[Mariner Analyst]

The Seattle Mariners and the Business of Baseball …
(What the M's Were … What the M's Are … and What the M's Could Be …)

For the second time in three seasons, the Mariner faithful are facing the prospect of losing 100 games. At office water coolers, in coffee shops, at other local watering holes, and on the internet, audible grumbles can be heard regarding Howard Lincoln, Chuck Armstrong, and a team that has this year resembled an adult version of the Bad News Bears. For all of that talk going on, very little of it seems to be focused on understanding the overall financial picture of the club. Maybe that’s because though most serious fans can readily name the M’s starting nine, very few of those appear to have a true in depth dollars and cents understanding of financial resources of this club. Today, we’ll turn our attention to an aspect of the Mariners that isn’t often talked about -- the business side of baseball. We’ll do that by looking extensively at some of the financial numbers produced by this club and by reviewing a little history.

It is my hope that at the end of this piece that it is abundantly clear to Mariner fans exactly: who the Mariners were … who they are today … and just what is possible with this organization …

What the M's Were …

At the risk of sounding blasphemous and totally hypocritical, in many ways Howard Lincoln and Chuck Armstrong deserve some credit for helping to make the Seattle Mariners in to one of the elite franchises in all of major league baseball. Now hold on a sec – whoa there big fella! Before you start launching the nukes and calling your local mental health professionals to commit me, let me explain. For those younger fans out there who weren’t around in those days, let me paint you a picture of the way things were …

On July 1, 1992, the Baseball Club of Seattle, headed by Hiroshi Yamauchi and Nintendo, bought and assumed control of the Seattle Mariners for $100 million.* As the former chairman of Nintendo and the current controlling shareholder of the Mariners, Yamauchi is a billionaire and one of Japan’s richest people. With the purchase of the Mariners, Yamauchi brought with him former Nintendo CEO Howard Lincoln to be CEO of the Mariners and his right hand man regarding all manner of baseball operations. There’s one interesting thing of note regarding Lincoln that I hadn’t realized until Baker reminded fans of it recently …

Quote

Let's not forget, it was Lincoln himself who brought Yamauchi on board as the majority owner. Lincoln was a shrewd, brilliant business executive in Nintendo's international division under Yamuachi. A man who helped earn Yamauchi tens, if not hundreds of millions of dollars.

Source: http://seattletimes.nwsource.com/html/mari...erformance.html
* (Note – some sources report the sale price as $100 million, while others report it was $125 million.)

The facts are that were it not for Lincoln’s efforts in getting Yamauchi on board to buy the Mariners in the first place, there is a high likelihood that there might not have been a team in Seattle for very much longer. At the time that Yamauchi was brought on board in 1992, the Seattle Mariners were one of the laughingstocks of sports – a losing franchise who was a virtual farm club for all of major league baseball, trading away prospects who would become future stars at a rapid fire pace. Annual attendance for the Mariners then was 1,651,367 … which was well below the major league average attendance of 2,268,524. The previous owner of the Mariners, Jeff Smulyan, had bought the team in 1989 for $76 million, but had relied heavily upon financing his purchase of the club through two large bank loans. In December of 1991, Smulyan announced that the Mariners were for sale, as he was facing serious financial difficulty and a deadline of having to pay off a $39 million loan by February of 1992. Though he was able to procure over $10 million a year in pledges from local business leaders, Smulyan doubted that a buyer would be found soon enough to save the team. On December 11, 1991, Peter Schmuck of the Baltimore Sun-Times reported Smulyan as saying, "I truly believe that if the franchise isn't sold in 120 days, we have the right to leave Seattle." Thankfully, that never came to fruition, as Smulyan accepted the Baseball Club of Seattle’s offer to buy the team in January.

After the Baseball Club of Seattle assumed control of the club, that attendance figure grew to 2,052,638 in 1993 (still below the major average), but took a major hit (as did all of baseball) in 1994. By 1994, the Seattle Mariners – literally – were falling apart. On July 19, 1994, several tiles fell from the Kingdom roof during a game - a symbol of just how neglected this club had been throughout the years. The major league baseball strike also hit that year – and annual attendance with the club to a low 1,104,206 (again, even far below the major league average.)
And then the 1995 season hit – the year that literally did save baseball in Seattle. Prior to the ’95 season, there had been serious talk of relocating the Mariners to Tampa Bay. According to Hardball Times, the Mariners net worth at the start of the 1995 season was $92 million – in other words $8 million less than what Yamauchi had originally bought the club for in the first place.

Relocation was a real possibility yet again had the M’s Miracle Run in 1995 not happened. With that run though, the Mariners attendance figures soared from 1,643,203 (still below the major league minimum of 1,811,356) in 1995 … to 2,723,850 in 1996 (well above the major league minimum of 2,122,721.) In 1 year, nearly one million more people decided that coming to Mariners games was a pretty cool idea. That run started the M’s ascension out of the primordial slime … and in to the ranks of baseball’s elites.

Sources:
http://www.baseball-.../mariatte.shtml
http://www.hardballtimes.com/main/article/...llclubs-part-1/
http://1995mariners.com/2009/06/27/the-fal...kingdome-tiles/
http://www.nytimes.com/1992/01/24/us/japan...ml?pagewanted=1
http://articles.balt...mulyan/recent/3

What the M's Became …

Financially, there is quite a bit out there, actually, on major league baseball and the Seattle Mariners. Forbes has data from 2001 to 2009 on every club online – here are the numbers for who the Mariners were … and who they have become …

*Note – the following years listed below by Forbes are based upon reported numbers from the previous year.

2002 – The Seattle Mariners ranked #6 on the list of major league baseball teams with an estimated value of $373 million and annual revenue of $166 million.

2003 – The Mariners still ranked #6 on the list of MLB teams with an estimated value of $385 million and annual revenue of $167 million.
One thing of note from that year – the Mariners were noted that year to have the richest cable deal among small market teams.

2004 – the Mariners checked in at #5 on the list with an estimated value of $396 million and annual revenue of $169 million.

2005 – the Mariners still ranked #5 on the list of MLB teams with an estimated value of $415 million and annual revenue of $173 million.

2006 – the Mariners check in at #6 on the list of major league baseball teams with an estimated value of #428 million and annual revenue of $179 million.

2007 – the Mariners ranking falls to #12 on the list with an estimated value of $436 million and annual revenue of $182 million.

