermetric Research says the Yankees are doing. Even though the Yankees claim they’re running a barely profitable business, Birnbaum delves into the figures publicly available and posits that, by delving up the business and selling off certain aspects of Yankee Baseball — including the TV rights — the Steinbrenner family is running a highly profitable venture, and the millions that reap can either be reinvested into the team or taken as a dividend outside of the revenue sharing scheme baseball has in place. If the Steinbrenners want to put a team getting paid $240 million onto the field, the only thing stopping them would probably be pressure from Major League Baseball.
So maybe all of this hand-wringing over Derek Jeter’s worth, value and contract prospects are for naught. Maybe the Steinbrenners don’t really care that they’re saying they’ll “take care” of Jeter because it’s small beans compared to the overall revenue picture. They can still provide for Jeter, sign Cliff Lee and perhaps even put together a decently-stocked benched next year. It is, after all, only money.
With finances laid bare, what future revenue sharing?
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Earlier this week, a leak rocked the baseball world. Now, this wasn’t your run-of-the-mill steroid leak. This wasn’t news of a player traded, suspended or otherwise disgraced. This was a meaty, juicy leak of MLB’s hard-to-find financial information, laid bare for all to see.
The documents, originally posted on Deadspin included the Pirates, Rays, Marlins and Angels in one leak, the Mariners in another and the Rangers in a third. The numbers are in line with what most industry-watchers perceived them to be. Small market teams have been, thanks to revenue sharing, turning small profits while putting teams of varying quality on the field. It’s not so much an outrage as it is a giant question mark for the future of the game and baseball’s next collective bargaining sessions in 2011.
Over at the Biz of Baseball, Maury Brown contextualizes the numbers in the documents. Since two of the clubs — the Angels and the Mariners — dole out revenue sharing money while three others — the Marlins, Pirates and Rays — receive it, we can see the disparity between the haves and the have-nots.
Florida, for instance, had a combined net income of $32 million over the past two seasons while receiving over $90 million in revenue sharing. The Rays had a net income of $15 million while taking it $74 million in other team’s money. If Yankee fans want to a bit jilted, they have every reason to. In a sense, our team is paying to compete against Tampa Bay this year.
This glimpse at the numbers leaves us wanting more. We don’t know how the Yankees’ finances look; we can’t see the Red Sox’s books. We can only guess from the Angels’ ledger — and their $30 million revenue sharing charge — the top-tier teams must contribute to Major League Baseball’s pot. Without a full sense of how each of the 30 clubs are doing, it’s tough to issue many conclusions about the state of revenue sharing and the luxury tax in baseball, but we can try.
Maury Brown, writing this time for Fangraphs, already has. In a piece earlier this week, he made the case for increased revenue sharing. Even though teams are seemingly overly subsidized, Brown wants to see what he terms “salary compression.” Because, as he puts it, “subsidizing clubs at the current levels that continue to lose repeatedly may not be incentivizing them to move up the standings,” the top teams’ spending must be reined in while revenue sharing continues in an effort to level the playing field.
Over at Sports Illustrated, Joe Sheehan has a different proposal. He would prefer to see Major League Baseball establish a market size-based model of revenue sharing. Instead of a welfare system where mediocrity — or downright losing — is constantly rewarded, Sheehan too pushes for something that can create economic parity by adjusted for the market. “If a team does a particularly good job of leveraging its market to make money,” he writes, “they shouldn’t be penalized for that. Similarly, if a large-market team becomes a sad joke, they shouldn’t get bailed out by dipping into the fund. Revenue-sharing shouldn’t be punishment for failure or reward for success; it should be a tool to create a fair and level field of competition.”
Should we, as Yankee fans, be satisfied with either of these answers? After all, although revenue sharing is billed as a way to penalize all of the teams, its primary purpose is to limit the Yankees’ natural economic advantages, and thus, any revenue sharing/luxury tax proposal will inevitably hit the Yankees the hardest. Some might say that if the Yankees are unhappy, the revenue sharing is doing the job, but as long as the Bombers are outspending everyone by significant margins, MLB’s shot at parity isn’t working.
