(The following is being syndicated from The Captain’s Blog).
Ever since “Moneyball” was published in 2003, authors have been lining up to tell the next best tale of mind triumphing over money when it comes to building a winning baseball team. Michael Lewis’ controversial look inside the front office of the Oakland Athletics not only spawned needless controversy and endless debate, but also inspired a litany of books, essays and articles about how various teams had broken the mold to uncover the keys to success.
According to Lewis, the Oakland Athletics were successful because GM Billy Beane had adopted a philosophy that embraced non traditional means of player evaluation. Contrary to the initial reaction, it wasn’t so much a tale of scout versus calculator, or a treatise about the value of OBP, but really a story about how a small market team could compete without the same financial resources of the monoliths in the bigger cities. In other words, the book wasn’t really about a particular stat or means of player evaluation, but a more traditional tale of David versus Goliath. Since Moneyball, books like Tom Verducci’s “The Yankees Years” and Jonah Keri’s “The Extra 2%” have presented similar arguments for how the Red Sox and Rays, respectively, were able to compete toe-to-toe with the Yankees, although in Boston’s case, their sling shot was much bigger.
Did the Athletics considerable success in the early part of the 2000s stem from the realization that drawing a walk was an undervalued talent, or because Beane relied more on statistics than scouting reports? Were the Red Sox successful because they employed the sabermetric formulas of consultant Bill James? Could the Rays have risen from the ashes without the Wall Street strategies used by the team’s new ownership group? Although all seem like very simplistic assumptions, let’s leave those debates for another day. In the meantime, I am more interested in the story of how Goliath got to be so big.
This morning, Forbes released its annual financial report on the economics of baseball. Not surprisingly, the Yankees continue to top the list in terms of revenue and franchise value, but the growing gap between the Bombers and the next closest (not to mention the average) team continues to amaze (especially when you consider the Yankees pay the most money into the revenue sharing pool). According to Forbes, the Yankees are worth $1.7 billion, or nearly twice the value of the second ranked Boston Red Sox. This valuation doesn’t even take into account the many other business ventures centered on, but separate from the team, including the Yankees’ stake in the YES network and Legends Hospitality Management. In total, Forbes estimates that all of the “Yankees assets” have an enterprise value of $5.1 billion.
The Growing Value Gap Between the Yankees and the Average MLB Team
Source: Forbes.com
It’s easy to dismiss the Yankees success as merely the result of being in the right place at the right time, namely New York City during the information age. That argument falls apart, however, when you look across town at the Mets, who are currently embroiled in a financial meltdown. Although the New York market has always been fertile, the team still had to plant the seeds of financial success. The two crown jewels in the Yankees’ empire are its new Stadium and regional sports network, but long before both came on the scene, principal owner George M. Steinbrenner had already placed the team on a path toward unprecedented financial strength. How he was able to revive a tarnished brand and restore it to heights unimaginable by even its own lofty standards is the story around which a book needs to be written.
I am sure many people aren’t interested in paying homage to Goliath, but his side of the battle is half the story. What’s more, wouldn’t David be even better off if he tried to learn a lesson or two from the giant rather than just focusing on how to refine his own weapon? Instead of having to scrape the bottom of the barrel, maybe teams like the Rays and Athletics could afford to pay more for premium talent if they focused as much wisdom off the field as they do on it?
Finding bargains, or arbitrage, isn’t the only way to pad the bottom line. Although financial realities dictate that not every team can be on the same footing (nor is there any reason to believe they should), the Yankees have demonstrated that new revenue streams can be discovered and, just as importantly, existing ones can be turned into rivers. A walk can often be as good as a hit, sabermetrics often trump traditional evaluation, and putting in that extra 2% will always go along a way, but the real undervalued commodity in baseball isn’t a type of player or method of analysis, but the game itself. If every other team exploited this resource as well as the Yankees do, Goliath would be able to pick on someone its own size.
The Making of a Baseball Empire
Source: Forbes.com
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6 Responses to Extra 300%: Rebuilding of the Yankee Brand Is a Story Waiting To Be Told
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I wish people would stop considering Billy Beane a genius. He is not. A genius would have won a Pennant by now. He’s never won one. Contrast that with the other teams that have won Pennants. Since the last A’s Pennant in 1990, the following teams, all in smaller markets (when you divide the Bay Area’s population by 2), have won Pennants: Cleveland, St. Louis (2 each), Colorado, Minnesota and San Diego.
It is true that, under Beane, the A’s have made the Playoffs 5 times. But over that same stretch, St. Louis and Minnesota have each done it 6. Why are their GMs not “geniuses” for doing more than Beane with less of a pool to draw from than Beane?
Just dividing the market in two doesn’t accurately portray their market. The ballpark makes them barely viable, to the point where they might need to move. They are always at or near the bottom in terms of payroll. Most of the teams you mentioned won with middle of the road payrolls at worst, except for Minnesota. And Minnesota is now actually one of the higher payrolls in the game.
What exactly has Beane and moneyball won? Where are the rings?
They’ve won a lot more games than you would expect given their payroll. They aren’t perfect, but they regularly outperform their payroll.
In response to Uncle Mike and Mike above, pennants and rings are the result of the baseball playoff system, which hardly guarantees that the best team will win. The argument that “a genius would have won a pennant by now” or “where are the rings” are not really all that relevant in assessing Beane’s performance. Any team can lose in five games to make it to the ALCS. It’s too much of a crap shoot.
If there are any bad moves that Beane has made, and I’m sure there certainly are because all GMs make bad moves, please bring them up and discuss them in light of the rest of his body of work and with due consideration to the fact that many GMs and teams now are attempting to employ the same techniques Beane is known for. It does no one any good to look at one criterion and make a judgment based on that when the actual factors affecting a GM’s performance are many.
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