2008 – the Mariners check in at #11 in MLB with an estimated value of $466 million and annual revenue of $194 million.

2009 – Forbes ranks the Mariners #13 on its list with an estimated value of $426 million and annual revenue of $189 million.

And back to the present we go …
2010 -- The Seattle Mariners currently check in at #14 on Forbes’s list of major league franchises … squarely in the middle with a current value of $439 million and an annual revenue of $191 million.

Notice if you will that though the Mariners ranking as club has steadily fallen, its estimated value and annual revenues steadily increaseduntil 2009…

Sources:
Forbes Business of Baseball 2002
Forbes Business of Baseball 2003
Forbes Business of Baseball 2004
Forbes Business of Baseball 2005
Forbes Business of Baseball 2006
Forbes Business of Baseball 2007
Forbes Business of Baseball 2008
Forbes Business of Baseball 2009
Forbes Business of Baseball 2010

Mariners estimated value
2002 -- $373 million
2003 -- $385 million
2004 -- $396 million
2005 -- $415 million
2006 -- $428 million
2007 -- $436 million
2008 -- $466 million
2009 -- $426 million [101 losses takes quite a toll on a franchise’s value]
2010 -- $439 million

Mariners Annual Revenue
2002 -- $166 million
2003 -- $167 million
2004 -- $169 million
2005 -- $173 million
2006 -- $179 million
2007 -- $182 million
2008 -- $194 million
2009 -- $189 million
2010 -- $191 million

What the M's Are …

Let’s go further in depth on the numbers -- to the stuff that starts to push me to the brink of sanity …
Forbes lists the 2009 Mariners as having had $191 million in annual revenue and player expenses of $119 million. However, that doesn’t mean that M’s ownership took home $62.5 million in profit for 2009. After all, at the end of the day, the Mariners still have to pay the bills like the rest of us. That means not only expenses that they have to pay in terms of player payroll … but also in terms of maintaining operations at Safeco such as: electricity to open & close the roof, new grass seed for the outfield, new T-shirts for the Mariner Moose to launch, paychecks for Jack Zduriencik, team concierges for games, parking lot staff, janitorial staff, Rick the Peanut man, etc, etc.

So, Just how profitable are the Seattle Mariners?

For the answer to that question, we’ve got to go deeper and look at the team’s Operating Income. In financial terms, Operating Income (or Profit) is a measure of a company’s earnings before all of the bills and costs of doing business are paid: administrative, advertising, and sales costs (i.e. paper, pens, staples, etc.), costs to make all goods that are sold, costs of replacing obsolete/broken equipment, maintenance, taxes or interest paid out on outstanding debts is figured in to the equation. With that in mind, let’s take a look at the reported Operating Income of the Seattle Mariners from 2001 to 2009 according to Forbes magazine …

*Note – the following years listed show the reported earnings for the previous year.

Reported Operating Income (Profit) for the Seattle Mariners

2002– $ 10.33 million - #9 in profit in all of Major League Baseball in 2001.
2003– $ 23.3 million – #1 in profit in all of Major League Baseball in 2002. The Yankees came in 2nd at 16.1 million.
2004 – $17.0 – again, #1 in profit in all of Major League Baseball in 2003. The Red Sox came in 2nd at 11.4 million.
2005 -- $10.8 million – the M’s slipped to #10 in profit among Major League Baseball teams.
2006 -- $7.3 million – the M’s slip even further in profit to #23 out of 30 teams. (Interestingly enough, the Yankees check in at dead last that year at -$50 million reported lost in 2005.)
2007 -- $21.5 million -- #9 in reported profit in all of baseball in 2006.
2008 -- $10.1 million -- #23 in reported profit in all of baseball in 2007.
2009 -- $3.8 million -- #27 in reported profit in all of baseball for 2008.
2010 -- $10.5 million -- #22 in reported profit in all of baseball for 2009.

So, according to Forbes, between 2001 and 2009 Mr. Yamauchi, Chris Larson, and the rest of the Mariners shareholders hauled in $114.63 million in take home pay before taxes and interest payments on accrued debts. That’s good for 14th best out of 30 teams, despite the struggles this team has faced the past few years.

Of course, those numbers are undoubtedly a bit skewed and misleading. After all, every organization I’ve even known has an unknown somehow unaccounted for vast underground sea of cash reserves – the mere existence and exact depths of which they keep a well guarded state secret -- ala information on CIA Black Ops or Jack Benny’s money vault. In all reality, the financial resources of the Seattle Mariners are undoubtedly much greater than is generally known.

Notice if you will, that despite spending $117 million on player payroll and losing 101 games in 2008 that the Mariners … still - made - money. In 2009, how in the world were the Mariners able to increase their operating income despite drawing 134,410 less fans?

Well, according to Forbes,

Quote

The team's bottom line improved [in 2009] though thanks to a $17 million reduction in payroll. Operating profits jumped to $11million from $4 million

http://www.forbes.com/lists/2010/33/baseba...ers_331202.html

So, in large part the Mariners have been able to maintain that bottom line the last couple of years due to cuts – and as I’d contend not because they have to mind you. The Mariners’ percentage of Debt/Value is currently 23% … which ranks 10th best among all 30 teams in baseball. For comparison's sake, the Rangers are #1 in Debt/Value with 105% (they’re in Chapter 11) and the Yankees are #2 with a Debt/Value of 89%.

A Peek In to the Underground Vault …

As you’ve no doubt heard by now, on August 23, 2010 Deadspin.com dropped a bombshell on the Sports Landscape by posting sensitive financial documents from the Pirates, Marlins, Devil Rays, Angels, and Mariners online. MLB is currently investigating how and where Deadspin was able to get its hands on them. In the meantime though, these reports provide us a rare glimpse in to the accounting ledgers of MLB teams. For the Mariners Baseball Club of Seattle, those reports show a detailed breakdown of the club’s finances for the 2007 and 2008 years.

And speaking of numbers being misleading and skewed, we need look no further than these documents that Deadspin.com obtained. Your honor, I submit for your review Exhibit A (the Operating Income/Profit numbers reported by Forbes) … and Exhibit B (those numbers obtained by Deadspin.)