It’s easier to say first what shouldn’t happen. MLB can’t simply increase revenue sharing money that goes to the teams without money. An extra $5 million in the pockets of the Pirates won’t help them become competitive. Perhaps it will allow them to spend more at draft time, but the two-win player $5 million can buy on the free agent market will be the difference between a 90-loss season and a 92-loss season. Fans won’t come out in droves for that quality of play.
Major League Baseball also cannot put itself in a position of penalizing owners for making a profit. It’s easy to fault the Pirates and the Marlins for taking millions out of their baseball clubs while the Yankees invest millions in the on-field product, but that’s a calculated business decision. Owners get into the game to make money, and the $10 million will do just as much on the field as it will in the pockets of an ownership group. The Yanks shouldn’t be paying out more dollars just so that the Pirates owners can enjoy higher profits from a team that’s consistently losing.
So we’re left trying to find some economic incentive to invest. Maybe baseball should allow revenue sharing for small market clubs on the verge of competitiveness. On a case-by-case basis, MLB can assess how much money a team would need to field a competitive club. Of course, this would lead to a situation where non-competitive clubs see their margins shrink. In essence, this could create contraction by market forces as the clubs that don’t compete can’t and are no longer viable MLB teams. The union would demand an expansion of the active rosters, but baseball would see the gap shrink between the haves and the have-nots simply by economic attrition.
Despite this glimpse into baseball’s tortured economics, we’re left where we started: with few real answers and no good solution to a problem that will dominate headlines for the coming year. Baseball certainly has a competitive imbalance as the Yankees and the Red Sox can pump more money into their teams in one season than some clubs can in three. Even as we learn more and more about baseball teams’ ledgers, to solve this problem while encouraging competitiveness remains an ever elusive goal.
Derek Jeter’s marketable edge
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Having five World Series rings is better than a panoramic vista view sunroof. Credit: AP Photo/Kathy Willens
To say that Derek Jeter is popular is akin to proclaiming New York in slight fiscal troubles. Both are understatements of the highest degree. In fact, no other Major Leaguers are, according to a recent Sports Business Journal survey, as popular and as marketable as Derek Jeter, and how the Yankees realize this marketability could impact Jeter’s off-season contract negotiations and his Bronx future.
Based upon the results of a survey sent to 49 sports business executives and media personalities, Derek Jeter is tops among baseball in terms of marketability. He appeared on 47 of the 49 ballots and garnered 39 first-place votes en route to 223 total points. Albert Pujols finished behind Jeter with 111 voting points. (The full results are available here.)
Those in media were universal in their praise of Jeter. “You’ve got the star power. He’s playing in the biggest market. He’s obviously an All-Star caliber player. And I think more important than anything else, he’s one of the few guys that has really just stayed out of all kinds of trouble and controversy,” Mark Feinsand, Daily News beat writer, said to SportsBusiness Daily. “He’s got a clean-cut image and he’s always lived up to it. Any company that would get into business with him wouldn’t be worried about waking up and seeing his face flashed across the front page for the wrong reasons.”
Jeter, says the business executives, is primed for a very successful post-baseball career as a brand as well. He has become synonymous with Yankee success and class, and marketers love the image he puts forward. “He’s just so consistent, and I think people feel that reliability,” Brandon Steiner, chair of Steiner Sports, said. “It’s just really unusual for a player and a personality like him to be that consistent for that long, all going in the right direction.”
While this news is all well and good for Derek Jeter’s accountant, for the Yankees, it is just another aspect of Jeter’s package to consider when he comes up for free agency in a few months, and it adds to the forces pulling the Jeter issue in various directions. As some coverage focuses on Jeter’s image, in today’s Times, Joe LaPointe looks at Derek’s slump. Through 89 games, Jeter is hitting .271/.335/.384. He has a 97 OPS+, but with an sOPS+ of 110, he’s still better than the average AL short stop by a significant amount.
The team though has reason for concern. He’s seeing a career low 3.53 pitches per plate appearance, hasn’t homered since June 12 and is hitting just .248/.324/.338 over his last 310 plate appearances. He also turned 36 last month and is due to take home $21 million this year. Brian Cashman recognizes that a prolonged slump at this stage in a player’s career could be more than just a slump. “We’ll find out at some point,” Cashman said last month of Jeter’s play and his ability to stick at short. “The clock runs out on everybody. Sometime in the future, it will be a real issue to deal with.”
