Silicon Valley / San Jose Business Journal - September 21, 2007

A's hope global strategy will lead them to World Series

The Oakland A's are known as a team that has been able to do less with more.

Owners and managers raise players from the farm system, keep a lean and mean administrative staff and don't spend a ton on advertising. They've been successful with that strategy ("Though not this year," owner Lew Wolff jokes.)

But the team's efficient strategy has a downside: The A's have not been able to tap into the growing and lucrative fan base for Major League Baseball in foreign countries. And that means they're missing out on corporate sponsorship and partnership opportunities, merchandise sales and other revenue streams that give teams with more foreign players an edge.

Wolff and the other Oakland A's owners -- who also own the San Jose Earthquakes Major League Soccer franchise -- want that to change.

"The A's have a tremendous brand and I'm not sure we've maximized that outside our market area," Wolff says. "We're busy trying to win games... It's just a little different approach than the former people who had it. We're much more interested in building this into a much bigger brand. We want the A's and the Earthquakes to be internationally recognized."

The planned Oakland Athletics stadium in Fremont will be one way to create more revenue for the team so that it can afford more foreign players, A's executives say.

If the team can attract foreign players, that will open the team up to international audiences, especially in the lucrative Japanese market where fans support home country baseball stars like outfielder Ichiro Suzuki of the Seattle Mariners.

But money talks in baseball. And to tap the international baseball stars will mean the A's will have to pay to play.

"And that's the whole point of moving to the South Bay," says Ken Pries, vice president of broadcasting and communication for the Oakland Athletics, "improving our financial model which will allow us to sign the players that the Yankees and Red Sox have been able to. The value of those franchises is so astronomical, it's harder to compete on our level."

The New York Yankees had 11 players on their 2007 roster who made more than $10 million this year, according to data provided by ESPN. The Oakland A's had none.

Yankees paid Japanese left fielder Hideki Matsui $13 million in 2007. Chicago Cubs left fielder Alfonso Soriano of the Dominican Republic made $10 million this year. The Mariners paid Suzuki more than $12.5 million.

Clearly the A's are behind other franchises in terms of tapping into international markets and that means their behind in race to create new revenue.

It's worked for the league, which broadcasts baseball in 229 countries as of 2006. International sponsorship grew 40 percent from 2001 to 2006. And international licensing generated more than $400 million in retail sales in 2006, up from just more than $50 million in 2000, according to the league.

The popularity of Japanese players on the Seattle Mariner's roster inspired a partnership in 2001 between Major League Baseball and Amazon.com for an online Seattle Mariners store targeted to the Japanese and a live online broadcast service of Seattle Mariners games. And while Major League Baseball collects some of that revenue and distributes it throughout the league, teams make some of that money directly through ballpark signage and other sponsorship deals.

Indicating how important Japan has become as a baseball audience, the 2006 World Baseball Classic played its opening game in Tokyo to a sell-out crowd. And nearly one million fans showed up to watch the Japan All-Star Series in 2006 also in Tokyo.

The As may get a taste of that market in 2008, with their opening game against the Red Sox tentatively scheduled in Tokyo.

"But that's more because of the Red Sox than because of us," Pries says.

The Red Sox have two Japanese star players in Daisuke Matsuzaka and Hideki Okajima.

The more players added from foreign countries, the larger that revenue can grow.

The number of foreign-born players on major league rosters has jumped from 18.9 percent to 29 percent in the past 10 years. There were 246 foreign-born players on 25-man league rosters and disabled lists at the start of the season, according to the league.

The New York Mets had 15 foreign-born players at the beginning of the season. The Seattle Mariners had players from 11 different countries.

The A's have only two foreign-born players on their roster and they're from Mexico.

Crucial to the A's changing their internationally insignificant status is an approval of the A's stadium deal by the city of Fremont, where A's owners want to move the team.

The A's stadium plan in Fremont incorporates retail and office space plus residential housing that will generate the revenue to build the stadium, which at 32,000 seats will be the smallest baseball stadium in Major League Baseball.

"Our philosophy with the small stadium is being able to create a little demand for tickets and a little interest for tickets and follow the model of getting the money and signing some bigger name players," Pries says. "I don't think we'll ever be able to do what the Yankees do, we're just not that kind of team. We bring our players through the farm system and it'd be nice to fill it in with some veteran players to fill some of the gaps. With a new stadium, we may be able to do that."

The A's also want to add training facilities in Japan and possibly other countries to develop some international talent that they'll have first access to.

As do many Major League franchises, the A's have one minor league training facility outside of the U.S. in the Dominican Republic which produced players including former American League MVP Miguel Tejada, who now plays for the Baltimore Orioles.

"Some day we may be able to do that overseas in Japan," Pries says. "And hopefully this will be a step in that direction to be able to incorporate some talent over there."

The other piece of the overall marketing strategy is the partnership with Cisco Systems that committed to 30-year naming rights deal to name the new ballpark Cisco Field. The deal is valued at $4 million per year.

"The first step will be to be able to reach out internationally. That's where the thought is. The minute Cisco came into the equation, we were like, 'We can make this bigger than the Bay Area,'" Pries says. "Cisco is a global company and we can hopefully expand internationally."

Along with that, Cisco is working to develop technology that fans can use while attending A's games that could include mobile applications or advertising applications, Pries says.

LINDSAY RIDDELL covers finance, venture capital and sports management for the Business Journal. She can be reached at 408-299-1829.

Questions ...

quote:

The New York Yankees had 11 players on their 2007 roster who made more than $10 million this year, according to data provided by ESPN. The Oakland A's had none.

Is that becasue the Yankees overpay, or is it because the A's underpay? Just because they CAN, does that mean the Yankees SHOULD be paying that much to players?

quote:

The more players added from foreign countries, the larger that revenue can grow.

Which comes first? Do we add foreign players so we can increase our revenue, or must we first increase our revenue so we can add more foreign players? Is this cause-and-effect, or simply a self-perpetuating cycle that has no end? Is there a limit, or will the demand for revenue become so great that eventually teams and markets will price themselves out of existence?