This week in “Last Week in Bizball”, dynamic pricing and the secondary market, worldwide draft update, plus tidbits.
DYNAMIC PRICING & THE SECONDARY MARKET
Seemingly every week I mention that another team has either implemented, or expanded their use of, dynamic pricing of tickets. Another subject that I frequently bring attention to is the challenges that the secondary ticket market pose to many MLB franchises. Despite the reported approximate $60 million annually that BAM earns from their formal partnership with StubHub, and the avalanche of qualified sales leads it generates, many clubs believe that secondary ticketing is killing their primary sales. My piece from December on MLB and secondary ticketing included this quote (courtesy of SBJ) from Braves Executive Vice President of Sales and Marketing Derek Schiller, “I don’t believe there is any bigger obstacle or issue, any bigger threat to the professional team sports marketplace and industry as a whole…This is the single biggest issue facing our industry….The amount of dollars at risk is growing near exponentially. And we absolutely as an industry — and not just baseball — need to manage it.”
The Giants were the first MLB franchise to implement dynamic pricing, using it on a limited basis for the 09 season. This season, 17 teams will use dynamic pricing. 10 of those teams will use dynamic pricing to set the price of all single-game tickets. Initially, the motive behind dynamic pricing was both to increase the number of tickets sold and the average sale price. More recently, clubs are also implementing and expanding the use of dynamic pricing to limit the amount of ticket inventory resold on the secondary market. LWIB Danny Ecker reported on the Cubs decision to use dynamic pricing this season for 5,000 bleacher seats. According to the piece, “Expanding that model to the entire ballpark could mean recouping as much as $11 million a year from resellers.” And, “Teams are looking at (dynamic pricing) to capture some of that secondary market that they're not capturing,” says Colin Faulkner, the Cubs' vice president of ticket sales and service…”
WORLWIDE DRAFT UPDATE
January 9 was the date of the first meeting of the International Talent Committee. The co-chairs for the committee are MLBPA ED Michael Weiner and MLB’s senior executive on labour matters, Rob Manfred. According to the press release, “…the International Talent Committee is responsible for examining a number of areas related to the procuring of international players including but not limited to the exploration of the possibility of an international draft, improving the education and acculturation programs of Clubs at their international academies and the development of appropriate country-by-country plans for playing and development opportunities for players prior to draft eligibility.” This committee exists as a direct result of the new CBA, which contemplates either an expansion of the Rule 4 draft, or the introduction of a wholly separate “international” draft. (The Rule 4 currently includes Canada and Puerto Rico). After years of attempting to control club spending in the Rule 4 via his office’s “slot recommendations” commissioner Selig succeeded in the last round of negotiations in implementing fundamental changes to the acquisition of amateur talent. Beginning this season, clubs exceeding spending limits in both the Rule 4 and international free agent market will be severely penalized by MLB. In addition, MLB foresees the implementation of a draft in the Dominican Republic as part of its ongoing efforts to reduce age/identity fraud and bonus skimming there. LWIB, commissioner Selig commented to Baseball America on the much discussed worldwide draft, "It is inevitable. I would like to see it. We have made some significant progress to that end. When we went to the draft in 1965, it was to create a more level playing field. We've done that, and the same thing will have to happen internationally." Josh Leventhal added that there is plenty of opposition to a worldwide draft, both within, and outside of, MLB.
….many front-office officials have said they neither want an international draft nor are confident that MLB has the ability to pull it off.
The Dominican Republic, Venezuela and the other Latin American countries all have their own issues with laws, player registration and investigations that would need to be worked out. Then there are agreements with Asian baseball governing bodies that would have to be worked out, including Japan, Korea and Taiwan, all of which have their own professional leagues.
Some major league club officials think an international draft will penalize teams that work hard in Latin America and have invested more resources into scouting the region. However, many teams, trainers and agents have seen the writing on the wall the last couple of years that an international draft was behind MLB's efforts to reform Latin America, even if MLB didn't always explicitly frame it that way.
Also LWIB, Zachary Levine examined how the Astros attempt to greatly increase the quality and quantity of players they recruit in Latin America is being impacted by the aforementioned changes in the CBA.
SELECT READ MORE TO SEE THIS WEEK'S TIDBITS
- Last week I commented that predicting the next team to cash in on the windfall of RSN money in MLB has become a sport unto itself. LWIB, it was Gordon Wittenmyer’s turn. Gordon reported that the Cubs deal with WGN expires after the 14 season. According to Gordon, the Cubs earn an approximate, combined, $45 million annually from their deals with WGN and CSN Chicago. Gordon correctly notes that those deals are ridiculously under priced in today’s market. I wonder if Cubs owner Tom Ricketts has plans to launch his own RSN? After all, he has been attempting to emulate everything else that Red Sox owner John Henry has done. But, might Ricketts plans be complicated by his family’s 20% stake in CSN Chicago? Gordon adds, “It’s unclear how complicated the Cubs’ path to leveraging similar riches will be made by the White Sox’ agreements with WGN and CSN or Jerry Reinsdorf’s disproportionate influence at CSN through his dual stakes in the Sox and Bulls.”
- Omeranz & Landsma Corporation is suing the Miami Marlins Baseball Club, claiming it bought the team at a public auction in 2008. And their winning, and only, bid was only $10 million. Seriously.
- LWIB, there was a very thorough piece from Paul Hoynes, centred around the P formerly known as Fausto Carmona, on the hows, whys, history, present and future of age and identity fraud amongst teenaged boys in the Dominican Republic chasing the big league dream.
- The new CBA was widely criticized for it’s changes to the Rule 4 draft. Critics believe the new signing bonus pools, and the severe penalties for exceeding them, will result in more elite high school athletes foregoing professional baseball in favour of football. Many also believe that the Rule 4 changes will boost the quality of talent in college baseball as a result of less signing bonus dollars being spent in later rounds. The upcoming June draft (aka Rule 4 or amateur draft) will be the first conducted under the new rules, and so, will be closely scrutinized. LWIB, I found this excellent report (HT Sports Agent Blog) that somebody filed for the AP on the subject.
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Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.
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