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Rockies Business - Interview with Maury Brown - Rockies Zingers Colorado Rockies Baseball

Rockies Business – Interview with Maury Brown

Maury Brown is a sports business analyst and the founder of the Business of Sports Network. His first notable work in sports business was assisting in the Submission to Major League Baseball by the “MLB to Portland” effort during the Expos relocation derby and is the former co-chair of SABR’s Business of Baseball committee. He is a contributor to Baseball Prospectus and Forbes. Brown is commonly sourced for analysis and commentary by newspapers, online journals, television and radio shows across the country. He can be followed on Twitter @BizballMaury and The Biz of Baseball can be followed @BizofBaseball. Recently, we caught up with him to discuss the Colorado Rockies franchise and Rockies Business in general.  

Maury Brown - Business of Sports Network

Maury Brown – Business of Sports Network

Richard Bergstrom for Rockies Zingers : What determines whether a baseball team is small market, mid-market, or large market? And where do the Colorado Rockies fall in that range?

Maury Brown : Well, it’s a bit of a subjective question in terms of how fans see it. I normally look at it holistically. I look at it in terms of its population size, in terms of its television market size, which requires looking at baseball’s television territory map, and factor things such as corporate base against the number of franchises that occupy the market. That can fluctuate over time. And then, of course, where a market is placed can have a role in it. So speaking of the Rockies – if you think about it – while they’re not wholly insulated from the rest of the country, Denver’s really fortunate that it doesn’t have a lot of other teams surrounding it. Whereas, certainly you might get a population density and whatnot on the East Coast, but you get teams in pretty close proximity. Certainly, Baltimore and Washington are examples of that. And other shared markets with the Mets/Yankees, Angels/Dodgers and whatnot. But Denver, I would view them as a mid-market. They’re certainly not small, by any the stretch of imagination. Based in terms of the size of population density, and certainly how large the market is in terms of it. I would not put Denver anywhere near Pittsburgh, for heaven’s sakes. Because of that, they’re stuck in no man’s land. I understand how fans get into this conversation, saying that it’s small, it’s mid, it’s large. It’s very easy to say some of these– small or large. If you go look in New York or L.A., it’s pretty easy. If I were to pick on somebody like Oakland, it gets pretty difficult to try and figure them out, due to where they’re located next to San Francisco, how the South Bay reaches. If I was going to put them in a bucket, I suppose I would put them in a mid-market. Certainly not small. But somewhere closer down toward that range. It’s certainly not toward the top.

Bergstrom : Speaking on isolation as well, the Rockies are the only baseball team in this time zone. Arizona, for a little while, is in our time zone, but they come on out. There is a perception here that the Broncos do their spending sprees for big free agents and all that, but the Rockies only get a Justin Morneau or a Boone Logan. That makes Rockies fans wonder if the owners are just not willing to spend. Is it that they don’t have money to spend? What kinds of things tie on in to how much can be spent on payroll, as far as ticket sales go, merchandising, and TV deals?

Brown : Well, TV deals are critical right now. The Dodgers are, of course, easy to look at and go, ‘Wow.’ They signed an $8.35 billion television deal for 25 years, and you instantaneously see the response. You look at the Rangers, you look at the Angels, you look somewhat to the Mariners, and you see TV deals that are altering the landscape. And there’s this often instantaneous spending that can go along with it. But there is spending by some clubs that are not in the midst of a new TV deal. You’ve seen some pretty aggressive spending. Look at the Tigers and what they’ve done not only recently with the Miguel Cabrera deal, but historically over the past few seasons. So you look at Detroit, and you go, ‘Why– how could Detroit do that? The market is really depressed. The auto industry is just now coming out of its funk… Detroit’s in bankruptcy, for heaven’s sake.’ Well, Mike Ilitch [the Tigers’ owner] has multiple holdings. He owns a pizza company, a massive pizza company in Little Caesars. He owns another sports holding in the NHL Red Wings, and he moves that money around and makes it happen. So the Rockies’ ownership is not in as flexible a situation as some others are. It often gets lost. And I’m not being an apologist for ownership for the Rockies whatsoever. What I’m saying is that it often gets lost that many owners spend more than they should and have put themselves in debt.

