Professor Panel Series - Professor Reibstein - Nov. 18th

As part of the Professor Panel Series, Professor David Reibstein hosted a session entitled “Exploring Ways to Increase Interest in Major League Baseball”. He discussed his time working on a panel with MLB commissioner Bud Selig and fielded questions and comments from the audience on the state of the game.

Professor Reibstein recalled a day several years ago when he fielded a call from a man claiming to be “Bud Selig”. Convinced that it was one of his friends masquerading as the Commissioner of Baseball, it took Professor Reibstein several minutes to finally realize that he was, in fact, talking to the top man in Major League Baseball. Selig asked to join a panel comprised of those with a vested interested in baseball’s welfare. The panel included executive from ESPN, Pepsi, and TBS, pitchers Tom Glavine and Al Leiter, two team owners, MLB union (“MLBPA”) chief Donald Fehr, Bud Selig and Washington Post writer George Will. Bud Selig brought them together at least once a month to consider all aspects of the game that could be addressed to make the game more marketable to a dwindling and aging fan base. Professor Reibstein proceeded to discuss a litany of ideas, some of which were eventually implemented.

Shortened season. The panel considered shortening the season, which currently runs 162 games. One proposal would shorten the regular season to 154 games, and introduce another round of the playoffs and a 2nd Wild Card team for each league, thereby expanding the playoff field from 8 teams to 10. Professor Reibstein ran scenario analyses in order to determine how much longer each team would be “in contention” due to the addition of a 2nd Wild Card slot in each league. Revenues would benefit from the addition of an extra round of playoff revenues. Regular season revenues would also improve as teams remain in contention for a greater percentage of the regular season. However, there are drawbacks to shortening a season given the game’s statistical legacy. Hallowed milestones like 300 strikeouts, 200 hits and 20 wins – all of which are anchored around a 162 game season – would become more scarce. Furthermore, a contemporary performance over 154 games would become more difficult to compare against great historical season in the 162 game era. While the jury is still out, it sounds as though this is a proposal still being considered by Major League Baseball.

Player privacy. Another proposal involved making players more accessible, either by “miking” a player on the field or through more extensive interviews during and after the game. Who wouldn’t want to know what a team’s star pitcher though about being pulled in the middle of the 6th inning with the bases loaded and two outs? Unfortunately, this seems to be at best a remote possibility as the MLBPA is very protective of player privacy. Donald Fehr, who heads the powerful players’ union, was opposed to miking more than one player per game, and both he and player representatives Glavine and Leiter had sincere misgivings about in-game interviews.

Competitive imbalance. No discussion of America’s Pastime would be complete without addressing the league’s perceived competitive imbalance. No doubt the shoestring budget AL Champion Tampa Bay Rays would beg to differ, but most fans believe that MLB competitive balance is hopelessly skewed towards the big market, big money teams in major cities like New York and Boston. Professor Reibstein went into the panel with this as his number one issue, but learned that this is a conversation that has been rehashed “a million times” with very little to show for it. The case against revenue redistribution is that TV ratings are highest when two big-market teams square off in the playoffs. However, there are several reasons to consider revenue redistribution – one need only look at the NFL to recognize the value of the resultant competitive balance. First, it would introduce an element of fairness that appeals to every true sports fan. Second, it could result in a positive revenue impact to help offset (and potentially outweigh, as evidenced by the NFL’s success) the “big city” benefits under the current system. Many NFL fans will watch games that don’t even involve their home team because they are fans of the competitive product the NFL puts on the field. At the start of any given season, virtually every team thinks they have a chance to win a title and that boosts interest in the league as a whole. So while it’s true that the NFL would rather have two big market teams square off in the Super Bowl, they seem content to risk having two small market teams play because of the attendant benefits of competitive balance. While many in baseball recognize the potential benefits of revenue redistribution, the gating factor has been existing big-market owners. Owners of big market teams feel justifiably threatened, since they paid far more for their asset than they would have for, say, the Florida Marlins. Revenue sharing would reduce big market team valuations and be a boon for small market team owners. With these very real financial considerations in mind, it will take creative solutions to pave the path to more comprehensive revenue sharing in Major League Baseball.

