Money stuff

Analyzing the Reds new FSO deal

On Wednesday, the Reds announced a much-anticipated agreement with FOX Sports Ohio that extends the network’s visual broadcast rights for another 15 years. FSO has televised Reds games since 1998. Before we analyze what we know about the deal, let’s consider the context.

Important, but not all-important

Local broadcast revenue is important, but not all-important for a major league baseball organization. Teams receive revenue from four primary sources: people who attend games; corporate advertising; MLB profits and revenue sharing; and local broadcast rights, both visual and radio. On average, 25 percent of team revenues comes from the latter. For the Reds, visual broadcast rights haven’t even been 15 percent.

The Reds other sources of cash flow have been up and down in recent years. Attendance at GABP has suffered the past two seasons as a result of the Reds poor record on the field. But Major League Baseball’s contribution has grown substantially with cash from new lucrative national television contracts ($25 million per team) and booming digital platform sales ($10 million-plus per team per year) rolling in. Small market teams like the Reds continue to benefit from MLB’s base and supplemental revenue sharing systems.

Forbes Magazine estimates total 2016 revenues for the Reds at $237 million. The FSO contract is one piece of the club’s financial picture.

Equity shares

We tend to focus on the shiny annual payment figure in regional sports network (RSN) contracts. But local broadcast deals often include granting ownership (equity) shares of the media company to the team, where the club and network become formal partners. More than half the major league teams have an equity share in a RSN and that number is growing. For example, the Angels and Phillies receive a 25 percent share; the Cardinals, 30 percent. Teams, as owners, receive a cut of the television network’s profits.

The reason professional baseball teams are eager to obtain an equity stake as compensation is that income earned that way is exempt from MLB’s revenue sharing. The current Collective Bargaining Agreement requires teams to send 34% of their baseball revenues back to MLB. That money is then redistributed in roughly equal shares to each team.

But teams are required to share only their baseball receipts. Profits from owning a television network are considered media revenue, not baseball revenue. The same goes for other non-baseball revenue the team may earn. It’s a loophole in the revenue sharing rule big enough to drive a Paul McCartney concert through.

In terms of actual new cash flow to the Reds, we don’t know how much profit FSO earns on an annual basis. But equity in an RSN increases the value of the baseball club even if it doesn’t increase annual revenue streams much. RSNs are worth differing amounts. The Phillies possess a 25 percent ownership stake in Comcast SportsNet Philadelphia, a network that also owns the rights to the Flyers and Sixers. That’s a valuable property.

If the Reds now own, say, 20 percent of FSO, then the baseball franchise has increased in value by one-fifth the amount FSO is worth. It’s an excellent time to own part of the company that holds exclusive rights to broadcast Cleveland’s baseball and basketball teams.

Since Bob Castellini bought the Reds in 2006, the value of the club has increased from $270 million to over $900 million (Forbes). That doesn’t include the new partial ownership of FSO or the Reds’ cut of MLB’s digital operation, estimated to be worth $200 million per team. The growing value of the Reds may not translate directly into higher payroll spending. But if the Reds have suddenly become worth a half billion dollars more, ownership could depart from their break even business model.

The fuzzy value of payroll

All that said, what most of us care about in the short-run is what the new deal with FSO means for payroll spending. But keep in mind that payroll doesn’t buy wins the way it did a decade or more ago. The connection isn’t zero, but the correlation between payroll and wins continues to decline.

The reason for this is easy to understand. What separates the big spending teams from the rest are expensive free agent contracts. They are paid mostly late in a player’s career, when he’s well down the slope of his aging curve. In a perverse sense (or glorious, depending how you look at it), mega contracts are equalizers. Twentysomethings under team control and relatively cheap produce the most WAR in PED-free baseball.

Related current events anecdote: The Dodgers and Cubs may be at the top of this list, but Cleveland is at the bottom.

My old debate coach used to say whether you’re rich or poor it’s good to have money. Of course she was right. But being smart about how you spend it matters more.

Reds-owned leverage

The Reds revealed at the FSO announcement that they explored the possibility of starting their own sports cable channel. Other teams operate their own networks with varying degrees of success. Difficulties include finding sufficient supplemental non-baseball content and having to negotiate distribution with content carriers.

The owners of Cleveland’s baseball team created the SportsTime Ohio network in 2006 to carry their games. They ended up selling STO to Fox Sports Ohio six years later. The Houston Astros began a new sports network with the NBA Rockets and had a terrible time reaching an agreement on fees with CATV and satellite companies in Houston. Their network went bankrupt in less than two years. Cautionary tale. Yikes.

The Reds decided they didn’t want to take that risk. And as far as we know, no company other than FSO, like Time Warner, offered a competitive bid. But it’s possible the Reds were able to use their dabbling with a Reds-owned network as leverage with FSO to improve the deal. Hope so.

15 years, cord cutting and in-market streaming

The one number we do know for sure about the Reds/FSO agreement is that it runs for 15 years, through the end of the 2032 season. That’s the same duration as the deal the Cardinals signed last year. A few years ago, longer contracts were commonplace. But with rapidly rising revenues in the sport, it’s not clear that longer is better. After all, Reds fans have been eager to see the current deal end.