As Jeter’s struggles continue and the Yanks continue to win despite his lackluster play, the jury is decidedly out on how his season will end. Buster Olney, writing today, thinks Jeter will recover because “his history tells you he’ll bounce back.” Baseball history, though, says that middle infielders playing in their late 30s aren’t too dissimilar from this year’s version of Jeter. But Olney also says that if Jeter didn’t carry that marketable image around with him, he probably wouldn’t get more than $5 million a year after a season such as this one. Fangraphs’ WAR valuation pegs Jeter to a three-win season which would be worth closer to $12 million annually. The truth is somewhere in the middle.
NoMaas, in a piece that analyzes Jeter’s new-found tendency to swing at too many pitches, ponders the same problem. “In a strange and perverse way,” SJK writes, “this could be a blessing in disguise for the front office, since a down year could give them a stronger position in contract negotiations additionally influenced by public relations and legacy.”
So with three months left in the baseball season, the Yankees find themselves stuck in the middle with DJ. Chances are good that, because of Jeter’s image and marketability, the proper contract length for the right amount of dollars will generate enough revenue to pay for a significant part of the salary. But the Yankees also need a short stop who can man the position and a hitter who isn’t a drain on the lineup. How much should Jeter earn? For how many years? As I’ve said this season, I’m glad I’m not the one making that decision.
The post-George still-Steinbrenner Era begins
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Hal Steinbrenner watches over his New York Yankees during yesterday's win over Tampa. Credit: AP Photo/Bill Kostroun
George Steinbrenner always had impeccable timing. He knew when to hire and fire managers in such a way that would generate the most publicity for the Yankees. He knew which free agents his team should have; he knew when his incendiary statements would garner the most outrageous coverage on New York’s back pages. And whether he realized it or not, he knew when to die.
As callous as that sounds, George Steinbrenner’s death could not have come during a better year for the Yankees than in 2010 for this is the year the estate tax has lapsed. Prior to 2010, those with estates of over $3.5 million were taxed at a rate of 45 percent. After 2010, those with estates over $1 million will be taxed at a rate of 55 percent. This year, though, Congress allowed the estate tax to go uncollected, and although some Senators wish to restore the tax retroactively to January 1, for now the Yankees are off the hook.
For the post-George Era, it’s hard to understate the impact this good luck has on the Yankees. Estimates from Forbes Magazine pegged Steinbrenner’s worth at over $1 billion, and the Yankee heirs would have had to liquidate some of his holdings to raise the money for a $450-$500 million government bill. Despite the value of the Yankees, the family apparently doesn’t have that much cash on hand, and the Steinbrenners may have had to sell a large chunk of the team to do so.
The point though is moot. As Forbes’ William Barrett wrote, the family has spent a lot of lately working to avoid that reality. The team is controlled by a variety of holding companies of which the various Steinbrenner children are the controlling shareholders. Major League Baseball officially recognized Hank and Hal Steinbrenner as the team’s day-to-day operations heads in 2008, a move made to protect the family’s control over the club. The family, says the Associated Press, wants to avoid falling into the same trap that plagued the Wrigley’s when then-Cubs owner P.K. Wrigley died in 1977.
But questions surrounding club ownership remain. Do the Steinbrenners want to cash in on their billion-dollar gem? Do the sons want to be as involved as the father was? So far, the family has given every indication that they will not be selling the Yankees, as Joel Sherman wrote on Friday. The Post scribe, well-connected in the upper echelons of the Yankee Front Office, offers up this revealing take about life after George initially stepped down:
Hank Steinbrenner — think a combination of hot-headed Sonny and underwhelming Fredo — briefly oversaw baseball operations after the 2007 season. He quickly burned out, not fully understanding the time and scrutiny that came with the job, especially if you were going to try to be Boss Jr. with loud proclamations.
Hal stepped into the breach, though it felt more out of responsibility to the family business than love for the job. So there was an assumption that whenever George died, so to would the Steinbrenner obligation to owning the franchise. It was not hard to imagine a frenzy of the super-rich bidding to buy the Yankees after George’s death.
