2008 FCI – WTF?

The A’s are off the charts, folks.

I’m not referring to the team’s popularity or TV ratings, nor is it an attendance phenomena. Remember this chart?

This year’s Fan Cost Index by Team Marketing Report has the A’s average ticket price for 2008 at:
It’s way off the above chart, a whopping 22.3% increase over 2007 ($23.88). That’s good enough for third highest in MLB, behind the Yankees and Cubs.

The increase contributed to an overall FCI of $206.80, 11.5% over 2007 and good for 10th in baseball. That’s higher than most teams with recently built ballparks, including the Nationals ($195.50), Padres ($201.72), and Giants ($183.74). The Giants actually posted a FCI drop of 0.7% relative to last season – but only because they were allowed to go back and adjust prices after the season was over.

But is $29.20 right? Compared to last year, several seating sections received $4-6 ticket hikes, whereas roughly one-third of the stadium has only a $1 increase. There’s premium game pricing for the Yankees, Red Sox, and Giants, but that’s only 11 out of 79 games (Tokyo doesn’t count). There’s also the addition of the all-you-can-eat seats, but even that only equates to a $1-1.50 hit. (I’ve sent Team Marketing Report a request for clarification but have not received a response.)

If one were to follow simple supply-demand rules, a ticket price hike (whatever the final number) would appear to be a major cause for the significantly reduced attendance this year (see sidebar). Reduced expectations and a revamped roster with few big names haven’t helped, neither have the oddly cooler temperatures observed for A’s homestands as opposed to Giants’ games. Now that the team is leading the division and Frank Thomas has returned, there should be some uptick from the bandwagoners and youth, along with warmer weather. However, I don’t think they’ll catch last year’s total or eclipse 2 million unless they go on a massive winning streak or run away with the division – thoughts that were unheard of in the winter.

Dodger Stadium improvement plans announced

Dodgers owner Frank McCourt announced his long-awaited plans for Dodger Stadium. McCourt was assisted by a Vin Scully-narrated promotional video. 3-D models and renderings abound.

The largely outside-the stadium project will cost $500 million on top of the $250 million spent inside the stadium over two years ago. They have the buzz words down, talking up the Stadium’s transformation into a “lifestyle destination for all of Los Angeles for all twelve months of the year.” Also emphasized is a change in the way the venue is operated to a more environmentally responsible one (no mentions of specifics other than a nod to technology).

Among the improvements:

  • Dodger Way – A new “front door” to the stadium in center field framed by a tree-lined walkway. The center field plaza would connect to a promenade featuring shops, restaurants and a Dodger Experience museum.
  • Green Necklace – A landscaped, tree-lined perimeter surrounding the stadium. Fans will be able to access their seats and concessions via the Green Necklace.
  • Top of the Park – Behind the highest point of the park behind home plate would be a a outdoor plaza with views of the Los Angeles skyline, Santa Monica bay, the San Gabriel mountains and the field of play inside Dodger Stadium

In addition, the Dodgers plan a “transit plaza” (read: bus station) with a dedicated bus lane and garages to replace terrace parking lost to construction. Two of the garages are on the left and right edges of the above rendering. Additional parking will be underground. As for extending rail-based transit, McCourt left that up to the city to figure out. Even though MTA’s Gold Line has its Chinatown stop just slightly over 1/2 mile from the stadium, it’s also a 300-foot vertical climb. Perhaps they could use a funicular like Pittsburgh’s Duquesne Incline or the incredibly cool Katoomba Scenic Railway in Scenic World, west of Sydney, Australia. Half-seriously, they could even contact Six Flags when Magic Mountain inevitably closes for their funicular. They’ll need to figure out how to enhance pedestrian access as well.

What’s going to pay for the Dodger Stadium improvements? Scuttlebutt is that McCourt will sell off development rights to pieces of surrounding land. As much as the Dodgers are advertising the great views from the stadium, some of those views will be undoubtedly altered by the stadium’s ancillary expansion, as well as the presence of condos all over the nearby hillsides.

Forbes new valuations out: A’s worth $323 million

For a commissioner, Bud Selig makes a pretty good CEO.

League revenue is up again, this time 9.3% over last season. That’s actually down from the last three seasons, when they typically had 14% gains. Revenue is still impressive and will only go up through the end of the current CBA. Yield like that would be an excellent investment for those looking for a mid cap. Of course, MLB is entirely private so no one outside the Lodge could entertain such notions. Regardless, it’s impressive.

