Thoughts about our National Pastime and occasional thoughts for the Good and Welfare of the Reader (and maybe the writer)

Sunday, March 29, 2009

Winners and Losers

Spring training camps will be closing up this week. The last spring game I will see will be Wednesday when the Marlins and Orioles pack it up in Fort Lauderdale. Of course, for the Marlins the trip home is a white knuckle ride down I-95 while the Orioles have a relatively peaceful flight back north to Crab Cake Corners. I really do not think of Baltimore as Crab Cake Corners, but every once in a while I get in the mood to write like a sports writer and use cliché nicknames.

The rule when I wrote sports for the Daily Pennsylvanian was to never use the same word twice to describe something. The headline "Natators Triumph over Middies 39-26" can be translated to mean that Penn's swimming team defeated the Naval Academy's team by 13 points. Similarly, "Cagers Get by Cantabs" meant that Penn's basketball team beat Harvard. I am not making this up, but it is a digression.

The news this weekend had to do mainly with competitions among players (batsmen and hurlers) for key assignments. Two that interested me were the Yankees (Bronx Bombers) naming Brett Gardner to be their starting center fielder and Kevin Gregg winning the closer job on the Cubs (Wrigleymen). Some of my friends think that Jordan Zimmerman being named to the back of the rotation slot with the Washington Nationals (Nats) is a big deal, but I do not. You have to feel sorry for a kid whose big break is to participate in a projected 100-loss pitching rotation.

Thinking about Gardner and Gregg, I got to thinking about the losers – Melky Cabrera and Felix Marmol, respectively.

They Yankees announced that Cabrera will go north as the fourth outfielder. Joe Girardi, was spoke highly of him, pointing out that he is only 24 years old, he is a switch hitter and he can play all three positions. He is also out of options. To me that can mean that he might well be making his contribution elsewhere by June. There are some big gaps in the bullpen and what if Alex does not come back as scheduled? Do you see Cody Ransome as the answer at third base?

The Gregg win over Marmol is a puzzler to me. Gregg is a career 4.00 ERA guy. He is a decent closer who turned in 29 saves for the Marlins last year, before being closed down on August 30th with a bum knee. He also had 38 BBs against 57 Ks. Personally, I like closers whose K:BB ratio is north of two. He does not give up home runs easily but his H/9 ratio is greater than nine. You really want a closer who shuts them down.

Marmol looks more like a closer. His ERA lifetime is below Gregg's and last year he turned in a sub-1.0 WHIP. His BB to K ratio is a very healthy 5.0 and his H/9 is well below one per inning, 3.7 last year. The only thing I can think of is the woeful performance of the Dominicans in the WBC. Being away from camp may hve hurt him although being away from Pinella may have helped.

Marmol, like Cabrera will be OK. He could be a bargaining chip in a trade negotiation, but he is more likely to stay in Chicago. He was given the set up job and with Gregg's age and medical history, he might well end up closing when the Northsiders meet the Gotham nine in the World Series this year.

Old Business: I wrote the case for no #1s in the Final Four at the start of the tournament and I was half right. Hey, if I could make 50% of my shots from behind the arc, I would be an NBA all star. Besides, BHO picked North Carolina when he did his bracket and who overturns a presidential directive these days.

Friday, March 27, 2009

The Turk is Walking in Baltimore and Everywhere Else

For beleaguered people in the north, like the friend who posted the following on Facebook, "really want to see some greenery," spring is just barely on the horizon. For the spring training aficionado it is almost over. That was evident at the Orioles ball site yesterday. The O's had started the spring with 68 on the roster and all 68 were in the dugout on opening day. Yesterday, 48 survivors suited up in the sparkling home whites instead of the training jerseys and at of that 48, twenty-three knew that AAA Norfolk or AA Bowie awaited the services of the luckier ones.

The question, of course, is always who gets to go to Baltimore when the O's open their season against the Yankees in just about 10 days. Manager Dave Trembley and his staff have some issues to resolve, the most glaring being the pitching rotation and the bullpen. The starting eight looks to be serviceable although some would say they have the wrong Izturis at shortstop and I had to chuckle when I say Felix Pie trip on his own feet chasing a ball in left field.

The games on the field still don't matter much but the players are going out there knowing that the coaches, scouts and supervisors are watching every ball hit in their direction, every at bat and, for pitchers, every pitch thrown. At the end of each game from now to opening day, several messages will be delivered in various ways. Cutting away manager-speak, here is what 22 guys will hear. Matt Wieters is the 23rd for an entirely different reason.

You have been optioned to (fill in the blank). That is not bad. For three seasons, if a player is on the 40-man roster but not on the active major league roster he may move between the major league club and any of the minor league affiliates. That can be a strategic move. The Marlins consider Anibel Sanchez their fifth starter but, given days off, they will not need him until April 18th. They might well start his season in New Orleans to be able to give some other player a longer look. . Earlier this week, the Orioles optioned LHP Chris Waters to Triple-A Norfolk. Waters is close to being a career minor leaguer. He was a 5th round draft pick of the Atlanta Braves in 2000 but he got his first cup of major league coffee only last season. He started 11 games, turned in a 3-5 record 5.01. That did not win him a shot at the rotation. But last year, he was 8-6 in 22 minor league starts, including being 5-0 for AA Bowie. On an Orioles team that has Adam Easton penciled in as the number 3 starter and Hayden Penn in the number 4 slot, if Chris is able to hold his own or better in AAA, he will be back in Baltimore sooner, rather than later.

We want you to report to the minor league camp tomorrow. That is not good for older players, not that bad for the real young guys. Usually that means you did not make the 40-man roster, but you have a place in our organization. On Wednesday, the O's reassigned RHP Brad Hennessey to minor league camp. Brad was a #1 pick in the 2001 draft, selected by the Giants. In October, he and his lifetime 4.60 ERA were sent outright to the Giants Fresno farm. Employing the privilege of a 5-year veteran, he declined and signed a one-year minor league contract with the Orioles. Brad thinks he is young enough to try again. Given the shakiness of the Orioles starting rotation, I am sure he is thinking that he has a chance to earn another shot at the bigs.

