Vertical integration in sports

Bachelor Thesis Organization & Strategy, 2010 Paul Tips S469657 Eric Dooms 7.914 words

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Table of Contents

Chapter 1 Introdution ................................................................................................. 3

1.1 Introduction...................................................................................................... 3

1.2 Problem Indication ........................................................................................... 3

1.3 Problem statement .......................................................................................... 3

1.4 Research Questions ........................................................................................ 4

1.5 Research Design and Data Collection ............................................................. 5

1.6 Structure of the thesis ...................................................................................... 5

2. Competitive advantage through vertical integration ............................................... 6

2.1 Introduction...................................................................................................... 6

2.2 Reasons .......................................................................................................... 6

2.3 Transaction costs ............................................................................................ 6

2.4 Competitive advantage .................................................................................... 8

2.5 Conclusion....................................................................................................... 9

3. Vertical integration and competitive advantage in sports ..................................... 10

3.1 Introduction.................................................................................................... 10

3.2 The sport business ........................................................................................ 10

3.3 Owner behaviour ........................................................................................... 11

3.4 Winnig as competitive advantage .................................................................. 11

3.5 Business results as competitive advantage ................................................... 12

3.6 Conclusion..................................................................................................... 15

4. Consequences of vertical integration on the competitive balance of MLB ............ 16

4.1 Introduction.................................................................................................... 16

4.2 Winning percentages 2000 – 2009 ................................................................ 17

4.3 Postseason 2000 – 2009 ............................................................................... 18

4.4 Championships 2000 – 2009 ......................................................................... 19

4.5 Historic perspective ....................................................................................... 20

4.6 Financial performance ................................................................................... 22

4.7 Conclusions ................................................................................................... 23

Chapter 5 Conclusion, discussion and recommendations ....................................... 24

5.1 Introduction.................................................................................................... 24

5.2 Conclusion..................................................................................................... 24

5.3 Discussion ..................................................................................................... 24

5.4 Recommendations ......................................................................................... 25

References .............................................................................................................. 26

Appendix A Major League Baseball Division ........................................................... 30

Appendix B Wins / losses 2000 – 2009 ................................................................... 31

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Appendix C SPSS Output........................................................................................ 32

Appendix D Major League Baseball playoff format .................................................. 33

Appendix E Postseason appearances ..................................................................... 34

Appendix F Historic overview .................................................................................. 35

Appendix G Franchise values .................................................................................. 36

Appendix H Profit / loss values ................................................................................ 37

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Chapter 1 Introdution

1.1 Introduction

In this first chapter the problem that this thesis is going to address is

introduced and the questions this thesis will try to answer to come to a conclusion

and suggestions about how the problem can be handled are clarified.

1.2 Problem Indication

Apart from many publicly listed companies the trend of multiple business and

multinational operations is also emerging in other kinds of organizations. While we

have seen vertical integration in the industrial business world since the beginning of

the twentieth century (Coase, 1937) this development took long to gain ground in the

sports world. The first good example of this development are the 1980s the Major

League Baseballs (MLB) Chicago Cubs which their owners the Tribune Corporation

used to extend the national market for the Tribunes World's Greatest Network

(WGN). The trend of vertical integration really took a flight in the mid-1990s though

when News Corp. bought the Los Angeles Dodgers, Walt Disney purchased the

Anaheim Angels and the Mighty Ducks of Anaheim, and Time Warner took over the

Atlanta Braves, Hawks and Trashers (Bellamy & Walker, 2005). Then, starting in

2002 Yankees Global Enterprises LLC (YGE) started operating the Major League

Baseball (MLB) team New York Yankees and its Minor League affiliates but also the

broadcasts of the team‟s games through its Yes Network. Ever since these first

starters this tradition has been followed by numerous organizations, both clubs and

governing bodies, in both the United States and Europe (Hoehn & Lancefield, 2003).

As shown this trend is only a very recent one, not more than 30 years old. It is

strange that it took sports organizations so long to get involved in vertical integration,

but more important to me is why they are doing it now. This thesis will try to find out

whether or not vertical integration has lead to a competitive advantage for sport

teams involved.

1.3 Problem statement

Can sustainable competitive advantage be achieved through vertical integration in

the sports industry?

In the industrial world one of the reasons to get involved in vertical integration is to

gain a sustainable competitive advantage over competitors. Extensive research has

been done into this (Stucky& White, 1993). Not so much attention has been paid to

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vertical integration in the sports world though. I will try to find out how a sustainable

competitive advantage can be gained by sports organizations by vertically

integrating.

(A firm can be described as vertically integrated if it encompasses two single-output

production processes in which either (1) the entire output of the "upstream" process

is employed as part or all of the quantity of one intermediate input into the

"downstream" process, or (2) the entire quantity of one intermediate input into the

"downstream" process is obtained from part or all of the output of the "upstream"

process (Perry, 1990).)

1.4 Research Questions

How can sustainable competitive advantage be achieved through vertical

integration?

To research if competitive advantage can be achieved through vertical integration we

first need to research how competitive advantage can be achieved using vertical

integration. Because there is not a lot of scientific study on the way this is done in the

sports world I will study the industrial business world, look at how it‟s done there and

then try to link that to the world of sports.

How can competitive advantage be measured in sports?

After I have established that vertical integration can lead to a competitive advantage

it is important to know how competitive advantage can be measured in sports. Apart

from financial results there are of course also the results, winning or losing, on the

playing field and probably these two results are related. How do stakeholders look at

these advantages and which do they find most important.

What are the consequences of vertical integration on the competitive balance

in MLB?

After we have established how competitive advantage can be measured in sports I

will single out Major League Baseball and try to establish whether or not baseball

organisations that have gotten vertically integrated have gained a competitive edge

over their competitors that have not moved in that direction.

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1.5 Research Design and Data Collection

This research will be an exploratory research. The method that will be used is

a literature review but financial data and results of sports organizations will also be

reviewed. The focus will be on the Major League Baseball, with literature in the field

of sport management, strategic management and organizational behaviour being

studied.

This study will primarily use secondary data sources. These secondary data

will be gathered by using the services of the library of the University of Tilburg and

the University of Utrecht, in particular the search engines; ABI-inform, the NCC and

JSTOR. Validation whether or not an article is reliable can be done by checking if the

source is a reliable business journal. A list of reliable business journals is presented

in the course „business research‟. A problem with this can be that sports

management has only recently attracted vast scientific interest and its journals have

not really made it to the lists of top journals yet. The first research question of this

thesis gives me the change though to first study established articles on vertical

integration and competitive advantage which I can than link to the sports world.

To answer the third research question I also looked at sites that keep

baseball statistics such as baseball-reference.com and at Forbes‟ valuation of MLB

franchises.

1.6 Structure of the thesis

This thesis will consist of five chapters with this one being the first. Chapter 2 till 4 will

subsequently answer one of the research questions. In chapter 5 than the

conclusions and recommendations based on the findings in the previous chapters will

be given.

