Sports Capitalism

The Foreign Business of American Professional Leagues

Frank P. Jozsa

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351148627
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

The book focuses on how, when, where and why the US-based professional sports leagues extend their brands and penetrate markets in nations across the globe. The book examines the strategies, progress and expectations of each league despite the cultural, economic and political barriers that exist between and within countries and areas. It offers a model of the sports business and, where appropriate, the emergence, evolution and growth of prominent women's sports leagues are documented. This book is unique as there are no other academic publications that study and report the global ambitions of this special group of organizations in one volume. Readers such as college and university sports history, management, marketing and international business professors, students and researchers can use and apply the book, as either a teaching supplement, reference and/or literature source. It will also appeal to targeted groups beyond the academic community with strategic economic incentives to learn about sports capitalism, such as sports entrepreneurs and league officials.

Chapter 1
Major League Baseball

In America, professional baseball’s National League of Professional Baseball Clubs (NL) and American League of Professional Baseball Clubs (AL) were established, respectively, in 1876 and 1901. Each league, which then consisted of eight teams, became the organizational entities that formed Major League Baseball (MLB) in 1903. That year, to arouse baseball fans and other sports enthusiasts in the United States (U.S.), the AL Boston Americans defeated the NL Pittsburgh Pirates in MLB’s first World Series, which was played at Huntington Avenue Grounds in Boston and Exposition Park in Pittsburgh.

Until the late 1960s, MLB franchises remained located primarily in medium to large cities throughout the U.S. There were at least two eastern Canadian cities, however, that contained relatively large and diverse populations. As such, these cities were well-prepared places to host a NL and/or AL professional baseball team. Because of the revolutionary advancements and economic efficiencies that had occurred within North America’s telecommunications and transportation networks, in 1969 MLB’s existing franchise owners collectively approved a NL expansion team to be placed in Montreal, and in 1977 an AL expansion team in Toronto. Since 1977, however, there have been no MLB clubs to relocate or expand outside of the U.S. border. Apparently, MLB officials had jointly decided that, besides Montreal and Toronto in Canada, other foreign cities did not contain the ballparks, fan bases or economic and demographic characteristics to support a relocated team or a new professional baseball franchise. Nevertheless, despite the league’s policy, from the late 1970s to the early 2000s MLB had continued to market, promote and internationalize its brand name and sport.¹

Given the league’s formation, history and tradition, this chapter analyzes why, when, where and how American-style professional baseball has gradually become a global sport, especially since the early 1990s. To highlight the status of baseball and the elements of MLB’s international strategy, Chapter 1 focuses on the league’s organizational structure and other professional baseball leagues in various countries, the presence and numerical growth of foreign players in MLB, and on other topics such as the league’s investment in and supervision of baseball academies and other facilities that are located overseas. Furthermore, the chapter discusses the significance of MLB’s policies abroad with respect to the drug test programs administered to Latin American players, the expected development of an international player draft system, a World Cup of Baseball tournament, and the creation and suspension of the Canadian Baseball League. After a table lists the non-North American cities that represent potential sites to locate a current or expansion MLB team, the chapter concludes with a brief history of women’s baseball leagues. To a great extent, these elements and topics involve inter-country agreements and alliances, and sports events and business relationships that, in turn, influence and impact the game of professional baseball and MLB’s fans, franchises, players and markets in America and elsewhere.

Reorganization Strategy

Between 1920 and 1945, nearly 50 foreign-bom men who were primarily from the island of Cuba had played in either the NL or AL. Then, in the late 1940s groups of young and skilled baseball stars from various Latin American countries had emerged to willingly sign teams’ contracts and, as their occupation and career, decided to join U.S. minor league and MLB rosters to play professional baseball. To avoid a lifetime of poverty and second, to hopefully earn a sizable income, those talented athletes had emigrated to America, in large part, from rural and urban communities in the Dominican Republic, Mexico, Puerto Rico and Venezuela. Thus, the number of Latino players in MLB has increased for almost 90 years. Besides Latinos, since the 1980s an increasing number of Japanese, Korean and Taiwanese athletes have become MLB players. Indeed, the import of foreign players and other factors such as the league’s interest to expand, control and manage global partnerships, sponsorships and licensing agreements, and the league’s opportunities to broadcast its teams’ regular season, playoff and World Series games overseas, had compelled MLB to restructure and consolidate its international business activities into one organizational unit during the late 1980s. According to some experienced baseball officials, this corporate-wide reorganization was initiated by MLB, respectively, before the other U.S.-based professional sports leagues had formed similar units within their organizations.²

