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Wednesday, October 14, 2015

The New Chaos: On Arte Moreno's Hyperactive Ownership

I read with no surprise, sadly, that the Angels had just barely missed the postseason (old news), and that Jerry Dipoto resigned after years of arguing with Mike Scioscia (even older news) to be replaced, temporarily, with Bill Stoneman, GM emeritus, returning to that role. So when former also-ran and Yankee front office product Billy Eppler won the job, it took me a bit to realize something fairly important: Eppler is now the fifth general manager the Angels have had in the Arte Moreno era (fourth if you count Stoneman's two terms as one). You think the Gene Autry era was tumultuous, what with its loud personalities and poor decision-making skills? The worst they managed was three GMs in as many years, from 1991 through 1993. Arte's got a problem, and whether it's in the mirror, or the field manager having too much power, or both, the echoes of the old, bad teams from the early 1990's are impossible to ignore.

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Tuesday, June 30, 2015

Cord Cutting Continues, Now Up To 8.2% Of The Subscriber Base

Something I forgot to write about last week: a new study by Digitalsmiths shows an 1.3% year-to-year decline in the number of people with cable TV, making 8.2% overall who are former cable customers, while "a much larger 45.2 percent said they reduced their cable or satellite TV service during the same time frame." This "cord shaving" suggests people are doing other things with their free time, and cable/satellite TV is increasingly irrelevant. Unclear how many of them are in the LA area, but this can't be a good sign for traditional cable.


Wednesday, June 17, 2015

Why Sports Net LA Can't Sell A La Carte

With the Dodgers' $8 billion/25 year TV deal in the can but not realized (still), Time Warner taking on water to the tune of a $1 billion loss over the life of the contract, and the proposed merger with Comcast dead, it's been a terrible year for Dodger fans hoping to see their team on TV, and mostly without hope. Or it was, anyway, until Time Warner bid and won on the consolation prize of Charter Communications, immediately expanding the reach of SportsNet LA. For customers on that network, nine innings of Vin Scully is a reality again.

But the money drain continues for that channel; they still have less than half their projected audience, and there's no other sign of them getting to an agreement with the remaining cable and satellite carriers. It's interesting, then, to take a look at one of the more commonly suggested answers to the problem of rising cable costs, a la carte purchase. Despite a great deal of belief in the idea that live sports are the last redoubt of cable TV, the reality is somewhat more complicated; for instance, only 35.7% of those polled said they would buy ESPN if it were offered as a separate channel. Similarly, the economics become highly questionable, to say the least.

Let's dig in by first taking a look at a recent Times story on the ratings boost provided by the Charter acquisition. Charter serves 300,000 subscribers, while Time Warner has "four times" that number, making 1.2 million for that carrier, or 1.5 million in all. An earlier LAT story suggests the total number is closer to two million, but it's unclear whether that includes San Diego County homes that would be in the Padres broadcast area and would not get SportsNet LA; for this discussion, I use the lower figure. If we take Time Warner's subscriber base and reverse the calculation that they're 30% of the market, the overall subscriber base should be 4 million.

As a sanity check, let's look at the dollar figures from the contract to make sure we're not missing something. The first year of the deal required Time Warner to pay the Dodgers $210 million, which means if we were to assume they merely broke even, that would be

$210M/year / $5/subscriber*month / 12 months/year = 3.5M subscribers

(For the purposes of simplicity, I round up the $4.90 per subscriber per month figure to $5.) So we know we're on the right side of these numbers; Time Warner has to make a profit somewhere (that's the extra 500,000 subscribers from our earlier calculation). Now that we know the size of the market, we can look at prior years' ratings to give us an indication of the number of people willing to fork over their hard-earned dough so they can root for the Dodgers.

Ratings vary quite a lot depending on whether a team is winning or not, and the Dodgers are no exception. Their successful 92-70 2013 season resulted in average per-game ratings of 154,000 viewers, where the mediocre 82-79 2011 season yielded an average of 65,000, less than half. While the 94-68 2014 season was even more successful than the prior year, the cable TV impasse sent ratings even lower, to an average of 40,000 viewers per game, the lowest figures in nearly two decades. So let us assume that the Dodgers are capable of averaging around 100,000 viewers per game, even though we know the variance is quite large. Let us also assume that each and every one of those viewers will be willing to pay for a subscription to see the Dodgers. In an a la carte scenario, that means we're going to divide the expected revenue by the number of viewers.

Get ready.

$210M/year / 12 months/year / 100,000 subscribers = $175/month*subscriber

One hundred seventy five dollars per month per subscriber. This monthly figure is more than the price of MLB.TV for the year. Nobody's going to pay that, and hardly anyone could afford it. In short, this isn't happening, now, or ever, unless the Dodgers give up their current salary structure.

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Tuesday, June 16, 2015

Bombshell: FBI Investigating Cardinals Hacking Of Astros Front Office

The New York Times uncorked a doozy today when they broke the story that the FBI is investigating the St. Louis Cardinals for hacking into the Astros' network and stealing proprietary player data.
The Astros hired Mr. Luhnow as general manager in December 2011, and he quickly began applying his unconventional approach to running a baseball team. In an exploration of the team’s radical transformation, Bloomberg Business called it “a project unlike anything baseball has seen before.”

Under Mr. Luhnow, the Astros have accomplished a striking turnaround; they are in first place in the American League West division. But in 2013, before their revival at the major league level, their internal deliberations about statistics and players were compromised, law enforcement officials said.