We are designating you for assignment. That is the MLB equivalent of "we will announce that you are leaving to pursue other interests." Closely related to that is "You are being released." That is usually delivered with the thought that "this will make it easier for you to find your own deal." For a player who is going to be fired, being fired earlier is better than being fired later of course. Those who are released early still have a chance to be invited to another team's camp to compete for a minor league slot. Josh Bard comes to mind. He got cut late by the Red Sox and is still shopping as I write this.

The Matt Wieters Story. Matt is the top rated prospect for the Orioles and, for many, the #1 in baseball. Baseball America ranks him #2 behind David Price and John Sickles calls him the #1 hitting prospect in MLB. But on opening day, Greg Zaun will be behind the plate and Chad Moeller will likely be the backup. The O's haven't announced whether Wieters will start in Bowie or Norfolk, but it will not be at the home grounds. Wieters will start in the minor leagues so that the team can postpone the agonies of free agency for another year. They will talk about seasoning, wanting him to see more pitches, giving him a chance to play every day, but that is a load of hooey. What they have in mind is this -- Players with at least two but less than three years of Major League service, who are considered to be in the top 17% of all players, are eligible for arbitration one year sooner than the rest. These are known as "Super 2" players. Super 2's, must have accumulated at least 86 days of service in the previous year. Wieters will join the team as soon as there are 85 days left in the season unless the Orioles get off to a miraculous start and/or Zaun breaks down.

Tuesday, March 24, 2009

Thinking about the Stadium Experience

A few years ago we did some research for a bank. The subject was The Branch of the Future and the idea was to see who physical appointments, blended with technology could be used to improve the customer experience and, more or less equally important, the branch employee experience. Part of the research was a series of focus groups with people who visited branches regularly (many do not, using ATMs and the internet to conduct their banking). Our goal was to see if we could come up with two sets of insights – first, a notion of what people notice about a bank branch and how the impressions affect their overall attitude about the bank. The second set of ideas was to gather some thoughts on what improvements people might suggest.

That second idea did not work out as well. It rarely does. Customers are not bankers nor are they retailers or are they architects and systems designers. In fact, in a typical focus group procedure, if a person demonstrates expertise we generally exclude them, preferring to talk to the proverbial "man in the street." Some disagree. They point to the classic story that the notion of putting an open box of baking soda in a refrigerator to absorb bad smells came from a focus group. The other side counters with the notion that even a blind pig will stumble on a truffle from time to time. It can be argued successfully, that a focus group is an excellent way to obtain reactions to what it is shown and a bad way to stumble on the truffles of breakthrough innovation.

Anyway, the study of the Branch of the Future was revealing because it does turn out that people notice the level of service they are getting but they also notice the physical aspects of the environment – the layout, the convenience of certain features, the ease of operation and, not surprisingly, the general décor, upkeep and cleanliness. We also learned that those impressions begin as the customer approaches the bank and includes the layout of the parking lot, the drive-in lanes and overall upkeep of the facility.

Yesterday, I drove to Fort Myers to the City of Palms ballpark to see the Red Sox play against the WBC-deprived Detroit Tigers. With Magglio Ordonez, Curtis Granderson, Carlos Guillen, Miguel Cabrera and Armando Gallaraga still off at the tournament, the Tiger lineup was no match for the full-strength Red Sox.

The starting pitchers, Edwin Jackson for the Tigers and the Sox' Brad Penny acquitted themselves well, but the final 7-6 score indicates how far behind the bullpens are. The hitting highlight was back to back to back to back home runs by Mike Lowell, Jason Bay, Chris Carter, and Ivan Ochoa. You do not see four consecutive home runs every day, even in spring training. The Tiger highlight was getting a hit once Penny left. Brad's three hitless innings came on the heels of the no-hitter turned in against the Bengals by Ricky Nolasco, et al the day before.

City of Palms Park is nice spring training site but it does not have long to live. Faced with competition from Sarasota and Vero Beach, the commissioners of Lee County have gone all out to develop a plan to build a new Red Sox facility. The new park will solve a problem for the team by putting the minor league fields adjacent to the stadium. They are now 20 minutes away. You would not think that matters, but in the Spring, after the batting practice and other warm ups, the players who are not needed for the game will go off to the other fields for more work.

The new stadium is designed to create an experience for the fans by featuring a southwest Florida of Fenway Park, complete with the Green Monster in left field and, I think, a Pesky Pole. I am not sure what they mean by a southwest Florida version – maybe there will be an alligator pond at the base of the wall.

That got me to thinking about the customer experience as it relates to baseball parks. What are the factors that enhance that experience – or detract from it? And, do they matter in terms of getting rear ends into seats?

Here is my top 10 list. After I hear from some of my correspondents, I will continue this series with thoughts on some of the baseball stadiums that I have visited.

1. General neighborhood ambiance. How does it feel as you walk up or drive up to the ball field?

2. Parking.

3. Entry and first impression on entering.

4. Stadium amenities – food stands, rest rooms, team stores . . .

5. The seat itself.

6. Food and drink – quality, cost, availability.

7. Information – program, score card, scoreboard.

8. Fan behavior.

9. Official distractions (some would say "fun activities," so you know my ingoing prejudice).

10. Egress

Thursday, March 19, 2009

Cluttered Desk, Cluttered Mind, Cluttered Thoughts

The Federal Reserve Board took action yesterday by agreeing to buy $300 billion dollars worth of long term Treasuries and four times that amount of Mortgage Backed Securities. That is old school, traditional monetary policy that has a risk involved. I did not read much about it, but my Treasury Management text says that when the government monetizes the debt and puts that much cash into circulation either productivity increases or inflation follows. So, the question is – is inflation a bad thing? Ask yourself, is paying more for the same thing a bad thing? The answer might be yes if by doing so you are helping companies make money and rehire staff. But in a real inflationary economic scenario that does not happen because the company making the good is also paying more for the same and cannot afford to expand. That is why no one likes an inflationary economy.

What that means to me is the following has to happen: The liquidity pumped into the market ends up in the vaults of the banks who bought the Treasuries that the Fed is now buying from them. Manufacturers line up to borrow the new liquidity in order to go into a higher level of production. Retailers line up to buy the increased production in order to restock warehouse and shelves. Consumers line up to buy the stuff, using cash or using credit card with a careful eye on limits and ability to repay.

