BASEBALL IS A BUSINESS

by Holly Horning

It’s not as sexy as home runs, but as I’ve been writing ever since Totally Tigers was born, money is the primary element that drives this game of baseball.

It is the key factor in how owners run their organizations, the people they hire, the players they sign and the level of competitiveness and winning they want.

Sorry folks, it’s not about the fans. 

Well, not a whole lot.  We take a backseat to the owner’s goals.

Let’s remember that baseball is a private enterprise.  Just because it’s entertainment doesn’t mean that those who rule the industry don’t run it like a business.

This stance was further enforced last week with an article written by Jules Posner in Forbes.

He explains how baseball has become more profit-driven and teams more efficient.

The rise of analytics is one factor.  A system that has the ability to put a “true value” on most free agents.

But Posner explains that it’s also Rob Manfred who brought in a baseball model that is more business-oriented and benefit owners the most.

As a result, owners are giving priority to putting ROI over winning championships.  The most business-savvy have found ways to maximize profit margins that combine as little payroll as possible while also fielding competitive teams.  We’re talking about you, Tampa Bay.

Jules goes on to explain that baseball is changing as the older ownership groups leave and are replaced by owners who are investment-minded.  Steve Cohen is the perfect example.  Other teams have increasingly moved to ownership groups that are run much like corporate boards.

The modern team now understands that the best money spent is not on players, but on R&D and coaching.  You could hire 50 new people and still save millions that would have been spent on a single high-priced free agent.  The benefit is that all these new people are focused on maximizing player production – esp. with the hidden gems found in free agency and the cost-controlled younger players.

And owners got that magic bullet by understanding that analytics is the key.  Teams were jumping on the analytics bandwagon, even enhancing and strengthening their departments, in order to use its results to cut payroll and improve performance. 

The bottom line as Posner concludes is “Analytics have emerged because baseball owners want to run better and more profitable private baseball clubs. Not because owners want to win championships.”

He states that “business is about efficiency.  It’s about making your business as profitable as possible while keeping your overhead low.”

There are additional benefits as well.  When you keep your payroll low and your team competitive, attendance, media contracts and other money-making sources go up.  Revenues – and profits – increase.

And so does the value of the team you own.

In case you ever want to sell it down the road.  (Another topic for another day so please hold your comments for then.)

As Posner summarizes, “Keeping payroll down keeps profit margins high and ownership happy. Most owners probably do not care about winning championships, but they care about being competitive.”

Winning championships costs more money.  Just look at the Tigers under Mike Ilitch.  The Tigers regularly lost money during their best competitive years.  They also didn’t have an analytics department.

But being good enough – and interesting enough to fans – generates a healthy dose of profits.  Especially when you’re not blowing up your payroll with expensive free agents.

Let’s look at the Tigers now.  How well do they follow the past and current business models?

As we return to when the team was owned by Mike Ilitch, we can see that it was a badly-run business in comparison with today’s formula and what other teams were doing back then.  During his last 10 years, the Tigers’ payroll skyrocketed and so did their operating expenses.  As I have written previously, the Tigers’ operating expenses were nearly double that of the next team.

And while the team was competitive and popular, the Tigers lost money every year.  This despite having attendance over 3 million.

The minor league system was neglected, if not decimated.  There were no coaches in the system that anyone else wanted to hire.  Or Front Office personnel for that matter.

There was no analytics department despite 25+ teams that had one.

You could say that Mr. I was simply throwing money at the problem.  Conceivably, it could have been a move of desperation in his attempt to win a ring before the ageing process claimed him.

And it was left up to his son to clean up the mess.

Chris Ilitch significantly changed how the Tigers were run. And in all probability, he’s not done yet.

Even though we hated every single minute of it, and often questioned it, it’s become more and more clear that a tear down had to be done if the team wanted to return to contention sooner rather than later.  It was going to be ugly no matter what.

But since the tear down, the rebuild has been very different and more in line with what other teams are doing.

Analytics was finally introduced and the department grew every year.  The latest in technology was brought in.  And personnel started to be broomed in favor of top hires from the top departments of other teams.

Coaching and managing improved – and expanded.  Over the past couple of years, the Tigers have hired a ton of new personnel working behind the scenes and responsible for player improvement. When you wondered why the team wasn’t spending on players, they were doing it in other areas of the organization.

Player signings got better with Robbie Grossman, Wily Peralta and Akil Baddoo.  This off-season, the Tigers earned 1 of only 3 A grades from the experts given out for their roster building.

And 2 years after taking over, Ilitch put this team in the black.  He also just brought in Chris McGowan who will be in charge of improving the fan experience – and raising prices (and profits) in the near future.

The Tigers are starting to turn out a better product at a much lower cost.  And a year after Covid, it is expected that they will make more money.

They are following the business model described by Posner in the Forbes article.

It’s often been said that Mr. I loved baseball and was beloved by fans.  Conversely, Chris Ilitch is often regarded by many as a businessman who doesn’t love the game – or team – as much as his dad.

But wouldn’t it be ironic if the changes he has implemented turn this team into a contender with the results that his dad never got?

(Please follow the rules listed above, including limiting your responses to 3-4 sentences in order to be published.)

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What did you miss on our Twitter feed yesterday? (And why aren’t you following TT yet?)

• MLB Radio gave their list of what the Tigers still need in order to contend.

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