Sports Business: BASEBALL
A GRAND-SLAM SEASON
On-field glory has burnished baseball's business prospects
This baseball season will forever be remembered for the September home-run heroics of Mark McGwire and Sammy Sosa, but it was apparent as early as May 17 that the gods were smiling on the game again. On that day, the New York Yankees' David Wells pitched the fifteenth perfect game in major-league history. Normally, the Yanks would have been lucky to draw 20,000 to a spring tilt against the Minnesota Twins. But because Wells staked his claim to immortality on Beanie Baby Day, a packed house of 49,820 cheered him on. The Yankees beat the Twins 4-0, and thousands of kids left Yankee Stadium with a stuffed animal and a memory to last a lifetime.
That was the season in a nutshell: extraordinary athletic performance enhanced, for a change, by spot-on marketing. But now that baseball has America's attention again and the 1998 World Series is drawing to a close, can the sport maintain its momentum? It is highly unlikely that the new single-season home-run record of 70 will fall next year, or that anyone will pitch another perfect game, or that any team will top the Yankees' new American League record of 114 wins. So the real issue is how does Major League Baseball (MLB) transform the excitement generated by this quasi-miraculous conflation of events into enduring enthusiasm for the national pastime.
Certainly, the business of baseball has already gotten plenty of bounce from this season. For starters, the on-field brilliance finally got fans to stop fixating on the players' strike that caused the 1994 World Series to be canceled. "The memory of 1994 will never go away, but we're as over it as we'll ever be," says Paul Beeston, MLB's president and chief operating officer. "People don't talk about it any more when they talk baseball."
Beeston himself is an integral factor in the case for optimism. A longtime Toronto Blue Jays executive, Beeston was installed in the newly created position of MLB president in August, 1997. He filled a management void that had bedeviled the sport ever since Commissioner Francis "Fay" Vincent was ousted in 1992. An unpretentious, high-spirited man with a reputation for straight dealing, Beeston, 53, is the rare baseball executive who is as well-regarded among players as among team owners. "Paul was the equal of any club executive over the last two decades, if not the best," says Donald M. Fehr, the executive director and general counsel of the Players Assn.
You also have to admire Beeston's timing. In 1998, his first full season on the job, a record 70.6 million people attended a major league game. True, the gate was inflated by the addition of new franchises in Tampa and Phoenix. But Sosa's Chicago Cubs and McGwire's St. Louis Cardinals led the National League in road-game attendance--clear evidence that their home-run race sold tickets from coast to coast.STAR POWER. And there's no reason why attendance should decline much in 1999. Having been transformed from stars into household names, Sosa and McGwire will continue drawing fans no matter what their home-run totals. More important, over the next few years, new stadiums are expected to open in a half-dozen cities, including San Francisco, Detroit, and Pittsburgh. The baseball marketing revelation of the 1990s was that an artfully designed and well-located new stadium can enable even a mediocre team to draw huge crowds.
Baseball's three national broadcasters--NBC, ESPN, and Fox Sports--all posted solid ratings increases this season. In fact, Fox's ratings for its Saturday game broadcasts topped last season's by 15%--the largest jump in national game-of-the-week ratings since 1966. "I don't think there is any question that this has been a breakthrough year for baseball," says Ed Goren, executive producer of Fox Sports. In its eagerness to help boost ratings, MLB allowed Fox unprecedented input into the complex process of creating the 1998 season schedule. "Broadcasting has always been a priority," says MLB Vice-President Leslie Sullivan. "But only this season did it become our No.1 scheduling priority."EARLY INNINGS. The current network contracts extend through the 2000 season, denying MLB an immediate opportunity to cash in on baseball's surging popularity. But after years of desultory efforts to establish a foothold outside the sports-programming ghetto, Sullivan and her colleagues were able to parlay the home-run race into a regular gig on Nickelodeon. The kids' network assigned its own 10-year-old reporter to cover the home-run contest (sample question to McGwire: "How far can you spit?") and aired nightly updates that segued into World Series coverage after the season ended. "I think we are in the infant stage of what will be a great relationship," says Cyma Zarghami, executive vice-president and general manager of Nickelodeon.
MLB also used the race to best Roger Maris' record to open doors outside the U.S. For nearly a decade now, baseball's central office has been trying to build overseas markets by promoting foreign-born major leaguers to their home countries. The result has been an intense but narrow interest in American baseball in the 19 countries with players currently on big-league rosters. "The home-run contest enabled us to expose the game broadly in many countries for the first time this season," says Timothy J. Brosnan, chief executive of MLB International. In Japan, for example, TV carried every single Cardinals and Cubs game during the last two months of the season--while continuing to show all games pitched by Hideki Irabu of the Yankees, Hideo Nomo of the Mets, and other Japanese hurlers.
Dentsu Inc., MLB's main broadcast licensee in Japan, is betting that all that game coverage whetted the national appetite for American baseball. In mid-October, Dentsu signed a five-year contract extension with MLB under which the annual rights fee it pays will double, says Brosnan.
At the same time, home-run hysteria induced more of baseball's U.S. corporate sponsors to work the game into their promotions at home and abroad. PepsiCo Inc. featured Sosa in all of its Latin American ads. In the U.S., sales of MLB-licensed apparel were strong all season but soared with the McGwire-Sosa contest and the resurgent popularity of the Yankees. "When you put it all together, the only way the season could have been better is if McGwire played for the Yankees," says Robert Williams, president of Burns Sports Celebrity Service Inc., which pairs athletes and corporate sponsors.
MLB is planning to step up its marketing across the board in 1999 in what has become an increasingly close and productive partnership with the MLB Players Assn. The current era of good feeling between management and labor will not soon be imperiled by contract negotiations. The existing agreement runs through the 2000 season, with the union holding an option on 2001.
Until then, the direst threat to baseball's long-term health is the growing gap between an elite minority of revenue-rich teams that can afford to pay for star players and their revenue-deficient doormats. "The disparity in payrolls between the highest and lowest teams is not just 100% or 150%. It's 500%, and that's untenable," says Paul J. Much, senior managing director of Houlihan, Lokey, Howard & Zukin, a Chicago investment bank. The correlation between winning and player salaries has come to seem inexorable, demoralizing the fans and players of also-ran teams.
In 1996, MLB imposed a revenue-sharing scheme that will be not be fully implemented until the 2000 season. "Revenue-sharing has worked to a certain degree, but not to the extent everyone thought it would," Beeston says, "mainly because the big-revenue clubs have grown faster than expected. We may have to go another step." But with team owners sharply divided on the question of how to restore competitive balance, Beeston is in no hurry to suggest what that step should be. Like the owners and players, he intends to bask for as long as he can in the glow of a truly memorable season.By Anthony Bianco in New York