Reserved and protective of his privacy, Hal projected the wrong fit for the job. Except Hal did a funny thing: He changed the way the Yankees Boss operates. Over the past few years, he learned he actually could run the Yankees under the radar. He has managed leadership without bluster or much inspection of his private life. He rarely speaks in public, offering almost none of the state of the Yankees messages that his father could deliver multiple times a day, especially in bad times. Does Hal burn to run the Yankees like his father? No. However, he has learned to like this job, and — as it turns out — the Yankees are in the Steinbrenner family blood now; George’s four children all having grown up in pinstripes.
Randy Levine, current team president, succinctly summed up the family’s thinking. “They have no plans to sell. There are no succession issues,” he said to Sherman.
Hal is, as Sherman puts it, the “cautious” version of George Steinbrenner. Whereas George’s brashness made baseball popular and rich off the field, Hal plans to own the game on the field. He’s a quiet and collected individual who knows when to delegate and knows when to step in. He’s willing to support a high-payroll team and understands that victories equals dollars in the world where Yankees and the YES Network dominate New York.
In one of the better business columns written about the Yankees post-George, Joe Nocera of The Times explains how George got lucky. The Yankees became so valuable because of their preeminent place in the country’s number one media market and because they started winning at the right time in the nation’s economic path. George happened to be the guy holding the reins, and although he made a lot of good decisions, he made some bad ones too. He didn’t sell when the chance arrived, and good fortune smiled down upon him. In a smaller market — had he bought the Indians as he so desired — George Steinbrenner might just be another irascible owner lost to the pages of baseball business history.
With a history of sports ownership in tow, the next generation of Steinbrenners will look to build on their wealth through wise investments. Luck always plays a part of the capitalist market, but so too does diversifying and smart management. According to one British tabloid, the family may bid £450 million on the Totteham Hotspurs with Hank taking his turn atop that Premier League team. Baseball owners have a mixed track record within the EPL, but it’s a start. The club reportedly has no interest in buying into the NFL, NBA or NHL.
For now, fans should see nothing new. The Steinbrenner family will invest and try to win those championships. The looming axe won’t be there to fall, but the pressures of a high payroll will remain. It is, after all, always beneficial to be in the business of winning. That’s what George was, and that is what his children should be.
Secondary market prices up 77 percent for Friday
Posted by: | CommentsOur partners at TiqIQ have put together the following graphic on ticket prices since George Steinbrenner passed away yesterday. With the Yanks out of action until Friday, tickets for the game have increased by 77 percent since Tuesday morning. Those seats that are generally the least expensive have seen the biggest increase with Grandstand prices spiking by nearly 200 percent. For those looking to buy and those looking to sell, the market strikes me as capitalism the Boss would have loved.
Could Super Two changes affect the Yanks?
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Frankie won't be cheap forever. (Photo Credit: Rob Carr, AP)
Once young players started to become more prominent in baseball’s post-PED, post-megacontract era, the intricacies of arbitration and free agency and service time started to become more well known to the common fan. In a nutshell, the player will earn close to the league minimum for the first three years of his career, then go to arbitration and earn a salary comparable to his peers for the next three years, and then he’ll be eligible for free agency. Of course it’s not entirely that simple, talking specifically about Super Twos.
Teams have begun to exploit the process by keeping their best prospects in the minors for a few weeks to start the season, which essentially gives them another year of control over the player. Instead of six years of production at below market rates, the team gets six and a half years, six and two-thirds, something like that. A lucky few fall into the Super Two category, which happens when they fall just short of the three years of service time needed to qualify for arbitration. Those players instead go to arbitration four times. Robbie Cano, Melky Cabrera, and Chien-Ming Wang were all Super Twos, but the Yankees signed Cano to a long-term deal before the arbitration process became a hassle.
Once the Collective Bargaining Agreement expires after the 2011 season, it seems all but given that the player’s union and the owners will make some changes to the arbitration process, but no one knows exactly what. Not even the two sides at this point, I assume. The Super Two provision is sure to be addressed in some manner that will either a) put more money in the player’s pockets, or b) bring them closer to free agency, I’m almost sure of that. Perhaps one solution is setting a very specific date in the season that serves as a cut off; if you call up the player before that date he gets a full year of service time and is that much closer to free agency, but if you call him up after that date he gets just a partial year of service time but goes to arbitration four times regardless. I dunno, just spit-balling ideas.