To make this longed-for economic scenario real, BHO has to take another look at his 10-year, overloaded, unprioritized, do-everything fiscal plan and get real.

The Congress is like a gaggle of children in a bathtub fighting over the toys. We can let them do that as long as some adults supervise how many toys are in the tub at once. We can tolerate the posturing, the hypocrisy and the pandering to the TV cameras just so long as they stand aside and let the fiscal authorities do their job. Ronald Reagan was more right than wrong when he said that government is not the solution, it is the problem. Congressional leadership has become an oxymoron.

How about a prisoner exchange? Part I: Republicans will stop caring about when BHO and his treasury secretary knew about AIG bonuses if Democrats stop trying to blame the Bush Administration for not shutting AIG down. Part II: Senator Dodd will give back his AIG political donations and Representative Frank will admit he insisted on including AIG in the first round of bailouts (Oh. Wait. They are both Democrats).

On to the World Baseball Classic for the USA means on to California and TV competition with the sprint to the Sweet Sixteen. Which would you rather see – your bracket coming through the weekend or the USA winning the WBC? This week there has been a lot of talk about the injury toll. Who would you blame – the WBC for holding its tournament when the players were still tuning up or the USA team authorities for not obtaining its own pre-tournament training site and bringing the players in two weeks earlier? Here in Florida the facility built for the Indians and never occupied and Dodgertown in Vero Beach were both vacant and available for Team USA. Meanwhile, Cuba has gone home with their entire team intact – no defections. Does that mean that [a] people in Cuba are happier with Raul than they were with Fidel [b] things have gotten so bad here that defecting is no longer that good a deal or [c] security was so good that Scott Boras could not get through to sign anyone?

There are 17 days until opening day. But with the disparity between good and bad wider than ever, we might as skip right to the playoffs. It is September, the Yankees, having beaten, the Angels will beat Minnesota in the ALCS. The Twins spent their energy outlasting the Red Sox. In the NL the Dodgers top the Marlins (wild card but still without a firm stadium plan) and the Cubs beat the Mets (NL East leader). Los Angeles wins the NLCS despite the goat sacrifices in Chicago. Yankees win the World Series in 6 games and Alex Rodriguez donates his share to charity.

RIP: Whitey Lockman. Whitey Lockman is the answer to the trivia question – who was the runner who scored just ahead of Bobby Thomson when Thomson hit the shot that was heard around the world? If Lockman had not hit the double first, Don Newcomb might have still been on the mound to face Thomson.

Tuesday, March 17, 2009

About Last Night

It would take someone with greater journalistic skill than I have to truly capture the essence of last night's WBC game between Venezuela and Puerto Rico. I have never experienced a game in any sport with the level of zeal, enthusiasm, brio, rapture and simple enjoyment. There was spontaneous singing where everyone seemed to know the songs; homespun cheers; friendly banter between the sets of fans. Since Venezuelans outnumbered portorriqueños by about five or six to one, that was good judgment on the Puerto Rican side.

The irony, of course, is that most of the venezelanos are here in Miami because they are not happy with the Chavez regime. But they flew the flags and sang the songs and waved the banners and banged on the thunder sticks with no thought other than urging on their country's team. Oh, there was some booing for Magglio Ordonez for his support of Hugo Chavez. But, when he came out to toss the ball with Melvin Mora before the game the fans swarmed the front row with cameras and pleas for autographs.

How wound up were the players? The first seven outs that were recorded were strike outs – a combination of tough pitching and the anxiety of the hitters, who were swinging for national honor, not punching the ball into the opposite field.

There is a growing, but still miniscule, body of Americans who wear the colors and chant USA USA but it is not the same. As a sports culture, we are raised from birth in devotion to a team. So are English soccer fanatics. But, when the teams dissolve and a national side is established, even the most ardent Liverpool supporter will stop singing "You'll Never Walk Alone," and will take up their national anthem in a heartbeat. In the Venezuelan crowd, I saw a lot of Caracas Leones gear and a scattering of other local teams, but the country colors prevailed.

And, according to my friends on the catering staff, arepas outsold hot dogs.

XM radio and some other commentators are turning a tad nasty about the WBC. They are annoyed by the mercy rule defeat that the USA suffered on Saturday and by the injuries. I have to question their timing – coming right after the worst US performance it does sound too much like what sore loser language.

The mercy role may sound sissified to us because we think of it as a little league thing. But, ending a game after seven innings if one team is up to 10 runs is not an awful idea. They cut off beer sales around that time anyway.

The injury issue can be problematic. The Latin American teams have come off their seasons and the Caribbean World Series, so for them the WBC extends the season, but they are in shape. The Asian teams all create training camps for the WBC and have been preparing it for weeks. In the US, it is our spring training season and we are asking players to go all out much sooner than they otherwise would. There is no solution for the timing – no one wants to extend our season into November/December and stopping MLB in mid June or July is also a non-starter. So, I guess we have to suck it up every four years. Or, as on listener suggested, send out a team of college and AAA players.

Last night, I did experience video replay. And, it was not a good thing. Earlier in the game, the venzelano manager, Luis Sojo, came out to protest a ground ball that he said hit a Porto Rican runner. The umpires huddled, called out a fifth umpire to confer with them, and ruled in Sojo's favor. Not so bad. But later in the game, Ramon Hernandez hit a long fly to left center that the umpire rule bounced off the wall. Hernandez slid into third with a triple, but Sojo and the fans thought otherwise. Amid a chant of "jonron," Sojo came out to protest. Huddle. Send for the 5th guy. Then, the umpires left the field, leaving one behind to, I guess, maintain order. It seemed like an eternity when they returned and awarded Hernandez his home run.

Umpiring judgment and occasional errors are a part of baseball. Freezing everyone in place while the scorecard flashes, "play in review" is not.