Earlier start times. Baseball’s fan base between the ages of 12 and 30 is dwindling, and one of several culprits often cited is late start times. October baseball, laden with the sort of every-play-matters drama that can hook a new fan for the sport, often drags into the early hours of the morning on the East Coast. Most of the World Series games had scheduled first pitches after 8:30 PM EST, meaning that even an average game wouldn’t end until after 11:00PM EST. Young fans especially have a difficult time staying awake to catch the end of playoff games. However, TV executives argue that if MLB were to move the games earlier, MLB would lose “a billion dollars” in TV revenues. They pointedly ask if baseball is willing to make that kind of an investment in hopes of recapturing younger fans, and the question remains one open to debate.

Shortening games. Back in the era of Sandy Koufax, baseball games took on average 2 hours. By the time the panel met to discuss, that average had crept to over 3 hours. Part of this was driven by increased offensive production, which is generally seen as beneficial for attendance. However, another culprit was the increasing number of pitching changes in an era where terms like “pitch count” and “lefty specialist” were now part of baseball lexicon. Longer games during an age of compressing attention spans were viewed as a significant problem. A number of ideas were set forth to address the problem: managers could just announce an intentional walk rather than throwing four ceremonial pitches outside of the strike zone; MLB could limit the number of pitching changes per game; MLB could reduce the number of warm up pitches allowed each inning and for each relief pitcher; MLB could limit the number of times a pitcher throws over to 1st base to check a runner. Rather than tinker with the rules of the game, however, the committee decided to encourage the umpires responsible for managing game times to speed the game along. Professor Reibstein drew an analogy to the airline industry. Once airlines started publically reporting on time arrival rates among airlines, every airline realized this was a metric upon which they were judged and almost instantaneously improved. The committee took a similar approach by internally circulating the average game length for each umpire, and then proceeded to encourage those presiding over longer games to pick up the pace of their games. This simple measure, which didn’t entail any fundamental changes to the game, reduced average MLB-wide game times by 14 minutes.

Interactive in-game entertainment. Professor Reibstein suggested that if MLB can’t easily pull levers to shorten the game itself, they could at least shorten the perceived length of games with in game entertainment. For example, MLB could wire stadiums for hand held devices on which fans could “bet” on the outcome. Between pitches, fans could guess the outcome of the ensuing play. The stadium would post the highest scores after each inning and offer prizes for the best totals at the end of each inning or game. For a generation of children growing up playing video games, it is a way to make baseball more interactive. Fans of any age would be more engaged during “down time” between pitches rather than counting the minutes towards three hours in a ballpark.

Worldwide Rule 4 Draft. Professor Reibstein said in response to an audience question that the concept of a worldwide Rule 4 Draft was “never discussed”. Professor Scott Rosner, who is currently writing on the topic, was also in attendance and lent his expertise on the matter. The MLB and MLBPA reached an agreement in principal during the 2002 Collective Bargaining Agreement (“CBA”), but could never reduce it to writing. There are several implications of a Worldwide Draft to consider. Teams (particularly the smaller ones) that have invested in “baseball academies” would lose the benefit of their investment, because players who could have been developed and then signed through the academy would now be scouted and signed through a league-wide draft system. Second, baseball participation in the countries to be added to the draft could actually be adversely impacted. Puerto Rico was added to the Rule 4 Draft in 1989, and this winter the Puerto Rican Winter League was folded after 69 seasons because of financial problems. Professor Rosner postulated that the MLB Draft offered fewer opportunities for the large signing bonuses that used to offer young Puerto Rican players a shot a financial freedom. Finally, the MLB would like to incorporate the Japanese Major Leagues into a Worldwide Draft but is confounded by a player posting system. By the time the next CBA came up for negotiation in 2006, there were so many other issues swirling that the concept of a Worldwide Rule 4 Draft was pushed to the background.