Anyway, how is all this going to affect the Yankees? The team currently boasts more young players than it has at any time in the last decade and a half, and soon enough the big paydays will come. The first two come this offseason, when Phil Hughes and Joba Chamberlain go through the arbitration process for the first time. Both are going to get raises into the $2-3M range, maybe a touch less, but that won’t financially kill the Yankees. Those two are the only first timers.
Down the road, the only four players currently on the 40-man roster that are in line to qualify for Super Two status are Ramiro Pena (after 2011), Frankie Cervelli (2011), Jon Albaladejo (2011), and Romulo Sanchez (2012). Brett Gardner falls about two weeks short of qualifying as a Super Two after next season, David Robertson a little more than that. The extra year of team control for Gardner is going to save the team something like $3M in the long run, which may not sound like much, but it’s actually $4.2M because of the extra 40% tacked on by the luxury tax.
Of the four players in line to become a Super Two, Cervelli is the safest bet to actually get there. Pena could go down at any moment in favor of a more experienced utility infielder (similar to what happened last year when the Yanks acquired Jerry Hairston Jr.), and both Albaladejo and Sanchez would have the spend the entire 2011 season (and 2012 in Romulo’s case) on the Yanks’ 25-man roster or Major League disabled list. That’s unlikely to happen for obvious reasons, though Albie will be out of minor league options next year, so it’s always possible. Stranger things have happened.
Cervelli has the backup catcher’s job locked up for the foreseeable future, and there’s really no reason to expect him to go back to the minors anytime soon. Jeff Mathis received $1.3M his first time through arbitration, Gerald Laird $1.6M, and frankly I can’t come up with better comparables for Cervelli. I get the Melky vibe hearing those numbers; Frankie’s a great guy to have around when he’s making six figures, but once you tack on that seventh one, suddenly the appeal isn’t so great.
The Super Two issue is more of a factor for guys who have yet to reach the big leagues. Jesus Montero, despite his subpar 2010 season, is still expected to be a long-term fixture in the Yankee lineup, and Austin Romine is right behind him with the expectation of being an every day catcher. Depending on when those two are summoned to the big leagues and how the arbitration rules are changed, it could end up costing the Yankees in both money and years of team control.With more than $73M (over $102M with luxury tax) already tied up in just three players during the 2013 season (not counting Derek Jeter), the Yanks are going to need as much production out of cheap players in their pre-arbitration years as possible.
I don’t know how the next CBA will alter the arbitration process, but chances are it’s going to cost teams somehow. They’ll either lose some kind of control over the player or just plain old have to pay up, and as they tend to do, the Yankees will have to pay more than everyone else.
Under Armour to sponsor Stadium Slugfest
Posted by: | CommentsWhen Yuri Foreman and Miguel Cotto take centerstage at Yankee Stadium this Saturday evening for the highly anticipated Stadium Slugest, Under Armour’s presence will dominate the ring. As CNBC’s Darren Rovell reported this afternoon, the sports apparel company has signed on to sponsor the title bout. The company will get signage throughout the ring and will air a commercial on the stadium’s giant jumbotron.
“We liked the opportunity of being part of the first fight in new Yankee Stadium and being live on HBO,” the company’s senior VP of brand Steve Battista said to Rovell. “We’re also focused on our current campaign of combine training and boxers go through a level of combine training that is levels above anything else.”
In other fight news, Todd DuBoef, president of Top Rank, the company promoting the fight, said that sales have been going “very well.” The stadium will be configured to seat 30,000 on Saturday night, and the coverage of games on YES has been inundated with ads for the bout.
Yankees, Scranton extend PDC through 2014
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The Yankees will be in Scranton through at least 2014, the club announced yesterday. The big league organization has opted to extend its player development agreement with its AAA franchise to cover the next four seasons. Additionally, SWB Yankees LLC, the joint venture between the Yankees and Mandalay Bay that manages the team, has also re-upped its agreement for the same length of time.
