Inconceivable: MLB Realignment Proposal Gets Leaked

The award -winning publication, Baseball America, ran a story on Wednesday with a leaked proposal being considered by Major League Baseball that would realign the divisions, shorten the regular season, and add more playoff teams. The theory being that the reduction in travel costs will offset the revenue lost from the shortened schedule.

The proposal would eliminate the American League and National League as baseball fans have grown accustomed to throughout the history of the sport. The new realignment would group the teams geographically without allegiances to the current divisional groupings.

The new realignment concept would include expansion of the league by two teams to bring the total number of teams to 32; allowing the realigned proposal to divide the teams evenly. The new plan would create four divisions with eight teams each, and the two teams mentioned in the expansion component are Montreal and Portland, Oregon.

I have covered the expansion plans for all the major sports leagues for about four years now. I completed a huge series of articles on expansion about two years ago which considered several factors for different potential markets for new teams in each sport. These two cities are not surprising as top expansion destinations for baseball to consider at this point.

The support to bring back the Montreal Expos has been growing in the past few years and they have a potential ownership group and a few different sites identified for a downtown ballpark which I covered in a piece I wrote last year. Montreal makes sense because they have a built-in fan base from their first iteration that MLB can draw from and grow. The trepidation that some will have, and it is understandable, is that the city had a team and lost it already, that same type of fan apathy can happen again. That situation would be obviously very unideal for the league.

Portland came in “second place” in the race to get the relocated Expos in the early 2000s. The city has some solid demographic evidence to support a team and some potentially problematic detracting factors (media market size, weak potential corporate sponsorship) and they have no current stadium to support a team.

However, according to this report and some other research, the ownership group in Portland can still access a state grant for funding for a portion of the new stadium which was approved for the pursuit of the Expos relocation and still has not expired.

The last time MLB expanded was in the late 1990s and the valuations on those teams have gone through the roof relative to their initial expansion entry fees. The formula for the expansion fee for the two teams added in this proposal would apply the average franchise valuation and factor in the increased value based on revenue models as well as the average value increase over the past twenty years.

The new expansion fees will provide significant revenue to each owner and would be incentive enough for them to add two new members to the ranks. The newly proposed alignment would put teams like the New York Mets and New York Yankees in the same division. The format would put the Chicago Cubs and Chicago White Sox in the same division, and would break up certain rivalries that the average fan has grown to enjoy.

The Mets would be in a division without any of the other members of their current division, the NL East, and the Minnesota Twins would play all of their road games in the Eastern time zone. The questions will almost certainly arise around the designated hitter rule with the dissolution being proposed of the two league structure in place currently.

The purists are going to have several issues with this proposal including the marked increase in the number of playoff teams. The realigned league would have 12 playoff teams: the four division winners, and eight “wild card” teams that would play each other to determine who plays the four division winners in the Division Series, then the final four teams would compete to determine the World Series participants.

The shortened regular season would lead to more playoff games which would invariably increase the value of the television and media rights deals that MLB would seek to broker with their broadcast partners in the future.

The debate will most certainly be spirited regarding the expanded playoffs and the value of “making the playoffs” only to play a winner takes all one game elimination wild card game. The other side will defend the decision with the rationale that the league will have two more teams, and the expanded number of postseason slots should keep more teams in contention. This will translate into better interest in late season games in more markets which should help attendance levels in late season games with a reduced regular season.

The detractors to this proposal will inevitably feel that the elimination of the divisions we have grown traditionally accustomed to (i.e. AL East, NL West) in favor of a completely different / highly geographic setup which eliminates some historic rivalries will damage the television ratings for the sport.

In my view, baseball is different than the other major sports because it does not have the same national appeal. The television ratings for MLB have proven that it is a regional sport and while the nationally televised “Game of the Week” is nice, that game does not generate ratings the way a national broadcast for the NBA or NFL “Game of the Week”.

The argument could be made that this new proposal will become too specifically focused which could hurt the interest in the sport. A good example is who is going to care about a Baltimore Orioles versus New York Mets game outside of those two markets? Not that many people.

The new proposal is also going to face resistance from certain team owners especially in the western regions and some of the small market teams which will be placed into divisions with several larger market teams. The team owners in the eastern regions and the southern areas will most likely support this type of proposal because it will drastically reduce their travel costs, which is becoming a growing concern for team owners across Major League Baseball.

