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Expansion, not relocation, is Portland's ticket to MLB

Portland Business Journal
by Maury Brown

As a former member of the Oregon Stadium Campaign, and a current sports business analyst, I was pleased to read Andy Giegerich's article, ["Supporters hope stadium plan leads to big-league ball," Oct. 26].

In a city that continues to see rapid growth, the idea of having another big-league professional sports franchise would add value to Portland's entertainment options and bring in revenue from outside the city and the region.

However, as one who researches Major League Baseball as an industry, I found comments by Steve Kanter of the Portland Baseball Group regarding the possible relocation of an MLB team to be misleading.

Kanter states that "there will be a team moving," but events at this time point to quite the contrary. While matters could change, officials with Major League Baseball have placed the development of a new stadium for the Florida Marlins at the site where the aging Orange Bowl now sits as one of, if not the, top priority for the league.

MLB Commissioner Bud Selig has said that he wishes to keep the Marlins in the south Florida market, and believes that only the lack of a new retractable-roof stadium is preventing the franchise from garnering the revenue needed to be successful. This hardly seems like a team ready to relocate.

The same can be said of the current situation with the Tampa Bay Rays. While the team's current stadium, Tropicana Field, is a substandard domed facility for baseball, ownership has invested in capital improvements to make the "Trop" more attractive.

On top of that, the team announced this week its intent to work toward a new $450 million, 35,000 seat waterfront stadium.

In Portland, a state-of-the-art stadium would require an orchestrated effort by the city and the business community -- neither of which seems doable at this time given the political leanings of Mayor Potter, who is against any tangible discussion regarding stadium funding.

Instead of talking relocation, baseball boosters in Portland should mention the possibility of MLB expanding from the 30 teams it currently has. While this may still be remote in the near term, the odds are better than a team relocating given MLB's extremely rosy financial standing as of late -- gross revenue is projected to be in excess of $6 billion this year.

(Use the link above to read the rest of the article)

For those interested, I go in-depth on the topic of expansion and relocation today on The Biz of Baseball:

Why MLB Relocation/Expansion Won't Be Happening Soon

I almost think that contraction is as likely as expansion at this point. Major League Baseball just does not seem likely to want to further water down a product that is currently percieved as tapped out. There are at least 4 franchises with huge obstables yet in regards to fanbase, stadia and poor management and market stability.

MLB would be crazy to expand with so many struggling franchises. Yes, I know attendance is at an all-time high, but it does not seem to be helping Tampa, Florida, Kansas City, and to a lesser degree Oakland.

BC would argue, but Tampa was a mistake from the word "go". Major League Baseball won't work in the "Trop", and $35 million in improvements is nothing. Heck, Paul Allen dumps $10-15 million a year into the Rose Garden.

The 4:00 lunch crowd in Tampa are not likely to approve $450 million ballpark. So, while relocation seems unlikely, it is still really the only option in the next 10-15 years. Even if it is remote.

Will MLB expand? Maybe, but not for a long long time. By that time, Portland will be a MLS, NBA, and probably NHL city.....our shot for MLB is in the next 3-5 years or never....

probably the latter.

just my two cents.

Hey, at least the Blazers are not moving to OKC

There are no "mistakes" in putting MLB franchises in places with over 2 million people, just bad "business" decisions by local ownership and MLB refusing to operate within a reasonable budget (like the rest of us ordinary folks have to do!).

Well, there is the concerns regarding how a corporate base is, regardless of the population. There is concerns about how a team placed in a market of that size impacts a team (read: Mariners) in terms of television and radio revenues and possibly sponsorships.

The decision to expand or relocate teams always is weighed against the impacts to other franchises (Selig repeated this ad nausium in regards to the Orioles when the Expos landed in DC).

I still believe there is a significant difference between placing a team 45 miles away from a current franchise (Baltimore and Washington) and 150 miles away (Seattle and Portland). The impact of a team in Portland will be much less on Seattle than is a Washington team on Baltimore. And it is a sad commentary on the financial state of the game (despite the record attendance) when teams are packing their stadiums and STILL have to rely on the big businesses to bolster their revenues. Things may be good now, but it is a shaky foundation MLB is resting on if corporate dollars are an essential for teams to survive. What happens when those dollars dry up? Teams are pushing their expenses to the extreme and it won't last forever. Owners had better wise up and learn to operate within reasonable budgets, and shouldn't have to rely on other "markets" for survival to the extent that they cut off placing teams in other cities.