Baseball’s global footprint. MLB is very focused on trying to grow the game globally. Baseball was dropped as Olympic sport for the London 2012 Summer Olympics. MLB is very concerned about the international implications of losing baseball in the Olympics, and are working to get back into the games in 2016. Baseball’s status as an Olympic sport and the attendant funding is important for the development of baseball in small countries.

Thanks again to Professor Reibstein for an enjoyable and informative hour.

Article Contributor: Robert Sebastian

Sports Business Career Trek - Nov. 14

On November 14, the Wharton Sports Business Club organized their first career trek of the semester to New York City. First up were the offices of the NFL, where we were greeted in the reception by a 150 inch plasma screen TV beaming the latest news from the world of American Football. After a brief presentation from five members of the NFL, we were given the opportunity to ask questions about the NFL’s functions, strategies and possible career opportunities.

Many questions centered on the international strategy of the NFL. While internationalization is something that the NFL has been working on for some time now, it is only recently that they have realized that the key is to offer their best product. This means that instead of hosting less-intense preseason games overseas or supporting a developmental league such as the now disbanded NFL Europa, they must offer competitive regular season games. While concerns were voiced about whether this was fair to fans of the teams that had to travel to Wembley Stadium in London to play a regular season game, it was pointed out that the NFL offered travel packages and first option on the tickets to home fans should they wish to travel overseas for the game. Further, under the current arrangements each NFL team will only have to play one game abroad every sixteen seasons.

Following a tour of the memorabilia laden offices of the NFL, it was then time to visit the NBA. Although the NBA has 1,187 employees and offices all around the world, it soon became clear from the presentation that the real focus for growth and hiring over the next few years would be NBA China. With 100 employees already working in China, the NBA seeks to double this number in the next 2 years. So if you’re a MBA with a passion for sports and are lucky enough to speak fluent Mandarin, then the NBA could be the perfect opportunity. If on the other hand you’re like me and can barely speak English never mind Mandarin, then there are in the range of five paid internship positions available this summer in functional areas ranging from marketing, team partnerships and business development to mention a few.

The fact that the NBA seeks to hire those with functional rather than sports backgrounds was emphasized by Nina Tamenbaum, who herself joined the NBA from Blackstone 2 years ago. In her role as a Senior Director for Strategic Development she also emphasized the importance of China and India, where her department were focusing on grassroots events to grow the market. In addition to the international growth another topic that came up throughout the day was the impact of the current economic climate. The NBA is not immune to this downturn, and a large amount of time and energy is currently being spent on developing new strategies to ensure that people renew their season tickets, given that ticket sales are still the largest source of revenue for the NBA.

Next stop was the Jockey Club, where the smell of rich mahogany represented a striking contrast to the more contemporary offices of the NBA and NFL. For those of you unfamiliar with the work of the Jockey Club, its mission is to improve thoroughbred breeding and racing in North America and you must be registered with the Club in order to breed or race a thoroughbred. A thoroughbred is a breed of horse whose ancestry traces back to three foundation sires – the Darley Arabian, the Godolphin Arabian and the Byerly Turk. This selective breeding process in the horseracing industry has been going on for more than 300 years.

There was a period in the US when horseracing filled grandstands to capacity but in recent times it has dropped down the list, being eclipsed by the likes of Nascar in terms of popularity. With regards to how to respond to this, James Gagliano, Executive VP and Chief Administrative Officer of the Club explained that unlike the NFL and NBA which operate revenue sharing schemes, one of the problems with racing is that each racetrack is by and large out for itself as a result of the organizational structure. Further, there is no central marketing authority to promote the sport and there is no central regulatory body in the United States with each State having its own racing commissioner. A very informative Q&A session ended with a discussion about the interrelation between horseracing and gambling, and with an estimated $15 billion bet (legally) on the sport of horseracing last year, it’s safe to say that the sport still has a great deal going for it even in these difficult economic times.

Thanks again to Wharton Sports Business Club Trek Directors Jeff Wilen and Amrita Bagaria for organizing the event and to the NBA, NFL and Jockey Club for their time and hospitality.