The league has other issues though that this proposal, or one of similar type, will not repair. The pace of play situation is a huge problem for the sport. The league has been looking at ways to speed up the length of games because millennials and younger people are not interested in anything that takes three to four hours out of their life to do. The average length of a game went down a couple of years ago and this season is up over three hours and five minutes. That needs to get resolved or else they will have a more difficult time maintaining fan interest in the future.

The long- term viability of certain franchises, namely the Oakland A’s and Tampa Bay Rays needs to be clarified before they expand and add two new teams to the league. Those two franchises are struggling to generate attendance and revenue and their respective owners are trying to get new stadiums built for them thinking that will solve all of their issues.

The proposal is radical, it is inconceivable to me that they would alter and eliminate the National League and American League and dissolve the current division structure and playoff structure. Then, I think of the changes to the league structures when they moved Houston to the American League which made necessary an interleague series all year long because of the unbalanced number of teams. The MLB offices did that to slowly dissolve the lines between the two leagues, to prepare the fans for something else in the future: one league.

The debate will continue as the months move forward. It should be noted that MLB knew what it was doing when it “leaked” this proposal. This was a calculated move to soften the ground around making these types of changes. It is a test sample, this does not mean this proposal for realignment is set in stone.

Conversely, the league has certain issues that you might consider giving them credit for recognizing: the cost of travel for a whole roster of players and support staff is getting very expensive, the amount of games in different time zones is draining the players, and the season is a six month grind with not enough off days (this proposal would give one day off a week to players and allow for travel the next day rather than overnight flights which can be a safety issue).

Major League Baseball has some issues that they must resolve and they are also trying to adapt to a changing landscape for the viewing of sports content and for maintaining fan interest in a world full of other distractions. This proposal seems radical, bizarre, and doomed to a baseball purist like myself.

However, we must all realize that this was just a test, the real changes are coming down the road, and I cannot imagine how inconceivable the actual realignment will be when it rolls out in the future.

Opening Day Versus Muscular Dystrophy: White House Petitions and the Flaws in Society

The recent push by Budweiser and Major League Baseball to have Opening Day of the baseball season declared a national holiday or national day of observance hit a new milestone, as was widely reported in the media yesterday, the petition to The White House hit 100,000 signatures.

 

This number was reached well ahead of the 30 days required to attain the threshold for White House consideration. The background description for the petition references the notion that Opening Day is also the start of Spring and a time of renewal for the American people, and that creates further merit to that day being a day of observance for the nation.

 

Now, I enjoy watching Major League Baseball just as much, if not more, than the average American. I attend games, listen on the radio, and watch a great deal of out-of-market games as well. I find the pace of the game relaxing, and the battles between the pitcher and batter fascinating.

 

However, I do not feel that the Opening Day of the professional baseball season should be a national holiday, and I have made this opinion well known on social media, where MLB and Budweiser have promoted this effort heavily, especially on Facebook.

 

This is a blatant attempt by Budweiser to sell even more beer by having a captive audience of Americans for Opening Day games, many of which are played in the afternoon during regular working hours. The interest by MLB is clear, while the attendance level and ticket sales demand has always been robust across all the markets in the league on Opening Day; they will have a new audience of TV viewers if everyone is home from work that day. The ratings will drive up as well the advertising revenues for these first games.

 

An additional benefit for Budweiser will be heavier bar and restaurant traffic on Opening Day if it is a national holiday. That will mean increased profits for the beer making giant.

 

A Stalled Cure

 

In the meantime, this month also featured another petition to The White House that my sister alerted me to recently regarding the potential cure for Duchenne Muscular Dystrophy.

 

This petition seeks help from The White House in gaining Accelerated Approval for a drug that has shown incredible progress in the reversal of symptoms for patients with Duchenne Muscular Dystrophy who are suffering tremendously.

 

Duchenne Muscular Dystrophy effects 1 in every 3,500 boys in the United States. The condition results in muscle degeneration and over the course of time, death. The average life expectancy is 25, and the disease rapidly deteriorates the muscle mass in the legs and pelvis and progresses up the spine and neck.