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2. Competitive advantage through vertical integration

2.1 Introduction

Before I take a look at how competitive advantage can be achieved through

vertical integration we first need to define these two concepts.

According to Porter (1985) a firm's relative position within its industry determines

whether a firm's profitability is above or below the industry average. The fundamental

basis of above average profitability in the long run is sustainable competitive

advantage.

2.2 Reasons

Vertical integration can be defined as integrating two or more adjacent economic

stages under its ownership control. The outputs of earlier stages are then used all, or

in part as inputs for subsequent stages (Perry, 1978). The existence of vertically

integrated enterprises is evident throughout history and although it can generate

significant administrative and strategic costs through greater complexity and

commitment escalation (Mahoney, 1992) it continues to be a popular (Pitta, 1993)

and important strategy (Stuckey & White, 1993). According to Mahoney (1992)

reasons to vertically integrate can be divided into four different motives. These

motives are transaction costs incentives, strategic rationales, uncertainties regarding

price, and incentives related to output and/or input conditions. However, according to

Philips and Mahoney (1985) when we abstract transaction costs from these four

reasons there are no real motives for vertical integration left and it has no more

advantages then vertical contracting (i.e. exclusive dealings, resale price

maintenance, exclusive territories, etc.). In other words vertical integration for other

reasons then the transaction cost incentive will not lead to a clear competitive

advantage. Therefore, in this chapter we will focus on the transaction cost reason to

engage in vertical integration.

2.3 Transaction costs

The term transaction cost has caused much friction in the economic lexicon. Its

ambiguity comes from the problem that there are two literatures simultaneously

claiming ownership over the term (Allen, 1991). While sceptics claim that currently

the term “transaction costs” can include any cost that is convenient and elusive

enough to avoid critical examination (Niehans, 1987) advocates have compare the

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words and its meaning to economic important words such as marginalism and

substitution (Cheung, 1983). I will use the definition first stated by Arrow (1969). He

defines transaction costs as „the costs of organizing the economic system‟. Following

Coase, transactions are sorted according to whether they take place within a firm or

on the open market. Market alternatives become dangerous when exchanges that

are repeated regularly involve transaction-specific capital and information processing.

Within firm transactions then provide a suitable alternative. Ownership of physical

capital limits the possibilities of opportunism that might be possible when capital is

owned by different owners. The structural entity of the firm also provides a basis for

more efficient information transfers. In terms of vertically related production

processes, the firm will integrate when the costs of transacting over markets

outweighs internal costs of management (Levy, 1985).

The transaction costs theory of vertical integration thus leads to specific

competitive advantage. These five, amongst others, are identified by Mahoney

(1992):

1. Profit: The profit incentive is probably the clearest source of competitive

advantage. Due to the fact that all profits falls under one company there are no

claims on them by other stakeholders so there is no need to negotiate over how to

divide these profits.

2. Coordination and control: A vertically integrated firm has better control of

opportunistic behaviour due to the authority relationship within the firm (Dow, 1987).

Divisional managers can more easily be required to cooperate with the general

behaviour of the company because they can be steered by promotions or financial

benefits. It usually is also more efficient to settle disputes within a company than

through court with a contractual stakeholder.

3. Audit and Resource allocation: According to Williamson (1975) the auditing powers

of the firm are superior to the auditing capabilities of contracting parties. Although this

is disputed by Grossman and Hart (1986) research done by Chandler (1977) into the

auditing improvements of merged railroad firms compared to railroad cartels

empirically proves Williamsons claim is very likely to be true. A firm has the legal

right to audit its own divisions but the right to audit outside contractors always has to

be contractual arranged which involves transaction costs (Mahoney, 1992). Also the

superior information on which a firm can base resource allocation to their divisions

prevents these divisions from strategically using their information and thus the risk of

detriment of profit through misinformation is eliminated (Crocker, 1983).

4. Communication: The standardization of language in between divisions of an

integrated company increases communication efficiencies and provides stability in

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operations. While these advantages could be obtained through recurrent contracting

in that situation there is always the risk of opportunistic behaviour (Malmgren, 1961).

Firms are arguably better than markets in communicating because the incentives for

opportunism are reduced through much better auditing opportunities (also see point

3). Integrated firms thus have an information processing advantage over its non

integrated competitors and that advantage is even larger because it complements its

superior auditing capabilities (Sandler and Cauley, 1980).

5. Tax advantages: Coase (1937) was the first to link vertical integration to the

avoidance of sales taxes with respect to arms length contracting. More recently Bolch

and Damon (1978) found that petroleum firms in the United States found it profitable

to increase the price of crude oil relative to the price of final products in order to shift

as much of their reported earnings as possible to the raw material extraction stage,

which enjoys tax preferences associated with resource depletion. Similar results

were found by Scherer and Ross (1990) in their study of the copper, aluminium and

steel industries.

2.4 Competitive advantage

In this chapter, and also in the introduction the words competitive advantage have

been mentioned multiple times. But what exactly does competitive advantage entail?

According to Barney (2000) a competitive advantage is a value creating strategy, not

simultaneously being implemented by any current or potential competitors.

A sustainable competitive advantage is the same as the above mentioned definition

with the addition that these competitors are unable to duplicate the benefits of this

strategy. There are however some points to take into account considering this

definition. That a competitive advantage is sustained does not imply that it will "last

forever." It only suggests that it will not be competed away through the duplication

efforts of other firms. Unanticipated changes in the economic structure of an industry

may make what was, at one lime, a source of sustained competitive advantage, no

longer valuable for a firm, and thus not a source of any competitive advantage.

These structural revolutions in an industry culled "Schumpeterian Shocks" by for

example Rumelt & Wensley (1981), redefine which of a firm's attributes are

resources and which are not. Some of these resources, in turn, may be sources of

sustained competitive advantage in the newly defined industry structure (Barney,

1986). However, what were resources in a previous industry selling may be

weaknesses, or simply irrelevant, in a new industry setting. A firm enjoying a

sustained competitive advantage may experience these major shifts in the structure

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of competition, and may see its competitive advantages nullified by such changes.

However, a sustained competitive advantage is not nullified through competing firms

duplicating the benefits of that competitive advantage.

This definition, combined with the resource based view, which assumes that firms

within an industry can be heterogeneous with respect to the strategic resources they

control and that resources may not be perfectly mobile within an industry can be

translated to the baseball strategy. This topic will be discussed in more detail in

chapter 3

2.5 Conclusion

According to D‟Aveni and Ravenscraft (1994) vertical integration results in

economies of integration, regardless of industry effects and economies of scope and

scale. Furthermore they find that both forward and backward integration contribute to

greatly reduced general and administrative expenditures. This suggests that that

integration does not increase the costs of hierarchy despite the need for greater

internal coordination with upstream and/or downstream lines of business. D‟Aveni

and Ravenscraft also found that the cost savings from general and administrative

expenses are most clearly linked to increased profitability and thus I think I can

conclude that vertical integration can lead to cost reduction and in that way can lead

to a sustainable competitive advantage.