Monday, March 16, 2009

Some Weekend Thoughts

On Politics and the Economy: Fifty days into the new administration and we are already reverting to the same old Washington DC scene. I shorthanded this before – Barack Obama is a brilliant man who ran a superb campaign for the presidency. He avoided every mistake made by losing candidates in the last four or more elections. His choices of an inner circle, particularly on the financial side of the table, include some of the smartest guys that were available. I questioned getting early advice from Paul Volker and I would like to read about him widening the circle to include some of the brilliant conservative minds, like Martin Feldstein, but overall it is an A Team. And then he turned to the B team and let Harry Reid and Nancy Pelosi carry the ball. The result has been packages full of easy targets for the critics, a significant slowdown in the process and a total obfuscation of the desired end result. President Obama, please put the first team back in. This is not T-Ball and everyone does not get a turn to play.

    Granted, Rep. Barney Frank (D-Ma) has some good ideas on post-crisis regulation (and some bad ones, like letting headline-seeking state Attorney Generals sue national banks). But, if Treasury Secretary Geithner is a former Federal Reserve president and Ted Truman has an even longer credential. Let's hear from them and soon.

On the NCAA: For the next two or three days everyone I know will become a brilliant bracketologist. People who have no idea whether Portland State is in Oregon or in Main will be picking winners, pounding tables, flipping through TV channels and otherwise stop everything to indulge in March Madness. I am pretty good at it and I have won the pot once or twice – but when you work at home – you lose the frustration of seeing someone who is not sure what a 3-point play is walk off with most of the money. So this year, I am going to hold back except for making a plausible case for no number one seeds in the Final Four.

        In the Midwest, Louisville, the number one seed, will not make it to the final 4. They will stumble against Ohio State and Kansas will emerge the winner.

        I don't want to call the Connecticut v Memphis pairing in the West Region. But the 1 and 2 will meet in the regional final, as planned. OK, I will go with Memphis.

        Duke will not make it past Texas in the East Regional, but Pitt will stumble against Tennessee and 7th seed Texas will get to Detroit.

        North Carolina has shown an ability to lose big games and the regional final will be another one of those. Syracuse goes to the final 4

    And my bracket busting fearless pick of the tournament: Cleveland State over Wake Forest

On the PGA Tour: Note to the golf beat. Sooner or later we are going to stop caring about who finished 9th. Why not focus on who finished second after entering the final round tied for first. The headline in the Fort Lauderdale Sun-Sentinel – Mickelson Hangs on at Doral . . . Tiger Woods ties for ninth – is bad journalism and an insult to Nick Watney who moved into third place among PGA money winners.

On What Makes a City a "Good Sports Town: This is a work in progress, but I am thinking that Miami is not. This past week and weekend we had the Doral, we are hosting the second round of the WBC, The Marlins minus some key players who are in the WBC are in the midst of Spring Training, the Orioles are playing in our backyard, Dwayne Wade is tearing up the NBA, and the Panthers are in the thick of a very tight race to get into the NHL playoffs. So what consumed almost an entire hour of sports talk radio on Friday? The Dolphins signed someone named Green who is a mediocre corner back, but better than anyone the fans think the team has now.


Saturday, March 14, 2009

Why I Like Spring Training

The obvious answer is that, since I live in South Florida, it is accessible. The Orioles train about 20 minutes away. The Cardinals and Marlins share a facility that is just a shade less than one hour, door to door. Add another 20 minutes or so and I am at the Mets. The Twins and Red Sox are at the other coast of Florida, but it is a doable 2 and a fraction hours. Add a half hour and I am at the Rays. But, reflecting on it there are four other important reasons for my infatuation with the Spring games.

You really can get up close. Here is a picture of Josh Johnson warming up – no telephoto lens involved, just a few yards between me and a potential Cy Young winner. Go to a football game. First, you cannot figure out who is on which team because their faces are hidden behind masks and tinted face screens. But, even if you knew a player by his number, try standing this close. And, notice how the rest of the pitching staff forms an audience. That is what happens when you are the ace.

You can focus away from the score. The score is not really relevant, so you can watch another aspect of the game. At this game, I decided to follow Johnson's pitch count. Forget how it used to be, today a pitcher is expected to pitch 100-120 pitches per game. If he gets his team into the 7th inning, he gets credited with a quality start. That breaks down to about 15-17 pitchers per inning. Scott Kazmir is considered to be an inefficient pitcher, because he consistently runs counts up and is more likely to throw 20 pitches per inning. He started 27 games last season, pitching 152 innings, or 5.6 innings per start. Ricky Nolasco, by contrast, turned in 212 innings in 32 starts, averaging 6 2/3 innings per start.

If you look at the Box Score, Johnson turned in a good performance. His 3-inning line score was 1-3-1 and the run came on three singles. He struck out three and walked one. He threw 37 strikes vs. 26 balls. But, that leads to another story. His pitch count was 14-29-20 and 63 pitches in three innings is not that efficient. At that rate, he would burn up his per game allowance before the 7th inning starts.

You get a chance to make fantasy baseball real. Those of us who play the Strat-o-Matic version of the game are always playing with last year's statistics. Although you can use some of your picks on potential, if you want to compete, it is last year that counts. It is sort of like driving with your eyes fixed firmly on the rear view mirror. Strat-o-Matic uses the prior year statistics to simulate a game based on the lineups and rosters of the competing teams. The game engine is comprehensive and takes all aspects of the game into consideration. Pitchers, for example, are rated on their ability to keep runners on base and position players carry defensive ratings.

Hanley Ramirez, who is the darling of the Marlins – they broke with their usual practice and signed him early to a long-term contract -- made two horrific throws on routine ground balls, but his first baseman, Gaby Sanchez rescued both. He let two ground balls through for singles that most shortstops would have stopped and that many would have converted into put outs and he misdirected at least one outfield cut off throw. None were scored as errors. As Terry Dell points out in his great primer, Dell's Strato Strategy, the shortstop handles 23% of the possible fielding chances. He will give up a lot of hits in 2010 if he keeps playing like that in 2009. To paraphrase a famous theatrical review, the guy plays shortstop as if he is afraid that the field will rise up and play him. He is also a walking endorsement of the theory that errors only tell some of the story.