 

The Food & Drug Administration (FDA) has been reluctant to mark this important drug with even limited approval despite promising data from successful clinical trials with the drug. The parents and relatives of those suffering with the disease are pushing this effort for Accelerated Approval forward.

 

However, through no fault of their effort, the promotion for this petition has been largely through grassroots e-mail distribution and has far less social media exposure than the promotion that Budweiser is committing toward the Opening Day holiday petition.

 

This petition is trying to solve a critical issue, what can mean literally life or death for people, and the cure is being delayed and stalled in the FDA. Their petition is struggling in the month of March to gain even a few thousand signatures while the Opening Day petition has 100,000 names on it.

 

A Flawed Society

 

This whole situation is a microcosm of our flawed society in America. The effort is there behind something rather trivial in having Opening Day as a national day of observance, while the effort to gain approval of a drug to deal with a horrible disease is not on anybody’s radar screen.

 

The effort behind getting the petition for the Duchenne Muscular Dystrophy drug approval accelerated is called “The Race to Yes” and further information can be found on their site: http://www.theracetoyes.org where you can also access the link to the petition for this critically important effort.

 

I also wonder how the victims and families of those lost on 9/11 feel about the Opening Day situation. I expressed on social media their prior attempts for federal government support for 9/11 to be a national day of observance, a day where people would be off from work and would be requested to perform an act of service to the community on that day.

 

I think we all can take a very educated guess on how the victims and families of those lost on 9/11 feel about this situation. Could you imagine working on getting this type of recognition for 9/11 and the Opening Day petition gets to 100K signatures, being pretty upset would be an understatement, that is what is wrong with American society: the emphasis on things that are not important.

 

Counterpoint

 

In fair balance, MLB does an incredible amount of charitable work and community service, particularly in the markets where the league has franchises, which is essentially all of the major cities of the United States. I am sure that Budweiser, and their parent company, AB InBev, conduct a large amount of community service and charitable giving as well.

 

In addition, Major League Baseball was and still is a very generous supporter to 9/11 related charities for the families of the victims and for the police, firemen, and other first responders and their families. Those games of baseball played just after that tragedy helped myself and many others return to normalcy after such a horrible and traumatic event.

 

Budweiser is looking to enhance baseball which is an incredible profit generator for their company, and they are well within their rights to do so. It just does not mean that I have to agree with their pursuit of this Opening Day petition.

 

In fairness, the rationale behind the FDA not providing at least a limited approval of the Duchenne Muscular Dystrophy drug could be indicative of a potential issue with the drug. Although I could not find any reports of adverse events, side effects, or discontinuations regarding the drug in my review of the clinical study data.

 

Regardless of the rationale, the fact remains that the FDA has not moved on a drug that could represent the best opportunity for these children to have a better quality of life with a horrible disease. An explanation from the FDA to the families of those afflicted regarding the reason for the delay would probably be a good idea for someone at the FDA to pursue at this point.

 

 

Outlook

 

In the end analysis, the petition process via The White House web site has plenty of worthwhile causes vying to receive some sort of assistance from the federal government to progress their respective cause.

 

I feel that these issues I mentioned and others deserve some merit and attention and that the Opening Day holiday petition is completely unnecessary. The American society has holidays in place where we can all sit around drink Budweiser and watch baseball already which are called Memorial Day and Labor Day. We have days off of work where we can watch baseball and have a beer too: it is called the weekend. Another holiday for baseball is not needed.

 

A cure for a disease effecting children is vitally needed, and others days of observance or service such as 9/11 would enhance our society. To borrow a phrase from baseball it is time for Americans to “keep their eye on the ball” and focus on the issues that really necessitate federal government support.

 

(Statistics and background info courtesy of NIH, www.muscular-dystrophy.org and www.theracetoyes.org  Opening Day info courtesy of UPI and Facebook)

 

 

 

TV Markets and the Expansion of Sports – Part 2

The expansion of professional sports is tied to a few very important factors, and one of them is the size of the television market that city is within, other factors are tied to population and corporate support. The first part of this series introduced those factors and the role of revenue sharing in league expansion. It then went on to look at the NBA potential expansion sites.

 

In this second part of the series, I will look at Major League Baseball (MLB) and the potential expansion of this top-tier sports league. I have read and researched these potential bids for years, and I have a great deal of knowledge on the subject.