Based on the documents published by sports analysts, in 1989 the division of Major League Baseball International (MLBI) was established. When formed and as it currently exists, the division’s mission has been to expand, promote and manage MLB’s global business operations. That is, to develop and nurture various alliances, partnerships and sponsorships with foreign broadcast, marketing, media and industrial companies, and also, to provide and support baseball activities, grassroots programs and services abroad that result in more worldwide exposure, economic opportunities and free cash flows for the league and its member franchises. By the early 2000s, for example, in Australia, the Czech Republic and Holland, MLBI had created the Road Show, which was an interactive entertainment event that was marketed to baseball fans at community fairs and shopping malls in those countries. To simulate the sport’s game conditions, the Show’s visitor’s batted baseballs ejected from pitching machines, threw baseballs at stationary targets and posed in uniforms to have their pictures displayed on baseball cards. Likewise, in Germany, Italy and South Africa, kids who were 8-12 years old participated in hitting, pitching and running contests while in some European nations an Envoy interactive program identified the whereabouts and performances of promising young baseball players. Because of those events and other popular programs, since 1989 MLBI has progressed to become a profitable organizational unit of MLB. To illustrate, from the late 1990s to early 2000s the unit’s annual cash inflows exceeded $50 million. This income had reportedly earned each NL and AL team an additional profit of at least $1 million.³

As a result of MLBI’s global business deals, commercial relationships and support of grassroots programs for baseball and other sports fans, more revenues have been forthcoming from such sources as broadcast rights fees, licensing and sponsorship agreements, and the sale of team-specific merchandise and memorabilia. Invariably, these business opportunities and contracts have further contributed value to the NL and AL, and their member teams’ earnings. As evidence of MLBI’s influence, five former moneymaking deals are summarized as follows. First, Global Access Telecommunications Services Inc., which then was located in Boston, Massachusetts transmitted eight hours of regular season MLB games each week to populations in such Asian countries as Taipei and Taiwan during 1996. Three years later, the World Series games between the best NL and AL teams were telecast to fans in 212 countries and in 2002, the World Series generated $50 million in revenues based on the broadcasts to 100 million people in 224 nations. Second, in 2003 MLB had signed lucrative five-year, $500 million licensing agreements with seven U.S.-based business partners. Collectively, these companies committed to promote, sell and distribute in international retail markets adult baseball apparel and headwear items that included caps, fleece, jerseys, t-shirts, turtlenecks and uniforms. Third, such sponsors as Adidas, Anheuser-Busch, Gillette, MasterCard, Nike and Pepsi-Cola agreed to provide specialized baseball products to consumers who lived in various Asian, European, and Central and South American countries. Fourth, each week approximately 40 of MLB’s regular season games and the league’s 2003 All-Star Game were beamed from U.S. ballparks into 200 countries by four Intelsat Ltd. satellites. Besides its telecommunications equipment in the U.S., Intelsat’s terrestrial end-to-end infrastructure then included teleports in Germany and Hong Kong, and fiber-interconnected points of presence in England and Germany. Fifth, for baseball games that were not broadcast on television, MLB offered streaming video programs over the Internet to sports fans located throughout the world.⁴

As a consequence of the cash inflows from MLBI’s operations during the 1990s and 2000s, there are two significant implications. One, MLB and its clubs will gradually become less dependent on U.S. and Canadian fans and markets in North America for their sales volumes, revenues and net profits. This means that, in the long-term, a smaller proportion of MLB’s economic resources and money reserves will be allocated to support domestic marketing programs and to invest in other product development projects. Two, if necessary, the teams’ franchise owners will demand more taxpayer subsidies from their respective local and/or state governments to pay the construction costs of a new and modem ballpark located at a site in the home city. Consequently, in the end MLB’s business and globalization strategies may eventually result in social dislocations and disharmonious relationships between various NL and AL teams and their local, regional and national fan bases, and their communities and perhaps with government officials. The previous paragraph concludes the analysis of MLB’s reorganization strategy and MLBI’s mission, organization and short- and long-term business matters. In the next portion of Chapter 1, the discussion focuses on the motivations and interests of baseball fans and other sports groups who reside in foreign countries. As a result of this section in the chapter, the reader learns where and why millions of kids and adults abroad adore American-style baseball and become fans of MLB.

