Advanced Metrics

A glimpse of baseball’s (filthy rich) data future

If you find the topic of baseball statistics and measuring player performance interesting, this article by Yahoo’s Jeff Passan falls into the must-read category. Here’s a small taste:

Sometime soon, there is going to be a new version of Wins Above Replacement available, and its goal, aside from encapsulating a player’s value into one tidy number, is simple: Don’t be scary. The plan does not involve dumbing down the metric that serves as the flashpoint between those who yearn for a catch-all and those who lament it. On the contrary, as with almost everything it does, Major League Baseball Advanced Media wants to make it so smart people can’t help but like it.

Because more is coming. Over the past year, a prototype 8k video camera has been integrated into Statcast for testing. The video is so stunning, so rich, that the system theoretically would need only one camera, high above home plate, to capture every movement on the field with as much precision as it does today.

And remember our conversation about baseball organizations pleading poverty in relation to their payroll spending?

BAM, as the company is known, is MLB’s greatest success story of the past quarter century, an investment of a couple million dollars from each team that blossomed into the largest tech outfit on the East Coast and the hub for much of the video that streams into American households and devices. Even the lowest-revenue franchises would sell for more than a billion dollars today in part because of their 1/30th stake in BAM.

Given the direction baseball and other sports are headed, I suspect we’ll look back and consider that statement conservative.

22 thoughts on “A glimpse of baseball’s (filthy rich) data future

  1. Amir Garrett/Dan Straily..Does not take a rocket guy to understand. Amir Garrett is a legit #1. It does take a rocket guy to understand a Dan Straily.

    • Who said they aren’t already doing so in some rudimentary fashion? The commissioner seems really locked in and focused on his “pace of play” initiatives. Something must have convinced him it was a top of the table issue.

  2. In addition to being a lifelong baseball fan, I’m a retired IT guy who started out in databases and finished in networking. Thus Statcast is fascinating and amazing to me at a number of levels as a confluence of two major. portions of my life.

    However, even after reading the Pasan article in full, I still don’t see where the current revenue streams come from other than support from MLB. Are they getting royalties from the broadcasts and telecasts which embed Statcast data? Are there commercial products available for a fee? Do they sell access to the data? Or do they see the value mainly as enhancing the marketability of MLB’s on field product? Just wondering.

  3. The evolution of BAM is fascinating, but the Reds likely derive more revenue from hot dogs and nachos than their BAM stake. Yes, BAM revenue will likely increase, but the long term trend is that other media revenue ( radio and cable) will decrease. 10 years from now there won’t be a Reds on Radio and we won’t recognize cable TV.

    A team can’t use BAM to increase payroll Thor 3.33% stake can’t be sold, borrowed against, monetized or leveraged. A 3.33% stake in a server farm doesn’t pay for a left fielder…cash does

    • So it’s your claim that the fact that the value of the Reds organization has increased from $270 million to over a $1 billion in ten years has no bearing on whether the ownership group can spend more on payroll? You think that wealth is unrelated to access to cash? Look, I’ve never been a billionaire before (maybe you have) but do have a graduate degree in economics. A person’s wealth (not talking about income) enables and encourages spending. Yes, an ownership growth can use their growing wealth to spend more on payroll if they want to.

      10 years from now, radio and CATV may not provide as much revenue or in the same way, but online streaming rights will dwarf those sources. Horse and buggy sales have declined this century as well. BAM makes a huge amount of money for baseball owners *outside* of what it earns distributing baseball images.

      I really wish you would (at least once) provide backing for your claims. Like find other sources that say an increase in wealth of a billion dollars doesn’t effect spending patterns. Or that overall revenues to baseball won’t continue to rise. So far, it’s just assertion.

      • But is he saying that an increase in wealth (albeit through an unrecognized capital gain in the team’s ownership of BAM) doesn’t influence their thinking (and perhaps actions) regarding payroll spending? Or that baseball revenues won’t continue to rise? I’m not necessarily interpreting that from his comments.

        His point regarding liquid v.s. illiquid assets is fair. It probably doesn’t address the whole picture which is what I assume you are getting at.

        But it is important to note that the team’s pari passu wealth increase along with all other MLB franchises due to equal ownership of BAM essentially produces a net zero gain in resource competitiveness. All teams are chasing a finite resource: talented players. If the Reds decide to spend more because they have more wealth, all other teams can do the same thing. Without a salary cap, we’ll just see ever escalating payrolls pursuing the same pool of players.