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3. Vertical integration and competitive advantage in sports

3.1 Introduction

This chapter of the thesis will discuss how competitive advantage can be

measured in sports. In the previous chapter the concepts of competitive advantage

and vertical integration have been explained and now it is time to translate this into

sports.

3.2 The sport business

Unlike businesses in other industries professional sport teams in any given

league not only compete against each other but also have to cooperate with these

same competitors to keep their right of existence. As noted by Neale (1964) and El-

Hodiri and Quirk (1974), the elimination of competition in professional sports

effectively eliminates the industry. Suppose the New York Yankees used their wealth

to buy up not only all the good players but also all of the teams in the American

League: no games, no gate receipts, no New York Yankees. The success of a

league is, at least to some extent, affected by the degree of uncertainty of outcome of

its contests and its seasonal competitions, or, in other words, by the degree of

balance among its teams. (Zimbalist, 2003). Fans tend to prefer contests between

equally matched sporting competitors. Again it is a peculiarity of the professional

team sports industry that, unlike other industries, increased monopolisation tends to

reduce profitability. This is variously known as the Louis-Schmelling or New York

Yankees paradox (Neale, 1964). Just as heavyweight boxing champions such as Joe

Louis need credible contenders to maximise their earnings, so too with top teams. As

is oft quoted, after a long period of dominating the American League in the 1950s,

the New York Yankees suffered a falloff in their gate attendances, only for this

decline to be reversed when they lost the championship. Fans lose interest in

contests that are a foregone conclusion.

Professional sports leagues also are different from „regular‟ industries in the

degree of public exposure they receive. Daily the results of games are reported

extensively by newspapers, radio, television, and on the internet. These results are

then discussed by millions of fans, which is a lot different from the quarterly numbers

of reported by companies in other industries.

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3.3 Owner behaviour

The question is of course whether or not these unique features of sports leagues

lead the owners of these businesses to behave differently from owners of other

businesses. In other words to they seek other competitive advantages then owners of

businesses in other industries. In 1973 a sportswriter for the New York Times

Magazine, Leonard Koppett suggested they do:

“Club owners are not ordinary businessmen. To begin with, profit in itself is not

the owner‟s primary motive. Any man with the resources to acquire a major league

team can find ways to make better dollar-for-dollar investments. His payoff is in terms

of social prestige… A man who runs a $100m-a-year business is usually anonymous

to the general public; a man who owns even a piece of a ball club that grosses $5m a

year is a celebrity… This does not mean, of course, that ball clubs don‟t seek

profits… but the driving force is to be identified with a popular and successful team…

and that motivation leads to important variations from „normal‟ business behaviour.”

Economists agree with this perspective. Peter Sloane (1971) states in his

article on English soccer that ownership of a soccer team had more to do with

maximizing utility than with maximizing profit. In 1999 however Kesenne and

Jeanrenaud concluded that one of the most important differences between sports

clubs in the USA and Europe was that American clubs are business-type companies

seeking to make profits whereas the only aim of most European clubs so far is to be

successful on the field. As this thesis is focusing in Major League Baseball, an

American Sport, the rest of this chapter will focus on the view at competitive

advantage of American team owners.

3.4 Winnig as competitive advantage

In interviews owners of sports organisations usually do try to emphasise that

they are motivated strictly and mostly by civic pride and have non-selfish motives

while operating a sports team. As Joe Maloof, owner of the National Basketball

Associations Sacramento Kings put it in an interview in 2003: „We have one goal in

mind and that is to win a title. We‟re not going to rest until we have that for the city of

Sacramento and for our franchise. We‟ve never had a title and that‟s what we need to

get‟. Because what people say in interviews and how they really behave sometimes

has some discrepancies there have been economists that have studied empirical

data to find whether they tell the truth and are really utility-maximizers or also trying

to maximise their profits. The difference between these two is that if club owners are

indeed profit maximizers they would invest in their teams success until the expected

marginal revenue from an additional win is equal to the marginal cost, while utility

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maximizers might invest beyond this point (Zimbalist, 2005). This implies that utility

maximising will put individual success above the success of the league and that

owners will spend as aggressively on players as possible even if this leads to the

creation of dynasties, teams winning championship after championship, possibly

leading to the before mentioned Louis-Schmelling or New York Yankees paradox.

Rottenberg (1956) suggests that a league with profit maximizing owners will lead to

greater competitive balance, El Hodiri and Quirk (1971) however argue that there will

always be differences based on market size and revenue potential of teams. There

findings are confirmed in a study that concludes that in the period between 1995 and

1999 profit maximizing teams in Major League Baseballs big markets pay free

agents, players without a contract, six times more than teams small markets.

There is however one problem with dividing owners in profit or utility

maximising and that is that one cannot exist without the other. If we assume that

owners maximize profit they are supposed to maximize earnings from fan attendance

and other endorsement deals. Fan attendance however is largely based on the

relative quality of the owners team (Vrooman, 1995). This means that he has to make

sure that he fields a competitive team, in other words, a team that wins a lot of

matches and has a yearly chance to compete for a championship. Thus, he also has

to be some kind of a utility maximizer to be able to be a profit maximizer. This also

goes the other way around; if the owner wants to win as many games as possible

this means he has to invest in the best, and thus most expensive, players available.

To be able to do that he has to make a profit otherwise he will be unable to do so and

thus unable to compete.

3.5 Business results as competitive advantage

According to Zimbalist (2005) owners take their returns on sports franchises

in a number of different ways which I will discuss below. He suggests that owners

see their sport franchise as some kind of consumption good and therefore try to

maximize their total return, both consumption and investment, not just their financial

profit.

Owners, for example use their sport franchises to develop new business

relationships and gain influence, thereby benefiting the owners other investments.

When Anheuser-Busch bought the Saint Louis Cardinals in 1953 August Busch Jr.

stated that “development of the Cardinals will have untold value for our company (…)

This is one of the finest moves in the history of Anheuser-Busch” (Bellamy Jr. &

Walker, 2001). Busch proofed to be right because only four years after the purchase

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of the Cardinals Anheuser-Busch became the largest producer of beer in the United

States.

Another way owners can gain money through their sport franchise is through

the substantial capital gains sport franchises seem to generate. Using Forbes‟

valuation of baseball franchises I calculated that the average annual rate of

appreciation for franchises in Major League Baseball in the period between 2002 and

2009 was 9.79 percent. This puts it well above the return on the ownership of

common stock in this period which equals a depreciation of 2.59 percent for the

Standard & Poor‟s 500 Index through June 5th, 2009. These are however, all long

term returns and will not show up on the income statement of the sport franchise.

