How Does America’s PASTime Fare in the World of Wikinomics?
Hello Wikinomics blog readers! I’m a new summer student with the Wikinomics team. I have decided to do things a little differently and profile a different business each week and grade them through the Wikinomics Report Card™. I will try to focus mainly on older businesses and organizations and analyze how they are utilizing the wikinomics principles such as being open, peering, sharing, and acting globally.
Background: Major League Baseball (MLB) was originally founded in 1876 and the current structure of the American League and National League has existed since 1903. Baseball is a game ingrained in American culture, and is frequently referred to as America’s pastime. Although attendance has grown steadily since the league’s inception (ignoring strikes and lockouts), the game is slowly fading away from the public consciousness.
Being Open: Major League Baseball is far from open. Its 30 team league remains fixed and closed, and the league is lagging behind the other major North American sports in video reviewing plays. There have already been multiple incidents of home-runs not being counted because of a lack of a video review system. Even worse are allegations that the league has long known about players using steroids and other performance enhancing drugs yet failed to disclose the information to the public. The resultant investigations of high profile players such as Roger Clemens and Barry Bonds has left a dampener on their career achievements.
Grade: D
Peering: This is where MLB has shined in recent years. Baseball has always been a game of statistics, and the release of pitch f/x has opened up countless opportunities for great visualization tools for baseball enthusiasts and bloggers alike. Pitch f/x provides fans with the release point, speed, location and movement of every single pitch thrown. The Mockingbird, a Toronto Blue Jays focused blog, has done a great analysis of the hitter Alex Rios using a pitch f/x visualization tool.
He found that Rios was hitting outside pitches much worse than normal and hypothesized that this was due to a change in his batting stance. For those who want to learn more about MLB’s vibrant statistical community, I recommend The Hardball Times and The Baseball Prospectus.
Grade: A
Sharing: MLB is trying very hard to protect their intellectual property. While they do provide a nice widget called gameday for free on their official site, users must pay to get access to watch their games via mlb.tv. While I can see how this makes sense in local markets where people have access to seeing the games live, this is not an option for people in rural communities or more importantly around the world. Internet users responded by watching games on SopCast a peer-to-peer streaming video website. However, like many old businesses, MLB sent in their lawyers and is one of the few major sports not available for viewing on sopcast. Now, these fans are forced to watch games with more obscure technology such as TvAnts if they can navigate the Japanese channels that broadcast the games.
Grade: B-
Acting Globally: MLB is making great strides in increasing their global appeal. For the second time this year, MLB started the season off in Japan where the defending champions Boston Red Sox took on the Oakland Athletics in a two game series. MLB has also been increasing their global appeal by forming the World Baseball Classic. Similar to the World Cup of Soccer, the best baseball nations around the globe compete to see who is number one. Finally, MLB is becoming a more international league. More players than ever are foreign born, and the trend is increasing every year. Importing the best players from Japan has greatly increased the popularity of the sport in the country as Japanese reporters follow the best players such as Ichiro Suzuki all season long. Where MLB is lacking is the fact that 29 of its 30 team league are based in the United States. Toronto is the only international team in the league.
Grade: B+
Overall Verdict: MLB has come a long way in embracing the principles of wikinomics in the last few years. They have shown great promise with new technologies such as pitch f/x and events like the World Baseball Classic. They need to try and be more open to changes in the game by allowing video review, and maintain its integrity by fully disclosing any issues of cheating. In addition, I think they need to expand their league more internationally by adding teams in Mexico and other Latin American countries. If they improve in these areas, maybe one day baseball will be referred to as the WORLD’s pastime.
Overall Grade: B-
Baseball fans, what say you? I would greatly appreciate some feedback on this article as well as suggestions on future businesses to profile. No business is too old or too obscure for the Wikinomics Report Card!