Roto players will revel in his hitting stats and can safely ignore his hamhandedness in the field. The rotisserie version, often called roto, is based on current performance. Roto is not a complete game measurement – most leagues play with a 5x5 format. In a typical 5 x 5 roto fantasy baseball league takes five hitting stats (Batting Average, Runs, Home Runs, Runs Batted In and Steals. The other five are pitching stats Wins, Saves, Strikeouts, Earned Run Average and Walks (there are variations). In Roto defense does not count and that should make owners of Hanley Ramirez very happy indeed. And, that explains why Sports Illustrated placed him 2nd, behind only Albert Pujols, in their draft guide.

You meet the greatest people. The tattooed wrist belongs to a charming young lady, who is devoted to the Atlanta Braves and Chipper Jones in particular. In addition to the wrist art, she was wearing a Braves necklace, a red Atlanta shirt and Braves sneakers (perhaps more out of sight) – but she told me there are no other tattoos.

No, she is not a real life Annie Savoy. She is a talented photographer who, in her words, "is married to baseball." She does not have a wardrobe that is exclusively Atlanta's though. She has a Maddux Cub jersey and follows other Braves when they switch to other teams.

Thursday, March 12, 2009

If Airline Executives Ran Baseball Teams

1. Fans would have to congregate in the parking lot and would be admitted to the ballpark in the order of their rows, with the higher rows entering first.
2. There would be a surcharge for carrying backpacks, large purses, or camera cases
3. If there are not enough advance ticket sales, the game would be subject to cancellation.
4. If a baseball goes into the stands and you want to keep it, they would accept Visa, MasterCard or American Express.
5. At random intervals, meaningless announcements would be made like, “We are going to slow up the game because there is weather ahead.”
6. Security personnel would be empowered to conduct random searches of all non-whites, particularly those with beards and turbans.
7. Fans would be required to remain in their seats during the 7th inning stretch.
8. Cell phone use would be barred during the 1st and 9th innings.
9. No game would start on time, but you would never know why.
10. Teams would agree to use two umpires and one team would leak the news that it was studying the elimination of third base.

Wednesday, March 11, 2009

MLB and New, New Economy

I believe that the current Economic Crisis signals a new definition of the New Economy, a term that social engineers, third-world advocates, and Al Gore fell in love with well before the global stock markets, banking systems, and employment levels fell apart. It also signals the beginning of a new template for Major League Baseball. I am going to call it the New, New Economy Action Plan.

Jonathan Mariner is the Executive Vice President and Chief Financial Officer of Major League Baseball, having formerly held the same position at the Florida Marlins. He knows baseball.

Not too long ago he was a guest speaker at our Wharton Alumni Club meeting and laid out a very interesting paradigm for understanding the changes in the business of baseball. According to Mariner, we are experiencing MLB 3.0. I have been thinking about this description of the evolution and began to wonder if MLB 3.5 should be beginning.

MLB 1.0, which lasted a very long time, was the era when baseball was the national pastime. The communications model was local radio, local TV and similar mid 20th century devices. I grew up in Brooklyn and I remember that, during memorable Dodger-Yankee World Series games skywriters would spell out the scores after the games (which were played in the day time).

Baseball was front page news in robust, local newspapers and kids could recite the starting lineups of all 16 (count 'em) 16 major league teams. A western swing took an eastern team to St. Louis, Chicago, Detroit and Cleveland (Cincinnati and Pittsburgh in the National League).

MLB 2.0, according to Mariner, started with free agency. I think it started with the movement west by the Brooklyn Dodgers and the Hew York Giants. At that point we stopped cheering for players and began cheering for uniform shirts. Sandy Koufax with an intertwined LA on his cap never looked right. Cal Ripkin and Kirby Puckett, playing out careers with one team, became the exception, not the rule.

Coverage of games moved to national TV, luxury box holders replaced bleacher bums as the paradigm of the “fan” and the NFL replaced MLB as the leading sports attraction. The Dallas Cowboys became America’s team, Howard Cossell enjoyed higher recognition than Mel Allen, and Monday night football caused program directors and meeting planners to avoid other Monday activities. And, on the food front, to tailgate became a verb.

Baseball did not die and MLB 3.0 is the (my words, not his) counterattack era. The goal, as I see it, is to achieve parity in the fight for the sports dollar. In this case MLB is taking on the NFL and the NBA and NASCAR.

Baseball is moving on a number of fronts to recapture the hearts and minds of the sports fans. New baseball-only stadiums were built in cities like Baltimore, Pittsburgh, Cleveland, and Houston. Waitresses and rocking chairs appeared in the first tier of seats. MLB went international. Caribbean players became a plurality and the Dominican Republic spawned countless baseball academies; instead of aging veterans seeking new lives in Japan, up and comers from Asia joined the ranks of US teams; the WBC was introduced; and offshore opening day became a reality, not just in Toronto.

MLB adopted new communications techniques – broadcasting, first on cable, now via the internet and, currently in Beta, via High Definition. And, despite a misbegotten effort to contract and a never-fully-explored back room deal that moved Montreal to Washington and re-shuffled the ownership of the Marlins and the Red Sox, franchises have stabilized.

Now it is interesting to see how MLB will deal with this New, New Economy.

The Pre Crisis New Economy was characterized as Green, Global, Connected and Technology-centric. The Post Crisis New Economy will have different priorities:

Cost Consciousness – working smarter and more efficiently
Customer Centricity – focused on retaining business by getting closer and staying closer to the customer
Control – creating a better understanding of the economics of the business, attention to liquidity, and awareness of risk

We can see several indications that MLB is not immune to the crisis.

Travel to spring training is down. In previous years I have gone to Jupiter for Cardinals exhibition games and sat among a sea of red, worn by Midwesterners who had combined vacation with a trip to see their Red Birds in action. They are still here, but the numbers are diminished. Similarly, in the aging home of the Orioles in Ft. Lauderdale, locals far outnumber visiting Marylanders. The signature "O" to start the last verse of the national anthem is clearly muted.

Stadium projects are in trouble. The White Elephant used to be the symbol on the uniforms of Connie Mack’s Philadelphia A’s. Now, it is rapidly looming over the big New York projects – the new Yankee Stadium and Citi/US Taxpayer Field. Oakland has abandoned its Fremont project and the new Marlins stadium is sturggling in the IC Unit.