I’m watching the Phillies right now. Here’s a prime example. Although they just landed a TV deal that basically set them afloat, but in 2011, they, the Cubs, Rangers, and Dodgers (under Frank McCourt’s bad ownership) were cited for being out of debt compliance. And you go, ‘I thought they were doing this to make money.’ Well, they are. But it’s how some of these teams spend to win. Many owners will go in over their head to win a World Series. That’s my defense of the Rockies. You mentioned one free agent signing with Morneau, and they certainly underachieved last year. Maybe it isn’t this season, and maybe it isn’t the next, but when the roster aligns and you need to plug holes in free agency, there is no excuse for any owner in the league not to drop the hammer and be aggressive in free agency. You make decisions and you spend – if you’re a good general manager and a good owner – when it makes baseball sense. Your spending should be centered around baseball sense, first, and any marketing as a secondary matter. But ownership should no longer be in a position to not spend. Money is flowing into the league at an incredible rate.

Bergstrom: Admittedly it’s a lot harder to spend on free agents, just because more teams are locking up their young players which creates a supply and demand dilemma that simply has to be overcome by dollars, and in many cases, years that you may not otherwise have done in years past.

Brown : I get that some clubs are in a rebuilding phase, or waiting for development on this, that, and the other thing, or your draft picks didn’t turn out, your prospects aren’t developing the way that you wanted to see it. But at a certain point, you just can’t hang around in the bottom of the standings, or toward the bottom of the standings for any set period of time. Because it just begs two questions: If you’re going to put all your efforts into player development and then be very selective in free-agent signings, great. Then what’s going on with your scouting department? What’s going on with player development? Are they sucking? You can’t have your cake and eat it too. At a certain point, you have to start pointing fingers as to where the problem lies over an extended period of time.

The Rockies have always been an interesting study. They undulate in the standings, but seem be more toward the middle or the bottom of the standings. You have to go back to 2009 for them to be in it when they lost to the Phillies in the NLDS. You don’t want to be the Royals, where you just seem to be perpetually stuck in that position (although this season they look on paper like a contender). And you don’t want to be the Marlins where for years now it’s been calculated penny-pinching for profit over winning. The Rockies don’t (and can’t) be spending like the Dodgers, but they are in a position to do something as the Rays have done, and possibly as the Diamondbacks appear to be doing.

Bergstrom : There was a quote from owner Dick Monfort during the off-season. It was right before Dexter Fowler got traded, where it said, ‘Based on our budget, our realistic goal is to make the playoffs twice, every five years.’

Brown : I think that that’s wholly reasonable. Clubs that are out of contention are supposed to be in a five-year cycle. That is what the league likes to see. There’s no excuse that any team should not be able to be competitive in a five-year cycle. What Monfort’s saying is that he wants to be more competitive than what is seen as the average rebuilding cycle norm– ‘We should be doing it twice in a five-year stretch.’ There are issues with economic disparity that while it allows for owners to be competitive in free agency or total player payroll for one to two seasons, sustained spending at that rate to be competitive is very difficult. The Pirates, they pulled it together last season. But how long can they do that for? I don’t know. The Rays seem to be– and the A’s seem to be able to get something out of nothing, year in and year out. It’s really quite remarkable. The Rays are an exception. They’ve broken every convention. Jonah Keri’s book really summed it up well in The Extra 2% – was very good about it. But it’s difficult to do that. The league is highly competitive right now. Maybe at its most competitive in many ways than it’s ever been where the amount of money that the Dodgers have or the Yankees have or even the Red Sox, who are going to come in at third or fourth this year in opening day player payroll, can make mistakes and can correct those mistakes by having extra money year in and year out to budget, there’s a cushion to buffer risk. So if they make a bad decision– the Yankees have been plugging holes on bad decisions forever, it seems like—there are resources available to plug those holes. That’s the true advantage clubs that have high revenues have over others. Not in a look at a particular season, it’s how that club looks across 5…6…7… years. So because of that, the Dodgers are real concerned. If I’m a Rockies fan, I’m concerned. Because they are hell bent for leather right now. They’re stacked in the minors and the majors.

Bergstrom : With the Dodgers new ownership, they’re reminiscent of the Steinbrenners. They’re in a position to pay to win. I don’t fault them for that. I think that’s what you want to do, assuming that paying is going to make a difference. The marginal wins that get you in the playoffs.