When the new agreement was announced, Phil Castellini mentioned the uncertainty of the marketplace. He was likely talking about the potential instability of the current RSN business model and the threat posed by cord cutting.

Cable and satellite-based content providers (carriers) like Time Warner and Dish pay regional sports networks like FSO a fee to carry the local baseball team broadcast. Right now, carriers build the FSO fee into the basic cable or satellite bill, paid by every consumer, not just those who watch baseball.

Those fees generate a lot of money for FSO and other sports companies like ESPN. It’s why the Big Ten expanded to Rutgers and Maryland, reasoning that the content providers in the New York and Baltimore/Washington D.C. areas would add the Big Ten Channel to their basic cable package. That happened.

The risk: Given the growing ability to find most programming online, consumers are cutting ties with expensive cable and satellite providers. That’s called cord cutting. If enough consumers do that, content providers will have to sell sports programming like ESPN and Reds baseball by specific subscription, like they do HBO, Showtime and other premium channels. Under that system, FSO would only get fees from people who actually watch the Reds, not every cable or satellite subscriber in Cincinnati and surrounding areas. RSN revenues could plummet, making their previous agreements with sports teams untenable.

So RSNs are hedging when they negotiate new deals with sports teams by asking for shorter contracts. Baseball teams offset that by taking on equity. RSNs go along because the partnership mitigates downside risk.

How real is this scenario? That’s open to speculation. People, particularly younger consumers, are cord cutting. But so far there are clear limits to how many television viewers are willing to do it. Recent deals signed by the Cardinals and Diamondbacks showed little signs of a popped bubble.

On the good-news side for RSNs, in-market online streaming of major league baseball is coming. So far, the only way in-market fans can watch Reds games online is if they buy a cable or satellite service. The RSN monopoly on visual rights is behind the unpopular blackout for local fans on MLB.TV.

But if cord cutting becomes more common, RSNs can change the basic arrangement with content providers and sell stand-alone online streaming to individual consumers. Imagine a world where FSO could sell every household with a Reds fan — whether in Cincinnati or China — a $50 subscription to watch all the team’s games. In-market streaming could make broadcast rights more valuable than they are now.

A guess at the annual amount

The Reds have been quirky and secretive about the terms of their new media deal other than its duration. Maybe they’ll reveal the details soon. It’s puzzling why they haven’t since the industry practice is plainly to disclose. The Reds operate like a quaint family business in some ways. A quaint, $1 billion family business.

Even if we knew the amount, there’s no point in bemoaning how little the Reds received in comparison to mega deals made by big market teams like the Los Angeles Dodgers ($334 million/year), Philadelphia Phillies ($200 million/year) and Texas Rangers ($150 million/year).

That’s comparing apples to gold-plated apples.

Instead, the Reds’ situation more closely parallels the Cardinals ($66.7 million/year), the Padres ($60 million/year) and the Diamondbacks ($75 million/year).

RSNs pay out based on the number of television sets in their region plus projected eyeballs as game ratings determine advertising rates. It’s common knowledge that Cincinnati is one of the smallest television markets. But FSO broadcasts to over 5 million fee-paying households in neighboring cities and states.

The Reds have a track record of high ratings – the percentage of households with TVs that watch – at least when the team is competitive. San Diego and Arizona have larger markets, but the Reds have had better ratings.

I’ll dial back my prediction a bit from more than a year ago. Although I still think the Reds did better than San Diego. The Padres got $50 million/year, a 20 percent equity share and a $200 million signing bonus.

Best guess: $65 million/year average and 20 percent of FSO. The annual payment will grow over the course of the contract, starting around $50-55 million in 2018.

Effect on payroll

The new FSO contract guarantees a higher income stream for the future. Reds chief operating officer Phil Castellini described it as a nice increase in revenue. General manager Dick Williams says it puts the club in a good position to continue the work started the last couple years.

The Reds will boost payroll spending as they have with enhanced revenue streams in the past. From 2010 to 2013, the club raised payroll by about $25 million — from $80 million to $106 million. That’s the income increase each major league club experienced those years from MLB’s new national broadcast contracts and digital platforms. The Reds sustained that level at $114 million and $115 million the next two seasons.

Last year, the offseason rebuild moves cut the major league payroll to $90m and even further with the Jay Bruce trade. But the club made major new commitments in the amateur draft and international signings. The Reds spent nearly $15 million in the 2016 amateur draft, compared to about $8 million in 2015. They also signed contracts of around $12 million for international players. Expect more of the same in 2017 with the #2 draft pick.

At a minimum, the new FSO contract will soothe concerns about the temporary decline in attendance-based revenues. In 2018 and beyond, with the Reds record and attendance rebounding, the new agreement should provide an additional $20-25 million in salaries. We could see the Reds raise spending to $140 million on their major league payroll in the not too distant future.

Keep your expectations in check. The Reds aren’t going to go out and sign a 5-WAR player in free agency. But they might trade for one still under team control.

