Over the last year the company I work for has gone through the same hardships many other companies do during recessionary times. Hours have been cut, reductions in the work force have been made and even a wage freeze has been in effect for over a year. We have been forced to hunker down to get through a period of reduced business in order to come out on the other end.
Strangely, one thing we have done is to invest millions in new equipment. We have bought several very expensive machines that will in the long run allow us to produce at a higher quality and at a lower unit price. The payback will be years away, but a good business manager has to plan for the future as well as for today.
As I watched theses machines come in, it occurred to me that this modal applies to baseball as well. A team, like any other business, needs to lay down plans to maximize profits over the next several years or else it will be caught by the competition. So I asked myself, where does the majority of a top franchise’s money come from? Ticket sales? No, maybe if the luxury boxes are considered but the average Joe’s tickets don’t do much to cover a team’s payroll.
For teams like Boston and New York it’s the TV deals that make the difference. Right now, the Angles make $50 million a year on their TV deal. The Yankees make $200 million. The Rangers, for their part, have already signed a deal that will bring in $150 million a year over 10 years. That is 3 times what the Angels get now.
So how should the Angels go about bringing in such a deal? The best way is to appeal to what drives networks, to go for their greed. The way to do that is to generate as much interest in the team as possible. To make sure that even fans who don’t pay much attention to the Angels now will know the names of the guys that are playing for them.
This is why it makes sense to sign the big name Free Agents. If over the next year or two the Angels can succeed in bringing in some top talent, talent that even people who don’t follow the team will recognize, then the networks will know that there will be good ratings for Angels games and will be more inclined to pay more for the contract. More fans equal more viewers which equals higher ratings. Higher ratings means they can charge more to advertise during the games.
If Arte is would be willing to take short term loses to bring in that kind of talent, he will more than get it back in TV revenues. Failing to do so will not only hurt his fan base, it could end up costing him upwards of a billion dollars over the long run