« Archive for February, 2009

From Darren Rovell:

A Bank of America official told us that for every $1 they spend on sports marketing, they net $3. They also said that out of all the new checking accounts that were opened in 2008, 10 percent of those were attributed to their sports marketing programs.

In other words, the fallout on the Yankees deal was political, not business.

That estimate seems a bit much, but I wouldn’t be surprised if sports marketing yields a higher return than most traditional forms. I also wouldn’t be surprised if that ROI is dampened by wasteful spending, which inevitably will come when companies are rubbing elbows with jocks and other assorted famous people.

CNBC had Casey Wasserman on to discuss the merits of sports marketing (to no one’s surprise, he’s bullish, but he does a decent job of selling it). And to celebrate CNBC’s long-awaited launch of embeddable videos, here you go:

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No surprises here, but still a blow to the Yankees a month before opening the new digs:

The deal was being termed as a “pseudo stadium naming rights deal” because the two parties had discussed giving the bank premium branding in the new Yankee Stadium.

On Thursday afternoon, Bank of America confirmed to Newsday that talks were suspended last month.

A Yankees official told CNBC on Thursday that the two mutually agreed to part ways after seeing the heat that Citigroup was getting for putting its name on the new Mets stadium.

Let’s say the deal would have brought the Yankees $5-10 million per year. That would make it a fairly typical mid-market naming rights deal — even though it’s not actually a naming rights deal. So the question is, with the financials out of the picture, who is going to pay that much for an expansive in-stadium sponsorship? Especially when the naming rights market is comatose.

If anyone can do it, it’s the Yankees. But unless they’re announcing a new partner next week, it’s going to be very difficult to get all relevant signage up by Opening Day.

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A proposed solution for an annoying problem.

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At least if you go by the Vegas over/unders, which have the Nats winning 68.5 games. I’ll take the over on that, as will PECOTA, which has them a surprisingly robust (if still mediocre) 80-82.

The Nationals definitely have a couple things going for them, including a field manager who actually knows what he’s doing. Washington has so many moving parts, and so much excess at certain positions, that having someone like Manny Acta to sort it all out is a major plus.

They also have some very talented players, most of whom were either injured, slumping, or playing elsewhere in 2008. That includes Ryan Zimmerman, Adam Dunn, Lastings Milledge, Nick Johnson, and Elijah Dukes. PECOTA assumes full seasons from the first three, all well above last year’s levels (assuming Dunn replaces Willie Harris, Aaron Boone, Dmitri Young, etc.). As for the latter two… well, your guess is as good as mine. PECOTA has Johnson and Dukes combining for 500 plate appearances, with EqAs of .302 and .312 respectively. If those two are healthy (and out of trouble), the Nats will be much better on both sides of the ball.

But even without them, Washington should be able to put runs on the board; it’s preventing runs that will be the problem. This depth chart isn’t pretty; the top four are pretty much set, and all are projects. If they all hit, it’s a damn good rotation; maybe Daniel Cabrera has his Oliver-Perez-2004, and Scott Olsen gets his head on straight. But they’re all just as likely (if not more likely) to be sub-replacement level. And in that case, it won’t matter how many runs they score.

But even so, 70 wins shouldn’t be a problem. None of Washington’s regulars, aside from Christian Guzman, produced significantly more than expected last year. So in other words, there weren’t a lot of breaks, which helps explain their 59-102 record. They might not be able to compete just yet, but crazier things have happened. And if the breaks go their way, I wouldn’t rule out a winning season in Washington.

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This is an incredibly important question for Disney, which relies on its cable networks (of which ESPN is by far the biggest) for 49% of its operating income. For comparison’s sake, the cable division brought in over six times as much in profit as the company’s broadcast networks (i.e. ABC), which used to be the crowned jewel of any media company lucky enough to have one.

The difference is that cable networks have a dual revenue model: advertising and subscription fees. Pretty much everyone who has cable in the United States (about 98 million, according to the WSJ) pays $3.65 per month for ESPN, the highest rate of any network. That’s about $4.3 billion in revenue… and that’s just the primary network, and only in the United States. So even if ESPN did exactly $0 in advertising, it would still be an incredible business.