Fan concern about the money the Reds have tied up in a few big contracts is misplaced. Players earning league minimum will fill the bulk of the roster spots for now. The Reds baseline payroll (no free agent signings) could be well under $100 million in 2018. Brandon Phillips ($14 million) goes off the books that year, Devin Mesoraco ($13.1 million) becomes a free agent in 2019 and the Reds will no longer pay Homer Bailey’s contract ($23 million) in 2020.

Conclusion

So how do we assess the new deal?

/shrugs shoulders/

Without details it’s impossible to judge how well they did in comparison to other clubs. If anyone tries to tell you it’s a good or bad deal, they don’t really know.

Again, payroll isn’t destiny. Being smart is so much cheaper than being uninformed. The new deal starts in 2018 and the annual dollar amount will increase in steps. A $15-20 million bump – and it could be twice that – is not nothing. That’s a 20 percent increase. The Reds will have enough money to make intelligent moves.

52 thoughts on “Analyzing the Reds new FSO deal

  1. Thanks for getting at least a little detail into the unseen side of things even if we don’t know the Reds actual details.

    I think the cord cutting/ switch to streaming and resultant unbundling could be the really coming thing. So far I’m still on TWC but if I read SlingTV’s website correctly, for $40 a month (their Orange+Blue package) I can get all the ESPNs, FS1/FS2 and my “local” Fox RSN. The day the BigTen network is added to the list, TWC is gone as my content carrier. The day BTN is added, I’m gone to Sling. If I can ever pick the Reds,OSU Football, BPL and likely the BlueJackets as single shot subscriptions that is what I will do.

    • Also, do you have any idea how much of FSNOH the Indians and Cavs own? From what I’ve ever been able to find out about the BlueJackets, CBJ do not have an equity position It is more of a straight revenue sharing agreement from dollar 1 with CBJ actually guaranteeing some minimum take for FSN to get the air time.

    • I’ve thought about dropping cable for years. Still might do it. I’d hate to not get to see the Reds regularly, but the internet streaming options are way better deals (Netflix, Hulu, Amazon Prime, etc.). More and more millennials are dropping cable or never starting.

    • Be careful with the Sling or PSN Vue…I have Vue and my local RSN isnt in it. But for the cost saving I have mlbtv and stream the Reds because im not in the blackout area.

      • I’ve walked the PSVue free trial far enough along to put in my zip code and confirm that FSOH is included in the feed I can get. The drop off in price is ridiculous. I’m stuck with Time Warner/ Spectrum for broadband but it looks like I can move my phone and content provider elsewhere (PSVue), pay TWC’s premium price for 30mb and still save 30-40% over what I’m paying TWC; and that includes everything I listed above.

  2. Great work laying that all out. Even without the dollar figures in, it sounds good.
    I think the Reds should invest a little bit of that money on signing a few current players to some 3 or 4 year deals to take up their arb. years. Players like DeSclafani, BHam and Barnhart this winter should be considered. Maybe Barnhart could wait until next winter, but I like him and would like to see him locked up and in the fold. And 2017 can be used to determine if you want to consider going down that road next winter with Suarez, Peraza, Duvall, Lorenzen, Finnegan and/or Straily.
    No real need to go free agent shopping for offense. But a trade for a 5 fWAR player under affordable team control is what I have been advocating since seasons end. What teams will be entering a re-build mode this winter? What teams have a severe need for what the Reds have?
    The Chicago White Sox are going into a re-build mode. There will be big changes in Arizona. Detroit’s GM has said there will be changes there. Several teams will be making moves this winter as some teams’ rosters will be in flux, some will be re-tooling, and some re-building for the future. The opportunity will be there for the Reds to find that 5 fWAR player this winter. The question will be, will they pull the trigger? It will cost a goodly price in prospects, but it will be well worth it in the end.
    And I will keep throwing this name out there until the winter meetings for the Reds to obtain. White Sox OF/RF Adam Eaton. Eaton will be 28 years old next year. He is a LH hitter. He hits mostly 1st or 2nd, but could bat 4th. He also is very good defensively in RF as he had a +22 DRS in RF, but a -2 in CF for a total of +20 DRS in 2016. Offense, defense and some speed in one package.
    Eaton is signed through the 2019 season with two team options for 2020 and 2021. He is scheduled to make $4M in ’17, $6M in ’18, $8.4M in ’19, team option of $9.5M in ’20 with a $1.5M b/o, and a team option for $10.5M in ’21 with a $1.5M b/o. An affordable contract for the Reds to take on, and one just large enough that the WhiteSox might want to get out from for 2 or 3 good prospects. You have to give up something good to obtain something good. An Adam-Billy-Adam trio in the Reds OF would look very good at GABP. This move would have a huge impact on the Reds offense. Eaton scored almost 100 runs in 2016 and putting him in front of Votto to go along with Peraza would be a formidable start to the lineup.