Brown : You mentioned marginal wins and your effectiveness. You can be inefficient, if you have payroll flexibility. This is the thing that the Yankees, of course, have done pretty much forever, it seems like. They don’t care if they’re inefficient. As long as they win a World Series, they can’t give a crap if they’re overspending. This is the thing when we start to basically use the analytics to try and define value and whatnot. When we look at how some teams are structuring payroll based upon revenues and whether there’s less concern about efficiency – if you’re overall goal is wins, it doesn’t translate well to a uniform formula for analytics. Yes, it shows that wins may be earned at a rate far higher than others, but that becomes academic if you have more money to work with. Look at the Opening Day payroll. Here’s the Dodgers, who open up a wallet and for the first time in 15 years some team other than the Yankees holds the highest payroll at the beginning of the season. If you go back and look, it was 1998 and the Orioles who last held that spot. Of course, if you think of 1998 and the Orioles, they were competitive. They were super competitive. Of course, you look at them then. They spent and then after Angelos had control, spending was reigned in, and with it, the number of wins dropped. The Tigers were bad for a period of time, and then they spent, and now they’re competitive. So our ability to assign the efficiency by which teams use their dollars is not critical. Dollars don’t purchase wins. Dollars year in and year out remove added focus on efficiency.

And even then, high player payroll isn’t seen as the be-all-end-all. I was talking to Dodgers CEO and President Stan Kasten at the Winter Meetings two years ago. I said, “Stan, you got a new stadium when you were with the Braves, and that was a rebuilder. When you took over, they weren’t in great shape. Then you go over to the Nationals. It’s the Expos, and there’s this stadium you’re building. And now, you’re coming over here. It’s the first time you’ve had a bunch of money to work with. What’s that like?” And he goes– and it just amazed me. He goes, “Maury, it never hurts to be rich.” He didn’t say, it doesn’t hurt to be “financially flexible” or some PC thing. He used the word “rich.” ‘It never hurts to be rich, Maury. But you have to be smart first.’ And that’s the thing. You can’t purchase or you can’t win simply by spending. But that would make sense, right? The best talent should probably garner the highest pay. At the same time, you don’t have to necessarily be efficient at it. You’re certainly going to get into a massive amount of inefficiency with these longer-term deals. There’s so much money flowing in that– there’s no way that Arte Moreno thought that Albert Pujols and Josh Hamilton were going to be great at the end of those contracts. Nobody in their right mind does it. But even now, we’re starting to get into really long lengths with pitchers. Your risk is so exceptionally high with pitchers.

Bergstrom : Back to a Kevin Brown type that–?

Brown : Well, the Kevin Brown one, yeah. It’s interesting, because I wrote a very critical article about how that was the start of bad pitcher contracts. Certainly, when he was with the Dodgers, he was good. But when he went over to the Yankees, he basically got a season and a half – out of him really good, and then it went bad. And I criticized it. I look at it now, and I go, ‘Well, that was that Yankees’ thing that’s really what’s going on with other clubs.’ We just looked at it as bad, because it wasn’t more of the norm. Now, maybe because we’ve been bludgeoned over-the-head with Cole Hamels’ deal, or– well, the Zito deal (that one was just bad period). You get into these deals now, to where you’re going to just start seeing clubs– because they’ve got so much money, they’ll either figure out a way to basically eat the money at the end of these deals, or they’ll try and move them somehow. Or they’ll get somebody else to pick-up its player, clear a roster spot, and move salary off – like we saw the Angels do with Vernon Wells.

Bergstrom : To your point as well, baseball’s generating more revenue than ever, and with limited ways to spend. You can’t overspend on the draft. You’ve got your slot limitations and all that. With a free agent pool that isn’t as enticing as it used to be, there’s definitely– in a sense, you almost have to overpay on free agents because there’s nothing else to spend it on. One of the things I noted – it was in my first article, in fact, with Rockies Zingers – was O’Dowd has done a good job at not getting stuck in bad contracts. Since the Neagle and Hampton stuff, very rarely has anything been really crippling. He’s invested in Ubaldo Jimenez, Troy Tulowitzki, Carlos Gonzalez. I might question picking up say, a Michael Cuddyer or anything like that, or think that the Rockies should be able to get someone like that internally, or a Justin Morneau. But two-year deals, three-year deals, are not these big albatross contracts.

