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Thursday, August 30, 2012

The Economist: Financial strategy in baseball: Everything must go

The Red Sox-Dodgers fire sale trade reveals the perils of having too-passionate fans.

Boston can ill afford to take a few years out of contention to “rebuild”, as typical fire-sale teams in small markets tend to do. The damage to the club’s brand and its fans’ loyalty would be immense, reducing its long-term revenues by far more than the $261m saved in salary. Thus, the question for the Red Sox is whether they can deploy that $261m to buy better players than Mr González, Mr Crawford and Mr Beckett…

Meanwhile, the Dodgers’ all-in move carries significant benefits that are not included in a simple dollars-per-win analysis…For a team in America’s second-biggest media market, a playoff appearance in 2012 might well be worth $60m—almost the entire amount they are thought to be “overpaying” to their new acquisitions…

Having a passionate fan base is a double-edged sword for professional sports teams. On one hand, it allows a club to maximise its revenues when times are good. But on the other, it forces management to try to put a winner on the field no matter what—even if a team is at a point in its “success cycle” when its stars are in decline, and the optimal strategy is to tear down and rebuild.

David Concepcion de la Desviacion Estandar (Dan R) Posted: August 30, 2012 at 08:08 PM | 5 comment(s) Login to Bookmark
  Tags: dodgers, economics, red sox

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   1. charityslave is thinking about baseball Posted: August 30, 2012 at 09:26 PM (#4223135)
To keep the rabid fan base, one must ignore the rabid fan base, grasshopper...
   2. Darren Posted: August 30, 2012 at 09:56 PM (#4223153)
Having a passionate fan base is a double-edged sword for professional sports teams. On one hand, it allows a club to maximise its revenues when times are good. But on the other, it forces management to try to put a winner on the field no matter what—even if a team is at a point in its “success cycle” when its stars are in decline, and the optimal strategy is to tear down and rebuild.


I have a hard time believing there's a big downside to having a rabid fan base. The Sox rake in a crap-ton of cash even though they've been down for the past couple years. Yes, they really do have to go out and spend a bunch of cash this year and turn things around pretty quickly, but that's not a function of their rabid fans--every team has to deal with that. The difference is that having rabid fans means you have a way to finance your winning teams.
   3. Bob Tufts Posted: August 30, 2012 at 10:07 PM (#4223159)
When going to Fenway is only a game and not a sportscape experience, when TV ratings and equivalent team RSN deals plummet, when MLBAM and central revenues fall, yes, the Red Sox may be in trouble. Call me when that happens.
   4. Phil Coorey is a T-Shirt Salesman Posted: August 30, 2012 at 11:34 PM (#4223215)
I'm not going anywhere as a fan. Does that matter out here in the sticks?
   5. bob gee Posted: August 31, 2012 at 07:58 AM (#4223319)
these lyrics work well in this different setting:

I look to the future it makes me cry
But it seems too real to tell you why

Freed from the century
With nothing but memory, memory

And I just hope that you can forgive us
But everything must go

And if you need an explanation
Then everything must go

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