    • Why would a rebuilding team trade a good, young player…who they can easily afford? The White Sox aren’t going to trade him unless they get a bundle. Wouldn’t the Reds be hurting themselves in creating weaknesses in other areas? The Sox don’t need to get .70 cents on the dollar. They aren’t broke. Wouldn’t the Reds just be robbing peter to pay Paul? How does that actually improve things?

      • I don’t think the Sox would be in any hurry to move him but he does make some sense to the Reds as he is a proven commodity in the OF and is under affordable team control for when the Reds might want to actually compete again. Where I think the stumbling block occurs is when the Reds find out what it might take to land a player who stands to be just as useful for the Sox and is already in their org. I’m thinking the package would have to start with one of Stephenson, Garret, or Reed and Winker. It’s likely that another top 15 Reds prospect would need to be added. That’s a pretty steep price. It is one that the Reds could probably afford without creating a huge weakness though.

  3. “The reason for this is easy to understand. What separates the big spending teams from the rest are expensive free agent contracts. They are paid mostly late in a player’s career, when he’s well down the slope of his aging curve. In a perverse sense (or glorious, depending how you look at it), mega contracts are equalizers. Twentysomethings under team control and relatively cheap produce the most WAR in PED-free baseball.”

    Thank you for so successfully articulating what I’ve been thinking over the last few years. It gives me hope that the playing field is not so skewed as it was in the PED era.

    • Money is still important. Mostly, it allows you to make mistakes in signing or resigning players. The Reds probably can make about 30 million a year in mistakes. Anything more than that and they are in trouble. That could be 3 players or 1 big one. The Dodgers can make 100 million in mistakes, that is a big pad! Also, they can acquire talent for bad salaries, like they have done time and again. This is like adding free players.

      In regard to FA’s, the Cubs would have not won the last series without Lester and Zobrist. FAs may be overpaid but they are the difference between winning and losing often.

  4. Steve,

    As always, a great piece.

    I believe the Reds will wind up at a 50 million average, starting at 40 million and ending around 60 million. I don’t believe they will do as well as Arizona, St. Louis and San Diego for the following reasons:

    1. St. Louis metro is about 25% larger than Cincinnati. Their ratings are both higher and deeper in that a 33 year old woman in Chesterfield, Missouri is more likely to watch than a 33 year old woman in Mason, Ohio. St. Louis has the same population growth challenges as Cincinnati, but the fact that DeWitt had the Blues as a potential partner gave him immense leverage. If you discount the Cardinals deal by 25% you land at 50 million per year.

    2. Arizona will grow by about 30% over the life of their deal. The subscriber base will be increasing over time and Cincinnati’s will not. Also, as people move to AZ, they need to reestablish buying patterns and that dramatically increases the universe of potential advertisers. Cincinnati has minimal new arrivals so the population determined long ago where they want to buy their truck and do their banking.

    3. San Diego is incredibly wealthy and most people who live their aren’t from there. Rich people who haven’t established buying patterns are an incredibly desireable demographic and advertisers will pay a huge premium. Ratings are important, audience composition is more important. For example, CNBC has 1% of the audience of TBS, yet charges huge rates because of who is watching.

    4. Arizona and San Diego have much greater diversity. This also increases the universe of advertisers and how much they can charge. Cincinnati has fewer Latino residence than almost any major metro
    area.

    • The issue that Arizona has is that when people retire there they bring their old loyalties with them. Mlbtv and such allows for a retired couple in Arizona to tune in the Reds every night and avoid the Dbacks.

      Does diversity mean audience? It means potential audience. But people are loyal. Seems like soccer is growing, and might grow even larger when this generation of kids who actuslly play the sport reach viewing age.

      San Diego is wealthy…Im not sure how ANYONE does business and lives out in California. Businesses could slash payroll in half by just upending to the midwest. SD is also very conservative.

      I read an interesting piecein the WSJ awhile back. They mentioned Milwaukee as an American city of the future. I found that odd. But they stated that many sunbelt states are facing water shortage, and the rest of the century might see America focusing on infrasture. The machines to do this are in places like Milwaukee. Interesting.

  5. Not trying to pick a fight by any means, but the selling of SportsTime Ohio to Fox was a huge windfall for the Dolan family. It was started in 2006 for between $25-40 million (depending on reporting), and sold 6 years later for $230 million.

    http://www.cleveland.com/tribe/index.ssf/2012/12/fox_sports_purchases_sto_for_a.html

    And, the debate over payroll and wins isn’t set in stone. According to fivethirtyeight.com, “evidence suggests that the relationship between money and winning is as strong now as it’s been any time in the free-agency era.”

    http://fivethirtyeight.com/features/dont-be-fooled-by-baseballs-small-budget-success-stories/

    9 of the 10 playoff teams this season were in the top half of MLB team salaries. The Indians are a true outlier, with its top 3 salaries being $11M (pro-rated, deadline pickup), $9M and $8.25M.

    • I think it all depends on how you define the argument.

      There certainly is some threshold above which it becomes easier to put together an 85+ win team. That’ll get you a shot at the playoffs. And most of the teams in the playoffs are over this arbitrary threshold, so it seems like money = wins.

