VideoClearly, Goldklang is simply a wealthier version of the ultimate baseball stakeholder—the fan. And that's why A-Rod deals will continue to happen. "We tell owners all the time: fans don't care if you are losing money," says Mariner. "And they shouldn't. It's not their concern.
"You have to try to operate in a fiscally responsible way," he says, "but at the end of the day, all the fans really care about is winning."
Tim Reason is a senior writer at CFO.
Build It and They Will Spend
No refrain better epitomizes baseball finance than the cry for public assistance in building new stadiums. "The timing could not have been better," says Florida Marlins CFO Michel Bussiere of the team's 2003 World Series win. By that he means the victory is likely to help convince state officials to help subsidize a new stadium. "We are revenue-challenged because of our lease structure," says Bussiere, noting that the team has limited concession, parking, and advertising revenue at its current home, Pro Player Stadium.
Instead, the Marlins want to build a baseball-only covered stadium in Miami. Ironically, a smaller stadium also will increase their gate receipts. "Scarcity of tickets is important in sports," explains Fitch Ratings's Dan Champeau, noting that football teams balance their huge stadiums by playing just eight home games—and charging much higher ticket prices. That, he says, has benefited popular, small-stadium teams—notably the Chicago Cubs and the Boston Red Sox. "Most new baseball-only stadiums have significantly fewer seats than their predecessor multipurpose stadiums. The architects are trying to get that supply-and-demand balance right."
That balance is critical because, among all sources of baseball revenue, the "gate is huge," says Red Sox CFO Bob Furbush. That's particularly true for Boston's Fenway Park, which has the highest ticket prices in baseball. Some 48 percent of Red Sox regular-season revenues come from tickets alone. Add in concessions, suites, and other game-day in-park revenue, and the figure is closer to 60 percent. Local and national media revenues, by contrast, are roughly 25 percent, with the remainder coming from miscellaneous sources like ballpark advertising and parking.
Those economics have resulted in multiple cases of baseball threatening cities with relocation or contraction unless they subsidize a new stadium. That's another critique of the sport leveled by Smith College economist and baseball gadfly Andrew Zimbalist, who says teams rarely present a believable case for financial need. But that may have to change. The Milwaukee Brewers moved into a new, covered stadium—built with the help of public funds—in March 2001. But when the club's plans to slash player payroll—one of the lowest in baseball—leaked out last year, the team's perceived failure to reciprocate the public financial commitment sparked widespread outrage.
The team (owned by the family of baseball commissioner Bud Selig) is for sale, and skepticism about its claims of financial distress ran so high that CFO Robert Quinn signed an agreement to open the team's books to auditors from Wisconsin's Legislative Audit Bureau and an independent panel of local executives. Despite strict restrictions on the level of detail negotiated by the team, both groups of auditors will make their findings public. That's an unprecedented breach of baseball's closely guarded financials, and one that could lead more cities to demand a closer look at the books before committing to replace their teams' aging stadiums. —T.R.
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