Operating Income for the M’s as reported by Forbes
2007 +$10,100,000
2008 +$3,800,000

Operating Income from Baseball Club of Seattle Documents Obtained by Deadspin.com
2007 +$13,765,000
2008 $-7,672,000

Operating Revenue for the M’s as Reported by Forbes
2007 +$194 million
2008 +$189 million

Operating Revenue from Baseball Club of Seattle Documents Obtained by Deadspin.com
2007 +$223,820,000
2008 +$216,200,000

Those are fairly significant differences and they underline just how difficult it can be to assess the true financial success of Sports franchises.

Here is an excerpt on some further analysis of those documents by The Biz of Baseball …

Quote

Digging deeper, Net Income, which calculates revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other expenses, and therefore, gives more weight to "true profit" (minus long term debt) breaks down as follows:
Net Income
Year Club Amount
2008 Pirates $14,408,249
2007 Pirates $15,008,032
2009 Angels $10,732,000
2008 Angels $7,088,000
2009 Marlins $3,900,000
2008 Marlins $29,462,000
2008 Rays $4,016,163
2007 Rays $11,066,191
2008 Mariners ($4,533,000)
2007 Mariners $17,864,000

A company's Net Income or Net Profit (often called the "Bottom Line") is the amount of profit that they have left over after all the bills and costs of doing business are paid (interest payments on debts, taxes, costs of replacing obsolete/broken equipment, maintenance, mortgage and rent payments, etc.) Because it takes in to account all expenses, it is the truest and most accurate measure of a company's profitability. Until the release of these documents, Net income figures on MLB teams have been very rare to come by, which has made getting an accurate financial picture for clubs difficult. So despite going in the negative $4.5 million in 2008, the Seattle Mariners made $13,331,000 million in take home profit between 2007 and 2008. Not a bad day at the office.

Source of above: http://www.bizofbaseball.com/index.php?opt...s&Itemid=39

So, financially speaking, the M’s appear to be a very successful franchise indeed. For making the M’s a financially successful and stable franchise, Lincoln, Armstrong, and the M’s Front Office deserve a lot of credit. But here is where my praise ends and my ire begins. And it’s called lack of vision.

What the M's Could Be … But Aren’t …

What could the Mariners be? Just exactly what is possible for club that stands to lose 100 games and that is seemingly in such disarray as they are? Let’s start to answer that question by first looking south to their division rivals – the Anaheim Angels.
In 2003, Arte Moreno bought the Angels from the Disney Corporation following their 2002 victory in the World Series. Let’s take a look at the financial numbers of the Angels, both prior to and after Moreno bought the team …

Anaheim Angels

Team Value
2002 Team value $195 million (ranked #23) – owned by Disney
2003 Team value $225 million (ranked #20) – owned by Disney
2004 Team value $241 million (ranked #20) – first year under Moreno
2005 Team value $294 million (ranked #17)
2006 Team value $368 million (ranked #13)
2007 Team value $431 million (ranked #13)
2008 Team value$466 million (ranked #6)
2009 Team value $509 million (ranked #6)
2010 Team value $521 million (ranked #7)

Annual Revenue and Operating Profit
2002 – Annual revenue $102.61. Operating Profit +$5.72
2003 – Annual revenue $118 million. Operating Profit -$3.7 million
2004 – Annual revenue $127 million. Operating Profit -$5.5 million
2005 – Annual revenue $147 million. Operating profit -$30 million
2006 – Annual revenue $167 million. Operating profit -$2.6 million
2007 – Annual revenue $187 million. Operating profit +$11.5 million Average ticket price $19
2008 – Annual revenue $200 million. Operating profit +15.2 million. Average ticket price $19 (Debt value 7%)
2009 – Annual revenue $212 million. Operating profit +10.3 million. Average ticket price $21 (Debt value 7%)
2010 – Annual revenue $217 million. Operating profit +12 million. Average ticket price $20 (Debt value 7%)

Friends of mine who are long time Angels fans tell me that Arte Moreno has been a godsend for their team. They paint him as being an owner who is a passionate fan … who cares about winning … and who wants to give his fan base a good time when they come out to the ballpark. When Arte Moreno bought the Angels, he did so with the belief that his team could become the Yankees of the West. And Moreno has good reason for that belief. With 5,659,170 homes, the Los Angeles market ranks #2 in the country according to the Nielson rankings. Hoping to build off the momentum of the success of the team’s World Series victory in 2002, he changed his team’s name to the “Los Angeles Angels of Anaheim” in order to go head to head with the Dodgers and tap more deeply in to that well. How has he done since taking over the club?

Moreno’s Angels have won the AL West 5 times and went to the ALCS in 2005. In the process, Moreno has seen Annual Revenues go from $127 million … to $217 million. And despite recording financial losses every year until 2007 (a grand total of $41.8 million lost) … Moreno has seen the Angels estimated worth go from $241 million when he bought the club… to $521 million today. And he has done that all, by the way, with ticket prices that are lower ($20 avg price) than the Mariners ($26 avg price.)

Encouragement for the Downtrodden …

How can the Mariners ever hope to compete with the Angels, you say? How can they compete against a team that in 2010 has $217 million in annual revenue, $133 million in player expenses ($101 million payroll,) and that broadcasts to the 2nd biggest media market in the country? The answer, surprising to many out there, is VERY well …

According to the Nielson rankings, the Seattle-Tacoma area is the #13th largest television market in all the country with 1,833,990 homes.

But calling this team the “Seattle” Mariners is a bit of a misnomer In reality, the Mariners are the team for much of the Pacific Northwest. Geographically speaking, the closest major league teams to Seattle are the Oakland A’s and San Francisco Giants -- 679 miles away (806 miles by car.) Denver, the home of the Colorado Rockies is 1,021 miles away from Seattle … and Phoenix, the home of the Arizona Diamondbacks is 1,112 miles away. The Pacific Northwest -- the territory that the Mariners claim for their own -- is a vast expanse. You can click on the following link to see a map of Major League TV Coverage Areas …
http://www.bizofbaseball.com/images/MLB_Bl...Map1000x733.gif

The Mariners flagship stations cast a wide net for their fan base. And because of that, the potential dollars that can and has been generated by this club is nothing short of stunning …

In 2003, Forbes reported that the Mariners had the richest cable deal among small market teams. In 2007, Forbes reported that the Mariners and Fox Sports Northwest reached a $300 million extension on a 10 year agreement. That report noted that for 8 consecutive seasons (1996-2003) that the Seattle Mariners led all MLB teams in television ratings – Yes, your Seattle Mariners ranked #1 in TV ratings in all of baseball! Today, Fox Sports Northwest broadcasts Mariners games not only in Washington State, but also throughout all of Oregon, and parts of Idaho, Alaska, and Montana. In addition, Radio stations that broadcast Mariners games are located as far west as Anchorage, Alaska … as far east as Kalispell, Montana … and as far south as Corvallis, Oregon. Mariner radio broadcasts can also be heard in parts of Canada, thanks to CKST in Vancouver … and selected television broadcasts can even be seen occasionally in Canada as well courtesy of Rogers Cable, Inc.