The A’s experienced an 11% jump, from $292 million to $323 million. They continue to ride the revenue sharing gravy train, as local revenue pales in comparison to most of their brethren. The welfare check should only become bigger next season as early attendance figures from the first two weeks portend a low season-end total. Forbes’ summary of the A’s financial situation is incorrect in that it identifies TIF as a funding mechanism for the ballpark. TIF requires bond money be raised. They’re not doing that in Fremont. Instead, privately generated proceeds from the sale of housing rights will help foot the bill.

I’m surprised that this year’s edition didn’t cover the debt issue. Quite possibly, the toughest task for Selig was to whip owners into shape by getting them to spend less. Over the last four years, teams have dropped from a collective 39.7% in debt to 32.7%, and that includes the two new stadia being built for the NY teams.

click for a larger chart

Look at the values on a team-by-team basis, and you’ll see a major trend downward for most of them. The old 60-40 debt rule may be obsolete, but it still informs club executives on how to run their teams, just as 50-60% of revenue is comfortable salary “guideline” for the teams.

Nowadays, there’s a simplification of the debt rule: teams can’t be in hock over 10 times the average EBITDA over the past two seasons. Notice that the A’s current valuation is exactly 10 times that of their average operating income from that period? I doubt it’s a coincidence. Moreover, the first $36.5 million in debt grandfathered from previous years doesn’t count, so if you’re Fred Wilpon or Frank McCourt and you borrowed heavily to buy your teams, it’s not that bad. And as an incentive to upgrade to new digs, any team incurring stadium debt gets to bump up to 15 times EBITDA for up to 10 years after the facility is complete. The difference between 10 and 15 times doesn’t sound like much. It’s only $75 million. Since income is expected to rise thanks to the massive payroll drop, so will that debt ceiling. Look for this:

  • $30 million in earnings each year in the two years prior to the ballpark opening
  • Multiply that figure by 15 to get max debt load, $450 million (which equals the projected ballpark construction cost)

There is, of course, the matter of player salaries. They’re the biggest expense and so they factor in. However, that fat $36.5 million deductible comes in handy, especially as a team’s payroll drops to approach that figure. Again, the rule is not a hard and fast rule like the NFL’s salary cap, with Selig or Bob DuPuy getting all punitive every winter. Referring back to the chart, it appears to be set up so that when teams are forced to go into major debt like the Yanks or Mets, the other fiscally responsible teams help soften the blow. In that sense, MLB and other leagues are akin to conglomerates, with each team acting as a single business unit. When a major profit center (Yanks/Mets) has to invest to invest in a new plant (stadium), the other units tighten up in response. After all, it’s the company’s overall health, not a business unit’s, that gets trumpeted by Selig. As the new plants open and become amortized, others take their turns.

Call it MLB’s “Circle of Life.”

Opening Day pushed back to at least 2012

A new article by the Argus’ Matthew Artz confirms a circulating rumor: the environmental impact review process will go the whole nine yards, pushing its completion until the end of the year. Nothing can proceed until the study is completed, reviewed, and voted upon. Tack on the normal construction time, and it makes 2011 unlikely. The A’s were hoping that portions of the previous Pacific Commons study could be used, but the presence of the old document makes the review more complicated, requiring a comparison of projected changes to actual changes.

Those of you looking for a political angle may look at the study’s availability after the November general election, when incumbent Bob Wasserman will face off against four-time former mayor Gus Morrison and councilman Steve Cho. Without even a draft, there isn’t much substance to debate. That’s not to say that Morrison won’t feature the anti-ballpark stance prominently, it’s just that he won’t have any specifics to point to unless he wants to put together his own independent study. Meanwhile, proponents will have the Economic Impact study from last year as ammunition, which I covered in several posts last spring.

A simple economic angle also can’t be dismissed. By pushing the opening back a year, investors may be hoping that they’ll be an additional year removed from the recession and the housing market drop.

The teams need elbow room on TV

Last week, we hit one of those so-called “perfect storm” situations that can occur with scheduling. On the main CSN channel, the A’s and Jays were locked up in a tight, late inning battle in Toronto. Waiting in the wings was the first playoff game between the Sharks and Flames. And the Giants were playing the Padres on the side stage, CSN Plus.

