Jonathan D. Mariner: The Business of Major League Baseball

Good afternoon. It’s a pleasure to be
back on grounds again. As he mentioned, I’m
a long-ago graduate of the McIntire’s school. I spoke at Darden,
about 10 years ago. And when I come here I
always like to point out. You know, I’ve always had a
partial connection to Darden. When I was at McIntire, which
really dates me, McIntire was– my first year in a com
school was on grounds, in what was the old Rouse Hall. My fourth year we
moved to Monroe Hall, which was the same year that
Darden moved to North Grounds. And so I kind of followed
Darden to the Monroe Hill area. I ended up– as I
mentioned earlier, my safety school was Harvard. I couldn’t get into Darden. And well, I ended
up going to HBS, I discovered that you know
and everyone, I guess, knows that Darden was started
by a group of former HBS professors. What I discovered
when I got to HBS was that the Monroe Hill dorms
and the McIntire’s school were literally carbon copies
of the Harvard Business School architecture. So I really felt kind of back at
home again, just being at HBS. So I’ve had this connection
to the Darden indirectly for some time now. And I’m also glad to be
here because obviously our basketball team is
playing well these days. Again, to date myself,
the team last year won the ACC tournament
for the second time. The first time they won it,
I was a fourth-year student at UEA, which really
goes way back. And as I thought about it, as
a lead in into my talk today, I was thinking about
how one of the ways we were able to watch
the games back then was because of Raycom Sports. Back then the Atlantic
Coast Conference was one of the very few
conferences that really had a dedicated sports
network that gave you distribution across the region. And that’s really the
trend we see today. And as I thought
about my connection going back to this year’s
team, and hopefully I’ll get a chance to watch
them on Saturday. There was that
interesting connection with the impact
of media on sports at the college level, and of
course, at our level as well. What I thought I would do
is take maybe 30 minutes or so and just talk
about a couple of things. And then leave some
time for your questions. I thought I’d first talk about
something that people always ask me. How do end up being in the
position that you’re in? And so I thought I’d just give
a little snapshot of my career path. And then talk about how
I’ve seen our industry grow, and the trends I see
going forward, you know, since I’ve been in this job. And then just some
final observations about the future
for those of you who might be thinking
about our business. Normally, when I talk
about our business, I talk about the actual
business model and more of a financial orientation. I thought I’d try to take a
broader perspective on what I see happening in our industry,
and in sports in general. And maybe that’ll lead to
some questions when I’m done. But first of all, my career. When I left McIntire,
I went straight to HBS which, back then,
wasn’t all that unusual. About 20% of my class was
actually straight from college. But I was an accounting
major, a CPA track. And ended up post HBS,
really moving more towards a financial track. I got my first real job was
with MCI, or as I call it, the real MCI before Rolcon
came in and really kind of screwed up everything. I was at MCI back when the
CFO through my later years, there was Bill
Conway, who was one of the founders of
the Carlyle Group. And Bill McGowan was
still running the company. And in its day, MCI was
probably equivalent of what Apple is today. It was this high-growth
technology company that was really kind of
challenging the establishment. And so it was familiar a great
experience as a young analyst, managing a group of analysts
a bunch of MBA students, etc. And it was really the first step
in my path to where I am today. I had a chance. And I was there right when the
federal government, Department of Justice was breaking
up AT&T into its since reconfigured parts. But in the course of that
transition, within MCI itself, I ended up getting
an opportunity to move down to South Florida,
to work for a company router system, Ryder Truck Rental. And as I mentioned to
some students today, one of the things that really
pushed me in that direction was that MCI at the
time, taking on AT&T, as they were going
through divestiture, was still growing as
an enduring company. And Ryder was really, at the
end of the day, truck leasing. They were a finance company. And I had a financial
background and really wanted to get more involved in the
financial side of things, a company that had more
of a financial orientation amongst people I’d hired. And so I ended up
doing M&A work. They were in a huge
acquisition mode. I end up doing a
lot of M&A deals for Ryder, got involved in
corporate planning, budgeting, etc. And then at one point,
after about four years, I had a chance to really
kind of change tracks. And when I talk
about my career path, I always mention the
shifts that I consciously wanted to make from
being in more of a staff role and working in a
corporate headquarters, doing a lot of analytics,
etc, to becoming a CFO. And so my first job was with
the Greater Miami Convention and Business Bureau. Which was not a
traditional role. But what struck me about it was
the fact that that organization had, as its board of directors,
the who’s-who of Miami. And it was also going through
some financial turmoil. So for me, as the
next career move, I really wanted to be able
to tackle a challenging job, and in a pretty
high-profile area. And three years later we
were able to really turn the organization around and
I did it in an environment where really noticed. And at the same
time, Wayne Huizenga had just been
awarded the franchise to the Florida Marlins,
the first baseball franchise in South Florida. I wasn’t a baseball fan. People always think that I am. I know I look like a real
athletic stud, but I’m not. At least only my head. But I ended up getting an
interview with the Marlins. And I tell people, had
they asked me on the way out the door to name
five baseball players and teams they played for I
wouldn’t have gotten the job. Because I didn’t
follow baseball at all. I grew up down the road
in Norfolk, Virginia. Virginia, to this
day, still doesn’t have a professional
baseball team, other than Virginia Squires
for a minute or two. But I ended up getting the job. And that really began
my career in sports. It wasn’t something that
I really aspired to. But it was an opportunity
that was available. I happened to see an article
in the paper about the Marlins front office and went after it
and ended up getting the job. And what helped was
the fact that you know, they were looking for a CFO. I was a CFO. I had been in a hands-on role. And this was literally,
a startup situation. You know, I literally
wrote the chart of accounts for the
Florida Marlins. That’s how much of a hands-on