So how do those other markets that the Mariners Broadcast into rank?

Portland, Oregon ranks as the #22 media market in the country with 1,188,750 homes.
Spokane, Washington ranks as the #75 media market with 419,350 homes.
Eugene, Oregon – ranks as the #119 media market with 241,730 homes.
Richland, Pasco, Kennewick, Yakima market comes in at #126 with 219,510 homes.
Medford-Klamath Falls, Oregon market comes in at #140 with 172,900 homes.
Anchorage, Alaska ranks as the #150 media market with 151,470 homes.
Missoula, Montana ranks #166 media market. Chalk up an additional 111,940 homes.
Bend, Oregon ranks #189 media market. Chalk up an additional 66,980 homes.
Fairbanks, Alaska is the #202 media market. Add an additional 36,250 homes.
Juneau, Alaska is the #207 media market. Add another 25,340 homes.

Though Forbes’s report in 2007 noted that the Mariners that would broadcast games to 3.4 million homes … those figures are obviously quite low today.

If we add those markets together in conjunction with the Seattle-Tacoma market, that gives us a total of 4,468,210 homes – which easily vaults the media market in to which the Mariners broadcast firmly into the top 3 or 4 in the country!!

But the markets in to which the Mariners broadcast goes beyond the bounds of the United States …
In addition to those U.S. markets, the Mariners also have an agreement in place with Rogers Cable, Inc to broadcast selected games in to British Columbia, which they do through Sportsnet Pacific. The Vancouver-Victoria, B.C. market is the #3 media market in Canada. Vancouver, B.C. is currently the 8th largest city in Canada with 578,000 people and the Vancouver CMA (the Greater Vancouver area) has a reported population of 2,116,581 (2006 Census.) Since there is no other MLB team in the vicinity besides the M’s, this is one plum that is absolutely ripe for the picking - they would be fools not to.

And Mariner broadcasts even stretch as far West as the land of the Setting Sun. For those fans who are continually calling for the Mariners to trade Ichiro, they would be doing so at the risk of committing financial hari kari …

On February 25, 2005, the Seattle Business Journal reported,

Quote

“the full value of Ichiro to the Mariners franchise is incalculable. … Ichiro is also front and center for the Mariners' marketing and advertising campaign, and thus he's closely tied to ticket sales. Ichiro's popularity in Japan was one of the key factors in Major League Baseball's $275 million deal to broadcast games in that country. And Ichiro continues to draw Japanese tourists to Seattle; 81,000 visited last year. …

In late 2003, the league signed its landmark, $275 million, six-year deal with Japanese advertising giant Dentsu Inc. for the rights to broadcast games in Japan, according to Street & Smith's SportsBusiness Journal, a sister publication. That deal marked a huge increase from the previous contract, valued at about $75 million over five years. Dentsu subleases the broadcasting rights to Japanese television networks NHK, Sky PerfecTV!, Tokyo Broadcasting System and Fuji TV.

In Japan, Ichiro is a Michael Jordan-esque sports celebrity with a massive following. All Mariners home games are broadcast in Japan, and MLB sells highlight-reel packages to television networks there. TV stations have been known to interrupt their programming to give updates on Ichiro's daily performance during the season.”

Though the Mariners must split those revenues obtained from Japanese market equally with all 30 Major League teams, in 2004 they also enjoyed revenues from a half-dozen Japanese firms who bought advertisement at Safeco with the idea of marketing to Japanese audiences watching Mariner games.

That article in the Seattle Business Journal quoted Howard Lincoln as saying, "If there was no Ichiro, there would be no broadcast of games back to Japan, and none of these companies would be interested in Safeco Field."

How does this all compare with the Angels? …

TV and Radio Revenues
(based upon actual MLB documents obtained By Deadspin.com)

Mariners
2007 -- $60,182,000
2008 -- $64,365,000

Angels
2008 – $42,967,000
2009 -- $45,998,000

As you can see, as income from TV and Radio is concerned, the Mariners far and away are cleaning the Angels’ clocks – and they’re doing so with an on the field product that’s far and away inferior. Just imagine the possibilities if the club is actually worth watching.

Playing With the Big Boys …

Though the Mariners have the richest TV contract of any “small market” team, they clearly have the resources (and have shown the level of viewer interest in the past) to be doing MUCH better.

In 2010, the 2 clubs with the highest player payrolls are the Yankees ($206,738,389) and the Red Sox ($160,913,333.) Is there any coincidence between that and the fact that those 2 teams just so happen to have significant stock holdings in television networks that broadcast their games? The Red Sox, own 80% of the New England Sports Network with the Boston Bruins owning the other 20%. In 2006, the New England Sports Network brought in $125 million in revenue from its 4 million subscribers. In 2009, NESN led all Regional Sports Networks in ratings (9.5), a distinction they’d held since winning the World Series in 2004. The Yankees own 36% of the YES Network with Goldman-Sachs & Co. the controlling stake holder (with 40%) and former Nets Owner Raymond Chambers holding a share of the network as well. YES was the top Regional Sports Network in 2009, with a reported revenue of $417.1 million. In 2007, Bloomberg believed that a sale of the network would fetch $2 billion … while Money magazine contended that a “full and fair” price for the entire network would be between $3 and $3.5 billion.

Other teams have been taking notice and are following suit. In 2006, the Mets and Time Warner entered in to a partnership to launch SportsNet New York and the Dodgers are currently exploring the idea of launching 2 TV cable networks (1 in English, 1 in Spanish) after their deal runs out with Fox in 2013. With the revenue streams that exist in the Seattle sports market there is no reason that the Mariners couldn’t launch a similar network (either by themselves or in conjunction with another partner) as well after 2017 when their contract with FSNW runs out. To do that though, they first need a product on the field that’s worth watching.

