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On the field it’s the power shots, the hustle, and the great saves that win the game, but on the corporate side of the sporting industry, different tactics clinch victories. Those strategies are both defensive—such as controlling costs—and offensive, like keeping the fans coming back.
The University of Chicago Booth School of Business hosted a daylong symposium to expose Booth students to professional opportunities in the sports industry, including an inside look at some of its business challenges from Jonathan Mariner, executive vice president and chief financial officer of Major League Baseball. The Booth MESG Sports Symposium took place at Gleacher Center on Friday, January 27, and was hosted by the Chicago Booth Media Entertainment and Sports Group.
The challenges cited by Mariner included increasing revenue, controlling costs, keeping a competitive balance among teams, keeping fans engaged, and expanding the fan base. “As exciting as our sport is, every business has to grow—and we’re no different,” said Mariner, who oversees central office budgeting for Major League Baseball’s 30 teams.
In Major League Baseball, revenue means media rights, naming rights, and ticket sales. Mariner described sporting events as “the original reality TV,” and a gold mine for television network advertising sales. Teams secure naming rights when they put their own name and branding on the ballpark, for example Yankee Stadium in New York.
The efforts to increase ticket revenue have prompted the league to use technology to make it easier for fans to select and purchase a seat. The move to make tickets printable at home, for instance, has helped make tickets more accessible to fans, Mariner said, and the league has formed partnerships with ticketing companies to help sell unsold seats.
Even as sports leagues explore new revenue sources, they must also deal with questions over its distribution. This summer, a clash over controlling labor costs came to a head with labor negotiations in the National Football League and National Basketball Association. On one hand, team owners were trying to decrease, or at least restrain, the cost of players’ salaries and teams’ operating expenses. On the other side, players wanted a larger share of league revenues.
In the case of MLB, the league worked to come up with a variety of strategies to satisfy both sides, such as implementing a luxury tax on teams who spend beyond a certain threshold in player costs and benefits, and introducing slotting, which caps how much teams can spend on draft picks. Mariner said that such expense controls will save the league more than $200 million over the next five years.
To address the issue of competitive balance, MLB uses revenue-sharing as a tactic to give fans the fair chance they want for their favorite team. “At the end of the day it’s about every fan having hope and faith that their team has a shot,” Mariner said. But, “you also want to have historic rivalries. You want Yankees versus Red Sox.” Sharing revenue levels the playing field for teams with smaller fan bases. The league wants to make sure that each owner is doing as much as possible to grow revenue, while also assuring teams who have larger fan bases that they are not just subsidizing smaller market teams with no incentive to grow their fan base.
With its long season, which has games scheduled almost every day, baseball’s challenge—keeping fans engaged “beyond just showing up”—can be tough, Mariner said. But, he acknowledged, just getting “someone’s attention for 20 minutes is a challenge.”
That’s where mobile applications and MLB.com come in. Mobile apps allow fans to order food when they arrive at the stadium and bypass lines to pick it up. On the website, fans can play games such as player bingo and guess which player will get a hit at the next game.
More fans have been able to keep track of their favorite teams, too, as the league has focused on supporting the fan bases that are growing outside teams’ traditional markets. Since 2009, Chicago Cubs fans living as far away as California, for example, have been able to watch games via the internet on MLB.tv and, more recently, on the MLB cable network. The network airs in more than 67 million homes, boasting the largest cable subscription base of any other sports cable network last year. Eventually, the league hopes to extend that access to mobile devices once the issue of authentication and broadcast ownerships rights between sports leagues, major televisions networks, and cable operators has been resolved.
The league’s strategies to address business challenges were an eye-opener for Brad Rodriguez, a second-year student in Booth’s Full-Time MBA Program and MESG co-chair: “MLB is trying to be holistic in their approach of giving fans what they want—not just providing a more competitive, different, or ‘better’ on-field experience, but trying ways to bridge between the casual fan and the superfan, and the traditionalist and the modern info analyst, without sacrificing the core of the actual game of baseball.”
These challenges are ripe for graduate business students with strong quantitative analysis skills. “MBAs in general are still underrepresented in these fields, which is a shame since Booth students have a lot to offer,” added Rodriguez, who was assistant general manager for a minor league baseball team in Florida before coming to Booth. “Events like this and groups like ours try to make that known.”
—Kadesha Thomas