Sometimes the greed of the game astounds me.

quote:

Originally posted by BC in Newberg:
I still believe there is a significant difference between placing a team 45 miles away from a current franchise (Baltimore and Washington) and 150 miles away (Seattle and Portland). The impact of a team in Portland will be much less on Seattle than is a Washington team on Baltimore. And it is a sad commentary on the financial state of the game (despite the record attendance) when teams are packing their stadiums and STILL have to rely on the big businesses to bolster their revenues. Things may be good now, but it is a shaky foundation MLB is resting on if corporate dollars are an essential for teams to survive. What happens when those dollars dry up? Teams are pushing their expenses to the extreme and it won't last forever. Owners had better wise up and learn to operate within reasonable budgets, and shouldn't have to rely on other "markets" for survival to the extent that they cut off placing teams in other cities.

Sometimes the greed of the game astounds me.

I would say that there is some truth in this, but at the same time, MLB is doing what it said it was going to do: stabilize.

Adding variables to the equation has to be done in terms of selling it in the near-term, as well as seeing what the direction of the league will be in the future. It would not astound me to see MLB decide to really lock things down stateside -- get all the franchises moving on all cylinders -- and look to do something more internationally. There is a tremendous push to grow the game overseas and get it more visibility. This isn't to say that MLB will be expanding into China, or Japan, or even Europe any time soon. But, the idea of development leagues abroad would be a good move.

As to relying on corporate base, it is where MLB is headed, and sports leagues as a whole. You lock in agreements with corporate deals, which gives you the ability to have dependable numbers with which to build off of, come good seasons or bad.

This is the issue facing small to mid-markets. Colorado or Cleveland can compete now through good internal player development, trades, and with wise investment, they have the means to garner some players via free agency. The revenue streams are not dependable as attendance still makes up the lion's share of where total revenues come from. When a team has attendance that fluctuates dramatically, on top of smaller margins, there is inability to retain talent.

I will say this. Clubs such as the Mets lowering seating capacity in an effort to boost suite and premium seating costs isn't right. There's an instance where the common fan is going to get shoved out.

quote:

Originally posted by BC in Newberg:
Teams are pushing their expenses to the extreme and it won't last forever. Owners had better wise up and learn to operate within reasonable budgets, and shouldn't have to rely on other "markets" for survival to the extent that they cut off placing teams in other cities.

The last time the owners tried this, they got busted for collusion. To me, the short term effect of collusion was expansion, but the long term effect was that it made the franchises act more like businesses.

In the 90's they started capitalizing on suite revenues and better facilities overall.

In this decade they are capitalizing on media revenues and new avenues of distributing their product. Merchandising has improved as well.

The jury is out for the next decade. Maury mentioned international expansion but they will have to overcome technological and cultural barriers to make that happen.

I think that there is massive revenue potential inside these beautiful stadiums that currently sit vacant most of the time, but nobody has figured out how to exploit it yet. I also believe that they are just scratching the surface on the revenue potential of seat licensing, flexible pricing, and the reselling of tickets. I'm sure that other opportunities will emerge as well since baseball is still in its infancy in functioning like a "real" business.

The thing with the media revenues is that we're in the middle of a growth spurt and nobody knows where it will end... so it would be foolish to try and place a value on it (which is why most of the settlement with the Orioles involved equity stakes in media outlets rather than cash payoffs).

But eventually this business disruption will end, revenues will stabilize, and MLB will figure out how to properly value broadcast territories. Then the door may swing open for expansion, but the following questions would need to be sorted out:

-Would two new franchises "grow the pie" or would they simply split up existing revenues?
-How do you realign divisions, schedules, rivalries, etc. in a palatable manner?
-What's the best way of handling the playoffs and seeding which preserves the balance of competitiveness and having the regular season mean something?
-What about talent dilution?

quote:

Originally posted by The Cactus Leaguer:
I also believe that they are just scratching the surface on the revenue potential of seat licensing, flexible pricing, and the reselling of tickets. I'm sure that other opportunities will emerge as well since baseball is still in its infancy in functioning like a "real" business.

On this, look for my interview with Lou Weisbach of Stadium Capital Finance soon on Biz of Baseball.com. Interesting twist on PSLs. Backed by Morgan Stanley Principal Investments.

For more... CNN/Fortune: The next big flip: Ballpark seats?

quote:

(Fortune Magazine) -- Less than four years after winning the World Series, baseball's Florida Marlins are looking at a shaky future. The lease on their stadium expires in 2010, and rumors are rampant that the team might have to leave South Florida.

The problem: Taxpayers are reluctant to foot part of the bill for a new ballpark.

Teams all over the country face this dilemma, but Chicago entrepreneur Lou Weisbach has a solution: sell seats to fans on a multiyear or permanent basis, just as if they were real estate.

Here's how it works: Fans contract with teams to own their seats for a set period - from five years to ten years to perpetuity - at a fixed price, paying in a lump sum annually. The teams, in turn, get a reliable source of cash flow to pay down debt or fund new stadium projects.

The concept, called equity seat rights, has gotten buzz in the industry (fans may have recently spotted in-stadium ads at New York Mets and Colorado Rockies games) and on Wall Street.