Sources:
http://www.bizofbaseball.com/index.php?opt...&Itemid=122
http://www.bizofbaseball.com/index.php?opt...n&Itemid=52
http://blog.nielsen.com/nielsenwire/wp-con...0-dma-ranks.pdf
http://seattle.bizjournals.com/seattle/sto.../28/story1.html
http://www.bizofbaseball.com/index.php?opt...s&Itemid=39
http://deadspin.com/5619509/mlb-confidenti...ne=true&s=i
http://articles.latimes.com/2010/aug/07/sp...ers-tv-20100808
http://money.cnn.com/2007/08/01/news/compa...rtune/index.htm
http://www.bloomberg.com/apps/news?pid=new...id=aTcfoWsgk6Yg
http://tvbythenumbers.com/2010/06/16/snl-k...s-in-2009/54370
http://www.sportsbus...m/article/64848
http://www.bizofbaseball.com/index.php?opt...&Itemid=122


Let's do some further rough comparisons between the Angels market and that of the Mariners. Here are some current population figures according to the U.S. and Canadian Census Bureaus ...

Population of Los Angeles County -- 9,848,011

Population of the Pacific Northwest ...
Washington State -- 6,664,195
Oregon -- 3,825,657
Idaho --1,545,801
Montana – 974,989
Alaska -- 698,473
Vancouver CMA -- 2,116,581
Total population base for the greater Pacific Northwest – 15,827,696

Now obviously, not everyone in what we would call the Pacific Northwest are Mariner fans (just come to Safeco when the Red Sox are in town.) Mariner broadcasts do not reach all of Idaho, Montana, Alaska, and B.C. – but this shows what is possible for this club. At the same token, not everyone in the Los Angeles region or Southern California is an Angels fan either. After all, Arte Moreno competes for fans with the Dodgers in the same city region. He has to share that #2 Media Market with them. And Angels country isn’t as big as you might think. Go north from LA, you start running in to A's and Giants country ... to the south, that's Padres turf ... and to the east, you start running in to the land of the Diamondbacks. Geographically speaking, the Mariners have the largest media market in all of baseball – and they virtually have it all to themselves. Because of that, they are in a unique location and position to ensnare a lot of fans -- and they most certainly have in the not too distant past ...

Attendance for Mariners games grew by 40% between 1995 and 1996 ... and by an additional 18% between the opening of Safeco Field in 1999 and 2002. Attendance for Mariners games hit its all time historic high in 2001 and 2002, recording over 3,500,000 fans in each of those years. Since that high point in 2002 though, attendance for games has plummeted 38%, and once again sits below the major league average.

Seattle Mariners Attendance
2002 – 3,540,482
2009 – 2,195,284
Difference = 1,345,198 fans
Source: http://www.baseball-.../mariatte.shtml

Given that average ticket prices at Safeco Field are $26, adding those fans back would mean a boost of $34,975,148 in ticket sales alone – to say nothing about additional revenue that would come via parking, merchandise sales, concessions, increased television ratings, and so on.
Just adding in those additional tickets alone, to the reported revenue from 2009, would give us an annual revenue of $225,975,148 – which would put the Mariners squarely in at #6 on Forbes’s list – ahead of the Angels! Winning clubs draw fans and make money. What a novel idea! If you build it, they will come.

A New Day? A New Way? Or the Same Old M.O.?

In 2009, the Mariners told us that Mariners baseball was “A New Day. A New Way." It most certainly was. On October 24, 2008, Howard Lincoln went on KJR-am radio in Seattle and was interviewed by Ian Furness following the hiring of new Mariners General Manager Jack Zduriencik. Here is what Lincoln had to say …

Quote

Ian: As you’re cutting salary and cutting the salary that you’re going to be spending on players, does he have the autonomy to go out and say hey, if I want to spend X on this player or that player, is he going to be allowed to do that?

Lincoln: You know, everybody in baseball operates to a budget. Everybody has a major league player payroll, and so we do as well. Ah, and so our payroll last year [2008] was really high, $120 million. It’s probably going to come down a little bit from that, but not that much. Um, but there’s no question that we’ll provide the necessary resources for him to be successful – and, uh we don’t reveal that payroll number until the start of the season for competitive reasons. But I think that when it is revealed that everybody will say ,“wow, they’re still putting a lot of money – this ownership group is putting a tremendous amount of resources and giving Jack the maximum flexibility to do what he needs to do.”

According to the AP (USA Today), the M’s 2008 reported team payroll was $ 117,666,482. Less than 6 months later after this interview, Larry Stone reported that the Mariners had given new general manager Jack Zduriencik the “maximum flexibility to do what he needs to do” by reducing payroll for 2009 “a little bit, but not that much” to $98,904,000 – a drop of nearly 19%.

Just a “little bit” mind you. To top that off, the reported team payroll to begin the 2010 season was $86,910,000 – an additional payroll drop of 8.7% from 2008.

If this is the kind of “the maximum” flexibility Jack has, he’s going to have to be Mr. Fantastic (of the Fantastic 4) to stretch this team into being a winner. Earlier on in that interview, Lincoln called Jack Zduriencik a “legendary” talent evaluator. Translated, what he apparently was saying was, “Oh boy! Here is our opportunity to go young and cheap.” Lincoln's non-answer to Ian Furness’s question on whether or not Jack has the "autonomy" to acquire player X if he truly wants him -- even if it stretches the boundaries of the budget just a bit -- is an obvious resounding "No." It is clear that the 11th commandment in Howard Lincoln’s book reads: “Thou shalt not violate the holy budget.”

Successful teams throughout baseball though simply aren’t that thrifty. According to Forbes, between the years 2001 to 2009 the New York Yankees reported Operating Income losses totaling $129.91 million – dead last in major league baseball. As stated prior, the Yankees come in at #2 on Forbes's Debt/Value list at 89%. Does that mean the Yankees are not a successful franchise?

[Dramatic Pause to wait for the laughter to die down]

Over that time, the Yankees have made the playoffs every year but one (2008) … been to the ALCS four times … and been to the World Series three times (winning it all in 2009.)