There are also a lot of ways for owners of franchise to obtain short term

gains. They might for example lend money to a partnership and then have that

partnership buy the team. The owner then in return receives interest payments over

the loan. An advantage of this is that these interest payments enter the team‟s

income statement as costs, lowering its book profits and thereby the amount of taxes

it has to pay. It is also common for owners to receive financial returns by benefiting

from salary, consulting fees and by hiring family members (Zimbalist, 2003). The

practice that is becoming more and more custom these days, and that is most

interesting for this thesis is how owners boost the performance of other companies in

their business empire through making favoured deals with the sport franchises they

own. When the owner makes a deal with own of his own companies he can off

course charge whatever price he wants, the money goes from one pocket into

another. In itself this does off course not give any gains because money put in the

sport franchise comes back through the other companies but there is no real money

made. Using an example shown in the book The Bottom Line by Andrew Zimbalist

this thesis will try to show you a couple of ways owners can try to use to make money

through this inter-business cooperation.

In 2001 the Chicago Cubs reported an income from local TV, radio and cable

fees of 23.6 million dollars. The other Chicago team, the White Sox, reported

revenue of 30.1 million dollars. This in itself does not seem strange but it is if you

take into account that the Cubs are by far the most popular team in the greater

Chicago area. This is clearly shown by the average viewer rating they received

during the 2001 season. The Cubs ratings were 3.8 and the White Sox‟s only 1.9.

This means that on average two times as many people watched a Cubs game as

compared to a White Sox game. In general this would off course lead to higher

incomes from commercials and fees paid by broadcasters (Gabszewicz et al, 2004).

These figures make more sense though if you know that the Cubs are owned by the

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Tribune Cooperation, which also owns WGN, the company that broadcasts most of

the Cubs‟ games. According to website Broadcast & Cable the real value of the

Cubs‟ local media fees if sold on the open market would have been some 59 million

dollars. The Tribune Company is thus, transferring revenue away from the Cubs by

using so called transfer pricing. There is nothing illegal to this and it is often used in

the sports business, but why?

The first reason is that in a lot of professional American sports, such as

baseball, basketball and American football there is a so called revenue sharing

system. This system issues a tax on the all local media earnings a team receives.

This is done to compensate small market teams for the revenues they miss

compared to large market teams. It would take to many time to go to deep into this

scheme of revenue sharing but to give an impression, cities such as New York,

Chicago and Los Angeles are considered large markets, where as cities such as

Kansas City, Cincinnati and Milwaukee are considered small markets. Every league

has its own system to compensate these small market teams but in Major League

Baseball for example the large market teams, in 2001, had to pay 20 percent of their

reported income and in 2008 this percentage was up to 40 percent. For every dollar

not reported on the Cubs‟ income statement the owner thus saves anywhere up to 40

cents because broadcasting companies, off course, do not have to pay luxury tax to

Major League Baseball.

The second reason is that players in American sports leagues play under a

collective-bargaining agreement (CBA). Every so many years this collective

bargaining agreement has to be renegotiated and naturally owners want to keep

salaries as low as possible where players unions are off course always trying to get

the best deal for there players. By showing that there teams are hardly making any

profits owners try to persuade the unions to lower their demands. Whether or not this

works remains to be seen but when negotiating a new CBA in 2006 MLB reported

only an operating income of on average 12 million dollars per team, with large market

teams such as the New York Yankees and Chicago Cubs reporting a combined loss

of 42.1 million dollars.

Furthermore keeping profits of sporting franchise low might be useful when

baseball teams seek public funding when to improve their facilities as the New York

Yankees and the New York Mets recently did to build their new Yankee Stadium and

Citi Field ball parks and it also helps to justify higher ticket and concession prices.

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3.6 Conclusion

Competitive advantage in sports is thus not only calculated in wins but at

least as important is economic gain Owners thus treat their sports team as a part of

their entire investment portfolio, which implies that competitive balance may be more

elusive to sporting leagues than they want because it is not the main motive of

owners. When the New York Yankees signed Alex Rodriguez to a 10-year 300

million deal in 2008 they were thinking not only about what he might bring to the

Yankees but also about his potential to attract interest for their Yes Network.

Zimbalist (2004) argues that team synergies with related business interest may

exacerbate inequalities and what might appear as utility-maximizing behaviour by

owners really is portfolio-wide profit-maximizing behaviour. In other words, owners

may find that the best way to profit globally is to win maximize at the team level. In

the next chapter this thesis will take a look at whether or not this is true for baseball

teams that have vertically integrated with their broadcasting network.

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4. Consequences of vertical integration on the competitive

balance of MLB

4.1 Introduction

In this chapter this thesis will discuss whether or not vertical integration has affected

the competitive balance in Major League Baseball over the last ten years. This period

has been chosen because during that time vertical integration with broadcasting

companies has taken a real flight. One important distinction that is made here is that

baseball organisations and broadcasting companies are considered vertically

integrated here when they are owner of their broadcasting network or are in the same

holding. We do not consider franchises that have exclusive broadcasting deals with a

regional sports network to be vertically integrated.

First this thesis will give some more details about the set up of Major League

Baseball. The Major Leagues consist of 30 teams divided in two leagues, the

National League and the American League. The National League consists of 16

teams while the American League hosts the remaining 14 teams. Both leagues are

divided in three divisions which are aligned through geographical position in the

country. Both leagues have an Eastern, Central and Western division. More details

can be found in appendix A. Within this environment there are seven franchises that

can be considered vertically integrated when using the before mentioned definition.

These franchises are:

The Boston Red Sox, which broadcasts it games through the New England Sports

Network (NESN) started in 1984, but integrated, with the Red Sox since 1999. Both

are owned by New England Sports Ventures LLC. Another team from a big city that

is vertically integrated are the New York Yankees, owned, just like their since 2000

operating broadcasting partner the Yes Network, by Yankee Global Enterprise LLC

also from New York are the New York Mets, who own their own SportsNet New York

network since 2006. Another vertically integrated team from the East coast are the

Philadelphia Phillies, who own a stake in their network Comcast SportsNet

Philadelphia, founded in 1997. The Kansas City Royals, who own a majority stake in

their broadcasting partner the Royals Sports Television Network which started in

2003 and ceased to exist in 2008 are a team from a smaller city just like the

Cleveland Indians, which are owned by the Dolan family, who also own the

SportsTime Ohio network that broadcasts the Indians games. The network started

broadcasting in 2006. The last team on the list are the Baltimore Orioles who own a

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majority stake of 90 percent in the Mid-Atlantic Sports Network that was launched in

2005. (Walker & Bellamy, 2008)

4.2 Winning percentages 2000 – 2009

As established in the previous chapter the competitive advantage of a franchise is

not only measured in its competitive results but also in its financial results.

First the competitive results will be discussed. To do that an analysis will be made of

the teams‟ winning percentages, postseason appearances and championships over

the past ten years, and these results will be compared with the league average and

also with the results of the seven before mentioned teams in the last two decades of

the twentieth century. The data sheets on which these charts are based can be found

in appendices B.

With data obtained from www.baseball-references.com we can determine the

winning percentages over the past ten years for the 7 franchises. Winning

percentages can be defined as the number of games a team wins divided by the total

number of games played. As American baseball does not acknowledge any draws

matches are always concluded by one team winning and thus the other team losing.