The A’s game ran a not-so-tidy 3:31, forcing the Sharks game to start without a TV broadcast. Instead of doing a picture-in-picture or split screen, CSN chose to keep the A’s game on while providing delayed updates on the Sharks game. Even though there was no HD broadcast of the A’s game while the Sharks game was to be in HD, the Sharks game could not be carried in HD until CSN switched feeds. Only after Bobby Crosby’s bases-clearing double and the final A’s out in the top of the 9th did the switch occur. Just as the switch happened, the Ryan Clowe scored for the Sharks over six minutes into the first period. Unfortunately, the Sharks were down 2-0 leading up to that point. It was quite a debacle as angry Sharks fans called CSN to vent their frustration.

There are really three issues here. First is the production choice made. AFAIK it’s pretty much the same staff from the FSN days with some promotions and attrition thrown in, but it mostly feels the same. Hopefully they’ve learned from this. Second is the HD problem. If there is an SD away baseball game and an HD home hockey game, why can’t they split it so that the HD channel carries the HD broadcast? I’m not up on the technical side but it doesn’t sound that difficult. At least the folks with the HDTVs – the bars and the regular folks who’ve plunked down a couple grand for a flat panel – can be taken care of. There is a long term issue of having only a single HD channel to begin with, but I’ll get to that later. Third, and most important, is that the juggling act that CSN does with the four area teams needs to stop. It was confusing from the first day that FSN Plus launched with its dozens of different channels on different systems. I’m sure that Comcast is attempting their best given the circumstances. But the situation as it stands is untenable. If you’re a subscriber of Comcast’s digital cable service or the sports packages on one of the satellite companies, you’re paying a premium for this. It’s just not a good way to do business.

If you’re wondering how the Bay Area fares compared to other similar markets, you might be surprised to find out that we are entirely unique in that in this market there is a single regional sports network, majority owned by the predominant local cable provider. So it shouldn’t surprising that when the Giants bought a stake in the new CSNBA, someone would object – the Warriors and owner Chris Cohan. Especially because Cohan in a previous life was a local cable operator, which probably means he knows something about the business.

Take a look at the chart below. I’ve mostly included other markets with two baseball teams, because they’re the only ones with similar scheduling dynamics. In LA, there are two full-fledged channels with exclusivity agreements for the three major teams there, leaving the lesser teams to battle for scraps. It’s not a perfect situation, but at least it lends stability for Angels, Dodgers, and Lakers fans. In NYC there are no less than four independent RSNs, all of which are owned in large part by their respective teams. While this makes it tough to push cable providers to include all of these RSNs in their limited space, at least it allows the market to determine the outcome. In Chicago, the two baseball teams are helped enormously by splitting games on the Superstation WGN and CSN Chicago. And in a still-puzzling, archaic move, the Wirtz family continues to not broadcast the majority of Blackhawks home games, freeing up space on the local RSN. In Baltimore and DC, MLB and O’s-created MASN carries the two baseball teams, while the local Comcast RSN sued MLB and the O’s because they felt they had the right to negotiate a deal and were blocked from doing so when MASN was launched. Currently, CSN Mid Atlantic carries the winter sports.

Comcast appears to be addressing the Bay Area’s logjam by adding yet another CSN Plus channel, called CSN Plus 2. There’s currently a placeholder for it at channel 412 if you’re on digital cable, plus DirecTV and Dish also have it. Perhaps they’re waiting to broadcast on it until next season or until more of the smaller cable systems pick it up, which is not a given. Having yet another Plus channel is only going to create more confusion.

That leaves one major issue looming: What about HD? Having two standard definition Plus channels does nothing to add HD offerings when in the coming years the local teams will do nothing but expand their HD schedules. This is a real quandary for Comcast, as they are stuck with real bandwidth limitations that restrict how quickly they can add HD channels. The normal convention is that on what we would consider an analog channel, there is space for two HD feeds and even an additional SD feed should Comcast choose to compress the signal a bit. For instance, the HD feeds for both KPIX and KTVU are carried on channel 78, while KBCW and KNTV are on 79. Contrast that with a possible 10 SD channels that can be placed in that same space. Comcast is stuck with this until the analog-to-digital switch is done and the old bandwidth is freed up. For them, the switch won’t all happen next February as consumer concerns will draw out the transition another year or two.