In 2002, Forbes estimated that the Yankees as a franchise were worth $730 million. Today, Forbes estimates that they are worth around 1.6 billion! Say what you want about the Yankees (I most certainly have), but they and teams like them get it.

True the Yankees spend a lot of money on high priced free agents … but they have also developed a lot of key players through their own minor league system (Derek Jeter, Mariano Rivera, Andy Pettite, Bernie Williams, and many more) as well. They are willing suffer financial losses in the here and now -- to take risks – with the belief that they will be rewarded in the future. One other thing the Yankees understand is the need for stability as far as leadership is concerned. Since 1996, Yankees have had a total of 2 managers -- Joe Girardi and Joe Torre. Their #1 goal above all things – is to win championships. They know that winning and exciting teams produce fans, which in turn produce more revenue. Virtually the exact same things can be said about the Angels as well. All Mike Scioscia (manager since 2000) and the Angels have chosen to do is win. And neither they nor the Rangers are probably giving up the AL West title any time soon to the Mariners unless they change their ways.

From 1995 to the and early 2000s, the Mariners and their fans danced with the Mariner Moose, thrilled to hydroplane rides, and reveled in “My Oh My” moments and the “SoDo Mojo “ at Safeco Field. At its height in 2001, the Mariners were like a prized mansion on a hill, gorgeous and wondrous for all to behold. Nine years after Sweet 116 though, that mansion has began to more resemble an old abandoned haunted house.

Jack Zduriencik is being asked to clean up a mess overnight that has been years in the making and he’s been given neither “the maximum flexibility” nor the tools to do so. With a team that has as many holes as the Mariners have, cutting player payroll by nearly 28% is like handing Jack Zduriencik a roll of duct tape and a rock and asking him to build the Taj Mahal.

The persistent picture that the M’s Brass keeps painting is that of the Mariners as a small market, cash strapped club that is still struggling just to make ends meet. Like Big Brother’s voice from above, fans are consistently told how lucky they are to have Safeco Field and how fortunate they are to even have a team in Seattle. They act like paupers when in reality they’re princes. However, as has been clearly demonstrated above, that picture … is an illusion – nothing but a smoke and light show from the Wizard of Oz, hidden behind the curtain. In truth, the resources that are at the fingertips of the Mariners Brass are immense – if they have the wisdom to know how to “maximize” them.

At the end of the high priced flameout that was 2008, the Seattle Mariners recorded their lowest profit totals (+$3.7 million) since the Baseball Club assumed control in 1992. And it is clear that when the profit margin was threatened, Howard Lincoln’s main goal was preserve it at all costs -- keeping the investors happy and their pockets lined with green by taking a katana to player payroll.

In my experience, problems in business are never ever solved with financial cuts – they’re solved with innovation. Cuts are temporary fix-its which rarely, if ever, grow a business. Forward thinking companies look to strike out in new directions, seek new markets, and work in ways to draw in customers – spending money through wise investments in order to make more money. At the first sign of trouble though, this club reaches for the purse strings -- can’t ever go in the negative.

But Winning clubs don’t act like that. Risk is a part of the game and it’s what clubs that consistently win do. The truth is … is that there is almost an inverse relationship in baseball between those who spend and those who win. Those clubs whose main goal is winning DO … while those whose main goal is simply to turn a profit – DON’T. Hiroshi Yamauchi has been patient with Howard Lincoln up until this point … but patience has its limits. In 2008, Forbes ranked Yamauchi as Japan’s richest person with a personal net worth of $7.8 billion. Today, a mere two years later, Yamauchi’s net worth has shrunk to $4.2 billion (now 7th richest in Japan) and he is reportedly “not pleased with the Mariners.”

Since signing Ichiro away from the Orix Blue Wave in 2000, the Seattle Mariners have one post season appearance (and a subsequent quick exit from it) to show for all their efforts. With its biggest star turning 37 in October, the Mariners are fast approaching a critical juncture – a tipping point where they risk falling off the financial cliff if they fail to act (if it’s not already too late.) The Mariners appear very much like a house of cards, ready to topple if this club fails to risk and put a winner on the field … and do so quickly. Like unfortunate creatures who allow themselves to get mired in quicksand … businesses who squander opportunities in times of crisis -- die. Just ask the Expos. Winning organizations start with strong leadership and winning attitudes – both on the field and in the front office. Mariner fans deserve a winner … a club that has the potential to win it all every year … and they should demand no less. Lord knows this club has the resources to make that happen -- for now.

MA

Sources:
http://www.forbes.com/lists/2008/73/biz_ja...auchi_LZWJ.html
http://www.forbes.com/lists/2010/10/billio...auchi_LZWJ.html
http://www.forbes.com/lists/2010/73/japan-...auchi_LZWJ.html
http://seattletimes.nwsource.com/html/mari...erformance.html

This post has been edited by Mariner Analyst: 29 August 2010 - 06:24 AM

[DaddyO]

to the MANalyst, who has done us all a great service by pulling all this information together in a coherent way and offering an interpretation. He did it far better than I ever could have.

Nobody's saying the Mariners are the Florida Marlins. The question I asked that MANalyst used as a springboard for an outstanding article is simply this, "Granted that Lincoln is a successful businessman, how good a job has he done maximizing the potential of Seattle Mariners franchise? In other words, not has he grown the value and made money, but given the conditions he inherited in the aftermath of the 2001 season, with the M's perched in the top 5 franchises in baseball, fans flocking to come to Safeco, a revenue stream that supported a payroll that allowed the M's to be perennial players in MLB, has he increased the franchise value and made money at a rate commensurate with the promise of those conditions?

If I was Yamauchi, and clearly I am not, I would not necessarily give Lincoln a passing grade since 2001. In fact, I would question him very closely about why that potential, a confluence of factors, a very strong business position that held incredible potential, appears to have been frittered away because of a lack of vision. Profitable, yes. Potential reached, absolutely not IMO. And there are no guarantees that mix of factors will ever come again.

If I was Yamauchi, it would be Lincoln on the hot seat, and not one of Lincoln's own choosing. I would say, "Howard, you have been an outstanding executive, you have done well for me in the past, but you have stumbled at this opportunity. There was opportunity for greatness, and you have settled for mediocrity. I will take care of you out of gratefulness for past performance, but do not sit on your laurels. I did not buy the Seattle Mariners to be a cushion for your retirement. If you cannot restore the franchise's position, you will be retiring sooner than you thought."