The league average thus always comes to an even 0,500.

The winning percentages of the seven before mentioned teams are shown in the

chart below. This chart includes the years 2000 – 2009 and the percentages from the

starting year the teams were first vertically integrated. For the Yankees, Phillies and

Red Sox these percentage are the same because they have been vertically

integrated the whole decade.

Chart 1 Winning percentages 2000 - 2009 and since vertical integration

As the chart shows the winning percentages of 5 of the 7 franchises are above the

league average, with the Yankees, Red Sox and Phillies winning 5 – 20 percent more

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games than the average. If we take a closer look at the winning percentages after the

franchises got vertically integrated we can see that for the New York Mets the

percentages go up even more. Where the Mets had a 0,504 percentage over the

entire decade it has a 0,531 winning percentage after vertical integration, thus after

2006. For the Cleveland Indians and the Baltimore Orioles though the winning

percentages have gone down since vertical integration. For the thesis there was also

an t-test performed on the data. Two datasets, one containing the average number of

wins per year for vertically integrated teams and one containing the same data for not

vertically integrated teams were tested against each other. Tested was whether or

not the average wins of vertically integrated teams were higher than that of not

vertically integrated team. This was done by testing the hypothesis H0 = Win VI >

Wins NVI, where VI stands for vertically integrated and NVI stands for Not Vertically

Integrated. The first test, done over the whole decade gave a t value of 1,422 which

makes us reject H0 at a 0,050 significance level. Testing shows that H0 can be

accepted at a 0,094 significance level. If data starting from 2005 is tested for the

same hypothesis it returns a t value of 1,793, which is also makes H0 rejected at a

0,050 significance level, but comes close because H0 can be accepted at 0,053

significance level. The SPSS output containing this data can be found in appendix C

4.3 Postseason 2000 – 2009

If we take a closer look at postseason appearances we see an even clearer

distinction. The post season is being played after all 162 matches of the regular

season have been played. Three division winners from both leagues and the team

with the best record not being a division winner from each league play is a playoff

format to determine the overall champion. An example of Major League Baseball‟s

postseason format is given in appendix D Getting into the postseason is very

lucrative to owner because it generates additional gate revenue and more exposure

because the team gets to play extra matches after the regular season has ended.

In the first chart below the postseason appearances for our seven integrated

franchises are given, as well as the league average and in the second chart we can

see the number of post season appearances for every team that made it to the post

season.

19

Chart 2 Postseason appearances per team 2000 - 2009

Chart 3 Division of all postseason appearances per team 2000 - 2009

These charts indicate that more than 25 percent of all postseason appearances of

the last decade have been made by these seven teams, with the Baltimore Orioles

and Kansas City Royals making none at all and thus bringing the actual number

down to 5 teams taking these places. This may not seem much but 8 places per year

have to be divided over 32 teams, which thus should give every team a 25 percent

chance to make the postseason. This chance is down to 23 percent because of these

teams taking this much places. The top three is taking even 18 of all places

available, making their chance to get to the postseason 60 percent, and bringing the

chances for the other teams down to 21 percent. The data used for this paragraph

and the next can be found in appendix E

4.4 Championships 2000 – 2009

The final statistic that has been researched concerning the last decade is the number

of championships won by the vertical integrated teams as compared to the rest of the

league. Chart 4, below, shows 5 of the 10 possible championships have been won by

9

6

32 2

0 0

2,66

0123456789

10

2000s

9

63

22

0

058

New York Yankees

Boston Red Sox

Philadelphia Phillies

Cleveland Indians

New York Mets

Baltimore Orioles

Kansas City Royals

Other teams

20

vertically integrated teams, with only three winning one or more actually and with the

other 5 going to the remaining 25 teams in the league.

Chart 4 Championships per team 2000 - 2009

To emphasise the difference even more, two of the three teams that were voted

Major Leagues Baseballs teams of the decade for the 2000‟s were vertically

integrated, these being the New York Yankees and the Boston Red Sox. The above

statistics also give you a good indication why. The Yankees finished first in winning

percentage that decade with the Red Sox coming in second and both finished first or

tied for first in postseason appearances and championships.

4.5 Historic perspective

The earlier data alone however doesn‟t yet prove that these vertically integrated

teams had gained a competitive advantage by vertically integrating, maybe all other

teams in the league just god worse at the same time leaving the door open for these

teams to step in. That is why this thesis also looks at how the performance of these

seven teams compares to their performance in the previous decades.

The graph below shows the winning percentages of the teams per decade and also

the league average (0,500).

2

2

1

0000

5

New York Yankees

Boston Red Sox

Philadelphia Phillies

Cleveland Indians

New York Mets

Baltimore Orioles

Kansas City Royals

21

Chart 5 Winning percentages per team per decade

As the graph shows the winning percentages of 4 of the 7 teams that have vertically

integrated have increased over the last decade. The Yankees have increased their

percentage by 0.049 percentage points and the Phillies even by .054. Only two

teams have over a period of 40 years seen their winning percentage dropped.

Also if we look at the number of postseason appearances we can see an increase in

the number of places taken by the seven teams over the last decade. Because the

number of postseason places has changed through the introduction of the wild card

the following chart shows the percentage of positions taken by the seven teams

instead of absolute numbers because that would create a distorted picture.

Chart 6 Postseason appearances per decade (percentages)

This chart also shows that some teams, for example the Yankees and Red Sox and

Phillies have made an improvement over their situation in previous decade. However,

the conclusion also has to be drawn that for some franchises, the Orioles and

Royals, being vertically integrated has not improved their situation on the playing

field. But, as we already concluded in the previous chapter competitive advantage is

not only measured by performance of the field, but also by the financial performance

of the franchise. This is where the next part of this chapter will focus on. An overview

of this data can be found in appendix F

0,400

0,450

0,500

0,550

0,600

0,650

1970s

1980s

1990s

2000s

0,0000,0200,0400,0600,0800,1000,1200,140

1970s

1980s

1990s

2000s

22

4.6 Financial performance

To analyse the financial performance of the franchises and the owners it would be

ideal if this thesis could study both the financial performance of the franchise itself

and that of the owner as well. Financial details about the owners are unfortunately

hard to obtain and despite several tries this study has been unable to determine how

much the owners of the seven integrated baseball teams have increased in value

since their franchises became vertically integrated. The values of the franchises on

the other hand are very easy to obtain because Forbes magazine does a yearly

ranking of the values of the MLB franchises. These values can be found in appendix

G.

In the graph below you can see how the value of the seven franchises has risen over

the past few years.

Chart 7 Team values per year 2002 - 2010 (million $)

On average the value of a Major League Baseball franchise rose more than 70

percent. The value of the seven integrated franchises rose with more than 80

percent. This is though mainly due to the fact that the value of the top 4 franchises

rose with over 105 percent. The value of the bottom three franchises only rose with a

little over 30 percent.