The intrusion did not appear to be sophisticated, the law enforcement officials said. When Mr. Luhnow was with the Cardinals, the organization built a computer network, called Redbird, to house all of their baseball operations information — including scouting reports and player personnel information. After leaving to join the Astros, and bringing some front-office personnel with him from the Cardinals, Houston created a similar program known as Ground Control.
Which suggests that Luhnow and others in the Houston front office didn't bother to change their passwords from their time at St. Louis. It also suggests that the Cardinals store their passwords in plaintext, which, why?

Fangraphs has a fine piece on the legal ramifications:
The primary law implicated by the Cardinals’ alleged hacking would appear to be the Computer Fraud and Abuse Act. The CFAA was originally passed back in 1984 to protect both the government and the financial industry from electronic espionage. The law was later expanded in 1996, however, to cover any unauthorized, remote access of another’s computer.
Under Section (a)(4) of the CFAA, anyone who “knowingly … accesses a protected computer without authorization” in order to “obtain[] anything of value” is subject to potential criminal liability for the hacking. Similarly, Section (a)(5)(B) of the law prohibits “intentionally access[ing] a protected computer without authorization,” should it result in any damage being inflicted on the computer’s owner.
The act provides for a five year sentence per instance of access, which could mean life imprisonment for ongoing spying. Also, the Electronic Espionage Act of 1996 makes the entire Cardinals organization possibly complicit in criminal activity, but only if the government can show high-level Cardinals knew or should have known about the matter.

But is that likely? As one of the commenters at a Facebook group observed, commissioner Rob Manfred has been pleased to use stolen evidence when it suited him; how hard can he really come down on the Cards? (Ignoring for the moment the consequence of criminal investigations, and assuming that there will be repercussions at the MLB commissioner's office.) One thing's for sure, there'll be a lot of billable hours among all parties.

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Monday, June 15, 2015

Wid Matthews' Matchless Track Record

Jon Weisman has a brief story up about how the Dodgers missed out on Willie Mays:
Jackie [Robinson] says the Dodgers blew a chance to land Willie Mays when he was a 16-year-old phenom with the Birmingham Black Barons. “The Dodger players were much impressed with Mays when we played an exhibition game with the Barons,” said Jackie. “The front office in Brooklyn was contracted, but Wid Mathews, Mr. Rickey’s assistant, turned down Willie because Wid said he couldn’t hit a curve ball.”
This is genuinely incredible, because Wid Mathews also wrote off Jackie Robinson  as "strictly the showboat type". It's one thing to be wrong about a player, but to clank so impressively on two Hall of Famers is something like a reverse Midas touch.

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Friday, June 12, 2015

Nancy Bea Hefley Nearly Retires

I was unaware of this, but Dodgers organist Nancy Bea Hefley handed in her resignation in sorrow at her diminished role (she only plays "Take Me Out To The Ballgams" now, and perhaps three or four other numbers, a total of five minutes a night) — but was talked out of it.
"They said I had a job as long as I want the job, the job would not be open for anybody else," Hefley said. "I will be signing a new contract at the end of the year."
Whew. Bullet dodged.

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Saturday, May 02, 2015

How The Luxury Tax Threatens Labor Peace

A great couple of posts by Nathaniel Grow at Fangraphs about MLB's luxury tax and its erosive consequences for player salary. Salaries as a percentage of league revenue have been in dramatic decline since the inception of the luxury tax in 1996, particularly since peaking in 2003:

Overall, however, it appears that the luxury tax threshold has effectively become a de facto salary cap for many of MLB’s larger market teams, and thus represents an important contributing factor to the players’ declining share of MLB’s overall league revenues.
This is not insignificant. One of Bud Selig's signal achievements is two decades of labor peace, bought mostly on increasing revenue for the clubs and climbing salaries for free agents.
In hindsight, then, the MLBPA likely made a mistake by agreeing to a more restrictive luxury tax framework in the last several CBAs. And to the extent the union intends to address the players’ declining share of overall league revenues in the 2016 collective bargaining negotiations, modifying the luxury tax will likely prove to be an important piece of the puzzle.
 Counteracting this, to some degree, is the willingness of teams to sign their young stars to extended deals that buy out not only remaining arbitration years, but their early free agency terms. This has the side effect of raising the cost of the few players who do actually reach free agency despite being on the wrong side of 30, precisely because there are fewer of them. But in the main, the benefits adhere to owners, who now nab the lion's share of revenues. The explosion in TV deal revenues is largely going unshared with the players, for a curious reason:
Unlike ticket sales – which generally rise as a team improves on the field – television revenue is fixed via long-term broadcasting agreements. So while franchises can increase their in-stadium profits to some degree by spending more on payroll – thereby improving the quality of their team – the same is generally not true for television revenue. As a result, teams have little incentive to spend any added broadcasting profits on payroll (because, in economic terms, the added television revenue has not adjusted the team’s marginal revenue product).
The Dodgers are in some ways an anomaly in that regard, and we shall see just how much of that actually pans out in a deal that appears largely doomed. If the MLBPA has been content to let ownership gradually but dramatically increase its revenue stream without sharing, that may not last past the next round of negotiations. On the other hand, I have to believe that negotiators for both sides remember the crippling 1994 strike, how much it soured fans on the game, and how nobody wants that again.

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