role it was at the time. And having had the visibility
in the South Florida community that I had from that previous
role really helped me. I mean, when it came time to
providing references, you know, I kind of had the who’s-who
of Miami in my corner. And so all of those things
really kind of came together to help me land that role. With the Marlins, a
lot of lessons learned. I was there for a start up. I was there during
the strike in ’94. I was there when we won
the World Series in 1997. Nice trinket they give you
when you do that kind of stuff. [LAUGHTER] And I was also there when we
had to dismantle the team. And when I’ve talked
before, about the economics of our business– I talk more about
that– but those were all interesting times. Working for a visionary
like Wayne Huizenga was probably one of the
highlights of my career. He took six companies the
New York Stock Exchange, some start ups and
amazingly creative and a businessman,
an entrepreneur. And I learned a lot working
with him and for him. Wayne, post you know the
dismantling of the team, had the team up for sale. And John Henry came in,
ended up buying the team. Now, John Henry today,
the principal owner for the Boston Red Sox. But I worked for John
for a couple of years. And as John was coming in,
I was actually thinking, I might end up doing
something different. I didn’t know him at the time. And I start looking at
other opportunities. And I found an opportunity
that I ended up doing. After a couple
years with John, I ended up working in the
educational administration business. I worked for a charter
school company, a startup company called
charter schools USA. Today they operate 70 schools
across seven different states. And probably got close
to 60,000 students. But I was a chief operating
officer for that company. It was a startup operation. The entrepreneur bug was in me. And it was a chance
to be involved in something like that. And really, again,
learned an awful lot working in an
environment where you’ve got multiple constituencies;
parents, administrators, teachers, a nonprofit
advisory board. You’ve got the
local school board. I often liken getting a
charter school in this country to trying to get a Burger King
franchise from McDonald’s. You’re competing against
the person that’s supposed to be basically regulating you. And it was a lot
of lessons learned. But again, there were all things
that really helped advancement to this stage, working with
multiple constituencies working now, in baseball,
with 30 owners. Not quite as– it was easier
working in charter schools, sometimes. [LAUGHTER] But anyhow, we were
actually in the midst of selling our company. We ended up not selling it. But in the course of all that,
I inquired about the fact that baseball was in the process
of buying the Montreal Expos and relocating them. And I initially inquired
about just being a consultant to baseball, as I thought
about my next role. Talked to Bud Selig,
who said, I’ve got a job in mind in New York,
that my first choice for. And the job was
CFO for the League. About probably
three weeks later, he sent the
President, Bob DuPuy, down to meet with me over lunch. And they made me the
offer over lunch. And so you know, I
was very fortunate. I got one of the best
jobs in the country and didn’t even
have to do a resume. But I spent 12 years
in the role of CFO. During that time, we
learned an awful lot. I learned an awful lot
about this business from a different perspective. And three weeks ago, almost
three weeks ago, Bud Selig retired. And Rob Manfred took over
as the 10th commissioner. Having spent 12 years as
CFO, as I kind of further describe my transition,
I talked to Rob about what was next
for me, and had been a CFO for
over 20-plus years, and I was involved in
a number of things. And he suggested that I take
on the role of CIO, which is what I’m doing today. And I thought the
best way to talk about what this next
role means for me is to talk more about that
second piece, the industry itself, and where
I see it going. Because what I’m hoping
to do going forward will be partly impacted by
the direction of the industry today. I spoke to a– let me get this right here. There we go. I’m not sure if
you can read that. I spoke to a group in
Princeton several years ago about our league. And the title was basically
staying competitive, and a centuries-old industry
trying to stay competitive in the 21st century. And what I came up
with was this framework for describing baseball in
terms of different phases. One could argue that you know
baseball version zero was really kind of pre Kenesaw
Mountain Landis, pre Black Sox scandal. But the first
commissioner came in. And I, looking at three
different versions of baseball, tried to describe how I saw this
in industry evolving; looking at market competition,
looking at how we distributed our game to the public, the
demographics who watched our game, the business
model itself, and then the key innovations. And one of the things
that I thought about in that first version. Really, during the course
of the Reserve Clause, when there was no
free agency, it was a very, very different game. The competition
was very limited. The people we marketed to was
a fairly monogamous group. And the economics
were pretty simple. It was kind of a
family business. Post free agency, the game
became more competitive. You had other sports,
basketball, taking off going to the ’80s
and through the ’90s. Basketball really
took off as a sport. The NFL took off as well. Super Bowl Sunday
became a big event. And the distribution
channels started to change. Cable became a much
bigger part of how people consumed our sport. But we also dealt with
a lot of labor issues. The cost of labor increased. And then we got through 2002
with a labor agreement that really set the
platform, set the tone for our current economic model. Now teams can make money. It’s a very, very
different economic model. The digital world
is really impacting how people consume our sport. Every sports league now has
some amount of TV exposure. There are more cable
channels out there that provides more content. And at the very bottom,
I put key innovations. I left off MLB Advanced Media,
Baseball Advanced Media, BAM, as we call it, along
with the network, as being some of the
things that we’ve used to kind of advance our
sport into this next phase. And but I thought
that this was one way to initially start talking about
how I’ve seen our game evolve. Having said that, there are
really kind of three areas that I thought really
made a difference in how we see our future. The nature of the
content itself, how we present the game,
how people consume it, how we distribute the game,
the different channels that people are able to access
it, and then how we make money. And these are the same things
that if you’re doing a startup, that people will ask you about. What are you really selling? What’s the content? How are people
getting access to it? And finally, and this