 

Structure

 

Major League Baseball (MLB) consists of 30 member teams split into two leagues. Each league has 15 member teams split into three divisions. Each division consists of five teams. The league recently made the change to two equal leagues after years of the National League consisting of 16 teams.

 

One theory for this shift to two even leagues is that it was done to expand the league by anywhere between 2 and 4 teams. The MLB is largely recognized as the second most popular sport in TV ratings, revenues, and media coverage next to the NFL, so the league executives and owners are always looking at ways to grow revenues.

 

Some analysts and experts covering MLB believe that for the league to expand it would have to do it by four teams. Meanwhile, others believe that expansion by two teams is enough, and that any further expansion would further dilute the talent pool of players. This dilution of the talent pool would ultimately damage the integrity of the sport.

 

The MLB owners do have a system in place of revenue sharing, and if certain teams do not meet certain benchmarks, then they are entitled to additional revenue sharing funds. The owners, particularly those who own the larger market teams, will be very reluctant to share revenues with smaller market expansion franchises that will struggle initially to put a decent team on the field.

 

The impetus for expansion though, is that the current owners could probably obtain record amounts of money in entry fees for each expansion team, and the entry into new markets will grow the media revenue streams as well.

 

One final note on the background for the MLB to keep in mind is that, similar to the NBA, they have a couple of teams that are struggling which could be relocation candidates. This could impact the expansion process as well because if a current franchise is relocated, then that ownership group does not have to pay an expansion entry fee, which is lost revenue for the league. Moreover, the relocation of one or both franchises to another city could eliminate a very viable market for future expansion.

 

Relocation for the A’s and Rays?

 

The two teams that are involved in potential relocation discussions at this point are:

  • Oakland A’s
  • Tampa Bay Rays

 

 

The situation in Oakland is a very long and convoluted story, but basically it boils down to this: the A’s play in a very old stadium (the Coliseum) and they would like to move to San Jose. The city of San Jose has a stadium site set aside and ready to be sold to the A’s ownership group. MLB has stated that the A’s cannot move to San Jose because it is within the territory belonging to the San Francisco Giants. The Giants have been unwilling to negotiate a deal with the A’s to allow them to move to San Jose (www.mlb.com).

 

Recently, San Jose filed a law suit against MLB saying that they have delayed making a decision on the A’s relocation. The delays by MLB have hurt the city of San Jose because they have set aside land that they cannot sell, and they are not collecting any tax revenue on the vacant land (www.cbssports.com).  This issue has been lingering since 2009.

 

The most recent development with the A’s is that their lease has now expired with the Coliseum and, according to several reports, the team wants a 2 year lease extension (www.cbssports.com). The Oakland Stadium Authority wants the team to sign a 5 year lease. The A’s obviously do not want to play there for another 5 years in a stadium that has a lot of current issues.

 

The MLB main offices have interjected and said that if the A’s do not get a 2 year lease in Oakland, then they will play their home games in 2014 in San Francisco and share AT&T Park with the Giants (www.cbssports.com). The situation is a mess, and MLB has to determine a way forward with the A’s very quickly whether it is San Jose or elsewhere as the future home of that franchise.

 

 

The Tampa Bay Rays have a stadium and attendance issue as well. The current stadium, Tropicana Field, is in St. Petersburg and some fans complain about the location and distance from downtown Tampa to get to the ballpark. The Rays are locked into a lease there until 2027, and the Mayor of St. Petersburg will not allow the team to even discuss other stadium sites outside of the city limits.

 

The Rays ownership maintains that they need a new stadium to gain increased revenues so that they can stay competitive with other teams. Others believe, myself included, that the stadium is fine and that the real issue is that the current ownership group does not have the money to compete and that they hoard the revenue sharing money they get from the league. The struggling economy is the other issue effecting attendance in that market. The ownership should sell to a new group that has the money to keep the team competitive.

 

 

Expansion Possibilities

 

The following cities have the potential to be expansion locations for MLB in the future: (all TV Markets data courtesy of www.stationindex.com all Fortune 500 corporate info courtesy of www.money.cnn.com and all metro area population info courtesy of www.census.gov )

 

  • Sacramento, CA – location in Northern California is an asset that could be used by MLB and the A’s to relocate the A’s or expand the league.