Brown : Well, to that– and this is once again, into a situational thing. That’s smart. That makes good sense, if you’re in the position that the Rockies are in. It’s not flooded with a bunch of new money flowing in right now, so you’ve got to do something like that. Where I would want to see– if you’re smart, and if you get into that situation, you do what they did with Tulo early. I remember writing a couple of articles that were really focused on what the Rockies had done and what the Rays had done about wrapping up talent. There was actually a couple others, where it was really a matter of really wrapping up talent early. In other words, you could place your risk on a veteran, or you can place your risk at the beginning on a prospect. In my mind, you’re better off. There’s risk on both sides. But in my mind, the risk is better with the prospect. You’re going to get beat up one way or another. But the Tulo deal, I would say that that was pretty smart. Certainly, the Longoria deal with the Rays and the Moore deal with the Rays are examples of ones where you just go, ‘Wow.’

Bergstrom : Well, even looking at the “failed” Tabata deal. He hasn’t necessarily lived up to those numbers, but the “worst” part is he’s going to be 5 million in his last year, and that’s what you might pay a backup outfielder anyway. So it’s still definitely moveable.

Brown : That’s just the thing, I would say – nothing, really. Compared to others, that’s like chump change to him. That’s when you’re starting to talk about $10 million… $15 million in annual salary. You start getting into those numbers, and certainly higher with the veterans. It just gets — you’re starting to look at $20, $22, $23, $24 million. It just gets into really large numbers with some of these veteran deals. You mentioned it earlier, and it’s very true. There’s more money flowing in, so good talent– instead of seeing them hit their salary arbitration years and going into free agency, they’re wrapping them up if they can through their salary arbitration years and potentially into free agency. Which you think, is it a free agency? Thins the pool. When it thins the pool, it drives up demand. And when it drives up demand, you’re going to see prices – salaries – go up. We’re going to hit a $4-million average across the league here in the bat of an eye. It’s probably going to go down. There’ll be players that’ll be optioned between now and Sunday, and will probably bring it down. But there’s a chance. Yet, at that– still, last year, I looked at total—basically, at the end-of-year payroll money compared to total gross revenues of over $8 billion. Even that was a fuzzy number that I got from my source at the league. He wouldn’t tell me what it was. He just told me it was above $8 billion. I said, “Is it below 8.5?” And he said, “Yeah, it’s in between there.” So I used eight as the low number, and looked at end of year player payroll for the 40-player payroll at the major league level. But it was 47% of the total. So the owners got their money even with player salaries increasing at the rate that they are, there’s plenty. Now, that’s an aggregate total. Some teams are – of course – are rolling in insane amounts of money, while others are only rolling in moderate amounts of it. And that’s the difference. I get so crazy when I see some fan go, ‘Look at what the Dodgers are doing. Why can’t the Rockies do that? Or why can’t the Padres do that?’ It’s like, ‘Really?’ Come on, it’s in a different stratosphere.

Bergstrom : We talked about television earlier. The Rockies’ television contract doesn’t end until 2020. Is it feasible for the Rockies to buy a controlling share of Root Sports Rocky Mountain, similar to what the Mariners did?

Brown : Well, anything is possible like that. It’s whether the deal make sense for something like that to happen. No, I don’t think it’s unreasonable. I don’t know whether the club has any interest in doing something like that. But given the rapid escalation of revenues for everybody else and trying to get in on something, if the opportunity presents itself, I don’t think that’s wholly unreasonable.

Bergstrom : From your site, the Rockies were 26th in 2013 with an average home ticket price of $47.82. MLB’s average is $70 per ticket. Is that good or bad for an organization?

Brown : I don’t think so. I think that you have to– if your team isn’t winning, you’ll get– fairly variable around that. But no, I think that that’s a good thing. If you’re having trouble getting people through the turnstiles, and you’re going to go ahead and set it that way, you’ll make it up in volume.

Bergstrom : You had an article in 2011 about the results from MLB’s mystery shoppers for season ticket buyers. The Rockies finished the worst in customer service. Also, I found it interesting that rarely do the agents actually close the sale… I don’t know if there’s been an update. Is that something that you keep tabs on since 2011? Do the Rockies hear about it? Did they change things?

Brown : You know what normally happens with that? Something like that comes out, and there’s immediately a meeting the next day, going, ‘What the heck, guys? We need to get our act together.’ So, I don’t know. I don’t know whether customer satisfaction has gone up or down. Ultimately, stuff like that changes depending upon how the team is doing. You see people a little more forgiving if the team was winning.