is the big issue, how do you make money off of it? In that latter case, we’re
talking about paid viewership people that either pay
for subscription rights or show up at the ballpark. We’ve got TV contracts that
basically drive our revenue. And then we’ve got
advertisers, sponsors. And ultimately, there’s this– the digital world is going to
really impact what we do to. And that includes how
we engage our fans. I was on a flight
about six months ago. And I was sitting next
to this gentleman who was the president of
a advertising agency. He mentioned to me that he had
seen this slide presentation put out by a company called LUMA
Associates or LUMA Partnership, that I had not heard about. Maybe some of you may have
known about them, the boutique digital media firm. And he shared the link to
this presentation that I saw. And I actually
wanted to use some of these slides
to talk about how I see our industry evolving. I found them to be quite
engaging and quite interesting. And I thought I would share
some of the slides with you as a way to talk about how the
media and technology has really started to impact our
business going forward. And so I wanted to make
sure I gave LUMA Partners the benefit of using
some of their materials. But I thought it was a good
way of really describing our industry. It starts with the simple
notion that since the ’50s, you know the evolution of
channels has been tremendous. I’m old enough to remember
when they showed four broadcast channels. There really only
used to be three. You know, Fox is a fairly new
creation, back in the ’90s. But you can see
the cable networks have started to expand. And then, of course,
the digital world, over– according
to this– a million different digital channels
that are out there today. But the point they make is that
early on, it was fairly simple. You watched traditional
TV on big screens. And you tended to watch digital
content on small screens. And it was a very, very simple
way to kind of view the world. And he pointed out some
of the digital players versus the traditional players. And for the most part, they
operated in separate silos. And everyone tended to kind of
stick to what they were doing. But then came the issue of
disruption versus convergence. Which way is the
world going to go? To the world of
traditional players, they see disruptions as a
way of losing market share. They’re fearful about
losing market share. And to the digital
players, they see the chance of getting a
piece of a much bigger pie. And that has set the tone
for, in my mind, the direction that we’re moving and how
people consume our content. Because right now,
traditional TV tends to be the place that they
generally tend to consume it. And of course, this fear
factor is based on the notion that for the traditional
linear TV content holders, they think about what Apple
did to the music industry, or what Amazon has
done to publishing. And that’s where the
fear factor comes in. But the notion of convergence
is also very much alive. And when you think about
the proliferation of devices with the smartphones and
tablets, Apple TV, the Google Chrome dongle, all of a
sudden, the second screen becomes very important in
how people consume content. All of a sudden, people don’t
just think in terms of silos. But there’s this notion of
wanting to watch content on multiple screens. And in fact, the
two cross arrows, really highlight some of the
themes you hear about today. TV everywhere is
that place where you find the traditional players
wanted to access all screens. They now want you to be able to
consume the attritional content on smaller screens
within the home. And there’s authentication
that’s tied to that. And on the other side, you’ve
got traditional digital player. You have new digital
players saying we want to bypass the cable box. OTT, over the top. Let’s just skip the
cable piece altogether. I’m curious, whenever
I talk about this, how many people, first
of all, in the room, has a land-line telephone? Raise your hand. [LAUGHTER] And it’s probably cuts
across demographically, age. I have one too. [LAUGHS] How many people pay for cable
service, monthly cable service? And I won’t tell
the cable company if you don’t raise your hand. OK. And that really
starts to point out what’s really
happening in the media today, between this notion of
if you don’t have a cable box, you still want to
be able to watch. And that’s the
over-the-top solution that tends to predominate. One of the things
that occurs with the additional proliferating
of second screens, more content has now been created. You’ve got many more screens. You’ve got Netflix,
Hulu, generating all kinds of new content. That really starts to open up
the app and the competition in our world. And also more content
attracts more talent. You’ve now got tier-1
talent, people that beyond– if you think about the old SNL
skit Garth in the basement, doing low-end content,
that world has changed. Now you’ve got top-tier
content like Kevin Spacey. You know, House of Cards,
that’s creating even more competition in the market. And then the final
point that they make, that I thought really
highlighted the challenges facing us is that
navigation’s changed. It’s now easier to
access all that content in a much easier way. There’s still talk about
Apple TV coming out with a device that will make
it even easier to find content, perhaps using Siri. But more content sometimes
is more confusing. But the fact that
navigation’s gotten easier has made it even more
competitive in our space. And ultimately, the
point that’s made is the consumers are in control. I was mentioning at
lunch today that I don’t know that there is
a linear TV program that I watch today live. I DVR everything. And I zap through
commercials like crazy. But that’s what
the consumer wants. And when you think
about Netflix, the ability to be
able to do basically do binge watching on TV,
that really underscores the extent to which the
consumer wants to watch, what they want to watch,
when they want to watch it, as opposed to the
traditional appointment TV. There was a time when
NBC or ABC, depending upon which time frame, kind of
owned Thursday-night viewing. That was kind the viewing. Well, that’s all changing now. And then the final thing
I want to talk about is the actual economics. And again, these
graphs, I’ll just summarize what’s happening. But perhaps
mentioning we all just watched the Super
Bowl a week or so ago. And one of the highlights
of the Super Bowl is really the ads,
the TV spending. And that’s really the engine
that drives our business today. And what the next three
graphs really attempt to do is to just point out the graph
on the left is traditional TV spending. The one on the right
shows, basically, the cost of what they consider
to be the last 5% or 10% of spending. And the point that
they’re making is to reach that last 5%
or 10% of the audience gets to be very, very expensive
in traditional television. This graph tends to show, on