But what happens if IPTV takes hold, and all those sub fees disappear? Or if, in a less extreme case, cable became a la carte? Could ESPN survive as is? Could Disney?

Well, here’s one possible solution: maybe ESPN should jump the gun, and start offering their networks online. Could they get die-hards to pay $100-120 per year for the service (i.e. 2-3 times what your grandmother pays for ESPN on cable)? I don’t think it’s out of the question, and it definitely won’t be in a year or two when there’s a bit more convergence between your computer and your TV.

This is probably the model all networks will have to go to in order to remain big businesses. The broadcast networks still have huge audiences today; they’re in every home in the US, so how could they not? But even they are struggling to keep up their ad rates, and that was true even before the recession hit.

Expect lots of middling cable networks (the ones that nobody ever watches but are still profitable because of sub fees) to disappear once cable is gone. But the really strong brands, like ESPN, should still be able to thrive. Getting ahead of the game would help immensely, and I think we may see this sooner than most think.

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From what I’ve heard, there are already a few teams doing this, and probably will be more as teams cut costs during the recession. I’m sure there will be some people that get pissed, and will throw it back in the Rays’ faces if they a) don’t win 97 games again, or b) reemploy an advance scout at some point in the future. But that’s really missing the point, which is that the Rays are simply looking for a more efficient way to spend their capital.

Joe Maddon seems to be on board. He actually summed it up better than Friedman did:

“When an advance scout goes in there, he’s seeing it for three, four days,” he said. “The data we’re going to accumulate goes over a longer period of time, which would indicate it’s more correct and not as much one man’s subjective opinion. We feel as though this may be the next level of advance scouting.”

Exactly. You can have the best advance scout in the world; he’s still only going to get 3-4 days worth of information, and one man’s eyes are never going to be able to match the reams of data that come out of objective statistical programs anyway.

Also note that the Rays aren’t firing their advance scout; they’re just using him in a more localized way. That cuts out all the travel costs, and gets a lot more bang for the buck. As Friedman said, in a perfect world they would do it both ways, but we’re obviously not in a perfect world right now.

So as much as people flipped when Oakland and Toronto cut their amateur scouting staffs way back when, this is a much more logical move. There’s so much information on Major League teams and players, and video is so accessible, it probably isn’t worth the trouble to fly somebody around the country anymore (especially not when the economy is this bad). A few years back, the Cardinals used to have Jim Leyland scout the National League exclusively from PNC Park; that seems like a pretty reasonable setup, even if it’s not a traditional advance scout

Amateur scouting is still a very different game; there is no pitch f/x system in Georgia high schools, and the amount of usable objective information on amateurs is still very limited. Could teams cut back some? Probably, but there’s enough value there to not be a slam dunk obvious move. Advance scouting, though, is rightfully on the chopping block, and I wouldn’t be surprised to see more of these stories in the next few months.

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My latest BP post is up, looking at baseball’s place in the new media sector. Long story short, it’s pretty promising. In twenty years from now, people will probably be watching baseball in similar ways as today: live, and with commercials. There aren’t many other forms of content that the same can be said about.

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Of course:

FORT MYERS, Fla. — Boston Red Sox owner John Henry is renewing his call for a baseball salary cap.

Henry said Wednesday he thinks all owners would support an “enlightened” salary cap to improve competitive balance and that players might agree. He did not give details.

Here’s the thing: if there’s any team that can benefit from a cap, it’s the Red Sox. Henry probably figures they could institute a cap right around the luxury tax threshold, and therefore only really affects the Yankees. In exchange, they could institute a relatively high payroll floor, and make the Pirates and Royals of the world spend their revenue sharing checks on player payroll.

As has been discussed, this could kill small market teams, but it would be great for the Sox: they could keep spending about what they already do, the Yankees would have to surround their top five guys with a bunch of pre-arb players, and the small market teams would eat it up anyway (since they all seem to be masochists).