Advance purchase of season’s ticket packages is down across the county. reported recently, “Baseball teams haven’t escaped the fallout. Teams including the Washington Nationals and Boston Red Sox have cut or frozen ticket prices this season. Oakland Athletics owner Lew Wolff said last month that ticket sales were down 10 percent.”

Most dramatically, the free agent market has shifted from a free spending Oriental bazaar to a bean counters paradise. Pat Burrell got $18 million for 2 years, not the north of $50 million for five that he was looking for. Bobby Abreu was a late signer and Pedro Martinez and Ivan Rodriguez remain unsigned.

So, the question is – How far will the New, New Economy Action Plan take baseball?

Ideas anyone?

Monday, March 9, 2009

Scooping Up the Weekend's Grounders and a Home Run

Chipper looks awful in the WBC. Now we find out he is off the team due to injury. In business, the PR release would have said, “He is resigning to pursue other interests.” Same difference.

Everyone expects the Yankees to reach out and find another third baseman to [a] replace Alex for the time being [b] hold in reserve in case Alex comes back and finds that the surgery was not as useful as expected – Dodgers have an extra option now that they got Hudson but will Joe Torre be willing to do a favor for the $teinbrenners and part with Blake DeWitt?
I am still betting on Brett Gardner as the opening day center fielder. And, I am wondering if Melky is trade chip that will get them a third baseman.

Jason Schmidt makes his spring training debut today. To me he is a poster boy for why Strat-o-Matic managers ought not to bet the ranch on pitching prospects. Remember when he was the hottest pick available? Now he is puffed up – disuse not Aroids.

Jimmy Rollins predicted a Phillies repeat when interviewed on during last night’s thrashing of Venezuela. He sees no reason why they should not do it again. I see one or two. Moyer is one year older and the Mets managed to influence the schedule maker so that they don’t close the season against the Marlins.

Dunn’s home run interrupted Rollins’ interview. Adam Dunn is the poster boy for the WBC which is growing on me. I love the guy’s enthusiasm. I have gotten so involved in the two US games that I began to wonder if Davy Johnson was the best manager we could have gotten. He nearly blew it by not activating the bullpen earlier when Oswalt faltered and no one can understand how or why he is using Rollins and Jeter the way he is.

And, for those of you who follow the economy – The uptick rule was suspended by the SEC some time ago. The rule says that no short sales can be recorded unless they follow an increase in the stock price (an uptick). Restoring that rule would shut down rampant short selling (selling stock you do not own in anticipation of being able to buy it back at a lower price). Restoring the rule would go a long way to stabilize markets. Changing the rule is within the executive powers of the chairman of the SEC. Ms. Schapiro may need a nudge.

Saturday, March 7, 2009

The Economics of Ramirez – The Dodgers Have to Get to the World Series

In my last blog, I revalued Manny’s contract to account for the deferrals and came to the conclusion that his $45 million dollar contract was south of $40 million in net present value.

Now, I want to look at the investment from The Dodger Perspective.

Doing that is much trickier. One of the top authorities on the economics of sports is the University of Pennsylvania’s Wharton Sports Business Initiative. I spoke to Ken Shropshire, the director of the WSBI, who told me that although they have studied and written about The Business of Sports Agents, the economic value of having franchises in a city, and justifications for corporate sponsorships, the have not approached the issue of what return a team might expect from a player contract.

It is not easy to do that because of the opacity of numbers. Simply put, it is hard to penetrate a team’s financial records because they are more or less sole proprietorships, controlled by an individual or a family. As a result, they are not required to divulge much.

So instead of trying to develop a typical ROI analysis, I set out to see how much of a financial burden the contract puts on the team. My most significant source of numbers was Forbes magazine. Forbes makes an annual effort to put together a tabulation of team values that is generally recognized as authoritative or, at least, as authoritative as we are likely to get.

According to Forbes, the Dodgers are a profitable team and a valuable franchise. The magazine sets the value of the Dodgers at $694 million, ranking them 4th in MLB behind only the Yankees ($1,306) the Mets ($824) and the Red Sox ($816). Their notion of value is based somewhat on recent franchise sales, but takes into consideration the worth of the stadium, the market in which they play, the value of being part of MLB and an admittedly elusive number – brand value.

Years ago, I heard a panelist at venture capital conference make the following statement when asked if his company was making any money, “We have made money every year, last year we made more than we spent.” Dodger revenue has increased every year since 1999 and, in the last three years, it has been more than the team has spent – in other words, the team is on a three-year profitability winning streak.

The revenue number for last year $234 million, $103 million of which came from the sale of tickets. The payroll was $132 million and the net income was estimated, again by Forbes, at $20 million.

So, let us play with numbers. We can call the valuation the equivalent of what a manufacturing company might call total assets. And, we can subtract the team’s total debt outstanding ($61 million) to arrive at an equivalent net worth, or owner’s equity, of $633 million.

Side note: Dodger debt is about three times revenue at the end of 2008. When you add in Manny’s deferral ($35 million) the multiple moves to just below five times, which gives the Dodgers another $100 million of borrowing power under the MLB guidelines. That would be enough to sign Pedro Martinez who, by the way, looked good again today in a three-inning stint for the Dominican Republic.

Return on equity is a shareholder measure to see how well management does with the funds that have been provided, in this case the $633 million dollar net worth. At the end of 2008, the Dodger ROE stood at 3.16% -- which is a woeful result.

It is better, of course, than losing money and having a negative ROE; but in the old economy’s normal structure, investors would be looking for ROEs somewhere north of 20%.

So, the Manny question is this: how much revenue has to be generated in order to turn in an ROE of 20%, based on a constant valuation? And, the answer is that the net income would have to move from $20 to $126 million. To achieve that net income, total revenue would have to increase to $330 million from its current $234 (assuming that profit margins remain constant).

Baseball teams report revenue in five categories.

1. Regular season game receipts
2. Revenue from local media broadcasts
3. Post season revenue
4. Local operating revenue (concessions, parking, in-stadium advertising, luxury boxes and other premium seating arrangements, etc.
5. The team’s share of national media revenue

At this point anyone of us can do what if analyses to sort out where the Manny-related boosts will come from. I will just make one or two observations.