TV Market Rank: 20

Metro Area Population: 27

Fortune 500 Companies: 0 (several large companies in area)

 

Synopsis/Outlook: Sacramento has several positives for an expansion bid including a very good TV market ranking, strong metropolitan population ranking, and demographically it is a very diverse city. Baseball has fans across the spectrum of ethnic groups so that is a big positive. It could be a solution to the before mentioned A’s situation as it is a 90 minute drive from the Bay Area. The city has only one major professional team, the Kings of the NBA, so the corporate sponsorship dollars would not be spread among multiple major teams. The stadium situation would entail renovating and expanding a very nice facility they currently have for their AAA team, Raley Field, which was constructed in 2000.

  • Portland, OR – A good strategic location in the Northwest, and a previous contender for MLB expansion, but the bid could have some issues.

TV Market Rank: 22

Metro Population Rank: 24

Fortune 500 Companies: 2

 

Synopsis/Outlook: Portland has been in the running for an MLB expansion/relocated team in the past, most recently losing out to Washington, D.C. when MLB relocated the Montreal Expos. After they lost that bid, the city decided to not fight the relocation of their current minor league baseball team which moved to Arizona. The city government then converted the baseball stadium to a soccer specific stadium in an ultimately successful bid to land a Major League Soccer franchise (the Timbers began play in 2009). The city has one other pro team, the NBA’s Trailblazers, and the fan support is very good. They would have a regional rival with Seattle, though the two cities are further apart than most people think: they are the approximate distance between New York City and Baltimore. The question would be whether the population base can support another team over the long term, the corporate sponsorships are more limited than in other cities, and the biggest issue with the bid is a stadium. Now that the other stadium was converted for soccer, a new stadium for baseball would need to be built. The climate there has several days of rain in the MLB part of the calendar, so a retractable roof could be a needed element for a winning expansion bid which is very expensive. I do not believe the political or public will is there to approve money for use in a stadium construction project. Unless that issue is resolved, Portland is an unlikely choice for an expansion team.

  • Nashville, TN – An interesting contender in a city that is experiencing growth and is located in an area where MLB has a limited presence.

TV Markets Rank: 29

Metro Population Rank: 36

Fortune 500 Companies: 3 (along with numerous large corporations)

 

Synopsis/Outlook: Nashville is experiencing tremendous growth and would be an intriguing bid for an MLB expansion franchise. The issues here though are the population rank is still a bit low when compared to other cities, and the stadium is a big problem. The AAA team in Nashville plays in a very old stadium, so a new facility would definitely need to be built for an MLB team to play there. It is unclear whether the state and county government would support a stadium referendum, and whether the public would divert tax dollars to that endeavor. Due to the high tourism there for music, they could use the model of Atlanta and other cities and approve new tourism and hotel room taxes to cover the outlay of the public contribution to finance a new stadium. They do have several sites under consideration for a new AAA facility at this time, land is not an issue. The city supports two major sports teams at this point (NFL’s Titans and NHL’s Predators) and the corporate sponsorship support should definitely be robust. They would have regional rivals with Atlanta and Cincinnati if they were in the National League. It is an interesting potential bid but much of it would depend on the viability of the stadium being constructed and if MLB feels the population could support the team over the long haul. Ownership groups could be an issue here as well.

  • Charlotte, NC – This is also a very interesting potential site for MLB, it fills a void in their current franchise makeup between the D.C. area and Atlanta in a growth region in the Southeast.

TV Market Rank: 25

Metro Population Rank: 23

Fortune 500 Companies: 11 (plus numerous Fortune 1000 companies)

 

Synopsis/Outlook: Charlotte is an excellent potential contender for MLB expansion. The city is in the Top 20 fastest growing metro areas in the U.S. and it is the second largest financial center (next to New York) in the country. The population demographics, the TV market in the top 25, and the immense corporate sponsorship support potential are very attractive attributes for a Charlotte bid. The city is just finishing construction of a brand new baseball stadium for the AAA Charlotte Knights which will open in April 2014 (www.charlotteknightsuptown.com). The city supports two major sports teams and could definitely support a third team. The stadium would need to be expanded and renovated to MLB standards but the political support would be there and corporate support as well. I see it as a great fit for an American League expansion city with so many transplanted people from the Northeast living in Charlotte. A berth in the AL East would bring the Yankees and Red Sox in regularly which would create tremendous attendance nights for an expansion team, similar to the effect it had initially with the Tampa Bay Rays drawing very well on nights where those teams visited.