“We remain committed to having our Triple-A franchise in Scranton/Wilkes-Barre,” Yanks’ COO Lonn Trost said. “The market offers us an excellent combination of business opportunities as well as player development and baseball operations efficiencies. We are delighted to be extending our relationships in Scranton/Wilkes-Barre.”
Scranton has been home to the Yanks’ Triple-A affiliate since 2007, when the team left Columbus after a 28 year relationship. The team made the move to bring its highest level minor league affiliate closer to New York, and it doesn’t get any closer than Scranton. The PDC extension is good news yet unsurprising because it really is a match made in Triple-A heaven. With a strong fan base, geographically favorable and good business opportunities, it just makes sense for both sides.
Despite this convenience, a PDC renewal was no sure thing last year. As the Yanks adjusted to life in Scranton, the club found that the ballpark needed $13 million in upgrades due to a bad drainage system, and Scranton was not too keen on building a new stadium for the team. Still, the Yanks are committed to working through these problems.
“We look forward to continuing to work with county leadership and members of the Multi-Purpose Stadium Authority of Lackawanna County to develop a plan to significantly improve the current stadium or replace it with a new one,” Trost said.
With this news, Kei Igawa too stands to benefit as he’ll have a few more years to build on his career franchise-record win total.
Additional reporting by Benjamin Kabak
To gouge or to capture? That is the question
Posted by: | CommentsAs American businesses have grown accustomed to life under a bad economy, consumers have seen long-established pricing practices thrown by the wayside. The airline industry has been the one taking the lead here, and the most notable example came last week when Spirit Airlines announced they would be charging for carry-on luggage.
Spirit’s CEO subsequently explained their pricing rationale. Their base fares would be reduced by $45, and those who wanted to bring a piece of luggage on board would have to pay the unbundled $45 to do so. Potential customers were unhappy but only because this is a new — and sensible — way to price a commodity. By paying for component parts, we are paying for what we need and want to use. If only telecommunications and cable providers would follow such a path.
In baseball, economics are moving in new ways as well, and the Yankees have been among the prime motivating factors. The team has long been a hot ticket in New York, and road attendance has risen as well. Last year, the Yanks averaged over 34,000 fans per game on the road, tops in the AL and second overall to the Cubs. Teams such as Tampa and Kansas City that don’t draw well regularly see record crowds when the Yanks come to town.
As such, teams have wisely jacked up prices when the Yanks come to town. Tickets and concessions are priced for premium games, and it works because the market forces of supply and demand can dictate the prices. If a potential fan is willing to pay more on the secondary market for a chance to see a premium team play, the home team should be trying to capture that added revenue.
What happens though when teams start bundling tickets? That’s the question Craig Calcaterra raises today. He highlights two Consumerist posts — one on the Mets and one on the Dodgers — that expose a new practice. Instead of selling individual tickets to games involving the Yankees, these teams are requiring their fans to purchase Yankee tickets as part of a season- or package-ticket plan. For Yankees/Mets games, fans have to buy tickets in groups of five or more. For Dodgers/Yankees games, Los Angelinos have to purchase at least a seven-game mini plan. (The Orioles, I believe, instituted this practice last year when Yankee fans started overwhelming the Baltimore crowd.)
Loyal fans, of course, aren’t happen. Said the Mets fan who reported his tale to Consumerist to his ticket agent, “I’m going to be blunt with you. That is a horrible practice. The fact that I have to buy four extra tickets to get a guaranteed good seat ticket right now is horse shit. To be honest you have just turned me off from buying a ticket for the rest of the season.”
From an economics perspective, though, teams should have done this years ago. The demand for these premium games is great enough for the team to try to get fans interested in other non-sold out games as well. The teams want to capture more fans, and if they alienate a few fans along the way, well, then others will just take those seats instead. What makes people uncomfortable with it is that it’s a new practice. Had the ticket office been run as a sensible business from the start, teams would have been bundling years ago.
Calcaterra wants teams to “what the market would bear for the hot seats and sell them individually,” but he freely admits its an emotional reaction to what he views as sensible economics by clubs looking to milk money out of fan attraction. We might not like the blatant money grab, but that’s the way the capture market works.