As recently as yesterday I said that the best situation for the A’s would be to team up with the Sharks on their own RSN. In light of the Warriors’ frustration, perhaps they are a better partner. Consider that there’s only a two-week overlap in regular season schedules between MLB and NBA, and the fact that both leagues’ postseasons are carried exclusively on big national networks. They could easily work around any potential conflicts. They would need Comcast to get a taste in order to get Comcast to carry the channel. At least with a new RSN, it’s a stable home and a chance to build a brand, as opposed to being just another part of the Bay Area sports menagerie. Obviously, I’d be remiss if I didn’t mention that the A’s would be in more control over their own finances and advertising revenue.

Change is afoot. Hopefully we won’t have to wait too long to see it.

Quakes’ soccer stadium deal announced

The “soccer village” is coming closer. Joshua Molina of the Merc reports that a team of developers and the city of San Jose have reached a deal for the developers to buy the bulk of the old FMC site from the city, upon which an 18,000-seat soccer-specific stadium and surrounding retail/commercial/hotel space would be built. Some specifics:

According to terms of the deal, Wolff and his partners would pay $132 million for 66 acres of the former FMC manufacturing plant. Of that, about 18 acres will be set aside for the 18,000-seat soccer stadium and parking.

The city bought the land in 2005 for $81 million.

Wolff and his team have until 2010 to pay the city the bulk of the sale price. In the interim, they have agreed to pay interest that San Jose will accrue on the bonds it sold to buy the property – as much as $12 million over the next two years. And Wolff must extend the city a $3 million letter of credit that would be payable if he walks away early from the deal.

Remember, this is a two-part deal. This part only covers the site on which the stadium and ancillary stuff would be built. To pay for the stadium, Wolff is pushing for rezoning of the Edenvale site in South San Jose, where 1,500 townhomes would be built. Looking at the FMC piece only, it’s a good deal for the city that forces the developer to have some skin in the game, even defraying the city’s “carrying costs” for a while. The Edenvale portion is what will create a burden on public services, but it’s not fundamentally any different than what Fremont will encounter with the baseball village. Awesome for the Quakes.

Come for the food, stay for the baseball

As both local teams have ratcheted down on-field expectations this season, they’ve focused on a different means of getting folks out to the old ballyard – the food. The entire first week of Giants broadcasts have been full of plugs about new meal and dessert choices. One particularly brutal scene was earlier this week, when Jon Miller and Dave Flemming were nearly buried alive by dishes of strawberry shortcake when that particular subject came up.

The A’s haven’t been any better. They’re pushing the all-you-can-eat section like it’s the next great prescription drug. And during the radio booth’s recent sampling of Kinder’s barbecue, it seemed like an entire inning of play-by-play was lost. I can only hope that now the teams have the message out they won’t have to needlessly flog the public with it. Some of us are just trying to listen to or watch a ballgame, y’know?

Then again, there are even better reasons to go to a game that have little to do with consumption. On Sunday I sat in the RF bleachers, Section 147. The game was well-pitched, the setting pleasant, the crowd rather sparse – except for the bleachers. On certain days when the bleachers are packed and you have the right people there, each of those little upper bleacher sections becomes a neighborhood. Yes, that same neighborhood feel that stadium designers ascribe to is already there. It’s a design accident, really. Football stands these days are designed to prevent views of the field from the concourse. Instead they build up more seating rows right up to the next level of seats/suites. Given the right conditions, one of these sections turns into a happy little fan ecosystem, like a sunken ship will turn into a new reef.

So there we were, a bunch of strangers enjoying a game, some Indians fans, a maligned BoSox fan, some families. A couple of tikes were going up and down the aisle. Suddenly a fan at the back gave one of the kids a dollar. The child proceeded to do the robot, which thoroughly entertained everyone in the section. He did it again for others. Everyone laughed, many pictures were taken, all went home with smiles on their faces (even though the A’s lost). I didn’t see anyone with takeaway boxes from Kinder’s. Few knew the names of the players on the field. It didn’t matter. That’s not to say that this phenomenon happens all the time or even frequently. Most weeknights those seats aren’t filled. If it happened more often more would know about it. And more would go.

It’s my hope that the A’s and 360 recognize that the neighborhood concept doesn’t occur just because you design a stadium a certain way. It takes certain fans, perhaps some decent weather, and a good ballgame. It’s not something you can bottle.

One other thing disturbed my about Sunday. It appeared that an effort to start the Wave came from the LF bleachers. WTF? BleacherDave?