Article Contributor: Donal Mcelwee

Professor Panel Series - Professor Shropshire - Nov. 10th

Monday’s Brown Bag Lunch with Professor Shropshire was as informative as it was informal. Professor Shropshire exuded a laid back and relaxed attitude that permeated the room and the audience. The 80 minute dialogue where he explained his background, discussed his books, and answered questions, however, was full of information, perspective, and evidence of Professor Shropshire’s love for the sports industry.

Professor Shropshire began the talk with a discussion of his background. As he puts it, he “lucked into” going to Stanford. Growing up playing football in south-central Los Angeles, he had scholarships to several major football programs, but was focused on Stanford’s victories in recent Rose Bowl appearances against Michigan (1972) and Ohio State (1971). Although in his words, he “practiced hard for four years, and never played a down” at Stanford, Professor Shropshire’s adoration for sports never dwindled. Professor Shropshire discussed his life after graduating from Stanford - which included law school and working at a law firm in Los Angeles, working as a part-time professor, and serving on the 1984 Olympic Organizing Committee for the Los Angeles Olympic Games. Eventually, jobless and looking for something more fulfilling, he described his first encounter with Wharton professors in Chicago on a recruiting trip. One thing led to another and he arrived at Wharton in 1986.

As he describes it, he did not know what he was in for. Professors around him explained the importance of publishing articles and books, and as the only person at Wharton focused specifically in the sports industry, he had a wide range of opportunities. He discussed the books that he has written since joining the faculty at Wharton and how these interests have changed and what opportunities they have afforded him. For example, his first book, Agents of Opportunity, which was published in 1990 was about the regulation of the sports agency business and its unique structure. He then shifted focus and wrote a book about sports franchise relocation as one of major issues at the time was the relocation of the LA Raiders to the Bay Area in northern California. His expertise in that particular area eventually led him to chair the Philadelphia Mayor’s Committee for Citizen’s Bank Park and Lincoln Financial Field.

Professor Shropshire then discussed the shift in the focus of his books. In the mid-1990’s, he transitioned to researching and writing about the social aspects of sports. He wrote books about the impact of race and celebrity status in sports as well as spent time analyzing basketball’s rise to become the new American pastime. Most recently, his book Negotiate like the Pros, discusses techniques in sports negotiations and applies them for use in business – from simple negotiating to building relationships to closing the deal.

Finally, before taking questions, Professor Shropshire discussed a recent trip to South Africa. He met with organizers of the Bafokeng stadium in rural South Africa and talked about many different things, including the fact that they will be one of the venues to host the 2010 World Cup. This stadium, he explained had been built because the leaders of the community understood the strong impact sports have on society. They believed that kids who played soccer would stay out of trouble and that having a local team would give members of the community a sense of pride. Furthermore, he explained, these leaders hoped that this sense of pride would keep locals from leaving for the “big city” and living in poverty there. The rural community needed its population to remain there in order to sustain itself. Professor Shropshire explained his awe when he visited the stadium.

The discussion then turned to an open forum where audience members were welcome to ask questions, and questions covered a wide range of topics. First Professor Shropshire was asked to compare sports’ impact in rural South Africa to their impact in rural South America. Then the discussion moved to the addition of social impact selection criteria in sports organizing committees. Committees are now focuses on only on hosting an important event, but also on creating a lasting legacy into the event. Logically, we then discussed the social impact of having a local championship team (go Phillies!). Ultimately, according to Professor Shropshire, winning a championship does not significantly increase overall social welfare. He commented that bars and restaurants may have increased revenues over the course of the series, however most people who watch the games are local and, thus, the hotels and rental car agencies are not recognizing many increases in profits. Also, he explained, these increases, though small, are not sustainable.