      However, I think the mathematical correlation between money and winning (actual wins, not “getting to the playoffs”) gets hosed because teams winning 90-98 games can have wildly different payrolls, like $300M to $120M and everywhere in between, so the actually correlation gets wonky.

  6. Excellent piece! I’ve often mentioned cord cutting and a potential rsn bubble. This really expounded on that and gave me some good info.

    I believe it’s inevitable that we’re heading to streaming as the technology is there now and only awaiting people to upgrade. Im in a town of 1,000 in Kansas…and even MY home is 100% online. We stream Playstation Vue as well as MLB.tv, and the various film/tv service…and do it all at a percentage of the cost of cable or satellite.

    As far as black outs…lets not hold our breath. There’s been rattle about that for years now. Even the NHL losing their court case hasnt led to much talk from mlb. If I remember correct the single team NHL package isnt much off their complete game package anyway.

    The one thing I would LOVE to see as teams build revenue outside of ticket sales…is to reinvest a bit and lower the cost of tickets. Its never hard to go to seatgeek or wherever and find tickets for a fraction of fave value. Are the teams dealing tickets direct to some of these sites in blocks? Ticket prices have ravaged the rate of inflation.

    I just believe that the one unique characteristic of baseball is its live experience. In every other way it must compete in the market place as programming. Lets invest back and develop some more fans. Lets get families and people that were in the park once a season there more often. Its hard to sell popcorn to an empty seat. Lets half price the kids tickets, etc.

    • The team needs to run an awful lot of good promotions, especially when team isn’t very good. The Sunday “family day specials” are a good start. Head of household pays full price and additional seats are half price. Not in all sections but there are some decent seats there. I didn’t have a package this year but it looks like the seats we usually get in the Mezzanine are $25. That’s not terrible for a ML sporting event. My Jackets tickets (NHL) for a couple weeks ago were $58 each.

      Keeping ticket prices reasonable and running well publicized specials is always a good idea.

      • And those Jackets seats were in the upper bowl along the blue line. Not bad (1st row of upper bowl) but not exactly premium either.

  7. The drop in attendance was mentioned in this article and that prompted a question. But first I wanna preface my question with this: The Reds FO knew that there’d be an attendance drop bcuz of the rebuild/losing, but that didn’t stop them from trying to get people to come to the games by putting in some new features in the park (to try and offset the drop). I even heard a Cincinnati sports show on the radio address this very issue. The host was addressing this one fan who bemoaned the improvements that were made to the park. I think this fan was coming at it from the point of view that they made these improvements to distract the fans from the bad baseball that was being played on the field. I think the basic gist of this fans argument was that these “distractions” weren’t going to fly with him. I bring this up (about this radio host and this fan) bcuz the host was basically defending the organization making these improvements in the park to draw fans in. My point being that I assume that this host wasn’t the only Cincinnati media (those who cover/talk about the Reds) to defend the organization making these changes to the park. So, here we go. We got the Cincinnati media icons basically working with the organization to get people to come to the ballpark bcuz, “it’s not really about the product on the field (for the time being, although one of the selling points was to get fans to come out and watch the promising young talent develop) but the ballpark experience”. Finally my question: with all the efforts by the organization and the Cincinnati media to get fans to come out to the park this year, there was still a drop in attendance. Now, I don’t know I if the drop in attendance was bigger or less than the FO expected, but my question is this: what does that say (if anything at all) about Reds fans attitude towards this rebuild? Does this drop in attendance say that Reds fans didn’t support the rebuild? Does it mean that the organization’s and the media’s efforts to get fans to come out didn’t work? I’m genuinely curious as to what the answer could be. I am prepared to believe though, that the answer could be neither of the things I mentioned. I’m interested to know which fans didn’t go out to the park as much this year than they have in recent years and what their reasons were. Genuinely curious.

    • In my opinion fans are cost sensitive. The Reds tried to keep the same price structure while adding gimmicks. $40 to see a competitive team is different than $40 to see a loser.

      I shake my head when teams do this. They charge you a good chunk of change, and then smile and tell you they upgraded the overpriced beer experience. How do fans really win this? Give BACK to the fans and see what happens….take the experience away from the bean counters in the marketing dept, and think like a fan. When a guy has his 5 year old son at the game…he just DOUBLED his ticket price.

      • Red Line 9, I certainly understand about spending the same amount of money to see a winner rather than a loser. That’s why I believe the FO (realizing this) tried to put the focus on the “ballpark experience” even though that experience costs an arm & a leg. But, in the end, I want the Reds to win EVERY year and I suppose this is the price we have to pay (literally). I believe that some of the money consumers spend at ballparks goes in part towards the payroll (but probably a very small part. I don’t know). It’s a dog eat dog cycle.

    • Ballpark upgrades are not equivalent to redoing the kitchen or master bathroom. Your home equity goes up in those cases. For a ballpark, its value is on a timer – a timer that can be slowed down some by interval upgrading. Apparently it was time for an upgrade or two.