This post has been edited by DaddyO: 21 August 2010 - 09:05 AM

[Nublet]

very interesting stuff.

how about those oversea markets for Mariners?

CKST sucks.. they don't broadcast Ms game much when hockey season starts...

and you can't put that 2 millions something canadian in the same catagory with those US city.
Not many canadian watches baseball. The thrive of Jayson Bay and Morneau helped but not yet at the same level/percentage as american.

[Taro]

Great Thread.

[senior octobre]

[MtGrizzly]

Wow. Quite the case study. This needs to be pinned to the top for a long time. I'll bet Phred even reads it. LOL.

[MtGrizzly]

Nublet, on Aug 21 2010, 10:34 AM, said:

very interesting stuff.

how about those oversea markets for Mariners?

CKST sucks.. they don't broadcast Ms game much when hockey season starts...

and you can't put that 2 millions something canadian in the same catagory with those US city.
Not many canadian watches baseball. The thrive of Jayson Bay and Morneau helped but not yet at the same level/percentage as american.

That, my friend, is called an opportunity.

[Vidya]

Nublet, on Aug 21 2010, 09:34 AM, said:

very interesting stuff.

how about those oversea markets for Mariners?

CKST sucks.. they don't broadcast Ms game much when hockey season starts...

and you can't put that 2 millions something canadian in the same catagory with those US city.
Not many canadian watches baseball. The thrive of Jayson Bay and Morneau helped but not yet at the same level/percentage as american.

But they travel to Seattle in droves whenever the Blue Jays are in town. BC is really a two team region, with the Mariners and Blue Jays sharing it. Both teams have their games televised into the region. There's no doubt that hockey is the #1 sport in BC, but baseball is a distant second.

I loved the analysis. Thanks much. One thing Lincoln and Nintendo have done is bring stability to the Mariners. The previous history of the team was an all too common 5 year ownership cycle. What many owners do is exactly what Smulyan did. Leverage the deal as much as they can, wait 5 years, take all the tax credits, then sell the team at an enormous profit. He almost doubled his money in that time, but many owners have done even better in a five year cycle.

The drop in the value of the team may have been due to poor economic conditions. Certainly the humiliation of spending historic amounts for a 100 loss team was a factor, but it may not have been the main factor. There's no way to really know without looking at the average value of MLB teams from 2007 to 2008.

What MA has done is make the case for hiring Zduriencik. His job is to build a winning organization that will have success on a regular basis. The Yankees have the success they do today, because 20 years ago they made a massive investment in scouting and development. In the decades before free agency, that's also how they built a very successful organization. They used their massive income to buy the best amateur players and develop them into stars.

One final note. The Forbes numbers don't include their massive income due to ownership of the YES sports network.

This post has been edited by Vidya: 21 August 2010 - 01:11 PM

[Nublet]

Vidya, on Aug 21 2010, 12:49 PM, said:

But they travel to Seattle in droves whenever the Blue Jays are in town. BC is really a two team region, with the Mariners and Blue Jays sharing it. Both teams have their games televised into the region. There's no doubt that hockey is the #1 sport, but baseball is a distant second.

actually, CFL is the 2nd favorite sport for canadian besides hockey.

the popularity of baseball (regardless of teams) is about same as soccor here (if not a bit less popular).
For Blue Jay's game, they broadcast almost every single game, but they don't do the same to the Ms game. I wrote an email to complaint the lack of Ms game showned when the season started and now they must be laughing very hard.

*I accidentally you... was trying to click reply... but don't know what happened..

[Vidya]

Nublet, on Aug 21 2010, 01:09 PM, said:

actually, CFL is the 2nd favorite sport for canadian besides hockey.

the popularity of baseball (regardless of teams) is about same as soccor here (if not a bit less popular).
For Blue Jay's game, they broadcast almost every single game, but they don't do the same to the Ms game. I wrote an email to complaint the lack of Ms game showned when the season started and now they must be laughing very hard.

*I accidentally you... was trying to click reply... but don't know what happened..

Oops, I forgot about that. Still, #3 isn't that bad. The town I was in showed FSN and many Seattle local stations on their cable package.

Aren't all the Blue Jays games still carried on the national network, or has that changed too?

[Nublet]

it's on national network, Roger's sports network. It's like yankees and YES network. All from the same owner.

[muddyfrogwater]

Nice write up.

Here's a little add in on Hiroshi Yamauchi, Nintendo and the current financial situation.

According to a recent publication Hiroshi Yamauchi (The majority share holder of the seattle mariners.) has slipped to number 7 on the Japan's richest list, and had slipped to number 3 as early as 2009. In 2008 he was listed as Japan's richest man with a net worth of $7.8 billion. His current net worth is listed at $3.8 billion. Although this is not surprising, as Japan is currently feeling the effects of a recession. The top spot on the list has changed 5 times in the last 6 years. And has been held for the past 2 years by Tadashi Yanai, who owns a world wide chain of affordable clothing. The majority of which are located through out Southeast Asia.

The Nintendo net worth empire has sharply declined since 2008 when Yamauchi was listed as Japans richest man. Since that time Nintendo has lost $4.0 billion on paper in net value in the short course of 2 years. I'm beginning to wonder if some of the cut backs are also a reflection of the parent company. With both countries feelin the effects of a recession team cut backs are not surprising now. In 2008 when Nintendo & Yamauchi were at the height of corporate financial success, was also the year the Mariners topped out with their highest ever payroll at nearly $120 mi. Although the M's account for roughly around 5% of Nintendo's net wealth It's still a significant portion. It seems as the M's financial ebb and tide may work in unison with the parent company.

With humble roots The Yamauchi family introduced western style playing cards which were a novelty in Japan in the early 1950's. Hiroshi Yamauchi took over for his grand father and turned it into the gaming console giant of Nintendo. Hiroshi Yamauchi will soon turn 83 and has retired from the day to day activities of Ninendo.

At times I don't care for corporate ownership and feel the team would be in better hands if the shares were owned by a single person. I sometimes imagine a more thoughtful ownership. Now that's not to say that corporate owned franchises can't be successful. Two other teams in baseball are corporate owned. The Atlanta Braves which are owned by Liberty Media and the Toronto Bluejays which are owned by Rogers Communications. Generally speaking both teams are well regarded as operating efficient franchises.