A Dodger season’s ticket is currently priced at $5,460 (infield box – good seat) to $336 (nose bleed section). Up the road, the highest price Giants ticket is $3,444. And, down the road, the Padres are getting $3,500. Both of the other NL teams in California are far enough away that competition is not an issue – but comparisons will be made – and the Dodgers do not have much room to jack up prices.

On the advertising front, the Dodgers are vulnerable to a longer-term economic downturn. The way corporations are shedding advertising budgets and pricy luxury boxes, it is not clear that the top end revenue is going to be easy to maintain, much less to increase.

Bottom Line: The Dodgers are going to have get to the post season and say around for this deal to work out economically.

Thursday, March 5, 2009

What is Manny Really Getting

This is not about who won and who lost (you might recall that Scott Boras entered the free agency market looking for 5 years and $150 million, but I could not possibly comment) but I think it is useful to discuss just how much Manny Ramirez is really getting.

If he stays the course under the deferred contract as signed, the net present value of the $45 million dollars is $37.66 million. If he opts out after Year 1, the net present value of the $25 million dollars is $21.82 million.

NPV compares the value of a dollar today to the value of that same dollar in the future. It is meant to account for inflation; for the risk of not obtaining the funds as promised; and for the opportunity cost.

Opportunity cost calculates what else Manny might do with the money other than lend it, tax free, to the Dodgers. Here is an example to help you understand the concept. A kid out of high school decides to go to college. He will lose four years of salary at the job he could get. He is investing that "loss" in the hope that his post-college salary will more than make up the difference in the future.

It is easy for calculate NPV, using a spreadsheet program's function menu. You input the amount the projected cash return in each of the years for as long as the contract runs and then determine the discount rate. The Excel command is:


The difficulty arises in deciding what a proper discount rate might be. There is some subjectivity involved and another analyst might well come up with a different number.

For example, I set the risk at 1%. I think there is a 99% chance that the Dodgers will be able to honor the contract. Some, would say there is no risk, others might place the risk higher.

I set the inflation rate at 2% because the current Fed target is fixed at between 1.7% and 2% and they often err to the high side.

The opportunity rate is even trickier. We have to make two simplifying assumptions. First, that Manny has enough money to invest all of the money, as it comes in, and second, that he would opt for safer investments rather than chase higher yields by absorbing more risk. Of course, there are problems with both assumptions. I have not accounted for taxes nor for the agent's commission. The whole amount would not be available for investment.

In this sort of analysis, the 10-year US Treasury bond is often used as the reference rate for the safest investment available in the market. That rate is currently 3.01% but I am using 3.5% because that is the highest annual percentage yield for a 5-year CD that I could find with a quick scan of the web.

In my next blog, I am going to try to turn the tables and see if we can work out what the contract is worth to the Dodgers. As you will see, that is quite a bit harder.

Wednesday, March 4, 2009

The Orioles Crush the Dominican Republic

Random thoughts from today's game, my first World Baseball Classic match.

The Supporters of the WBC are right: It was fun to watch what amounts to an all star team. Hanley Ramirez ended up playing shortstop so that Michael Tejada could play third, so that ARod could have a hip cyst specialist in Colorado look at his hip.

None of the rabid, Dominican fans seemed to miss him. They were just so excited to see their players. They got just as excited when Juan Berito came over to sign autographs as they did when Miguel Tejada did the same.

The Oriole pitchers may be better than I thought: Koji Uehara started the game for the Os, pitched two innings and all they got out of him sere singles by Tejada and Tavares. Tavarez led off with a sharply hit single followed by a Juan Bautista bunt sacrifice (who said you can't bunt your way off the island?). Uehara promptly got Hanley Ramirez to pop up behind second base. Big Popi was next and after the Dominican fans went crazy, Ortiz hit a long ball that Nick Markakis had no trouble chasing down. After Tejada singled to open the second, Uehara got Guillen to pop to the first baseman and struck out Aybar and Cruz.

In fact, the only DR run came when Bob McRory walked Tavares (on base all four times, two singles, a walk and hit by a pitch). Bautista's single mved him to third and he scored when Hanley hit into a 5-4-3 DP - one of 4 hit into by the DR.

Felipe Alou is 74 Years Old: But he carries himself like a 90 year old. But, he has his trusty sidekick, Luis Pujols with him as Bench Coach. Does anyone remember Pujols' 55-106 year managing the Tigers? Or, the time they batted out of turn?

30 MLB GMs May Not be Right:
Pedro Martinez pitched two credible innings. OK. It was against the Orioles and he did throw 19 pitches in each inning, and his first inning was weak -- after Tejada mysteriously let a pop fly drop in front of him, Scott pounded a long fly to left. Pie and Zaun then each stroked an RBI single. Pedro settled down after that, got Jolbert Cabrera and Dave Roberts to fly out peacefully. His second inning was better. After walking Adam Jones, he struck out Markakis and Gomez while Huff popped into left. All in all, he may just be someone's 5th starter

Tuesday, March 3, 2009

The Bank of Manny – Deferred Compensation and Debt Limits

"The truth is always a compound of two half- truths, and you never reach it, because there is always something more to say" - Tom Stoppard

The Manny, Boras, McCourt circus continues. This morning, McCourt is talking about lowering the offer and sources close to Boras (some think it is Boras himself) is saying that lowering the offer would offend Manny and could kill the deal.

Reaction to the deal covers the gamut. On Sirius/XM Baseball Beat yesterday, the talk turned populist – how could Manny turn down $45 million, regardless of terms when people are losing their jobs and their homes?

On MLB trade rumors the jury is split. Blueblooded wrote: “This is getting dangerous - Frank's not going in for the kill, he's sneaking out the back door. For a while I thought he was completely motivated by pride and hatred of Boras. Now, I'm starting to buy into the idea that he's just cheap.” On the other hand, celtics464 writes, “The Dodgers don’t need Manny. let him walk. he has disgraced the team the management and the fans. how any of them would want him back still amazes me.”

The issue still seems to revolve around deferred payment versus cash right there on the barrel head. So, my thought for today is – deferred payments: Who benefits. Who gets hurt?

