Friday, August 22, 2008

Red Sox Nation, Indeed

Fenway Sports Group -- a corporate sibling of the Red Sox -- is opening an office in San Diego:

The reason that Fenway Sports Group, a subsidiary of New England Sports Ventures
LLC, which owns the Boston Red Sox baseball team and the park it plays in, Fenway Park, as well as 80 percent of New England Sports Network — which is similar to ESPN — wants a West Coast hub “is to better leverage their lines of business and create new revenue streams that they don’t have to share with Major League Baseball,” said Pat Connors.

By that, Connors — tabbed this month to be senior vice president of FSG’s local office — means marketing, sponsorships and company acquisitions not connected to the ballclub.
Of course, even if it's not defined as sharable revenue under baseball's rules, its not like the piles and piles of money FSG makes isn't going to the same folks who hold the Sox' purse strings. In some ways, this is an old story. Ted Turner, George Steinbrenner, Anheuser Busch, and countless other previous baseball owners used money from their outside ventures to help subsidize baseball spending.

But there is a difference with FSG, isn't there? In a recent feature story on the business, Mike Dee -- FSG's President and the Red Sox' CEO -- made it pretty clear that, even if the revenue comes from selling ads at Boston College games, NASCAR partnerships, and all manner of other things, FSG's business is really about extending the Red Sox' brand. They're getting the opportunities they're getting because of that brand, and that brand is really part of Major League Baseball, isn't it?

I'm not suggesting that there's anything wrong with this necessarily. Other teams can try to do this too, though I'm sure only a handful have the capital to get such a venture going. But anytime you see one member of a group doing well, you can assume that the response of the majority will not be an emulative one. It will be jealousy, and everyone will want to wet their beaks, as it were. "Why isn't the revenue from a race car with the Sox logo on it sharable?" David Glass might ask. "The Red Sox don't exist without the other teams to play," notes Bob Nutting.

This is all worth watching because, as the years go on, it is apparent that the real business fissures in baseball are not between the players and the owners as much as they are between the big owners and the little ones. That certainly accounted for much of 2002's acrimony, and assuming bad times eventually hit baseball the way they're hitting the rest of the economy, these David vs. Goliath fights will crop up again.

Will the the game itself be affected when a group of the little guys try to make a grab for the FSG money? We shall see.

9 comments:

Enrique said...

Oh, the hypocrisy! Wasn't too long ago that Sox management were calling the Yankees "The Evil Empire" and look at what they're doing. Trying to buy more World Series. And no I'm not a Yankee fan, actually hate them as well.

tadthebad said...

I always thought that the revenue/profit gleaned from the FSG, as it relates to revenue sharing, was kind of a tenuous balance...after all, FSG secures contracts based on the universally recognized Red Sox brand (as you mentioned). However, I also think that the creation of the FSG was a brilliant business idea, and I can't believe that no other enterprising ownership hadn't tried this before. Perhaps I underestimated the business acumen of Henry, Werner and Lucchino.

tadthebad said...

enrique...doesn't every MLB essentially try to buy world series titles? Are you upset that the Sox found a better, more creative way to do so?

TLA said...

If the Red Sox are part of MLB and the Red Sox ownership is selling its MLB brand to a non-MLB entity which Red Sox ownership also happens to wholly own and that entity is reaping profits that the Red Sox ownership are not sharing with MLB and the other teams, aren't the Red Sox engaged in self-dealing of sorts. In essence, is the Red Sox ownership usurping corporate opportunities of MLB and the other teams? I am more talking (typing) out loud, than I am sharing a coherent thought. This is basically the other owners/franchises argument, right?

And yes, I realize the Red Sox are not the only franchise doing this.

mooseinohio said...

As a 'Mainer kiving in exile' and lifelong Sox fan I do find the Red SOx Nation a wee bit contrived but I am not shocked as only successful business people can afford to buy professional sports teams so when John Henry, Jerry Jones, or Mark Cuban utilize their assets to make even more money I have to tip my capitalist hat to them. While I can appreciate it as a formerly long suffering Sox fan I may criticize it as when Jerry Jones tries to push his Cowboys brand as America's team but whoever said being a fan made you rational. So I live the strange dictomy of being a fan - I criticize others (e.g., Yankees as the Evil Empire) while enjoying the spoils of the Larry Lucchino making the Red Sox as much money as possible so they can use $10+ million to sign their draft picks and develop a championship team. I look at it this way - my mental schism is probably healthier than being a soccer hooligan.

tadthebad said...

Red Sox Nation contrived? Gee, you think? (this coming from a lifelong Red Sox fan also). However, just because RSN is contrived doesn't mean it wasn't another smart business/marketing move by Henry et al.

To clarify, Lucchino's characterization of the Yankees as the Evil Empire came after year 1 or 2 of the current ownership, before RSN and before the Sox morphed into a juggernaut...clearly, it was a statement of envy, or greed...

Ethan said...

You should look to football (soccer) in Europe as an example of these dynamics. The FA (football association) in the UK has a very long tradition of managing multiple levels of the sport -- unlike baseball, the minor- and major-league teams can rise and fall between levels (sorry, Nats). A couple decades back, the "Premier League" was formed by a cabal of powerful owners as an icing layer on top of this system -- and then about a decade ago, a pan-European "Champions League" was created as a cherry on top of the icing. At this point, superbrands like Manchester United *don't* "need the other teams to play" that they used to play -- they care a lot more about the fortunes of FC Milan or Barcelona than they do Liverpool or, shudder, Bolton (that shudder is from them, not me). Baseball is probably insufficiently internationally monetized to support something like a Premier or Champions League, but a decade or two hence, I could really see such a thing happening to the NBA, with the Celtics and the Lakers caring a lot more about Buenos Aires and Beijing teams than they do about other NBA teams. In the meantime, MLB is probably bound too much to getting along in order to preserve its antitrust exemption to allow the formation of a sub-MLB "premier league" of just Boston, New York, LA, Chicago, or whoever.

Pete Toms said...

A lot of MLB clubs are getting into the concert promoting business as well. Another revenue stream not subject to sharing.

As for the always present problem of "big" vs "little", the Red Sox are getting a little bit pissed I think about sharing their loot. First, the last I checked, they refused to participate in the MLB / StubHub deal. This deal is more about revenue sharing than secondary ticketing. The clubs could individually handle this themselves but MLB wanted to centralize the revenue. The Red Sox said no. Second, Tom Werner made comments this winter about not being too happy about MLBAM controlling the clubs local digital rights. This again is about centralizing revenue. We'll see....

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