      You’ll never know if the upgrades generated fans. Yeah, attendance was low last year, perhaps it would’ve been *even lower* without the upgrades. I’m sure (I hope) the Reds had some economics majors who ran the numbers prior to upgrade to actually guesstimate what the financial impact would be by making changes, ahead of time.

      I’m not sure any fan base responds 100% favorably to a total rebuild. There’s a reason Fenway is always packed – different fans, sure – but different market and a team that has been more often than not *very* competitive for the last 20 years.

      I remember going to games at Wrigley field 5-10 years ago. Yeah, there’s a waiting list to get season tickets about 20,000 long, but the bleachers were rarely full. Often 2/3 empty, and TBH that’s the most fun place to watch a game in any stadium I’ve ever been in.

      Bottom line, IMHO: when you suck, even if there’s hope for the future, fans often will not buy a ticket to see tomorrow’s team, today.

      • Streamer88, so does the drop in attendance reflect the fans not supporting the rebuild or them just not wanting to spend a ton of money to watch a bad team? If you ask me, the two would seem to be tied together a little. It’s bcuz we’re rebuilding that we’re playing bad baseball and vice versa.

        • It’s a good question. Fundamentally I do not think ticket sales are tied to ‘the working mentality to the team’s organizational direction’ (think: we’re rebuilding now) so much as it’s tied to Wins-Losses.

          Let’s say, as an example, the halves of the season last year would’ve been reversed. And at the All-Star break we were a few games out of the wild card. We would’ve been in rebuild mode still, and (in this scenario I created) doomed for a terrible second half of regressing to our true mean, yet attendance would’ve been better because we would’ve had more wins and less losses at each upcoming homestand, which would’ve propelled ticket sales.

          This theory is speculation, but one I think few would argue with.

        • The more I ponder this question, the more I wonder if fan base expectations don’t play in as well.

          In another hypothetical, let’s say the Reds were picked to win the NL Central by a wide margin, and they were playing .500 ball, I suspect (or would consider the position) that ticket sales would not be as strong if they were picked to finish last and were playing .500 ball.

          Interesting question. In such a scenario, does the media have an affect on the ‘general public feeling’ towards the team? Quite an interesting theory.

      • Depends on the team. Wrigley Field is a tourist site. They drew well with some lousy baseball over the years.

        My heart is always with the working people, so I hate to see them priced out or pushed to the rafters. Im not sure how the math on pricing works…but you’d ultimately want your park filled every night.

        I just know that the true ticket value is not always reflected on the team sold ticket. I know its effected season ticket sales for some teams. People in New York realized they could get the seats cheaper online. Id like to know more about how the online market works. If the fave value of a seat is $40…and I pay $20…which has happened…someone seems to be losing $20…or maybe a couple bucks less if they were season tickets.

        It makes me wonder if teams are colluding with the secondary market straight out.

        • Often on the secondary market corporations or individuals who have season ticket plans will sell off the games that they know they can’t make. The demand at the time of sale sets the price. In a lot of cases, with our Reds being so bad this year especially, you’d have to think that the $40 ticket probably brought the seller (original ticket buyer) back $10. Well that’s better than not getting anything for a seat you’re not going to take up so you go ahead and sell it. Then the reseller sells it for $20. When there are a lot of sellouts or for a particular game where tickets are harder to come by, perhaps that original seller gets full face value for the ticket and the broker/reseller sells it for $60-$70. Make sense?

      • Streamer,

        I’d have to say having a perceived good team going into the season is the big difference in that typical 500k attendance swing. Tickets get sold in April and May at a greater pace I would speculate. I feel most teams essentially have two spectator seasons…April-May, Sept…and June-July-August. Summer gets kids out of school and people in town on trips. Id say year to year the teams attendance in the summer is fairly predictable. But youd want a good team going in to get those tickets sold to begin with.

        Ticket prices being what they are, the games arent spur of the moment decisions like choosing a restaurant on a Friday evening. I think we’d have to think of the Reds a little like a pay cable network such as HBO…..if the programming is strong…people buy. So many fans are astute now…that Id think having a promising team to go see would boost attendance. We talk about prospects now, when in the old days people hadnt seen or heard of a player until they hit the roster.

    • Two quick points and I have to run.

      I don’t think there is a monolithic media voice in Cincinnati. You may have heard one person take a viewpoint, but talk show hosts don’t get talking points from the Reds.

      Second, the budgets for capital improvements and payroll are separate. One comes from the non-baseball side – everything that goes into making the park experience more enjoyable. The other is the money the GM has to spend on the ball team. It’s not one or the other. I’d bet the planning for the park improvements is long term and independent of how well the team does. The Reds have improved GABP when the team was good and when it was bad.

      • Certainly. Everything in the park has an economic or usable lifespan. From the bathrooms to the concessions, seating, etc. Im not sure how their set up…but much of that is worked through the stadium authority. Im sure theres a basic stadium improvement plan….as well as dept and budget that addresses the items that are more yearly marketing dept. driven. Teams would have to both think short and long.

      • My wife is a CPA and corporate financial consultant. I wish she’d pitch in her knowledge on things like this, just for general information.