Questions were also asked about the impact that Obama’s election might have on the sports world (probably not very much) and how can sports capitalize on the increase in minorities and other racial issues. Professor Shropshire emphasized that baseball is trying harder to capture a larger black audience, but the sport still does not hold much appeal to this racial segment. He also discussed boxing in the United States, saying that he does not think that it will ever make a comeback. His opinion was that the “dilemma of cable” was driving boxing away from the mainstream – since it isn’t easily available to watch, people are choosing to watch other programs. In addition to his discussion on boxing, he answered a question relating to whether basketball can truly surpass football and baseball as America’s pastimes. Professor Shropshire answered that the NBA has fallen since the “Jordan era”, however it is the first American sport to capture the world stage. The league is still attempting to balance the priorities of the individual versus the team but has come a long way. His 1999 book, Basketball Jones, discusses many of these issues.

Professor Shropshire’s discussion was extremely informative. He was very open and honest with the audience about his background, noting that he never dreamed he would be a professor in a business school, let alone the author of so many books. He made it very clear that sports and the sports industry are his true passion and he continues to research sports history and impact on society. He was very open in answering questions and sustaining dialogue with the students present. Overall it was a great lunch hour.

Article Contributor: Amanda Noteware

Wharton Marketing Conference 2008 – Sports Marketing Panel - Nov. 7

The Wharton Sports Business Club, in conjunction with the Wharton Marketing Club, held a panel entitled “Leveraging and Maximizing Sports Marketing Partnerships in Today’s Economy” at the 2008 Wharton Marketing Conference. The high profile panel, chaired by Wharton’s Professor Scott Rosner, included representatives from three of Philadelphia’s major sports franchises, as well as executives from two major corporations involved with sports sponsorship. The panel consisted of Mark Donovan (Senior VP/Business Operations, Philadelphia Eagles), Lara Price (President of Business Operations, Philadelphia 76ers), Shawn Tilger (SVP, Business Operations, Philadelphia Flyers), Amanda Trautmann (Product Director, J&J Personal Care) and Paul Bamundo (Senior Brand Manager, Sports and Entertainment, Subway).

The discussion centered around reflections on the effect of the current challenging economic environment on sports marketing. The representatives from the professional team organizations agreed that there are significant challenges, particularly with corporate and premium sales. Clients may be trading down, and sponsors are taking longer to respond. Shawn Tilger commented that in circumstances such as these, the aim is to prevent sales and sponsors from sliding too much, while positioning the organization to be able to capitalize on the good times when they return.

The panel, however, also reflected that these conditions present opportunities for building stronger relationships with fans and sponsors. Mark Donovan commented that “now is the time to be really good partners”. One of the success factors of the Eagles organization has been to lock in longer term relationships before tougher times hit. But in the current conditions they are trying to offer even greater value to sponsors and corporate clients. For example, they have a program of premium sponsors eating with players and riding on team buses, which has not previously been offered, but has generated significant goodwill.

Amanda Trautmann provided some interesting insight into J&J’s sponsorship efforts with the Beijing Olympic games. This represented a unique opportunity for J&J to think ahead about large future markets, and to associate the corporation with some of the key values of the Olympic games. However, it was still a difficult challenge for the 10 members of the internal J&J team to convince decision-makers in the company as a whole that this made sense. At the games themselves, J&J operated a pavilion with both a public side and a private media side. Through the sponsorship efforts, J&J saw significant benefits through equity tracker metrics to become known as a leading healthcare brand in China.

The panel was asked for thoughts on the effect of two recent Philadelphia events – first the recent announcements that the city is cutting back its budget, particularly on recreation spending, and second, the Phillies world series victory. The panel discussed the opportunities for local teams to build brand equity, and make a real difference, within the city. The 76ers, for example, have refurbished local basketball courts together with major sponsors such as Toyota. In terms of riding the Phillies victory tide, the team representatives agreed on a number of comments. First, while they each obviously wanted to be the first to bring home a national title since the early 1980s, they acknowledge the need to do the right thing – congratulate the Phillies and work with them. The victory brings a positive vibe to the city and is good for all sports (just as the NHL lockout was a negative for all sports). Second, it represents an opportunity to get many of the more casual fans involved. On the sponsor side, Subway tried to line the right things up so that if the Phillies won they would be ready to capitalize (for example with the “From one big Philly to another” advertisements).

