Brian's Liable to be Just SICK About This One

[pdub]

Baseball and all...such as it is...it's a shame when a well qualified and experienced professional guy can't seem to rein in and control a herd of employees who make 7 or 30 times as much as he does, as boss. That's gotta be a tough situation.

http://msn.foxsports.com/mlb/story/boston-red-sox-fire-bobby-valentine-as-manager-after-one-season-100412

[Brian Lohnes]

Bobby V was a jerk from day one and managed this team like someone who was totally lost. The best decision this team made in the last 13 months was to fire his ass during a breakfast meeting today. I was sick when they hired him...today is a day to celebrate his dismissal.

[pdub]

Bobby V was a jerk from day one and managed this team like someone who was totally lost. The best decision this team made in the last 13 months was to fire his ass during a breakfast meeting today. I was sick when they hired him...today is a day to celebrate his dismissal.

Brian you're a way smart educated guy, with so many impressive accomplishments to your credit at such a relatively young age. And a baseball afficiando as well.

I'm asking, honestly, you can help me. You can help me with the baseball math in particular. I'm not kidding, I need some help understanding it.

Can you in a nutshell explain to me (or maybe lots of other folks here) the anatomy of the professional baseball financial structure? Or maybe every other professional sport?

Here's what I think I know, here's where it starts in my mind. Please, shoot me down, please.

The big city makes the city dwellers in most cases pay for a referendum or extra taxes or something to pay for the huge gargunatan stadium where the team will play.

Somebody, usually the team, the team gets all of the parking and concessions, even after the city dwellers have paid for it all already. (Stay with me)

And the TV networks pay huge contracts to the leagues to cover the games so they can sell TV advertisements at an inflated rate because lots of people watch.

All of that in turn leads to the rationalization that a single athlete is worth millions of dollars a year so they can all sell tickets and concessions and advertising, because if we don't have great athletes, nobody will watch.

It can't be that easy. What am I missing?

[Brian Lohnes]

Can you in a nutshell explain to me (or maybe lots of other folks here) the anatomy of the professional baseball financial structure? Or maybe every other professional sport?

Here's what I think I know, here's where it starts in my mind. Please, shoot me down, please.

The big city makes the city dwellers in most cases pay for a referendum or extra taxes or something to pay for the huge gargunatan stadium where the team will play.

I am personally not a fan of public money paying for stadiums, but I do agree with what Massachusetts did with the construction of Gillette Stadium where the Pats play. Basically, Bob Kraft paid 285 million to have the stadium built. The state spend $70 million for infrastructure upgrades to the roads and stuff around the area. I bet the stadium itself through games, concerts, and other events generated about 10 million per year in tax revenue for the state (remember all those tickets, concessions, etc are taxed. Also, you have the millions of dollars per year in merchandise the team sells which is also subject to the sales tax. On average stadiums have a life span of 20-30 years. The state will DEFINITELTY come out ahead on this one in the long run. If they had thrown in hundreds of millions, that would not be the case and any city/state that does is foolhardy in my opinion.

Somebody, usually the team, the team gets all of the parking and concessions, even after the city dwellers have paid for it all already. (Stay with me)

See above


And the TV networks pay huge contracts to the leagues to cover the games so they can sell TV advertisements at an inflated rate because lots of people watch.

Being somewhat in this game of advertising sales (albeit an amoeba when compared to a sports league), I can say that the bigger the viewing audience the more it should cost to be in front of that audience with your product.

All of that in turn leads to the rationalization that a single athlete is worth millions of dollars a year so they can all sell tickets and concessions and advertising, because if we don't have great athletes, nobody will watch.

As mystified as you are to the reason that most sports fans aren't pissed about how much these guys are paid, I feel the same way about people that are torqued off by it. While I agree that it is wild to have a guy paid 30 million bucks a year to hit and catch a ball, I would also argue that professional athletes have a much more direct role on the value of the company (team) they are playing for than a guy working for Large Corporation X. For example, look at the Jets. Revis and Holmes are done for the year. That team is going to suck and probably implode before it is all said and done, barring a miracle. If a senior manager at Large Corporation X walks out, he is replaced and life goes on. Such isn't the case with athletes at the professional level with specialized skills. When teams suck, like the Pats did for so long, people stop going to the games, they get blacked out of television coverage, and both the team and local economy suffer from that. I'd agrue that those guys have a substantial impact on the whole cycle. I am not saying it is right or wrong, but I am saying that those are some of the reasons the guys make big bucks.

It can't be that easy. What am I missing?

It may be that easy. I just don't see the big problem with it.

[Brian Lohnes]

Also, to play devil's advocate, what is the difference between a guy playing baseball or football and making huge money and someone with a guitar and a set of drums doing the same?

[pdub]

Also, to play devil's advocate, what is the difference between a guy playing baseball or football and making huge money and someone with a guitar and a set of drums doing the same?

At least I got it right, thought was way wrong.

And the guitar player or the drummer, they don't need to to sit in the whirlpool or the ice bath afterward, or go to the hospital and get stitched up.

Okay, I can deal with that analogy.

It still ain't fair. The cash flow is not the same, not nearly. Not even close.

[Barry Donovan]

I learned the big numbers are just said, the fine print is very meticulous.
if a superstar goes out on a sprite, it is big bucks, like a hendrix of the 60s guitar..right place right time.

jordan, bird
gretzky..

they go way beyond the career of a league.

they got alot of rules. not even politicians stay that good.