Bergstrom : The Rockies also opened up a rooftop deck. I’m not sure if you heard about that or not. But they took out a whole bunch of seats, and they made VIP cabanas, a bar section, a fire pit… Tickets are $14, which give you $6 in concessions and opens two hours prior to the game. In theory as well, that’s going to have music entertainment as well. I know that The Biz of Baseball had an article about how some stadiums take advantage of throwing concerts and other events. How does something like a non-baseball event help the Rockies generate revenue?

Brown : Well, as a non-baseball event, you’re maximizing the facility. They’re taking that money. They get that money. So you’re, of course, going to try to maximize on non-game days wherever you can. The idea of opening up patios and whatnot, and having stuff like that, that’s going around the league. That’s just becoming the norm. That was because they– certainly, you’re looking at– Coors Field’s a little bit bigger. So if you start to open that up, and then if you have concerts and whatnot, and you have tickets that are sold, that gets counted as attendance. It’s bringing in attendance. So whether you bring people in for a t-shirt, or you bring people in for a concert, or you bring people in for a calendar, that’s bringing people in the door. So that’s pretty much standard fare. What they’re doing is really looking across the league and going, ‘Everybody else is doing this,’ when you open up patios like that. It’s great that they tie food with it and value-add like that. That’s great– you’re trying to get as much flexibility and fan experience as possible. Look what MLBAM is starting to do with iBeacon, and it is just crazy. You can go, check into a game, and using the At The Ballpark app for your iPhone get a message, ‘You’re here for your fourth time? You get a rewards deal. You get to upgrade for $10 or whatever to move down here.’ Crazy stuff like that, and it’s highly customized – more flexible. You’re just starting to get into the same toward the fan experience. They’re trying to do whatever they can. I don’t think that [teams] are going, ‘I got to compete with them.’ We’ll pick on the Rockies. They couldn’t compete with the Broncos, and that’s awfully tough when you have John Elway. Certainly, as competitive as they were. They got trashed pretty bad in the Super Bowl. I can say that because I’m in the Pacific Northwest, and I can gloat a couple of weeks. But [chuckles] beyond that, that’s a tough thing to compete with. So you try and offer up stuff like that.

Bergstrom : Recently at Forbes, you wrote about the $25 corn dog offered by the Diamondbacks. What are your thoughts on that?

Brown : Concessions are starting to get pretty crazy, much like ticket pricing. There’s a limit to—a ceiling to this stuff. You’re going to get crazy things, like $40 hot dogs for the Opening Series, $25 corn dogs– $26 hot dog in Texas. Those are novelty items. You’re just not going to sell a whole lot of that stuff. It just goes out there in the media and it’s something to talk about.

Bergstrom : The Rockies also offer PowerTickets, where you buy a ticket and get $10 worth of concessions. But you can’t use them with the ushers. You can only use them at the brick and mortar concession stands. Do a lot of other teams do that?

Brown : But something like that, that’s smart. Let’s be honest. You know what ten bucks gets you? You know what ten bucks gets you, not a heck of a lot. It gets you basically, a soda. Then, you got three bucks. And you go, ‘But I want something else but I don’t have enough out of this $10,’ and you reach into your wallet. Or it’s like, ‘I’m getting a $7 beer.’ That’s just smart. That’s just really solid marketing right there. You get the idea that this stuff goes on in all other facets of business. It’s just difficult in baseball, because we still think of baseball as being a cheap–well, it’s still cheaper than certainly, any other sports You go to an NBA game, or certainly an NFL game, it just gets ridiculous now. They’ve got financing now for season tickets even in baseball. I remember that. That was a big deal. But single-game tickets for baseball remain reasonable. Why you may not always bump into a season ticket holder, but if you bump into someone that enjoys baseball, they’ll likely take in at least a game or two each season. It’s warm, it’s a great way to hang with family and friends… baseball’s still a great entertainment investment.

About Richard Bergstrom

Originally from Chicago and after an extensive tour of most of the western United States, this is my second stint in Denver. I’ve lived here since 2004 and go to quite a few Rockies games, especially Rockies fireworks games! When I’m not writing about baseball, I enjoy karaoke downtown, a bit of poker and a bit too much of my iPad.

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