the left, the orange bars, is media spending
for traditional TV. And on the right,
it’s digital spending. And if you look at
it carefully, you can see the dollars are off
by almost a factor of 10. The amount of TV spending, even
though digital is accelerating, there’s more digital channels,
the amount of TV spending is really substantially
more than what you’d find in the digital
side, by a long shot. And this final slot, when you
look at those four green bars on the top of those
orange bars, on the left, it’s really pointing out
what the incremental spending is for tradition TV. And if you took those
dollars and you put them on top of digital spending,
those right bars in blue, you would almost
double the amount of spending in
the digital space, just taking those hard-to-reach
traditional dollars. And so the point is
that even though there’s this debate about convergence
versus disruption, at the end of the day,
there’s an awful lot of room to grow both markets. And in fact, the toughest
TV dollars to be spent could really almost double the
digital market going forward. So that the conclusion
that they’re making– and I think it
impacts our business– is that rather than there
being this fear of disruption versus convergence, they
see convergence as really being the way that the
markets want to go. When in fact, you know
without the gory details of this market, they’re
saying that ultimately it’ll be possible for
advertisers to reach both the digital market
and the traditional market through one channel. And both markets
will tend to grow. So for us, that
means that while– just one last slide before I
transition to our business– the conclusion that
they’re drawing, and I think it’s
one that we accept, is that ultimately you’re
going to see a convergence of traditional digital media. The amount of spin
will continue to grow. It’ll probably grow cohesively
with the digital markets. But for us, it means we’ve
got to be in both places. We can’t just rely on
the traditional market. So when I go back to
where I began, impact, what does this mean
for our business? One more. There we go. For us, we need to
make sure, first of all, we’ve got the content
that people want to watch. For us, that means– when I talk about
player affinity, we’d have players that
people want to watch. There has to be that lure. And for as much as I
don’t understand it, people will watch the
Housewives of X City. I don’t get it. But they want to watch it. There’s compelling
stories there. And not that we would want
to be quite that dramatic. [LAUGHS] But the player affinity is going
to be very important for us. The game itself,
the game production, when you think about
watching a game, either based on giving access
to players, greater access to the players, mic players. I’ve even thought
about wouldn’t it be nice to have a
channel, a channel Z. I almost said channel X, but
channel X didn’t sound right. A channel Z, where you
could get more color, more behind-the-scenes
commentary during the game. That’ll engage the millennials. And that’s really
our new market. People that have
short attention spans, looking for and
competing against all that digital content
that I mentioned before. The pace of the game is
something that we always talk about in our business. We don’t say the length of game. It’s the pace. It needs to be at
a rate where people are engaged and
can stay engaged, versus the long lead times. And then competitive balance
is also very important for us. Bud Selig, our
retired Commissioner, always talks about how every
March, every April, this time of year, every fan
needs to be thinking, my team’s got a chance. There are some franchises– I won’t name them– that may not be the case today. But for the most
part, our fans need to be thinking I’ve got a shot. Distribution is going
to be important to us. And be it in the stadium,
be it for our TV contracts, we always see injuries
in sports networks. And in our case, we’ve got MLB
Advanced Media, MLB Network. They provide us our own
distribution channels to get our content
out to our fans. And then finally, how
do you get paid for it? The monetization piece. And those are things that
we continue to review. I’m going to skip through these. There we go. I’m going to skip
through these slides. Because we’re going
to save some time. What I do want to point
out is that this– when I talk about
distribution, I think we may want
to stop on here., they have a
tremendous franchise in terms of reaching our fans
through live video streams, page views, going to our site. We get over 10 million
page views per day. The amount of traffic we
get on our social media, those are all ways we’re looking
to use our digital platform in order to reach our fans. What’s interesting,
and Bob Bowman, who runs MLB Advanced
Media, shows this slide to his board on a regular basis. The blue line shows
all of our traffic. And you saw the big
numbers on mobile devices versus non-mobile devices. And this is page views and
video on mobile devices. And you can see how
against traditional desktop and other means of
viewing our platform, it is approaching
almost 80% of people are accessing our content
on mobile devices now. And so you think back to that
earlier slide about traditional versus digital. I mean, this is really where
our business is headed. And just briefly, MLB Network,
we’re in 70 million homes now. And so again, distribution
is important to us. And we think we’ve
got the platform to be able to reach
those fans through that. I’m going to skip
these next couple. And this last slide
I want to show you, regarding our business,
the first bar, the red bar, is 2001. The middle, purple bar, is 2006. And the final bar is 2014. And if you can’t read
that, the first one is gate receipts, local
TV, other local media, which is basically
advertising, sponsorships, and then national media. You can see how those
first set of stacked bars, you can see how revenue as a
percentage of total revenue. All right, gate receipts as a
percentage of our total revenue is actually dropping. And the first and third
bar shows the growth in our media revenue,
both local and national. So the media piece is a huge
part of our future, huge part of our revenue future. And again, being able
to access all channels is going to be very,
very important to us. And this one slide,
it was actually in an article The Washington
Post about a week or so ago. You may have seen it. When you think about how
important TV is to us, and I had mentioned
at lunch today, to a group of students, how
much sports media really drives the cable
business, and you know, the rights, the quest to
get rights, sports rights, have driven– not just
professional sports, but also college sports. The reason that the
University of Maryland is now in the Big 10 is
because of a TV contract. The Big 10 wanted
access to the DC market. And they made Maryland a
deal they couldn’t say no to. So sports media,