[Brian Lohnes]

Cash flow isn't the same for hugely popular musicians and pro athletes?

The league minimum in the NFL this year for a 3rd year guy is $650,000. Most careers in the NFL last three years and there are far more guys making the minimum or really close to it than millions per year.

The last concert tour for the Rolling Stones generated them more than $500 million dollars.

[SuperBuickGuy]

Also, to play devil's advocate, what is the difference between a guy playing baseball or football and making huge money and someone with a guitar and a set of drums doing the same?

the number of brain injuries at retirement.... that's the one that springs to mind at first

[Brian Lohnes]

I see your point there but I would counter with a long list of musicians that never lived long enough to see retirement due to chemically induced brain injuries.

[Ron Ward]

There are plenty more high-quality, high-paid athletes than there are high-quality, high-paid musicians. Sure, there's plenty of high-paid performers who THINK they are musicians....

I do love baseball, though. Two MLB strikes put a bad taste in my mouth of which I haven't been able to rid myself.

I like music, too...



Carry on...

[pdub]

Ron Nailed it. Weld it. Nuff said.

[38P]

The big city makes the city dwellers in most cases pay for a referendum or extra taxes or something to pay for the huge gargunatan stadium where the team will play.

Somebody, usually the team, the team gets all of the parking and concessions, even after the city dwellers have paid for it all already. (Stay with me)

And the TV networks pay huge contracts to the leagues to cover the games so they can sell TV advertisements at an inflated rate because lots of people watch.

All of that in turn leads to the rationalization that a single athlete is worth millions of dollars a year so they can all sell tickets and concessions and advertising, because if we don't have great athletes, nobody will watch.

It can't be that easy. What am I missing?

Good, but the wrong starting point. You've got to start with the franchise. The franchise is the "seat" at the table. A share of an oligopoly. From an economic standpoint, there's a very limited supply of franchises and a large demand. The elites in scores of cities want their bergs to be recognized as "Major League" cities.

For example, take Atlanta . . . once a sleepy regional center in the deep South. . . but someone moves the Boston Braves there in 1966 (after a thirteen year or so stopover in Milwaukee) . . . perhaps they were motivated by civic pride . . . . But because MLB keeps a tight reign over expansion, buying an existing franchise is the only way to "move" into the "major leagues."

The NFL, in their "war" with the upstart AFL, offers Rankin Smith a franchise to keep him from joining the AFL and the Atlanta Falcons are born. Then the NFL and AFL merge to protect the football oligopoly . . . Atlanta obtains other major league franchises . . . Hank Aaron breaks Babe Ruth's unbreakable home run record in a Braves uniform . . . A reckless heir to a small billboard company fortune gambles by putting an insignificant UHF tv station on satellite, initially giving away the signal to local CATV operators. He fills some of the broadcast day with Braves games. A "superstation" is born, leading to a whole family of cable channels (in different sort of oligopoly, which somewhat expanded an older oligopoly -- broadcast networks) . . . .

Major league sports and the related publicity machines make Atlanta more attractive to generations of younger Southerners. Major corporations invest in Atlanta because it's now "Major League." Nearly every sports report becomes a free advertisment as scores from Atlanta's teams are announced . . .

Major league sports, of course, become big business on television. And the finite supply of meaningful major league games drives up prices and results in more revenue to share among the members of the oligopoly.

Substantial barriers to market entry have emerged because competing leagues have proven impossible to duplicate at a reasonable cost (see e.g. the USFL, the XFL). And unless the teams are competing with other major league teams filled with rosters of quality, well-publicized players, then relatively few fans, advertisers, corporate hospitality operations, and broadcasters care (see e.g. the MLB minor-league "farm system.")


You see, because the supply of franchises is so limited, the teams can extort grand stadiums from beholden cities. And because the power of being a "major league" city is so hypnotic to the parochial burghers who really run things in most cities (and sports team ownership is such a status symbol to those the special few who have the financial resources to invest in franchises), successful teams are able to obtain all sorts of "concessions" and special "incentives."

And the cities aspiring to become "major league" have businesspersons working to obtain their "share" of a relatively tiny pie, driving up the costs of franchises. And the costs to keep them (Just ask fans of the Brooklyn Dodgers, Seattle Supersonics or the L.A. Rams about that one)

Of course, more than one hundred years of major league history shows that winning generates money.

And as in most things, there's an "arms race" toward winning. Other agreed restraints on free markets (drafts, limitations on free agency) keep this in check somewhat, leveling the playing field some between "small markets" and "big markets." But as Fast Eddie Felson said in "The Color of Money" (1986) "If you got an area of excellence...you're the best at something...then rich can be arranged." Another manifestation of supply and demand.

And as the price of excellence increases, the "rising tide lifts all boats" by escalating the market price for "near-excellence." Players' unions make sure that even the roster-filler, bench-warmer journeymen get a taste of the action. Higher business costs mean more pressure to develop additional revenue streams, sell more and more expensive tickets, and, ultimately, to win.

But it mostly boils down to the limited supply of franchises and the continued demand for them.

[Caveman Tony]

The last concert tour for the Rolling Stones generated them more than $500 million dollars.

Yeah but $498 mil of that went to drugs, botox, formaldehyde, child support & alimony.

[pdub]

Yeah but $498 mil of that went to drugs, botox, formaldehyde, child support & alimony.

And that differs from baseball in WHAT way?