      • Steve, (1)I’m talking about anybody who’s job it is to cover/talk about the Reds, whether local or national, in any media format (TV, Radio, Print). I certainly didn’t intend to imply that there was a “monolithic media voice”. I just assumed there were others like this radio show host defending the improvements. (2) I understand that they’ve made improvements to the park whether or not the team did well. I also don’t think I implied that the money for these improvements was being taken from payroll or vice versa. But what I’m talking about is how I read somewhere either last offseason or early in this just completed baseball season that the organization was trying to get fans to come out to the park for the baseball experience and that these improvements to the park were at least in part to help enhance the experience. (3) I wanna be clear though when I say that I personally do not have a problem with the improvements to the park no matter what the reason or reasons were behind them. All I wanted to know was if the drop in attendance this season reflected Reds fans attitudes towards the rebuild or if it’s bcuz not as many people were willing to pay a goodly amount of money to watch a bad team. But I’m willing to consider that it may be neither of these reasons I put forth.

        • Attendance was down about 600k last year. Their season ticket base dropped by about 4K so about half the total drop in attendance came from 4,000 people….many of whom bought season tickets so they could go to the 2015 ASG.

          Also, some businesses won’t buy season tickets when they suck as their clients won’t go and it’s wasted money.

          When the Reds are bad, they draw about 2 million and when they’re good they draw about 2.5 million. It’s a pattern that goes back 20 years. Stadium improvements helps you keep your core base of about 2 million and winning drives that incremental 4-6k extra per game.

        • @Chuck One quick point and it isn’t meant to disagree (or agree) with your overall point. I haven’t redone the math. I think I agree with most of what you say in this comment. But when attributing attendance declines to season ticket holders it’s important to factor in that anyone who buys a 20-game or above package is considered a season ticket holder. So you can’t just multiply the decrease in season ticket sales times 81.

        • I’d guess that the attendance drop was due to low expectations that were accurate, particularly during the first half of the season, not the rebuild per se, though rebuilds probably lead to losing in their early phase.

    • Well, we didn’t do a season ticket package this year mostly because we didn’t want to put that money into an inferior on the field product. We didn’t like the idea of paying MLB price for a AAA team and we weren’t on board with how the Reds were going about the rebuild. As for next year, we’ll see how the off-season shapes up. We missed going. I only went to 3 games this year and one was the RLN/RR meetup. If the off-season goes alright, maybe we get a 6-pack or a 12-game or something. It really comes down to me feeling that the organization is at least headed in the right direction before we put our money back into the product.

      • Whoops, we went to 4. Two in the CBTS Pavilion. One as a bday present for me that a friend took us to. And 1 was the RLN/RR meetup.

        • But we used to have a 20-game package AND would see a couple games from the CBTS Pavilion.

  8. The Reds are getting more money from TV but so will every other team. The Reds will be at the low end of new money. The Cubs new deal coming in 2019 will be enormous. The big markets have or will get bigger increases. The Reds will have $25 million more to spend but given the competition it won’t put them in any better position. This is a great deal for the players. They will get their share of a bigger pot. The $40 million per year player is coming soon. Votto will look inexpensive if he can keep hitting.

  9. Regardless of this, the question is still “how you use the money”. For instance, Are we going to pay for overpriced free agents we don’t need? Are we going to pay for one year wonders or wait to see if they can repeat their success. Are we going to put any of it into developing the minor leagues?

    • I go back and forth on this all the time. It takes a long time (think 10 years or so) to build a minor league that *consistently* generates top talent. Tampa, Houston, Chicago – these teams needed many years of multiple high draft picks to hit it big. But now, can they sustain it with less?

      Sadly, the team that comes to mind is StL. Seemingly every 2-3 years they replace an aging veteran with a 2-10th round pick that becomes a Cardinal staple for the next decade (e.g. Matt Carpenter was a 13th round pick). But notice, with all their minor league success stories (and there are many), they are never out of the free agent game. Matt Holiday, Jason Hayward, Rafael Furcal, etc.

      I think what they do better than most is look for market trends, and where they can find wins for the cheapest. Sometimes that’s with drafting, when everyone is signing free agents. Other times, that’s with signing free agents when everyone is obsessed with protecting their draft picks and developing their farm system. Look at David Ross and the Cubs — when the market doesn’t want anything to do with an aging, veteran, solid catcher, Theo gets him on the very cheap.

      That was a long way of saying – I think we should put our money wherever there is a sale. We should never pay full price for anything. If the cheapest thing going right now is speed, defense, oldish outfielders with tons of power but strike out a lot (Adam Duvall), then we should be trading 2 months of Mike Leake for that, and trading Todd Frazier for that, and buying that.

      • You hit the nail on the head with St. Louis. I’ve had some experience on the scouting end…and even these discussions come up. A strong team does consistently well rounds 3-13. The first two rounds are for the most part crap shoots..”crap shoot” is the term you’ll hear a lot of from scouts. Most knowledgeable fans could probably draft the first couple rounds….after that is where scouts build good organizations.