The implication of a deferred payment is a promise to pay a certain amount at some time in the future. It is, in effect, an IOU. Sometimes, but not in this case, there is a promise to pay interest to compensate the lender for accepting the deferral. A bank certificate of deposit is a deferred payment. So is a government bond. You are saying to the bank, “Here is my money. Do whatever you want with it. What I expect is that you will pay me the amount of interest you have promised to pay me and, at the end of the term (one year, two years, whatever) you will give me money back.

Manny, through Scott is saying, “Here are my services. What I expect is that you will pay a certain sum each year for the next four years, although I may only play for you for one more year – maybe two.”

There are three elements to consider when you or Manny agree to a deferred payment. There is credit risk. What if the bank or the team cannot pay? There is opportunity risk. Can I do better if I invest elsewhere? There is inflation risk. What I am investing may be worth less in the future.

Economic theory suggests that reward is a function of risk, so the interest payment is meant to cover those three elements. Businesses often calculate a hurdle rate – a minimum return that is required before they make an investment.

Bank customers do not do that – we read the tables of rates published in our newspapers or we go on line to a rate monitor site and look for a fair return. Of course, bank customers are also made secure by the Federal Deposit Insurance Corporation which, under most circumstances, guarantees that we will be repaid.

Avoiding credit risk is not quite the same for a ballplayer. Major League Baseball is not the FDIC and they do not guarantee that the Dodgers will meet their obligations. There is some protection. MLB has established and enforces debt limit on the teams, based loosely on cash flow (it is really based on EBITDA, but only Jonathan Mariner, the CFO of MLB, really understands the formula). We do know, however, that the definition of debt includes the present value of long term contracts and deferred compensation.

You can have an interesting discussion with agents about the issue of opportunity cost. In a recent blog, I discussed markets as defined by economists and as defined by Boras. For many free agents there is an active market – teams willing to bid for their services. In Manny’s case the market may consist of 1.5 teams – the Dodgers and, maybe, possibly, the Giants; or, it may consist of only the Dodgers.

The future value issue (the inflation risk) is vital when a company calculates a hurdle rate; it is less significant in a deferred compensation contract because it does not matter. Manny may retire in two years, go to play in Japan, sign with another team, or even sign to continue playing for the Dodgers, however, he will still get paid the residual on this contract.

So what is going on?

Frank McCourt is negotiating to improve his cash flow. By deferring payments, he conserves cash. By offering a no interest deferral, he is reducing his future obligation and staying that much below the MLB debt ceiling. In effect his not only banking on Manny, the left fielder, he is tapping the Bank of Manny. Last time I looked, the Bank of Manny was not on the FDIC watch list so for McCourt it looks like a good deal.

Sunday, March 1, 2009

Manny and Scott and the Law of Supply and Demand

You remember the law of supply and demand. It was the second lecture of your economics class. The first lecture was the professor telling you that this was going to be the most important class you would ever take and giving out the reading list.

Put very simply the law says that when prices are lower, people will buy more of a good and, as a result, they start bidding up for a portion of the supply on hand. So prices go up. And, when prices go up, producers are incented to produce more. And, eventually, there is too much of the good and, in order to move the products, prices are lowered.

In that construct, supply and demand are constantly seeking a happy medium, called equilibrium. To some economists, equilibrium is a seldom-achieved ideal. To Communists it is a natural event because they can control both ends of the equation and make it so.

The concept relies on the existence of a market. We define a market as a set of would be buyers who share a common need (baseball owners who need the services of good players in order to win a championship); a set of would be suppliers who have a solution (sports agents representing star players) and some mechanism for bringing buyers and sellers together. There is more, but that is enough for where I am going.

There are a number of events that disrupt the operation of pure market even in the face of our belief in free markets. Some examples are minimum wage laws, emission standards, rent controls and Scott Boras.

Scott has his own version of the law of supply and demand. His notion of equilibrium is the price he has invented and calls “the market for this player. The problem occurs when that market is alive only in his mind. Take the ongoing Manny Ramirez saga.

Boras controls the supply (Manny) and, in this case, he seems to have invented the demand, I have scoured the blogosphere, the local LA media, and the media in other plausible cities and I cannot find out who Boras means when he says that there are other conversations going on. San Francisco is, admittedly, hanging in on the periphery. Maybe they think that there will be a distress sale.

But, for now, it is the Dodgers bidding against themselves. And, the whole issue seems to revolve around how much gets paid in 2009 and how much gets deferred.

From Manny’s standpoint, it makes sense to want more up front. Even with CD rates hovering around 2-3%, there is an opportunity cost, a risk factor and an inflation assumption to deal with. The promise of $20 million four years from now is worth less than the same $20 million on the barrel head.

From Boras’ standpoint, it makes sense to get more. He had Manny walk away from $40 million (negotiated by another agent). Now, he has to deliver..

From the Dodger standpoint, however, deferral makes sense. I am not at all in the know about their liquidity, but I assume they would have to borrow in order to make the payment current. Credit is tight and there is no guarantee that they can call on support from their banks. In addition, MLB has instituted a cap on how much debt a team can carry. Deferring the payment and not borrowing, might be the only course open to them.

As of this writing, about 8pm LA time, spring training is continuing without Manny. The Dodgers lost to the White Sox with Juan Pierre going 0-3 in left field and no other team has stepped in to white knight the deal.

Lend Lease Players?

Over on an Oriole fan site, is the report that Tony LaRussa the Cardinals manager, is so short of pitching arms that he want to borrow two or three from the overstocked Orioles when the Cardinals come to Fort Lauderdale to play there.

I have another idea. Hire a second bus and bring more players to away games.

As it is, fans are seeing 1 1/3 teams instead of two while the ticket prices continue to escalate. I know the Yankees are not charging $2,500 for dugout to dugout seats at Legends Field, but $31 is still $31 dollars.

That is not too much to see some of the Yankees of the future, but when you pay it to see the Marlins host the Phillies, you sort of hope that the Philadelphia infield will not be Dobbs, Donald, Bruntlett and Matt Stairs taking reps at first base while Ryan Howard and Chase Utley are catching rays on St. Petersburg Beach.

Charging more for less is an airline concept that has not worked -- note that USAirways is returning to free soda and a Ryan air spokesman said that his CEO often makes things up as he goes along and they will not charge for using the on-board toilets.