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. Bloomberg.com 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?