Another financial effect we looked at was that vertical integration allowed franchises

to substitute profits for losses by pricing products at favourable rates to other entities

within the chain. We would thus expect franchises that are vertically integrated to

have lower profits than other franchises in the league. The chart below shows the

seven teams operating income before interest, taxes, depreciation and amortization.

As the chart shows the profits of the vertically integrated teams are not really

consistent with the theory presented in the second chapter. Especially the Orioles,

Indians and Royals seem to have reported a normal operating income. When we look

at the four other franchises though their profits seem to be a little low considering

0

500

1000

1500

2000

2002 2003 2004 2005 2006 2007 2008 2009 2010

New York Yankees

Boston Red Sox

New York Mets

Philadelphia Phillies

Cleveland Indians

Baltimore Orioles

Kansas City Royals

23

their value as presented in the graph above, especially the fact that the Yankees,

Red Sox and Mets have reported several losses over the years while being in the

biggest markets in the US.

Chart 8 Profit/loss per year 2002 - 2010

It can be assumed that profits of these teams have somehow been diversified to

other divisions in the organisation. The Yes Network, affiliated with the Yankees, has

been reporting healthy profits since the day it started Fortune reported that the six-

year-old YES Network took in revenues of $340,5 million in 2006 and since then

network‟s revenues top a quarter billion and its profit margin is 60 percent.

4.7 Conclusions

It is hard to draw conclusions on the data provided in this chapter. As far as the

numbers obtained tell us four franchises, being the New York Yankees, Boston Red

Sox, New York Mets and Philadelphia Phillies have created or developed their

competitive advantage during the last decade both on the playing field as well as

financially. The Cleveland Indians have not shown real improvement but have still

fared much better than the Baltimore Orioles and the Kansas City Royals who have

been declining their play on the field during the last decade, and even before that and

have not been able to outperform the market financially either. The balance of power

in Major League Baseball has shifted, with fewer teams having a bigger impact on

the game in terms of winning as well as financially. Whether or not this is because of

the fact that they have vertically integrated with their broadcasting partner or due to

other circumstances needs further research.

-60

-40

-20

0

20

40

60

2002

2003

2004

2005

2006

2007

2008

2009

2010

24

Chapter 5 Conclusion, discussion and recommendations

5.1 Introduction

This final chapter of the thesis will give a conclusion, discussion and

recommendations based on the information presented to you in the previous

chapters.

5.2 Conclusion

This thesis can come to a conclusion regarding its problem statement. The potential

sources for competitive advantage through vertical integration are certainly there, as

shown in chapter 2. These sources can be directly linked to the sports world as is

shown in chapter 3. Financial gains can be made by vertically integrating a sports

team with its broadcasting partner.

For the seven teams studied up until this point the vertical integration has had

different effects though. Some have fared very well, increasing in value and winning

championships each year while other have either not been able to improve

performance or have even declined when compared to historic results. It is true that

three of the teams vertically integrated have dominated Major League Basball over

the past decade but given the data obtained and the research done it is impossible to

say whether or not this is the result of vertical integration. Vertical integration thus

can lead to a sustainable competitive advantage, also in sports, but it is impossible to

say whether or not it actually does.

5.3 Discussion

What made coming to a conclusive conclusion about the problem statement of the

thesis hard is that in sports gaining a competitive advantage is influenced by a lot of

factors. Apart from the ability to earn money, there are a lot of other factors that have

to be taken into consideration. The ability and availability of players to the teams is

one that cannot be influenced by vertical integration but has a great effect on the

performance of the franchise. And even the ability to earn money is not solely

determined by the ability and willingness of franchises to integrate vertically. Market

size for example is also very important but was not taken into account in this

research.

Another difficulty is that the concept of vertical integration as it is research here, with

teams owning their broadcasting partner is a rather new concept. It has only been

around for the last decade, so it is difficult to measure its influence. The three teams

25

that have been vertically integrated for the whole decade have been outperforming

the market, while the teams that are not have been lagging behind. Is that because it

takes time to reap the benefits of vertical integration or does that have nothing to do

with it. What also needs to be taken into account is that all these factors influence

each other. If teams earn more money they can hire better players, which will make

them win more, which will lead to more people watching the teams matches, which

will lead to higher revenue, etcetera, etcetera, etcetera.

The final challenge for this research was that it is very hard to obtain financial

information about both the teams and their owners, which limits the research on the

influence vertical integration could have had on the financial positions of these

stakeholders.

Whether vertical integration in sports affects the competitive balance thus remains to

be seen. This research focused on Major League Baseball and found no conclusive

evidence. Fact is though that recently the „virus of vertical integration‟ has been

spreading to other sports, with European soccer being the newest development.

Teams like Real Madrid, Manchester United and FC Barcelona have recently started

their own TV networks. While these networks are still under development and for

example do not own the television broadcasting rights of the teams they are being

aired and it is not unlikely that eventually they will also obtain these rights.

5.4 Recommendations

So why do these teams do this if it is not clear if it has a positive effect on the teams‟

competitive advantage. That is one of the questions this thesis leaves unanswered.

Also this thesis focused on Major League Baseball but how do the findings relate to

other sports and what factors are of influence in that specific market. It would be

good to extend research into more branches of sports and into taking into account

more factors such as market size to really be able to determine whether or not

vertical integration does influence the competitive balance.

It will also be interesting to see how things have developed in 10 years. Has it

developed further, are more teams doing it, are other sports doing it or has it been

abandoned all together? Is it true that it takes time to gain from it, or will the

Cleveland Indians and Kansas City Royals never have any benefits from it and are

there thus other reasons that the New York Yankees, Boston Red Sox and

Philadelphia Phillies have been so dominant lately?

Finally being able to gain more insight into the financial position of the teams and

there owners might uncover other, not before thought of benefits, or drawbacks of

vertical integration.

