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Competitive Balance

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Competitive Balance COVER STORY | BASEBALL Competitive balance Remaining competitive, on and off the field, in a crowded US sports landscape is priority number one for any franchise based outside of North America’s so-called ‘big markets’. John Angelos of the Baltimore Orioles and the Mid-Atlantic Sports Network explains what he thinks could be done to level the playing field in Major League Baseball. By Ian McPherson. Photographs by Graham Fudger. “I want to have as many peaks and as few valleys as I can. I’m not going to go for broke to win the world championship every year.” t its most basic level, as a *S$ according to Forbes’ 2013 rankings, the series of wins and losses, stadium during the Leaders Sport Summit %97( baseball is a simple game. %"P>! franchise, with an estimated value of “You’re going to win 60 franchise and a venue, but over time we 8«9B"> gamesA and lose 100, or you’re going came to realise that in addition we owned toward mid-table safety – neither rubbing win 100 and lose 60, or somewhere content, we owned the access to develop shoulders with the league’s elite nor in between,” says John Angelos, the media platforms, create separate subsidiary \((!S executive vice president and chief N N% \ $% !">9+ \" &)*$¥&*$¦" years ago and perfected it seven years ago.” “Your goal,” he says, “to be a “So the issue really is that middle ground, 1%2 responsible steward of the franchise and those 40 games, which way is it going to ?( &*$* to make your investment return, is to say, go in a given year?” \ /(! As a business, however, baseball is a the embodiment of a middle of the road valleys as I can. I’m not going to go for "P% team. A record of 93 wins and 69 losses broke to win the world championship group has been involved in sports and in 2012 was slightly better than the league every year, or even to make the play-offs. media for just over 20 years, but when we average, while attendances of just under I need to run my team so I’m going to be began the process, being new to it, I don’t 30,000 throughout the regular season left in contention, competitive. And I’m going think we knew exactly where we stood,” them a touch shy of the median compared to market the team with that in mind. I’m admits Angelos, sitting in a bustling media &*$+A"& not going to make promises I can’t keep.’” 44 | www.sportspromedia.com Baltimore Orioles executive vice president John Angelos, pictured on 10th October at London’s Stamford Bridge during the Leaders Sport Summit That ethos has clearly been put into the franchise rights – the marks, the &*$ %( venue. They’re buying a media territory. rights model. ' They are buying a television territory “It’s clearly decentralised in the case of \ that is memorialised in the Major League media rights and you buy that as an asset,” 897H2# $ explains Angelos. “That’s why franchises in 1993. The incoming ownership group are exclusively owned by each franchise.” have the asset value that they do and are $ >% transacted at the price levels they are.” Peter Angelos – John’s father – and their own 24-hour regional sports Indeed, the revenues generated by a included bestselling author Tom Clancy, !¥C¦& team’s regional broadcast deals can be %+-9H"> !¥&¦#+--«"1 astronomical, with multi-billion dollar one of the strongest records in baseball the network, of which John Angelos is "5 N9A«-9AA7% \ 1'C the highest winning percentage in all of % 20-year, US$3 billion extension to their &*$N >&*$ 5' was sound. Commercially, however, the and an array of college sports. Angelos in September 2010, which equates to franchise possessed a vast amount of % around US$150 million per season, untapped earning potential. C while the Los Angeles Dodgers struck P> 5*¥5*¦ 87+: in and buys a franchise in baseball,” $!¥$¦ 1>0#+-9H Angelos says, “they’re not just buying 3!*¥3*¦ C SportsPro Magazine | 45 COVER STORY | BASEBALL Slotting in: the MLB Draft )*$ in January 2015 after two decades in the &*$ ¥&*$¦ role. As such, it became the norm for ("P% “inequalities”, has teams to overpay for a player compared 5*( installed some measures to his slot. Though the new rules are they have a virtually all-college draft,” he Mto promote competitive balance, such intended to “equalise smaller-market '% as extending the number of play-off clubs being outbid by larger-market have around 200 players on their books places to ten ahead of the 2013 season clubs”, John Angelos, the executive vice across the minor league system. “They – a feature of the 2011 collective \ have a feeder system that’s given to ¥0$¦N $% 0± RS new restrictions have