The Red Sox are very smart. They rarely do things for no reason, without putting serious thought into it. Granted, this could just be a political thing; big market owner fights for egalitarian policy, even though it has no chance of ever being put in place. But you never know, maybe they have something up their sleeves when they say they support an “enlightened” cap… whatever that means.

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So here’s an interesting one (hat tip: Pinto):

Free agents cannot be traded before June 15 without their consent, but the union will permit Cruz and other Type A players to waive that right, according to Rob Manfred, baseball’s executive vice-president of labor relations.

Such a waiver would enable the Diamondbacks to trade Cruz immediately after signing him. The D-backs would need to strike a deal within a set amount of time, probably 48 hours, major-league sources say. If no trade were completed, Cruz would remain a free agent.

“Historically, the union has been reluctant to allow advance waivers on blocking trades,” Manfred said. “They’ve expressed a willingness to allow it. We’ve given clubs advice on how to operate given the union’s willingness.”

No, players arent totally free agents. Manny Ramirez might have to take less to sign with another team… but that’s the whole point of the compensation system, which the owners have collectively bargained for. It’s only the marginal guys, like Cruz, who really get shafted by mistakenly being labeled a Type A free agent by Elias.

The easiest solution would be to finally give Elias the boot. They are the Microsoft of baseball stats, constantly trying to catch up with smarter competitors, but still getting the lion’s share of the business, just because they always have. If STATS Inc. or BIS or pretty much any other non-Elias company were put in charge of this process, Juan Cruz wouldn’t be a Type A in the first place.

But is it really worth it for the players to fight this issue? Probably not, at least in terms of net dollars (i.e. they’re not going to be able to increase the overall pay scale by making the rating process more realistic). But it’s certainly worth it for the owners to take the not-so-drastic step of changing providers; why should the D-Backs be rewarded by Elias’s ineptitude?

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Let’s take this step-by-step:

  1. 2007-2008 winter: Billy dumps Nick Swisher and Dan Haren for prospects, and publicly acknowledges that the A’s are rebuilding: “Our status quo going into next season was mediocrity at best,
    that’s my opinion. The cost of indecision for us was probably a bigger

    “We don’t want to sit around and pretend. We knew the day was
    coming we were going to start over. If you do it when everyone thinks
    you should, you’ve waited for too long.”

  2. July 2008: Proving that he wasn’t kidding around, Billy trades Rich Harden and Joe Blanton, even with the A’s just a handful of games out of first place.
  3. Winter 2008-2009: Billy acquires Matt Holliday; head-scratching ensues. The A’s also sign Jason Giambi and just miss out on Rafael Furcal, signaling that the rebuilding is officially over.

So what’s going on here? After one season (and one draft), Billy is done with his rebuilding process? After talking about having to “start over,”and doing it the right way? That doesn’t seem right.

But here’s the thing: the financial meltdown in September changed everything. The economics of losing are now very different. It’s a lot harder to be bad now than it was two years ago; attendance could completely fall off the table.

But last time around, I used the Pirates as the example, and said that they were still better off losing in 2009. After all, the investment they would have to make in order to become at least an 85-90 win team would be much higher than whatever the downside risks were.

But the A’s are in a much different position. In BP’s third-order standings, the A’s were just seven games off of the Angels, whereas the Pirates were thirty-three games behind the Cubs. Considering that A’s barely tried to field a team last year, and the Angels were losing significant talent off of their ‘08 roster, Billy probably realized he could have a shot at winning the division. Given the potential downside of fielding a 65-70 win team, it was worth it for the A’s to take a chance.

They would still have to add some talent, but the economy actually helped here too. With the market down, free agents would actually come cheaper. Wheras Jason Giambi may have been out of their price range in a better economic atmosphere, he actually fit in nicely with the market slumping.

Is this what happened? Who knows, but it makes a lot of sense, and it wouldn’t have been that hard to see back in October and November.

And on a related note, PECOTA has the A’s winning the AL West. Color me unsurprised.

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