26

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30

Appendix A Major League Baseball Division

Figure 1 MLB Divisional alignment

31

Appendix B Wins / losses 2000 – 2009

Year

W L % PS W L % PS

2000 85 77 0,525 87 74 0,540 D, WSC

2001 82 79 0,509 95 65 0,594 D, WS

2002 93 69 0,574 103 58 0,640 D

2003 95 67 0,586 WC, LS 101 61 0,623 D, WS

2004 98 64 0,605 WC, WSC 101 61 0,623 D, LS

2005 95 67 0,586 WC* 95 67 0,586 D*

2006 86 76 0,531 97 65 0,599 D

2007 96 66 0,593 D, WSC 94 68 0,580 WC

2008 95 67 0,586 WC, LS 89 73 0,549

2009 95 67 0,586 WC 103 59 0,636 D, WSC

Decade 920 699 0,568 965 651 0,597

Year

W L % PS W L % PS

2000 94 68 0,580 WC, WS 65 97 0,401

2001 82 80 0,506 86 76 0,531

2002 75 86 0,466 80 81 0,497

2003 66 95 0,410 86 76 0,531

2004 71 91 0,438 86 76 0,531

2005 83 79 0,512 88 74 0,543

2006 97 65 0,599 D, LS 85 77 0,525

2007 88 74 0,543 89 73 0,549 D

2008 89 73 0,549 92 70 0,568 D, WSC

2009 70 92 0,432 93 69 0,574 D, WS

Decade 815 803 0,504 850 769 0,525

Year

W L % PS W L % PS

2000 74 88 0,457 77 85 0,475

2001 63 98 0,391 65 97 0,401

2002 67 95 0,414 62 100 0,383

2003 71 91 0,438 83 79 0,512

2004 78 84 0,481 58 104 0,358

2005 74 88 0,457 56 106 0,346

2006 70 92 0,432 62 100 0,383

2007 69 93 0,426 69 93 0,426

2008 68 93 0,422 75 87 0,463

2009 64 98 0,395 65 97 0,401

Decade 698 920 0,431 672 948 0,415

Year

W L % PS W L % PS

2000 90 72 0,556 80 82 0,494

2001 91 71 0,562 D 81 81 0,500 WSC

2002 74 88 0,457 83 79 0,512 WSC

2003 68 94 0,420 81 81 0,500 WSC

2004 80 82 0,494 80 82 0,494

2005 93 69 0,574 79 83 0,488 WSC

2006 78 84 0,481 82 80 0,506 WSC

2007 96 66 0,593 D, LS 76 86 0,469

2008 81 81 0,500 79 83 0,488

2009 65 97 0,401 83 79 0,512

Decade 816 804 0,504 804 816 0,496

WC = Wild card winner

LS = League Series

WS = World Series

WSC = World Series Champion

Baltimore Orioles

Rest of the league (average)Cleveland Indians

Kansas City Royals

D = Division winner

Boston Red Sox New York Yankees

New York Mets Philidelphia Phillies

32

Appendix C SPSS Output

Paired Samples Statistics

Mean N Std. Deviation Std. Error Mean

Pair 1 VI 81,9429 10 2,09654 ,66298

NVI 80,0571 10 2,09654 ,66298

Pair 2 VI > 2004 82,9714 5 2,45864 1,09954

NVI > 2004 79,0286 5 2,45864 1,09954

Paired Samples Test

Paired Differences

t df Sig. (2-tailed)

95% Confidence Interval of the

Difference

Mean Std. Deviation Std. Error Mean Lower Upper

Pair 1 VI - NVI 1,88571 4,19307 1,32597 -1,11383 4,88526 1,422 9 ,189

Pair 2 VI > 2004 – NVI > 2004 3,94286 4,91727 2,19907 -2,16275 10,04846 1,793 4 ,147

Paired Samples Correlations

N Correlation Sig.

Pair 1 VI & NVI 10 -1,000 ,000

Pair 2 VI > 2004 & NVI > 2004 5 -1,000 ,000

33

Appendix D Major League Baseball playoff format

Figure 2 MLB playoff format

34

Appendix E Postseason appearances

Postseason apperances per decade

2000s 1990s 1980s 1970s

New York Yankees 9 5 2 3

Boston Red Sox 6 4 2 1

Philadelphia Phillies 3 1 3 3

Cleveland Indians 2 5 0 0

New York Mets 2 1 2 1

Baltimore Orioles 0 2 1 5

Kansas City Royals 0 0 4 3

Other teams 58 38 30 24

Post season apperances (percentages)