proved “counter- 0²" for the player draft. intuitive” for some teams. In effect, That makes their draft really reliable. The The latter involves a rather complicated teams from smaller markets – and, draft in baseball is inherently unreliable; system whereby each team is allocated consequently, with a smaller lure for almost 90 per cent of the players drafted \ players – previously had the opportunity never make it to the major leagues. rounds of the draft, while draft picks in to improve their sway in the draft by P1&*$ \ offering slightly over the odds for an !5*'$" ("1(RS individual. In the draft that amount might &*$S "1\ be the difference between a US$2 million drafting four-year college players, two- (! and US$2.5 million contract, whereas in year junior college players, high school has the highest value, while the second free agency players’ contracts swell to players and, to some extent, international pick’s value is slightly lower and so on. (89--" @"> C new restrictions, that approach has been you draft from college and junior slotting system in place prior to 2011 was limited somewhat. college and high school, then you’re not generally regarded as a loose guideline Ironing out the wrinkles in the league’s funnelling all the players, particularly the &*$ 0$ 0 $ Angelos argues that fundamental changes model. You’re splitting up the pool.” LA. Meanwhile, the San Diego Padres’ Though a decentralised structure has “There are some clubs that view those +-5'? \NC( limitations as not adequate, that want to thought be worth over US$1.2 billion. properties, with Forbes quoting a value see the national rights holders required to Angelos explains that because of in the region of US$600 million for the pick more of a panoply of games and not &*$P! %&N)" be able to load themselves up with certain revenue-oriented business model”, Perhaps chief among them is the lack big-market games.” 7-7: of equality that the model can breed. % cent of their revenues from their local Angelos argues that, in order to remedy among the clubs that share that view and markets, whereas the opposite is the case the league’s current state of competitive '&*$( 5*P7-7: &*$! to be crafting its national broadcast of the revenue comes from the league 5*PQ"1 arrangements in order to sell the league on \Q"3((&*$ he says, would focus on two principal the strength of its big-market, “marquee a globally recognised brand that sells areas: national television coverage and the teams” rather than the combined strength nearly 80 million tickets each year, even league’s revenue sharing model. of all its franchises. “You need to say the relatively limited inventory of rights E0C%! that the league retains centrally – which National television coverage A’s baseball is as important as Yankees, includes international broadcast and ±$²C'±0²0 licensing rights, merchandising in the P( Q"P% US and nationwide domestic media how many games of an individual team CS9"B rights – still yields billions of dollars in they can select,” Angelos begins. “So at million tickets to 2.2 million tickets?” ("189+"©&*$ '±6!²6! Angelos would prefer a model built set to receive over the eight-year period can be selected ten or 12 times, same PH-\(@ between 2014 and 2021 from national %E a lot of them and a little bit of the other 5'&. 0C"1S!6! +-Q5*S 1$2D games. They’ve got to pick a certain broadcast strategy as an example of what a case in point. number of every team. !(&*$" 46 | www.sportspromedia.com In MLB’s “local revenue-oriented business model”, Angelos says, teams like the Orioles earn up to 75 per cent of income from sources such as ticket sales “If this Sunday they’re promoting the (!.$" 8:-----(0$S" 6!.0 You could never sustain them except in Despite these boundaries, Angelos $Q"P 5*"Q &*$ four o’clock game is the Detroit Lions “the greatest amount of inequality” of .$D! Revenue sharing the four major sports leagues in the US, very different markets, then so be it. You \ get the impression that the rights holder Parity mechanisms extend far beyond 5*SPQ( and the league are behind and promoting national TV coverage, and each league’s model, which would go some way to the 32 franchises equally. It’s just a 0$N&) eliminating the distinction between “haves different approach. *$D (Q&*$"P±15*²( P±15*²>S( ¥&*$D¦&*$N( (] a Jacksonville, we’re going to have a promoting competitive balance. you have to have both,” he argues. “You .$( &*$(0$ can’t just bring down the big spenders those markets is if we can sustain those (+-99 because that takes compensation money markets and support them.’ And the way included a clause relating to blood- away from the union.
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