the sports content is driving media dollars up. But what this points
out though, is that when you look at the
average cost per channel of a cable bill, you know those
sports numbers are basically skyrocketing. And at some point, you’ve
got to ask the question how much longer can that continue? So on the one hand,
we know that TV is a big part of our business. But at the same
time, that’s a trend that concerns not
just us, but the cable business in particular. It also gets back– or as I have put in
my notes here– can you say over the top? You know, at some point,
people start to say, I don’t want to pay
those bills anymore. Or I’d rather basically
go to a digital solution. Perhaps Netflix, or Google
gets involved in our business. We don’t know yet. But that’s one of the things
that may impact this slide. All that brings me to my
current role as Chief Investment Officer. What will I be focusing
on going forward? Well, first of all, there is
some very traditional things that I’ll be doing. We’ve got our pension plan. About a billion-and-a-half
of pension assets. But we also have a
separate investment fund, a strategic investment
fund, that I set up about 10 years ago. We call it Baseball
Endowment LP, or BELP. It was set up initially
as a strike fund. And it’s grown over time. And today we have basically
evolved our asset allocation into areas that include not just
traditional public equities, ETFs, fixed income and we’re
also into absolute return funds, but also to really
expand into private equity and more recently, into
venture, into the venture world. And one reason we did that
was that we have a company– when I mentioned
MLB Advanced Media, they have a separate
affiliate that they’re now calling BAM Tech– that
really is pushing us into the world of
technology in a way that we’ve never seen before. MLB Advanced Media, every
day during the season, streams about 15 of our
games live every day. But they also stream over
22,000 live events each year. There was an announcement
just recently by HBO, that they’ve chosen to use our
platform, MLB Advanced Media, to stream their content. If you ever watch HBO GO on your
mobile device, on your laptop, or on your iPad, that
application will, as of April, be streamed on our platform. HBO made the decision to
dismantle their internal shop in order to use our
backbone to do that. And these are some of the
other clients that currently stream on our platform. If you are a huge
college basketball fan and you’re watching
March Madness, next month you will
be watching, you have been watching for the last
several years, on our platform. If you like any of the
ESPN products, watch ESPN. And I’ve noticed
over the years they went from being able to stream
just five games at a time. Now. You can literally watch
a dozen or more games. They made that switch with
our new TV deal with them a year or so ago,
to our platform, because of the capacity
we have on our network. So those are just
some of the companies that we’re currently
doing business with. WWE just announced an
over-the-top solution, where if you’re a
big wrestling fan– and you don’t have to raise
your hand and embarrass yourself in front of your friends– [LAUGHTER] But if you’re a
big wrestling fan you can watch, for
$10 a month, any WWE content on demand, fixed price,
including the special events. That was all being
done on our platform. And then Sony just announced– it’s not up and running
yet, but they just announced their own
over-the-top solution, where they know that they’ve
got millions of Playstations already in place. They’ve made deals
with, I think, 9 of the top 10 content
providers, CBS, NBC, etc, to where you will be able to
watch either on a, on a wireless device,
and/or on a Playstation, you’ll be able to watch a linear
TV for a fixed monthly amount. Again, a deal that they’re
doing on our platform. So we have, we think, the
components to really play in the digital space. And we see that as being
part of our future. These are some of the
companies that we’re still to currently about doing
some of the same services. So ultimately, the question
is how does sports media and technology intersect? The NFL, they have– I put in “quotations”
some of the things people talk about our
respective businesses. I did the math. If you watch an
NFL game normally, if you assume 10
seconds per play, each team runs 60 plays, 12
minutes of actual ball movement during the course of the game. 12 minutes. How do you fill that space in? Well, I’ve mentioned
just some of the things that they’ve done in order
to increase the entertainment content of what they do. The digital first-down marker. There’s all kinds of
fantasy things out there. If you go to DirecTV,
there’s a Red Zone. Those are ways that
they’ve used technology to really expand their
reach and the entertainment of what they do. The NBA, people talk about how
the game is only really worth watching the last five minutes. Well, how do they address that? They’ve got a very
interesting digital product. If you haven’t watched it
yet, it’s worth seeing. It’s called Sport View, player
tracking, where they literally have like, six cameras
that are shooting at all times, all the players. And it shows movement of
players around the court. So you can literally
start tracking who has the ball, in different
scoring opportunities who was where, who shoots effectively. It’s a very, very high-end
way of using digital content to enhance the viewing
experience of fans. And of course, in
our case, we’ve got expanded instant replay. People will say, it
should have been sooner. But we’re very traditional. And we think we’ve got the right
balance of where we are right now. BAM has had the At Bat app
out now for quite some time. It’s really helped
them in this space. We got a new product coming out
this spring called Statcast. And that product will
allow you to actually track the movement of players on
the field and moving the ball, and to be able to literally
determine, as you watch, the most efficient path
that an outfielder might take to catch a ball. The speed at which he
ran to get the ball. And you can start comparing
players based on their fielding efficiency in that way. So these are just some of
the ways that all of us have used technology to
try and improve what we do. I’m going to skip through this. I started by saying
there’s MLB version 3. Well, there may be
another version coming up, that we think might be
even more digital than what we’ve talked about before. One of the things
that’s taken place– and I mentioned
being involved in BAM Tech. But they’ve also
made investments in at least 10 other
companies, all of whom have provided either content
or technology to help them do what they’re doing today. One example is a company
called Parking Panda. Now, Parking Panda– I mentioned
the investment fund that that I’m managing– we have seven venture funds
that we’re involved in. Well, one of the
venture fund managers called me one day saying, we’ve
got a company in our portfolio that we think should be