2000s 1990s 1980s 1970s

New York Yankees 0,113 0,089 0,045 0,075

Boston Red Sox 0,075 0,071 0,045 0,025

Philadelphia Phillies 0,038 0,018 0,068 0,075

Cleveland Indians 0,025 0,089 0,000 0,000

New York Mets 0,025 0,018 0,045 0,025

Baltimore Orioles 0,000 0,036 0,023 0,125

Kansas City Royals 0,000 0,000 0,091 0,075

Other teams 0,725 0,679 0,682 0,600

World Series Wins per decade

2000s 1990s 1980s 1970s

New York Yankees 2 3 0 2

Boston Red Sox 2 0 0 0

Philadelphia Phillies 1 0 1 0

Cleveland Indians 0 0 0 0

New York Mets 0 0 1 0

Baltimore Orioles 0 0 1 1

Kansas City Royals 0 0 1 0

Other teams 5

35

Appendix F Historic overview

Teams

WP WSC WS POA WP WSC WS POA WP WSC WS POA WP WSC WS POA

Arizona Diamondbacks 0,497 1 1 3 0,509 0 0 1

Atlanta Braves 0,551 0 0 6 0,595 1 5 8 0,457 0 0 1 0,451 0 0 0

Baltimore Orioles 0,431 0 0 0 0,512 0 0 2 0,512 1 1 1 0,590 1 3 5

Boston Red Sox 0,568 2 2 6 0,523 0 0 4 0,525 0 1 2 0,556 0 1 1

Chicago Cubs 0,499 0 0 3 0,476 0 0 1 0,472 0 0 2 0,487 0 0 0

Chicago White Sox 0,529 1 1 3 0,526 0 0 1 0,486 0 0 1 0,469 0 0 0

Cincinnati Reds 0,464 0 0 0 0,521 1 1 2 0,499 0 0 0 0,592 2 4 6

Cleveland Indians 0,504 0 0 2 0,529 0 2 5 0,455 0 0 0 0,460 0 0 0

Colorado Rockies 0,474 0 1 2 0,478 0 0 1

Detroit Tigers 0,450 0 1 1 0,452 0 0 0 0,536 1 1 2 0,490 0 0 1

Florida Marlins 0,501 1 1 1 0,442 1 1 1

Houston Astros 0,514 0 1 3 0,529 0 0 3 0,522 0 0 3 0,495 0 0 0

Kansas City Royals 0,415 0 0 0 0,467 0 0 0 0,529 1 2 4 0,528 0 0 3

Los Angeles Angels 0,556 1 1 6 0,475 0 0 0 0,500 0 0 2 0,484 0 0 1

Los Angeles Dodgers 0,532 0 0 4 0,513 0 0 2 0,527 2 2 4 0,565 0 3 3

Milwaukee Brewers 0,458 0 0 1 0,478 0 0 0 0,514 0 1 2 0,458 0 0 0

Minnesota Twins 0,532 0 0 5 0,463 1 1 1 0,468 1 1 1 0,506 0 0 1

New York Mets 0,504 0 1 2 0,494 0 0 1 0,523 1 1 2 0,473 0 1 1

New York Yankees 0,597 2 4 9 0,548 3 3 5 0,547 0 1 2 0,555 2 3 3

Oakland Athletics 0,550 0 0 5 0,501 0 1 2 0,512 1 2 3 0,527 3 3 5

Philadelphia Phillies 0,525 1 2 3 0,471 0 1 1 0,501 1 2 3 0,509 0 0 3

Pittsburgh Pirates 0,421 0 0 0 0,498 0 0 3 0,470 0 0 0 0,569 2 2 6

San Diego Padres 0,474 0 0 2 0,487 0 1 2 0,486 0 1 1 0,415 0 0 0

San Francisco Giants 0,529 0 1 3 0,508 0 0 1 0,493 0 1 2 0,493 0 0 1

Seattle Mariners 0,517 0 0 2 0,493 0 0 2 0,430 0 0 0 0,386 0 0 0

St. Louis Cardinals 0,557 1 2 7 0,488 0 0 1 0,529 1 3 3 0,496 0 0 0

Tampa Bay Rays 0,429 0 1 1 0,407 0 0 0

Texas Rangers 0,479 0 0 0 0,519 0 0 3 0,462 0 0 0 0,465 0 0 0

Toronto Blue Jays 0,497 0 0 0 0,515 2 2 3 0,523 0 0 2 0,343 0 0 0

Washington Nationals 0,439 0 0 0 0,500 0 0 0 0,519 0 0 1 0,465 0 0 0

WP = Winning percentage

WSC = World series champions

WS = World series appearance

POA = Playoff appearances

Not available

Not available

Not available

Not available

Not available Not available

2000s 1990s 1980s 1970s

Not available Not available

36

Appendix G Franchise values

Values in million $ 2002 2003 2004 2005 2006 2007 2008 2009 2010

New York Yankees 730 849 832 950 1.026 1.200 1.306 1.500 1.600

Boston Red Sox 426 488 533 563 617 724 816 833 870

New York Mets 482 498 442 505 604 736 824 912 858

Los Angeles Dodgers 435 449 399 424 482 632 694 722 727

Chicago Cubs 287 335 358 398 448 592 642 700 726

Philadelphia Phillies 231 239 281 392 424 457 481 496 537

Los Angeles Angels of Anaheim 195 225 241 294 368 431 500 509 521

St Louis Cardinals 271 308 314 370 429 460 484 486 488

San Francisco Giants 355 382 368 381 410 459 494 471 483

Chicago White Sox 223 233 248 262 315 381 443 450 466

Houston Astros 337 327 320 357 416 442 463 445 453

Texas Rangers 356 332 306 326 353 365 412 405 451

Atlanta Braves 424 423 374 382 405 458 497 446 450

Seattle Mariners 373 385 396 415 428 436 466 426 439

San Diego Padres 207 226 265 329 354 367 385 401 408

Minnesota Twins 127 148 168 178 216 288 328 356 405

Cleveland Indians 360 331 292 319 352 364 417 399 391

Washington Nationals 108 113 145 310 440 447 460 406 387

Colorado Rockies 347 304 285 290 298 317 371 373 384

Arizona Diamondbacks 280 269 276 286 305 339 379 390 379

Baltimore Orioles 319 310 296 341 359 395 398 400 376

Detroit Tigers 262 237 235 239 292 357 407 371 375

Milwaukee Brewers 238 206 174 208 235 287 331 347 351

Kansas City Royals 152 153 171 187 239 282 301 314 341

Cincinnati Reds 204 223 245 255 274 307 337 342 331

Toronto Blue Jays 182 166 169 214 286 344 352 353 326

Florida Marlins 137 136 172 206 226 244 256 277 317

Tampa Bay Rays 142 145 152 176 209 267 290 320 316

Oakland Athletics 157 172 186 185 234 292 323 319 295

Pittsburgh Pirates 242 224 217 218 250 274 292 288 289

37

Appendix H Profit / loss values

Revenue in million $ 2002 2003 2004 2005 2006 2007 2008 2009 2010

New York Yankees 18,7 16,1 -26,3 -37,1 -50 -25,2 -47,3 -3,7 24,9

Boston Red Sox -11,4 -2,1 11,4 -11,3 -18,5 19,5 -19,1 25,7 40

New York Mets 14,3 11,6 -19,3 -11,2 -16,1 24,4 32,9 23,5 26,2

Los Angeles Dodgers -29,6 -25 -19,1 -7,4 13,4 27,5 20 16,5 33,1

Chicago Cubs 7,9 11,9 8,3 11,4 7,9 22,2 21,4 29,7 25,5

Philadelphia Phillies 2,6 -11,9 -12,5 6,1 14,8 11,3 14,3 17 14,5

Los Angeles Angels of Anaheim 5,7 -3,7 -5,5 -30 -2,6 11,5 15,2 10,3 12

St Louis Cardinals -5,1 -2 -11,1 -3,9 7,9 14 21,5 16,3 12,8

San Francisco Giants 16,8 13,9 0,7 6,9 11,2 18,5 19,9 6,6 23,5

Chicago White Sox -3,8 1,2 12,8 8,1 21,7 19,5 30,6 27,2 26,4

Houston Astros 4,1 -0,8 -1,9 9,6 30,2 18,4 20,4 3,8 7,1

Texas Rangers -6,5 -24,5 -28,5 2,9 24,7 11,2 17,2 24,5 4,7

Atlanta Braves 9,5 9,5 -0,3 15,4 27,6 14,8 28,1 13,8 1,5

Seattle Mariners 14,1 23,3 17 10,8 7,3 21,5 10,1 4,7 10,5

San Diego Padres 5,7 4,6 4,9 17,1 13 5,2 23,6 19,5 32,1

Minnesota Twins 3,6 0,4 -7,1 -0,5 7 14,8 23,8 29,4 25

Cleveland Indians -3,6 -1 10,4 27,2 34,6 24,9 29,2 42,6 10,1

Washington Nationals -3,4 -9,1 -8,3 -3 27,9 19,5 43,7 22,4 33,5

Colorado Rockies 6,7 7,1 -6,3 -7,8 16,3 23,9 26,2 26,8 20,1

Arizona Diamondbacks -3,9 -22,2 -15,2 -18,7 21,8 6,4 5,9 3,9 -0,6

Baltimore Orioles 3,2 12,4 9,1 34 21 17,1 7,7 17,4 19,4

Detroit Tigers 12,3 -5,3 0,3 7,9 3,5 8,7 4,6 22,9 -29,5

Milwaukee Brewers 18,8 -6,1 5,1 24,2 22,4 20,8 19,2 -26,3 10,2

Kansas City Royals 2,2 -11,2 6,6 3 20,8 8,4 7,4 9 8,9

Cincinnati Reds 4,3 4,9 11,7 22,6 17,9 22,4 19,3 3 17,8

Toronto Blue Jays -20,6 -23,9 0 7,8 29,7 11 -1,8 11,8 13,1

Florida Marlins 1,4 -14 -11,6 3 -11,9 43,3 35,6 43,7 46,1

Tampa Bay Rays -6,1 1,4 7,5 27,2 20,3 20,2 29,7 15,9 15,7

Oakland Athletics 6,8 6,6 11,2 5,9 16 14,5 15,4 26,2 22,1

Pittsburgh Pirates 9,5 -1,6 -0,3 12,2 21,9 25,3 17,6 17 15,6

League average 2,5 -1,3 -1,9 4,4 12,1 16,5 16,4 16,7 17,4