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Baseball can be examined as a business and as a pastime. As a business we need to know the cost of a team and the return on investment, which means opening the books of the teams. I’m guessing that most if not all are privately held, so it is hard to get these numbers. I’m also guessing that if we got the numbers, we would see that most teams are, at best, marginally viable economically and serve primarily to enhance the public images and profiles of their owners. For some, like Ted Turner, they also provide ready made content for his broadcast network. I don’t think that the owners have fully exploited Wikinomics principles to make their clubs better known or to generate revenue.
As a pastime or entertainment, there is a lot of potential for using Wikinomics principles to enhance the game for viewers, which should, in turn, mean more revenue for owners, but the relationship is not a direct one, and it is unlikely that the owners or MLB will be at the forefront of web-based innovation.
Comment by Norm - June 20, 2008 5:24 pm
Congratulations on your first in-depth profile, Ben! Very informative. People need to realize that so long as technological advances continue to revolutionize our daily operations, we must look for ways to embrace and build upon the standards that utilize said technologies - with regards to sports as well. And with the prospects of globalization, the World Baseball Classic is indeed the dawn of a new era for baseball.
Overall Grade: A+
Comment by Jacob Friedman - June 20, 2008 5:41 pm
As the recession in America continues to get worse, businesses, such as MLB, will be forced to adapt to far less robust American consumer. With a dollar crisis and an inflationary depression on the horizon, the American consumer is being squeezed from all sides as they struggle to pay for essential expenditures such as food and energy.
The American consumer will be looking for ways to save money by eliminating many non-essential expenditures, which unfortunately include paying expensive ticket prices at the ball parks as well as overpriced beer and food within the stadiums. Advertising revenues will also shrink as it becomes less cost effective for advertisers to pay for expensive commercials directed towards broke American consumers. Americans will also be less willing to pay a premium to buy MLB apparel and products. All of the major sources of revenue of MLB will decline (in real terms) as the collapse of the American economy accelerates.
Within the next few years, Americans are simply not going to be able to afford to pay to see a baseball game at a stadium. They may not be able to afford the gas to drive to the stadium, let alone the price of the ticket or the food once they get there.
If major league baseball is to remain profitable, they will have to substantially reduce their costs in order to lower prices so that their product will be more affordable. Teams in small markets and in areas particularly hard hit by the recession should be folded, as it will be especially difficult for these teams to remain profitable. When the American economy was booming, many expansion teams were added to the league, so it only makes sense that these teams should be purged from the league now that the boom has turned to a bust.
The operating costs across the board will have to be sharply reduced. Salaries for baseball players are astronomical and will be forced down by free market forces as owners look to cut costs. Non-essential personnel such as trainers, scouts, management, etc. can also be reduced. If owners refuse to cuts operating costs, they will be unable to cut the prices of tickets, food and drinks. If these prices remain at these levels, the broke American consumer will no longer be able to afford to see a baseball game at the stadium and revenues for MLB could dry up rapidly.
Modernizing the game by implementing video replay, additional statistics or reducing negative publicity from steroid scandals will do little to combat the macro-economic forces that doom the industry as a whole.
As you correctly pointed out in your blog, the solution it to act globally. Small market teams should be moved to countries in Central and South America since their consumers will be benefiting from the increased purchasing power that will result from a collapsing dollar. A substantial effort should also be made to further popularize MLB in the prosperous Asian nations, especially Japan, and secure contracts to broadcast games in these countries. MLB merchandise and apparel should also be marketed towards the global consumer who will become wealthier as the dollar crashes.
P.S. I really enjoyed your blog post… looking forward to reading your next one.
Comment by Adam - June 21, 2008 12:34 am
Thanks for the great comments so far!
@Norm: You raise some excellent points about the ownership structure of the league. However, despite what you think (and it came as a big surprise to me too) owning a MLB team is actually surprisingly profitable. This Forbes report breaks down the value, revenues, and operating incomes of all 30 teams, and only 3 teams had an operating loss in 2007. Surprisingly, those teams were the Yankees, Red Sox, and Blue Jays. As the article explains, even those losses are a little misleading. The Yankees and Red Sox both receive huge dividends from their unconsolidated cable networks and Rogers, like Ted Turner, gets lots of cheap content for his channel Sportsnet. The Florida Marlins, despite being the least valuable team in the league, generated an operating profit of $35.6 million. It probably helps that their entire team payroll is less than what the Yankees are paying A-Rod. Also, the team benefits greatly from the revenue sharing program that the league uses. By utilizing Wikinomics principles, which in general are low-cost, the owners should be able to increase their margins even further.
