Friday, January 09, 2009

Guest Blogging on Lohud Today

Here's the link if you want to check it out. It's also posted below.


We’ve heard squawking from some team owners recently, jawing and complaining about the Yankees’ spending this past off-season. What, this is new? Despite the fact that the payroll for the 2009 season is lower than that for 2008, some such as Houston’s Drayton McLane and Milwaukee’s Mark Attanasio are crying for a salary cap, or anything to artificially inflate the price of the franchises that they bought for less than what Mark Teixeira received.

Well, be prepared for more complaints. The Yankees’ financial advantage isn’t going anywhere but up. The people in charge of the franchise have finally learned how to truly exploit the market.

In 2002, the Yankees (or rather, a company now known as “Yankee Global Enterprises, LLC,” which incidentally now also owns the Yankees baseball club) founded the YES Network, and has reaped huge financial rewards from it. Cable companies were paying the Yankees millions of dollars per year for the rights to broadcast games, and yet were still making huge profits on the product. The Yankees realized that by starting their own network, those profits could be theirs as well and the rest is history, culminating in the new ballpark across the street — the House that YES Built.

The new ballpark opens new avenues for revenue beyond luxury boxes and ticket price increases, which I’m sure we’ve all heard enough about. An aspect of profit most may not think about that the Yankees are about to exploit is concessions.

Every major league ballpark has concession companies bid for long-term contracts in order to provide services for the fans: food, beverages, souvenirs, restaurants, etc. Of the 29 other MLB teams, 28 are serviced by either Aramark, Centerplate, Delaware North Companies Sportservice, or Levy Restaurants (the Marlins fall under a contract that Dolphin Stadium already had with Boston Culinary Group). Rather than follow the tradition route of bringing in an outside vendor, the Yankees instead are following the blueprint they laid out when founding the YES Network. They’re doing it in-house by founding Legends Hospitality Management with partners CIC, Goldman Sachs, and the Dallas Cowboys.

Don’t think there’s a lot of money to be made in this industry? Let’s look at the examples given above. Annual sales (2007) for Aramark, Delaware North, and Levy were $12.4 billion, $2.0 billion, and $610 million respectively.

Centerplate, which ran the concessions at the previous stadium, earns $740 million in annual revenue. However, Yankee Stadium was their largest source and generated approximately $70 million per year. With the new amenities, restaurants, shops and bars at the new stadium, expect that $70 million figure to rise starting in 2008. Why would the Yankees decide to share $80, $100, $150 million in sales revenue with another company when the team itself could reap the profits?

The value of the new ballpark to the team goes far beyond new ticket prices, synergistic YES marketing, naming rights, partnerships, and advertising deals. It’s yet another chance for the Yankees to truly flex their financial muscles and reap as much benefit as possible from their brand.

As long as they continue to sink it back into the team on the field (and – through luxury taxes – the rest of MLB) then count me as satisfied.

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posted by Mr. Faded Glory @ 9:47 AM   1 comments


At 1/09/2009 3:11 PM, Blogger June said...

well good on them (re legends hospitality). the food couldn't possibly be WORSE than before.


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