doing business with baseball. The company is called Parking
Panda, based out of Baltimore. And they describe
themselves as being the open table for parking. So if you’re going
to a sporting event, you can get on a mobile
device, reserve a parking space in advance, know that
you can get parked when you get to the event. And they thought that since we
sell over 30 million tickets online every year, that
having them on our platform would help them
promote their business. And so we end up cutting
a deal with them. And in return, BAM got some
warrants in the company. And so it was a very interesting
intersection of technology, a company looking to do
business with us, one that we sourced through
our investment fund, that ended up being a win-win. So when I talk about
the phase of what I want to do, that’s really the
place that I’m talking about, Bowman, we’d like
to do more of that. That was somewhat
circumstantial. But we’d like to pursue many
more opportunities like that. And I think the places
that, in particular, we’d like to focus on to
be, fan engagement. Things that happen that can
improve the fan experience in stadium. Another area, player wearables. Either analytics, diagnostic,
and performance measurement. So I mentioned the
NBA and our Statcast. We want to be able to
use more technology to help fans enjoy
different parts of the game in a different way. And then finally, there’s
some operational things within the facility. If there’s a company
out there that has an idea that might
fit into a facility, well, we’ve got 30 of them. And we see 74 million
fans every year. So we’ve got the perfect
way to perhaps try and marry some of what’s happening
in the venture world with what do in our business. And so those are
some of the things that I’m hoping,
as I go forward, we can do more of in order to
really create that next version of what baseball is all about. So in conclusion, my
career has been somewhat circuitous and unplanned. I didn’t necessarily
plan to be in this space, especially having
turned down a chance to go to Wall Street
out of B-school, now working in the
financial world. But it’s been, for
me, quite fulfilling. One of the things that has
made a difference for me is that I, in turning
down Wall Street, made a decision to really
pursue the things that were passionate for me. I also made a decision
to do things that would– and I’ve got three sons now
that are all out of college. But my family was also
very important to me. And so spending time in
a way that I could really raise a family, that was
important to me as well. And so as I look
back over my career and where I’m
standing today, I’m very delighted that I’ve had a
chance to be in one of the most fun jobs ever. But also that I
was able to do it in a way that really fit my
own goals, my own values. And I would encourage
you, in concluding, that as you finish
your time here, you will have access to
and the ability to do almost anything you want to do. The key will be
to just make sure that you embrace that
that’s important to you. And enjoy it along
the way, as I did. So with that, thank
you very much. I’ll pause for questions. [APPLAUSE] Yes. Here. Waiting for the mic here. Thanks. You touched on this a little
bit at the end of your speech. But I guess, more on a personal
note, when you’re looking back, if you could go back and
talk to yourself when you were going out of your
MBA program, what advice would you give to yourself? One of the things
that I remember struggling with–
in fact, my son finished his MBA
about three years ago, and had the exact same
decision about it. Do I want to go work for
a big company right away? Or should I go do something
more entrepreneurial, something smaller? There’s the obvious debate
of well, if I do it now, I’m single. I’ve got more risk to take. I’ve got a lot less to lose. Maybe I ought to do that as
opposed to the former approach. I didn’t mention
this, but I started, right out of business school,
working for a small consulting firm. And I enjoyed it a lot. But it took me a while
to get back to MCI. I had to fight my
way in the door. And you know, so looking back,
I would’ve probably said, you know what? I think, in reflection, for
those who are committed to and have the entrepreneur
spirit to do something small, I think you should do it. But I think there’s
an awful lot of value to building a track record,
building an area of expertise out of the box. That’s probably the only thing
I would have done differently. I don’t regret the path I took. Because I actually learned more
working for a smaller company than a bigger company. But that was the one thing I
remember coming out of school, that I was just so torn. I interviewed a
couple of big firms. I really wanted
something much smaller, and ended up taking
the latter approach. Again, no regrets. But beyond that, I think I’ve
got no regrets in my career path at all. Thanks for being here. Great growth story
in your technology. And I know a lot of students
are interested in technology. So I wonder if you could share,
with us, your hiring needs? [LAUGHTER] Are you looking? [LAUGHTER] I’m just teasing. I mentioned, you
know Rob Manfred taking over as Commissioner
a couple of weeks ago. In addition to my own
change, one of the things that he has really used as his– I guess his theme
going forward– and I should have mentioned this
early on– was he used the term one baseball. And one baseball, as I
interpreted what he is saying, is it comes in two places. Number one, it’s this
internal one baseball focus. And this more directly
addresses your question. I mentioned MLB
Advanced Media being one of our affiliates operating
out of Chelsea, in New York City. MLB Network operates
out of Secaucus. They have been able to grow
and thrive and be successful. Because for a time they ran
as independent entities. In Rob’s one baseball
world, he now wants to bring the
entities together. Not necessarily legally. But Bob Bowman, who
ran and still runs MLB Advanced Media, and Tony
Petitti, who ran MLB Network, and now are working
in Park Avenue Office, directly for Rob, as
a way to kind of pull the organizations together. One specific example of
where it’s made a difference, historically we were
operating in separate silos. And again, BAM
thrived because of it. But if you were Pepsi, and
you were buying a sponsorship deal with our league
office, if you were buying the rights to the Home Run
Derby or something like that, and you also wanted
some digital exposure, you’d have to go separately
to Bob Bowman’s office and buy a separate
digital package. What we are now doing is
we’re taking all three sales organizations and putting
them under one roof, in one location. And so now when you’re
buying baseball content, you’re buying it
across all platforms. And that’s the one
baseball thing. So that as that organization
grows and takes off, that’s one area,
for example, where I think there are going to
be opportunities for us. The same is true in some