@Jacob : I agree that baseball, as well as all businesses need to adopt new technologies to move forward and grow their business. The biggest problem for many businesses, like MLB, is that they are sometimes entrenched in old traditions. Businesses need to find the right balance of sticking to what made them originally profitable, and adopting changes for the future. Personally, I think MLB is a little too far on the tradition side by not having video review, and relying on umpires. One of the goals of my blog is to examine older businesses, and see how they have adopted to this new business paradigm.
P.S. Your website is really cool.
Comment by Ben Letalik - June 21, 2008 2:59 pm
@Adam: While it’s debatable what the severity and impact of U.S. recession will be, there will certainly be less discretionary income in the hands of the American consumer. As a business, MLB can do very little to combat the macroeconomic pressures. However, they can do two things. First, they can lower costs which you mentioned. As I said above, the Florida Marlins are a great example of how a team with lower revenue and low costs can still generate profits, while still fielding a competitive team. Second, MLB can improve its product to grab a bigger piece of the discretionary income pie. They can do this by providing or facilitating others to generate better stats, allow easier viewing online (where advertisers can microtarget the viewers) and by remaining open and transparent so that issues like the steroid scandal don’t tarnish the league’s image.
I totally agree with you that the league should expand internationally, and some of the smaller market teams should be cut. I’m going to be a little contradictory here and point out the Florida Marlins as an example of a team that should be cut. Teams like the Red Sox and Yankees are essentially subsidizing the Marlins as they benefit from the revenue sharing system in place. Michael Lewis, the author of Moneyball, wrote an article about the poor structure of the revenue sharing system. He argues that since the system offers no incentives for small market teams to increase attendance, they are simply reducing their payrolls and costs to increase profits while slowly killing their fan base. If teams like the Marlins, as well as the Kansas City Royals and Pittsburgh Pirates, perennial losers, should be folded and moved to international markets in the future. I’m sure there are many cities in Latin America that could easily support a team. Asia should be looked at as an option in the future for expansion. I could easily see a structure that would have an American League which includes teams in the U.S., Canada, and Latin America, and an International League that has teams from Japan, China, Korea and Southeast Asia. They could function very similarly to the American and National leagues work now, including interleague play.
Comment by Ben Letalik - June 21, 2008 3:01 pm
I enjoyed reading your evaluation of MLB, Ben. As I’m sure you’re already aware, Apple has struck a fairly substantial and notable deal with MLB; allowing up to the minute, streaming boxscores, and even highlights to those with an iPhone. I think this is a very notable move forward by Apple, especially given the fact they project sales of the iPhone to reach 10 million + units in 2008 alone.
Comment by josh - June 21, 2008 4:27 pm
The Batter’s Out is a book of instructions on how to play baseball defensively. It teaches how to play all nine positions properly on the field by showing how each player moves during the course of a play through illustrations. The Batter’s Out is a detailed description of what each player on any given team should do when the baseball is being hit to any given position. The illustrations are colorful and simulate real action. This book also holds a glossary of all the terms used for playing great defense. It’s ideal for Parents who want to become Coaches, Coaches who want to improve there coaching skills and Children who dream of playing professional baseball everywhere.
Comment by charles sledge - June 22, 2008 12:16 am
@Josh: Thanks for the compliment. I actually hadn’t heard about this iPhone deal, so thanks for pointing it out. All the reviews I’ve read about this application say it’s really good and is a bargain at only $5 for the whole year. I hope in the future they give full Gameday access like they do on other phones. Nevertheless, this is a great start and a win for both companies.
Comment by Ben Letalik - June 22, 2008 6:19 pm
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