        It seems to me that if the Reds want to find a competitive advantage, it will have to be through investing in something beyond payroll. Perhaps talent recognition and evaluation staff and systems?

      • While there certainly is empirical data around how spending is impacted by increased wealth, there is nothing that measures how hundred millionaires spend when they become multi hundred millionaires.

        People generally don’t become that wealthy by doing stupid things like borrowing money to subsidize the losses that occur when you over pay for baseball players. Especially when it is proven over and over again that your market has an attendance cap that limits your financial upside if your team is successful. A good Reds team that draws 2.5 million and spends 125 million likely makes a lot less than a bad one one that draws 1.9 and spends 90.

        While there will be huge growth in streaming revenue, it’s difficult to imagine that it will replace what is lost by future reductions in national and local tv deals. New stadiums, outsized local and national tv deals and BAM all happened over the past 15 years. The next 15 years cannot possibly provide the same level of growth.

        • Chad replied to me (above) that MLBAM leases time and bandwidth on their infrastructure to other streamers. This represents an entirely new and independent revenue source. They could even end up with their own baseball centric cloud.

          Looking to the future, if I pay say $20 bucks a month directly to MLB to stream the Reds from them with no surcharge to a cable/ satellite/ streaming service front door beyond the cost of my internet connection, who is to say the Reds/ MLB won’t end up seeing more money from me than they see from FSOH on a per user basis once it is filtered down through from the cable/ satellite company to Fox to the Reds? And I’m betting they would have many more viewers than now. They could also offer limited series or weekend packages, essentially marketing the games just like they do for the in the stadium customer. The entire paradigm could shift to Fox etc being paid by MLB to produce their telecasts.

          So, I can see the pie getting bigger and also being divided differently to the advantage of MLB.

          • Yes, yes, yes. MLB will quickly move beyond broadcast rights for TV to lucrative in-market online streaming rights. That’s in addition to the tech spin-off BAM-Tech which services a dizzying array of non-baseball clients. Disney bought one-third of BAM-Tech for $1 billion. Lamenting the loss of radio revenue in this context is like wondering what will happen to telephones when people quit buying rotary dial wall phones.

            For those interested in more, I wrote about this in greater detail a while ago: https://redlegnation.com/2015/08/17/tv-rights/

          • Jim…the issue is that FSO receives X amount per month from every cable-satellite susciber in its viewing area. My sister doesn’t care about the Reds but X amount of her cable bill is allocated to FSO.

            As cord cutting and ala carte offerings increase, the amount FSO receives will decrease over time. While there are a large number of people who will be willing to pay for the Reds, it may not produce the same consistent, guaranteed revenue stream that the current system produces.

            On any given night, about 10% of the HH’s in Cincinnati-Dayton are watching the Reds. In a ala carte world, those 10% would need to be willing to pay a rather large amount each month to watch the Reds in order for overall revenue to remain the same.

            ESPN’s revenue over the past 2 years shows that streaming doesn’t necessarily add to revenue. It just partially replaces what is lost to cord cutters. The impact won’t necessarily be felt over the next couple of years, but the long term trend is rather frightening if you’re MLB

          • My sense is the only person who is rather frightened about MLB’s financial future is you.

          • You may very well be right, Steve. I hope I’m wrong.

            My guess is the people who run ESPN know a lot more about this stuff than I do….and they totally got it wrong. They didn’t see the impact that cord cutting and streaming would have on their business model. They lost millions of cable subscribers who paid on average almost $80 a year for ESPN and they were replaced with a smaller number that paid on average $25 for streaming. Math is math.

          • Chuck.
            I think you are still looking at it with MLB at as the last person paid instead of the first person paid.

            Once MLB is at the top of the model, subscribers will pay them first and advertisers will pay them first. They will pay somebody to produce the telecast and sell the ads most likely; but these folks will be working for MLB.

            MLB will be in a position to mitigate and manipulate subscriber fees to maintain or increase their basis for ad rates.

            Only time will provided the answers. I’ll be glad just to be around to see how it turns out either way.

      • Steve: I know little about the finances of baseball and have no educational background in economics, so don’t take this as an argument, but my sense–anecdotal and based on running my own small business–is that demand for one’s product or services is what primarily drives investment in infrastructure. If the Reds (or any team) are getting money that isn’t directly a result of the quality of their product, wouldn’t there be a temptation to use it for things other than payroll?

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