of the operational areas. Because Rob, before he
took over in December, he announced the reorganization,
including my position, Tony’s, Bob’s, he
said to the staff, OK, these are the C-level jobs. I’m done. These guys are going to make
the decisions below that level. And so those are
the opportunities that are going to be
coming up over time. So it’s literally just
starting to happen right now. The other one baseball thing
that he mentions though, is the goal of trying to reach
down into the youth market. Our demographics are
growing over time. And we know that
when fans reach– you know, they’re fans and
usually playing the game through their early teens. But at some point, we
tend to lose our fans until they hit their 30s again
and come back with their kids. We want to keep fans engaged,
keep kids engaged in the game. And one of the ways we
think we can do that is to address the youth market. We think that
right now, in order to play beyond Little
League level, age 13, 14, you have to get involved
in travel baseball. You have to get involved
in some of the showcases. Very expensive. Huge burden on parents. We think there are better
ways to really keep competitive baseball going. And we need to play a
bigger role as a league, in doing that. And so that’s the
second, just to make sure everyone understands
what his mission is, that’s the second one baseball
thing that he talks about. Yes, ma’am? I know a lot of
the other leagues have looked to
expand nationally. So NFL games and
NBA games in London. And with baseball being
America’s pastime, are there any plans
to expand globally? Where have you seen
it grow thus far? And what do you see
looking forward? We don’t see expansion
taking place anytime soon. Although I was asked
the question last week. I was in Chicago, and someone
asked me the question. And I thought, I think
it’ll be at least– I say– a 10-year window. That’s my own estimate. Could we do something
in Cuba at some point? Yes. I think the political
infrastructure and the physical
infrastructure would have to change dramatically. But you know, from
my perch, I don’t know that going beyond
that is realistic. But you know, it’s such
a hotbed for baseball. It’s not hard to
envision that might be a place where you
could see there being a franchise at some point. And whether it’s a relocated
franchise, no one knows. But we do play internationally,
much the way the NFL does. We opened a season
last year in Australia. We opened the season
back in 2008, in Tokyo, and did exhibition games during
that same year, in Beijing. So we view the
international market as being important to us. Growing the game
internationally helps us expand that TV footprint. More eyeballs and
again, that kind of feeds the kid, if you will. But I don’t know that we
see expansion of a franchise internationally
in the near term. Yeah, I was wondering
if you could maybe talk a little bit about passions
over the course of your career? Because when we were
interviewing here, you’re supposed to
love the industry and then love the
company so much. And here you are, not even
caring about baseball. [LAUGHTER] [INAUDIBLE] So if you could just
talk about like, what you were passionate
about, and how that converted into success at the MLB. Well, actually, what
I was passionate about was finance and accounting. And I don’t know how many
people the Marlins interviewed before they hired me. I’m sure I was probably
the only candidate that did not talk about baseball
the entire interview. On the other hand, I
talked very passionately about building
that front office. So that’s always been my
passion, the world of finance. And I’ve worked in
telecommunications. I’ve worked in transportation. I’ve worked in travel trade. I’ve worked in sports. And when people have
asked me, especially as CFO, what’s different
about my job as CFO? I say, not much
other than the fact that in baseball, it’s like
doing a job in a fishbowl. But beyond that, the day-to-day
stuff is still the same. And that was a big
part of my passion. Now, as it turns out,
with this new role, having been CFO for
almost two dozen years, I’m like, been there, done that. And my new passion is, in
fact, getting involved– as I tried to do a couple
of times in my career– in the world of
entrepreneurship and venture. And that is now my passion,
building those bridges. And so I think the
theme is still valid. Question back here. Yeah, so transitioning
from CFO to CIO, just to build on what
you were just saying, there are many similarities. But there’s also many
more differences. Can you talk about a little
bit of the skill sets that are transferable, and
some of the major challenges that you’ve had as CIO? Well, I spoke to an
investment class this morning. And I began by
pointing out to them, you know a lot more
about this than I do. As CFO, I was responsible
for a whole series of a much broader range of
financial issues, everything from treasury issues, it’s
probably at about three billion of financings for the
League and different teams, et cetera; financial reporting
issues, compliance issues, getting involved
in new ownership, applications, getting
involved in the bankruptcy of the Rangers and the Dodgers. I mean, there’s a whole
much broader range of things that I had to become
a jack of all trades. A jack of all trades and a
master of all trades, as well. In this role, it’s a
much more narrow focus. And I’m fortunate enough to
have people working with me and inform me. This morning I said, I didn’t
take an investment class like one I sat in on today. So I won’t be talking about
sharp ratios and things like that. But that will be the focus. And I’ve always viewed myself
as more of a strategic CFO. And I think I will
be a strategic CIO. I’ve got some
investment advisers that work with me that are
much smarter than I am. And I’m more of a
gatekeeper for two billion of the club’s assets. And we’ll basically,
at this level, be responsible for basically
bringing in the right resources to safeguard those funds and
handle them in the right sort fiduciary way. But you know, I
couldn’t sit here and start exchanging
investment grass with anybody who took
the course this morning. [LAUGHS] Yes? Once again, thanks for coming
and sharing your time with us. I suppose you were very involved
with the decision in 2007, for Major League Baseball
to forego 501(c)(3) status. Could you talk a
little bit about that, and what you think the role
of a sports organization is, and if they should
be tax exempt? I was not only involved. It was my decision to do it,
And for better or for worse. And it’s actually not
that complex an answer. You When I talked about,
in that one matrix, you know the baseball
version 1, 2, and 3, well, baseball pre free
agency was kind of a mom-and-pop operation. And it was, for the most
part, a hobby of sorts. The League office,
most of the power rested in the economics
were with the teams locally, so that the