Use the link above to see the rest of the article.

Will let you know when I run the interview. Most of it is done, just waiting for some follow-up questions.

Yep, I heard about that. The thing is, this thing is still in its infancy and it is going to take some experimentation (i.e., trials and errors) to get it right. Stadium financing is one angle. Another is reduction in seating capacity and the tradeoffs between sitting in a nosebleed seat versus watching the game at home in hi-def. Another is the economics of predictable attendance. Another is capturing revenue which currently goes to the black market (i.e. scalpers). etc. etc. etc.

Looking forward to the interview, along with your insights.

quote:

I will say this. Clubs such as the Mets lowering seating capacity in an effort to boost suite and premium seating costs isn't right. There's an instance where the common fan is going to get shoved out.

This is the thing that scares me - true fans getting squeezed out. I went to two major laegue games this past summer, one in Anaheim and one in San Diego, and took my family both times, and each time, I came away with the realization that this was something I could afford to do only a couple of times a year, even if I did live in a city that had its own team. It cost me well over $150 for a family of four to go to each game, and we were only sitting in the medium-priced seating. If that is all most people can afford to do, then the market had indeed better be big so there will be a lot of those "once a season" fans who can show up. The day of the average fan like me being able to attend a majority of a team's games and afford season tickets is long gone, and despite the attendence numbers, the game is poorer for it. It seems it is the money that matters, not the fans.

This trend toward smaller stadiums, it seems to me, is a detriment to the game because it attacks the "problem" (how to increase revenues) by creating an artificial stimulus to attend (scarcity of tickets) instead of developing a more fan-friendly drawing card (putting a competitive team on the field and craeting an enjoyable atmosphere at the ballpark). Which is better for the game, 50,000 fans at $20 a ticket or 25,000 fans at $40 a ticket? They produce the same amount of revenue, but I would think the former is better because it allows more people to actually see the game and develop a true affinity for the team and the experience. Too many people in MLB don't seem to care any more about getting more PEOPLE to the games, just getting more MONEY into the coffers. Baseball is NOT better off with that mentality.

Blair,

With all due respect, I think you are being a little cynical. In the long run, no business can increase revenues by locking out their customers. I would argue that a smaller, more intimate and baseball-centric stadium is better for baseball and facilitates a more fan-friendly experience.

Yes, higher prices create a barrier for people who want to attend a MAJORITY of games, but I would argue that the percentage of people who want to do this are extremely small... and overall I'd argue that the hardcore fans have FAR superior access then they did a decade ago (media coverage in general; access to out of market games; fantasy stats; features such as Gamecast that show instant access to the speed, rotation, and location of pitches; high definition coverage; etc.).

You're darn right I'm cynical, but that is only because I see two things controlling the game I love - television, with its insatiable desire for ratings, and money, the lust for which leads to all kinds of mistreatment of people.

And at first glance, I would tend to agree with the idea that fans who want to attend a majority of games are much less than the occasional fans - yet if that is true, why do teams push so hard for season ticket sales, hoping to sell upwards of 20,000 season tickets to people who will come to lots of games? And I think you can create intimacy and a good experience at a ballpark with 50,000 seats, with some creative thinking and designing, just as well as you can with 35,000 seats. All I'm saying is that teams should be thinking how they can MAXIMIZE the number of fans they can get in to see a game (who will come back again if they enjoy it), rather than limiting the number of fans who can actually go to a game. Think of the revenue the Boston Red Sox could be making with a larger ballpark and the same prices, simply because the demand is high - and I don't think the demand for Red Sox tickets is based on the short supply but on the quality of the product.

I don't know Blair. The big stadium game was played in the 70's and 80's (and people complained that the owners were being greedy back then by building gargantuan stadiums), and it didn't work.

Maybe they can build a 50,000 seat stadium comfortably, but I guarantee that it will be more comfortable if it is designed for 35,000 instead.

To me it's all about being fan friendly, and a more comfortable stadium where every seat has a great view, and the stadium is always (predictably) near capacity and well staffed, is just a better experience.

And besides, I have never had a problem getting a ticket in any of these newer, smaller stadiums, and I've been to most of them. Maybe I would/will in Boston or New York, but those aren't the norm.

Coors Field is pretty fan-friendly, and it is a 50,000-seat stadium. You may recall that, after drawing upwards of 60,000-70,000 to Mile High in the early days, the Rockies were going to build the new one with only 43,000 seats, and there was tremnedous outcry among the fans who wouldn't be able to get seats in the new park, so they incerased it to 50,000. Same things is going to happen in the smaller ballparks; if a team gets to playing really well, the stadiums WILL fill up, and then a lot of fans who'd really like to come will get left out. I know there is a "happy medium" - you won't get the same sense of excitement for baseball in one of those 100,000-seat soccer mega-stadiums found around the world - but it angers me that teams are trying to create an artificial scarcity of tickets so they can jack up the ticket prices, hoping to attract more "corporate dollars", while ordinary, less well-heeled fans (like you and me) who are the "true" baseball aficionadoes get shoved aside.