  • Montreal – The MLB bid to potentially return to this city in Canada is interesting.

Synopsis/ Outlook: The other market data is not applicable in Canada so I will summarize this bid quickly because it is an outside choice, but it has been discussed within MLB as some media outlets have reported. The strong points for a Montreal bid are: population size in line with Portland and Charlotte, a built in fan base with the former Expos fans, a history to jump start the “new” Expos franchise, and strong corporate support potential. The downsides are the media rights deal locally would be smaller than a U.S. based expansion team, the right ownership group might be an obstacle, and the stadium: Olympic Stadium was constantly being renovated when the Expos played there. It will be next to impossible to get funding for a new stadium but it may be cheaper than overhauling Olympic Stadium to get it to current MLB standards. The other sign that MLB is testing the waters in Montreal: the Toronto Blue Jays are going to play exhibition games there in 2014 at Olympic Stadium (www.mlb.com).

  • Hartford, CT – Intriguing location between New York City and Boston but too many issues to be a real contender.

TV Market Rank: 30

Metro Population Rank: 46

Fortune 500 Companies: 4

 

Synopsis/Outlook: Hartford has been mentioned in other sources I researched as a potential candidate for MLB because of the location and TV market size. The city is the insurance capital of the U.S. and corporate support would be robust since this MLB team would be the lone major league team in the city. The population demographics are small by MLB standards but the fans would be baseball savvy due to the Northeast region being very strong in that regard. The city has no stadium for baseball and would have to build one which would be difficult in the economic climate today, plus the right ownership group is problematic. This bid is a long shot.

  • San Antonio – A city that has been mentioned often as a relocation potential location when the Marlins had stadium issues. A growth area both economically and demographically.

TV Market Rank: 37

Metro Population Rank: 25

Fortune 500 Companies: 5

 

Synopsis/Outlook: San Antonio is the second largest city in the country without another major sports team, and is the largest city in the country without an AAA or MLB team (www.census.gov). However, the biggest issue they have they have is the small population of their metro area. San Antonio has almost no suburbs, so the population is packed within the city limits. The TV market rank is not great either, and they have one major sports team (NBA’s Spurs) which receive excellent fan support, but it is well known that when the Spurs play on national telecasts that the ratings suffer. The economic growth and the corporate support would be strong points for a bid, they would have no issue getting an ownership group together. The government support is excellent as they were very willing to put up funding for a new stadium, which would be absolutely critical, since the baseball stadium for the AA Missions is not suitable even as a temporary home. San Antonio served as the “stalking horse” by the Marlins to get a new stadium built in Miami. One last interesting note, the Texas Rangers played two exhibition games at the Alamo Dome in San Antonio in 2013 (www.espn.com). The dimensions were strange because the dome was built for football, but it could prove to be a useful experiment should the dome have to serve as a temporary home for an expansion team.

  • New Jersey – A very interesting potential target for MLB. It is a longshot but it is potentially plausible given the right ownership group.

TV Market Rank: 1

Metro Population Rank: 1

Fortune 500 Companies: 21

 

Synopsis/ Outlook: The New Jersey bid is a stretch because of the anti-trust exemptions which place it within the territory of the Yankees and Mets. However, an exception to that rule was worked out when the Nationals moved to D.C. which was within the Baltimore Orioles territory. MLB did a study in the year 2000 which concluded that New Jersey was the top expansion location because of the population, the TV markets, the revenue from cable television to broadcast games, and the population size. The government would be very willing to partner on building a stadium in Northern New Jersey, and the right ownership group would be needed to pay an extra fee to the Yankees and Mets for territorial rights infringement up to estimates of $100 million. That would be on top of the expansion entry fee, but the cable networks could pay a huge sum of money to televise games for a third team in the New York metro area.

 

The next article in this series will be much shorter in length as it will cover the expansion potential of the NFL, which does not have many viable avenues for expansion.