League office was basically like an association,
a trade association. And in fact, this was the
legal status is technically 501(c)(6). We were, are really technically
still are, a trade association. So that the status
to your specific question for most
leagues, be it the NCAA or any other association,
tax-exempt status is basically based on
the fact that there are no revenue-generating
activities or for-profit activities
at that level. All of the League offices, for
the most part, are conduits. They basically take TV money in. They pay their
expenses, and the rest goes out, just like a trade
association that charges dues. And the rest goes,
you know, you only charge enough to
cover your expenses. So that as a not-for-profit,
I mean, that form makes sense. In our case, the simple
issue was because of other– I’ll use the term
political pressures around 501(c)(3)’s and other
not-for-profits, the reporting
requirements, filing a 990, they became much more rigorous. I remember as I got
involved in the process, they were not only asking for
very, very detailed information about board members,
but they were looking like one generation off. If you were on a
board, in other words, if you are on an entity that
was related to baseball, they wanted to pull you in and
make you start reporting stuff. Which we did. But there was a proposal out. I’m not even sure
whatever happened. Because, again, we opted out. But there was a proposal to
start including home addresses and phone numbers for the board
members, in this 990 filing. And I think I think it was an
overreaction to other abuses taking place, in other places. But we realized that for
the breach of privacy that we were going to be faced
with, and for the intrusiveness of the reporting for
people who had a pretty inactive role as a board member
of a charitable operation, not just league officer, but
other affiliated charities. If you were another
affiliate charity, you still got pulled into the
reporting at the league level. We realized that there
is no benefit to us filing a not-for-profit return. There’s no profit
to quote, “escape.” We weren’t making
any money either way. And so we thought the
filing burden was getting to be too onerous for us. And we simply chose
to file the 1120. And we paid a nominal
amount of taxes, which we thought was worth it. And in fact, what
was interesting in the whole
process, was that we had a bunch of lawyers and tax
accountants working with us. How do we basically
rescind our c6 status, our not-for-profit status? There were no regulations
that tell you how to do it. They say that if you screw
up, we’ll take it from you. But there was no way to actually
say, we don’t want it anymore. And so what we did, simply,
rather than filing a 990, we filed 1120. And so we are
technically still a c6. We simply said, we’ll
just file a tax return. Because again, there was
no financial advantage. And I don’t know
the NFL’s details. But I would tell
you that the notion that they are
sheltering profits, it’s a fallacious assumption. I’m not sure you have
to answer this question. But– [LAUGHTER] Thank you. Yeah. So I mean, through your tenure
with Major League Baseball, there’s been a lot of coverage
on performance-enhancing drugs. And from a pure
business standpoint, I know from a viewer, when Sammy
and Mark McGwire were smashing home runs, it was
pretty exciting and probably paid
attention more. So just curious your
thoughts on that process, and what was it like
going through that? And how do you
think about it now? I was with the Florida
Marlins in 1998. And I remember a
couple of things. I mentioned the strike in ’94. Our franchise started in 1993. We drew three million fans. August of 1994, we go on strike. Unlike other more
established franchises, they had fan bases waiting
for them to come back. We didn’t have that
same privilege. And so we suffered
in ’95 and in ’96, trying to get fans to come back. We won the World Series in
’97, which helped us a bit. But then we dumped
all of our players in ’98, which didn’t
help very much at all. Well, I remember in
’98, in the midst of being in a place where our
fans didn’t like us very much. When the Cardinals came to
town, you couldn’t get a space during batting practice. Because Mark McGwire’s
just hitting shots into the upper tier,
upper deck, and I remember vividly talking
with our colleagues, just marveling at
what he was doing. But the dialogue I
can tell you that I heard, the buzz amongst the
media was the ball was juiced. That was the buzz. Everyone thought
the ball was juiced. And there were all
kinds of studies being done to make sure
they weren’t putting a different cork in the ball. And that was the suspicion. For all the media
types that claim that owners were whispering
oh my gosh, isn’t this great? You know, that’s silly. Now having said that,
I’ve seen quotes from baseball people that
had their own suspicions. Because the one thing
you need to appreciate is that in the
world of baseball, the players’ clubhouse,
that’s their private space. And so I don’t think in the
10 years I was with the team I even went to the
clubhouse 10 times during the course of a game. Probably less than that. And so you don’t hear what’s
going on in the clubhouse. The baseball people might. And I’ve seen a story or two
where a baseball executive had some suspicions
about a player, or may have heard something. But we weren’t
testing back then. And so it was
simply a suspicion. And so I know what I was seeing
and hearing during the time that they were basically
making a big deal for us, even, in our ballpark. But no one, for
a minute, thought it was related to anything
other than suspicions that the ball was juiced. And you may recall, if you
were following baseball, there was a story about a
reporter seeing some androstene in McGwire’s locker. And so that started some
buzz about what he was doing. But people thought that
was what was going on. Well, that wasn’t really– according to some people– what was causing him to be so
prolific in hitting home runs. But that was the only whisper
of any performance-enhancing substances, was this stuff
that you could buy at a GNC. That was the other
part of the story. It was over-the-counter stuff. So even though they found
it, it wasn’t something that people were, at least back
then, were saying was an issue. Now, today if you
take something that is on our banned list from
GNC, it doesn’t matter. You get fined and
suspended anyway. But back then it
wasn’t something that people, even knowing
about it, was going to say, oh my gosh, that’s a bad thing. No other questions? Yeah. Got one down here. Time. I’m not too– how
much time do I have? [LAUGHS] Please join me in thanking
Jonathan for his time today. Oh, out of time. OK, I’m all out of time. [LAUGHS] We appreciate it as well. Thank you very much. Thank you for coming. Thank you for being here today. Thanks for coming. Thank you. [APPLAUSE] Thank you very much.

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