As for the "big-stadium" game of the 70s and 80s, their biggest problem was not the size, but the design - the so-called "cookie cutter" stadiums that were all built in the round, for multi-purpose use, and most of the baseball seating was too far away. I agree that they weren't great for baseball - but the Big Red Machine didn't have trouble filling Riverfront, nor the Cardinals in Busch, or the Phillies i the Vet when they were winning. If the product on the field is good, the fans will come; the owners won't have to push the fans to "panic mode" - "Get your tickets NOW or miss out because our ballpark is so small!"

Frankly, I like the idea of a ballpark being large enough that I will probably be able to get a ticket if I decide to go at the last minute, so I don't have to pay "scalpers' prices" if I try to get into a sold-out game. Hey, why not just cut down to a basketball-sized arena and charge NBA prices for baseball games - even the Devil Rays might sell out if there are only 18,000 seats in their stadium!

Stadiums are supposed to last 30 years. Building them to accomodate those occasional times when you make the playoffs (there are only so many wins to go around, and an equal number of losses) or during the honeymoon phase is foolish.

And yes, Coors Field is nice but the upper deck is not even close to being as nice as PNC, AT&T, or other stadia that are 40,000 or less... which is why the stadium became all the more cavernous after the honeymoon wore off for the Rockies.

Stadium costs and proper staffing are other considerations. I just think it's way too simplistic to claim that it is about creating an artificial demand and pure greed.

And besides, you are saying that bigger stadiums would create more revenue - couldn't that be characterized as greed as well?

quote:

And besides, you are saying that bigger stadiums would create more revenue - couldn't that be characterized as greed as well?

Sure, it would provide an opportunity for more revenue - but by allowing more fans to see the game, not by inflating the tickets prices beyond the reach of us mere mortals.

I know of a national radio host who has been heard lately saying (not near an exact quote) "you actually hurt your sport by attending the game instead of watching it on TV."

I'm not sure that adds to the equation or not, but I suspect it might.

I'd be interested to hear his reasoning on that, though I suspect there is some validity to it, given the amount of revenue generated by TV dollars.

The day may come when all our sports are "made-for-TV", played in empty arenas with computer-generated crowds and sound tracks, because it won't matter whether there are real fans in the stands or not - the medium truly becomes the message.

Or better yet, use holograms to project images onto the field for road games. Cha-ching!

Hey TCL, closing in on 4,000 posts, I see. That would make you third only to Maury and SeattleHawk, if I'm not mistaken.

Make #4,000 a good one!

quote:

Originally posted by The Cactus Leaguer:

quote:

Originally posted by BC in Newberg:
Teams are pushing their expenses to the extreme and it won't last forever. Owners had better wise up and learn to operate within reasonable budgets, and shouldn't have to rely on other "markets" for survival to the extent that they cut off placing teams in other cities.

The last time the owners tried this, they got busted for collusion. To me, the short term effect of collusion was expansion, but the long term effect was that it made the franchises act more like businesses.

Sigh, just one more reason why MLB's anti-trust exemption should be discontinued. If anyone is profiting from the antitrust exemption, it is the players, and a few greedy owners strange as that might seem. Correct me if I'm wrong, but I think a "trust" is more or less a monopoly. In sports, there is nothing with that. Want proof? Look at the NFL. What professional football league has seriously challenged the NFL for supremacy? The answer: none. The USFL didn't even come close to challenging the NFL as a dominant professional football league. In all seriousness, what professional baseball league could come close to competing with MLB for fans? The answer is probably none, because MLB has become such a tradition and engrained part of our culture. I think we probably see players salaries go down, and more expansion franchises without this stupid media territories deal if the antitrust exemption were revoked (intelligent MLB owners need to petition for this if they ever want to get a leg up on the MLBPA). But that's just my $.02.
To me, the antitrust exemption is up there with some of the nation's most ridiculous and archaic laws. (jaywalking comes to mind).

Really, the anti-trust law allowed owners to keep salaries DOWN for a long, long time. Labor unions rallied around baseball players when the players were fighting the reserve clause and, well, the players apparently never repaid the favor.

The higher salaries correlate more to baseball's increasing TV revenues... but they also allow a "depreciation expense" that is part of the reason baseball clubs can claim poverty while still increasing in value, which was a major factor in the last round of publically financed stadia, as well as fodder for attempts to gain power back from the players association. The salaries themselves generate publicity baseball doesn't have to buy in the media. You could argue the ROI of those salaries has been at least even.

I'm all for federal legislation yanking anti-trust UNLESS MLB teams reimburse public entities for funds provided for stadium construction.