        Maybe a #6 pick doesnt become Matt Carpenter….maybe he’s a decent bullpen piece. But that has value…it keeps the big club from needing to spend money on a potentially overpriced reliever.

        So, sure, building a team isnt just lucking out with top picks. In fact my first act as GM of a team would be to raid other orgs of their top amateur and pro scouting depts. Id pay top dollar.

        But so much is luck. I have it by good source that the Mariners dept had Mike Trout #2 in their draft board…but Jack Z overrid them. He slid to the Angels 2nd back to back pick…and the Yankees would have taken him in the next slot. Thats luck of the draw.

        You mentioned Matt Holliday. Im familiar with that situation…Matt was set to go QB in college and play baseball for his dad at OSU…most teams just passed him by…but his Uncle Dave was a national cross checker for the Rockies and Jack Daugherty was in on it. That was an inside job by the Rockies. But Matt vastly outplayed his skills going in. I’ll always say he was a better football player.

        • @streamer88

          If you want to see the Reds model, I think the safest bet is to look at KC. I look for them to try and add a top level controllable arm via trade maybe next offseason. The Reds might try and spend some money, they might be more inclined that the Royals. Dayton Moore had this fixation on his system, he’s a development guy…and he’s struggled with the major league roster….that and David Glass is tight. I don’t think Reds ownership will be as tight as KC.

          It’ll mostly be determined on what this class in 16 plays out like next season. If they think Senzel and Votto are gonna be lighting it up in a roster together…you’ll probably see them get slightly aggressive on the market. By aggressive I dont mean big ticket arm….but maybe a Chris Archer…someone that can be the pitcher James Shields was in KC

          KC has won by not being bad anywhere…and having failed sp prospects turn into lights out short guys. Thats the sp stockpile you’re seeing the Reds work on. Guys like Amir Garrett top end are maybe #3 sp…but he could fall without getting that change worked out…and be a 7th-8th guy pumping fastball slider.

      • Streamer88-

        I cant tell if you’re serious or sarcastic. I only go off what experience I can apply. Im not a business guy, so some of that is not where I’m at. Baseball is a small world. I haven’t been around it a lot in the past 20 years, but I’ve had a few moments when ive been brought into situations. Baseball is a tough life for scouts…not much money and hard to be have a family. My connections and sources were within the Rockies and Expos orgs. Its what i have to go off of, and what I can offer. My last activity was 2014. I was asked by the special assistant to the Rockies gm to come be a second set of eyes evaulating Low A pitching during the runup to the trade deadline.

        I’d highly encourage anyone that goes to minor league games to chat with the pro scouts behind the net with guns and charts….when they have a chance. Those guys, for the most part, are friendly, and love to chat baseball. They’re lifers…You’d have to be considering the travel and anonymity.

        I could write an interesting book.

        I’m just attempting to give insight from what I know and have experienced…its just an added piece to the dialog I hope. Same as any person here with business experience that can elaborate on business deals. I love this blog because of how earnest and in depth it is. There’s some serious thought here. I’m easily turned away when I see trash talking. I was told this was solid…and ive found that to be the case.

        • That was not a sarcastic comment. I enjoyed it. I love baseball but can’t be as close to it these days as I wish I could.

        • I appreciate your comments, as well. RLN is a great source for Reds fans because of the diversity and intelligence of the writers and the readers. It’s rare that I don’t learn something here.

        • @streamer88 and @greenmtred

          Thanks. I didnt intend to come off accusatory as far as your intent. I apologize for that. Just the nature of the written word doesn’t lend itself to the same understanding as an actual verbal conversation.

          What I gather from this site is that people are generally spit balling and tossing things at the wall….putting thoughts out there and learning. I love to learn, and the best way to do that is to interact. The pieces here are excellent…and even the comment section is informing. I mean, the idea is to be as knowledgeable as possible…and it takes others and their capacity to get there.

          Even a piece about the tv deal is enlightening. It touches on much speculation I’ve had, and explains away some notions I’ve had.

          I’m an idea person, while my wife is a CPA and corporate business consultant…We’re worlds apart in natural thought…but I love to ask her about the nuts and bolts. Same goes here.

        • “Baseball is a small world” … You sure got that one right. Though as I get older there are fewer and fewer people I know in that small world.

        • @lwblogger2

          It is getting to be a smaller world. Especially being a former Expos person. Soon after my time MLB got involved and people scattered in the wind. Same with the Rockies, who’ve had a massive turnover on the baseball side. That and some of the guys that brought me along are retired. Life moves on. Every once in awhile I run into someone. It’s nice, but Im cool with it. Its not always fun seeing how the circus operates.

  10. For those interested, dumped cable this summer. Switched to over the air (i.e. Free) TV supported by TiVo, and then got SlingTV as “cable-lite”. As I like be in Cincinnati area, I get FSN with Reds games streaming. Worth every penny. Went from paying $170+ per month to about $70/month (including cost of internet).

  11. Thank you Steve for outlining such a pertinent topic. Great comments as well.

Comments are closed.