Finally, Paul Bamundo was asked about the “Subway effect” – the apparent positive effect that sponsorship by Subway seems to have on athletes. Examples include Ryan Howard (World Series), Michael Strahan (Superbowl) and Tony Parker (NBA Championship). While Paul Bamundo played down the significance of this effect, many audience members were later seen trying to negotiate Subway business school sponsorship in the hope that it would help them secure future jobs!

The panel provided interesting insight into sports marketing in the current economic circumstances, and thanks goes to the SBC and the Marketing Club for putting together an impressive event.

Article Contributor: Ben Knepler

2008 Sports Business Career Panel

On October 30, following the Wharton Leadership Lecture by David Checketts, Chairman of SCP Worldwide, the Wharton Sports Business Initiative and Wharton Sports Business Club held their first Career Panel of the fall semester. Students from both the Wharton undergraduate and MBA programs came to learn about strategies for finding a job in the sports industry from an accomplished Career Panel.

A very interesting conversation about the sports industry was moderated by Jed Hughes, a sports industry consultant at Spencer Stuart. The Panel included: Brian Bolten, Group Director for Octagon; Andrew Brandt, CEO of the National Football Post and Lecturer at the Wharton School; Rob Digisi, VP of Strategic Development for Dale an Thomas Popcorn; Pam Harris, CEO of Real Madrid North America at SCP Worldwide; Nick Sakiewicz, CEO and Operating Partner for MLS Philadelphia 2010 at Keystone Sports and Entertainment.

At the outset each of the Panelists took time to share their passion for sports, how they originally got involved in the industry and their thoughts on where the industry is headed. Themes that emerged were that over the last ten years sports and entertainment have come together. This has come about largely as a result of the amount of money being invested in sports. For example, Nick Sakiewicz, who is involved in the construction of a 20,000-seat stadium in Chester for Philadelphia’s new MLS soccer club, pointed out that in addition to constructing the stadium they are also investing $800 million in real estate development. It was agreed that this is a trend that is taking place across the industry.

The importance of networking was also highlighted. Jed Hughes made the point that each of his eight jobs within the industry came about as a result of a relationship. Nick Sakiewicz emphasized that networking was valuable not only for finding jobs but also for being presented with opportunities for business acquisitions. Pam Harris stressed that even while working long hours it remains extremely important to find the time to develop closer relationships with clients. Andrew Brandt spoke about how it is often the little things that get noticed by people which can lead to future relationships. For example, his conduct while working as an agent led to him being offered the chance to work as chief salary negotiator for the Green Bay Packers.

Brian Bolten observed that networking efforts should be driven by a natural curiosity. In this way it is more likely that the job you are offered will turn out to be the right fit. Rob Digisi added that students should focus on the function (e.g. finance, marketing, strategy…etc) they want to serve within the sports industry, and concentrate on developing their skills in this area. Significantly he emphasized that this function can be developed outside of the sports industry, and those interested in sports shouldn’t feel pressured to find a job in the sports industry immediately after business school. However, what they should do is continue networking even after they finish business school. For example, Rob Digisi got a position teaching a sports class at Wharton many years after graduation as a result of staying in touch with Professor Shropshire.

After the Panelists had shared their thoughts, Jed Hughes presented data from a Spencer Stuart Study showing what sports firms are looking for when hiring from outside the sports industry. The three key requirements are: (1) active listener – curious about the industry; (2) adaptable – willing to be an agent for change when appropriate; and (3) consensus builder. In addition it also helps to have international experience, multiple industry experience and small and large company experience.

The Panelists represented a diverse group from within the sports industry, each with very different roles and functions. Accordingly the biggest take away from the Panel is that when conducting a job search you should define the sports industry broadly and remember that it is not limited to working for a league or a team. To summarize the career advice of the Panel, keep your search broadly defined, don’t be afraid to gain functional experience elsewhere before entering the sports industry, and work hard to develop your network through natural curiosity for the industry.

Article Contributor: Donal Mcelwee