[MtGrizzly]

SABR Matt, on Aug 21 2010, 03:38 PM, said:

...they suffer from the same disease that killed Japan's chances to dominate the global economic market. Their reverence for profit margins and short term quarterly gains clobbered the entire country and now they've fallen behind CHINA...their next door neighbors...their COMMUNIST! next door neighbors.

Ha - that's just sloppy Matt. You're better than that.

It couldn't be the aging Japanese population, the low birth rates and the wholesale flight of manufacturing jobs to cheaper labor countries that have stagnated their economy could it? It couldn't have anything to do with China entering into their own industrial revolution and moving about a hundred million people from subsistence farming and dirt floored huts to manufacturing/textile jobs and apartments in the city could it? As George Will says, demography is destity and there isn't a damn thing that Europe, the US or Japan can do about the demographics of China and India.

The Japanese business principles are FAR less focused on short term profit than business in the US. They didn't make Hondas and Toyotas that last for 20 years when US auto makers were making autos that started to fall apart at 60,000 miles because they were focused on short term profits.

No - it's not Yamauchi's Japanese business principles that have the M's where they are at. It's Howard Lincoln's lack of vision and failure as a baseball executive. This happens more often that one would think. An executive has enormous success in one industry, becomes fabulously wealthy, accumulates accolades and praise, even becomes a minor celebrity in certain circles. He is the Cock of the Walk as they say. Master of his domain. He has mastered finance and sales; operations and legal - all skills that are somewhat portable.

Then he moves to a different business in a different industry, with the assumption that he will be able to similarly dominate in the new arena. It rarely happens. More often than not, he fails or at least stagnates. All of a sudden he doesn't have the years or decades of accumulated learning to draw upon - he doesn't have the intuitive understanding of how things work in the new industry. All that "tribal knowledge" that he accumulated as he climbed through the ranks at the previous company/industry just isn't there. And his decisions suffer for it. Strategy gets skewed; tactical errors creep in.

Howard Lincoln is the problem. He and his toady Chuck Armstrong. Other than the three Japanese players, Yamauchi has delegated almost complete control to Lincoln. He's the root of the problem. Pinella knew it when he said that "Pat wants to win but Chuck doesn't know how". Jeff Nelson still talks about it. I imagine it's exactly what Valentine is referring to when he says that Seattle isn't a good fit.

[IcebreakerX]

SABR Matt, on Aug 22 2010, 06:38 AM, said:

...they suffer from the same disease that killed Japan's chances to dominate the global economic market. Their reverence for profit margins and short term quarterly gains clobbered the entire country and now they've fallen behind CHINA...their next door neighbors...their COMMUNIST! next door neighbors.

Griz is right for the most part. But I would disagree and say that government and business policy IS causing most of the problems, but none of it has to do with profit margins and short-term gains. Rather, Japan's incoherent and insolvent government is causing massive problems in being completely unable to mobilize or incentivize the capital locked up in its banks. At the same time, the population grows old and no one under 40 is willing to put in the type of work the original economic boom was fueled on; unpaid overtime, low income, high savings, no life.

Japan suffers from being the polar opposite of America; being overly save-happy and not using any of its money. At the same time, it suffers from what also ails America, what I call the developed economy syndrome; a post-industrial economy that doesn't know what to do by being post-industrial.

---

That's not to mention that Chinese economic policy is most similar to.... Japan in its heyday; pegged currency, state involvement in manufacturing & development policy, heavy government interference in trade, leveraging strong local currency to power boost foreign profits from dumping cheap, quality stuff into other countries, it's all right from Japan's playbook of the 1960s.

The reality is that Japan was the first successful command economy and the Chinese have studied and adapted Japan's moves to their own objectives. Chairman Mao never got it right, but the Japanese were able to do what the Communists wanted to do right under American noses.

---

But to get back to the Mariners, it's really not any Nintendo voodoo that is causing the problems. If you haven't noticed, Nintendo has enjoyed a modest renaissance after its fall from grace at the hands of Sony and, later, Microsoft.

No, the problem is indeed Howard Lincoln, his goon Chuck Armstrong and the rest of the BOD's inability to restructure the ownership-level of the front office.

[Nublet]

I don't think Japanese have "innovative ideas" problem... They drive hybrid 10+ years ago. Wii as a game console is a ground breaking leap in that industry. They made those flat screen lcd or plasma. Or that weird speaking robot.
Technology wise, I don't think they have problem forseeing/creating a new market..

As for baseball, they brought Japanese stars to open oversea market. (tho LAD is the first, but I think Mariners are the most succesful one on this front.) They brought a young star from Venezuela and have an baseball academy there to find more talents. They tried to get some Canadian born players tho none of them have work out yet. Creating bigger market wasn't their problem I think.

[IcebreakerX]

SABR Matt, on Aug 22 2010, 11:07 AM, said:

You realize, you're essentially saying the same thing as I did, right? Economic sluggishness...(being too risk averse...not investing your capital on the pursuit of new and innovative ideas, fearing to go into debt to make a business work...these are all traits that have infested Japan's biggest companies AND the Mariners)...that's all you're really saying. That's all I'm really saying.

No, what we're saying is that the although the symptoms are similar, the reason the M's are shit and the Japanese economy is shit are not the same. The M's barely have any interference from the Nintendoites and Nintendoites interfering with HL would be the corporate equivalent of the McCourt divorce. The Nintendo portion of ownership is essentially controlled by HL and NoA is basically a name on a bunch of paperwork.

[Toomany10pins]

If this team doesnt start winning soon, their value is going to drop and fast. Already this year we have seen some of the smallest crowds in Safeco history. With the economy in the crapper and a team in the crapper recordwise, and most M's fans not liking Chowie, just "stay the course" if you want to see a team's value drop in record time.

[Sancho Panza]

MtGrizzly, on Aug 21 2010, 04:32 PM, said:

As George Will says, demography is destity and there isn't a damn thing that Europe, the US or Japan can do about the demographics

Demographically destitute!

[senior octobre]

It's amazing what a little bit of momentum can do for ya. The '94 Expos had a great team but the labor dispute cost them about 25 home games, at a time when they were selling more tickets then the Yankees or anyone else for that matter. The lost revenue and the following year they cut loose all their good players and never to draw well at the box office again. It's tough getting the fan base back once you lose them. Winning, what a formula.