Global Baseball Markets

For at least two decades, MLB has attempted to market and promote its brand, image and sport in nations across the globe. As a result, baseball spectators from Toronto in Canada to Miami in Florida flock to teams’ regular season home games and fans from Madrid in Spain to Moscow in Russia view professional baseball programs on television and the Internet, and/or listen to sports announcers describe the drama of a nine-inning game on the radio. Meanwhile, children and teenagers enthusiastically compete in elementary and high school baseball games, and young and middle-age adults play on teams in local amateur and professional leagues. To determine why and how baseball has succeeded from an international perspective, the status of MLB is depicted as it exists within the sports environment of selected nations. Based on the research performed for Sports Capitalism, the countries that follow are listed according to how comprehensively baseball is ingrained in their cultures and how remote or connected the baseball fans in each nation are with respect to MLB. The first country highlighted is Japan and then Mexico, Puerto Rico, the Dominican Republic, Cuba, Venezuela, some nations in Europe and finally, China and Russia.

Japan

Introduced to the country in 1867 as a sport, baseball’s history is represented by wa, which is a Japanese term for team unity. Indeed, prior to baseball Japan’s sports culture had primarily stressed individual athletic endeavors such as judo and sumo wrestling. But, the societal emphasis on the group made baseball and team play a natural fit in the nation. The sport became more popular in 1934, when the New York Yankees home run player Babe Ruth had visited Japan. However, since the 1980s baseball has gradually eroded as a reflection of Japanese culture. Although the sport is extremely popular on the island, the old ways no longer necessarily apply, in part, because young people focus more on gadgets and individual activities. “It’s [baseball] changed drastically. Now individualism has spread all over Japan. It’s more like Americanized,” said Akiri Ogi, a former manager of the Japanese Pacific League’s Orix Blue Wave team. In the Land of the Rising Sun, there is a nationwide federation of officials and related groups that govern baseball events as performed by teams in Japan’s high schools. Since 1915, a prestigious national baseball tournament, identified in Japanese as Koshien, has been scheduled each summer to determine a championship high school team. In the majority, Japanese athletes of all ages are devoted, disciplined and passionate baseball players. That is, they practice the sport daily and assume that hard work and concentration will better prepare themselves and their team for the national tournament. Frequently, skilled players are remembered for their achievements in games at the Koshien tournament, which perhaps will qualify them to be drafted by one or more of Japan’s professional teams.⁵

Interestingly, various private sector corporations will generally sponsor and support the Japanese’s semiprofessional and professional baseball league teams. Consequently, a team’s previous and current performances are perceived to have a direct impact on the corporation’s stock price. In 2003, for example, the performance-to-stock price correlation supposedly affected three Japanese companies. They were Hanshin Electric Railway, which is a transportation company, and Joshin Denki, an electronics retailer and Takara, a toy manufacturer. As such, this correlation suggests that if American professional baseball teams, in the future, attach themselves to large corporations or small to medium sized businesses rather than to cities as proposed by Eric M. Leifer in Making the Majors, the firms’ stock market valuations would reflect, in part, the baseball statistics and performances of both players and teams such as batting averages, home runs, runs batted in, winning and slugging percentages, and the number of appearances and victories in an international World Series or World Cup of Baseball tournament.⁶

Based on the fanfare and hoopla about the AL New York Yankees’ left fielder Hideki Matsui and the Seattle Mariners’ right fielder Ichiro Suzuki, who are each a national hero and legend in Japan, perhaps MLB and its respective affiliated businesses, partners and sponsors that are located in the U.S. and abroad have mutually benefited. For example, because of Matsui and Suzuki hundreds of regular season games are currently broadcast on Japanese television networks. During 2003, the Japanese viewership of MLB games averaged 1.5 million television viewers, which was an increase from 983,000 in 2002 while 75 million Japanese watched the World Series. This interest in baseball motivated Yomiuri Shimbum Holdings, who owns the Yomiuri Giants, to promote the Chicago Cubs and New York Mets series in Tokyo during 2000 and the New York Yankees and Tampa Bay Devil Rays series during 2004. To acquire the series, Yomiuri had to pay MLBI a fee and MLB compensates its teams for all the gate and concession receipts they lose by ceding spring training and home dates. With respect to the Yankees-Devil Rays 2004 season-opening games in Tokyo, the managing director of MLB’s Japan office Jim Small remarked, “Our goal is to eliminate the culture completely, or as much as possible, during the 21/2 hours they are on the field. We want those 21/2 hours to be exactly like if they are playing at Tropicana Field [Devil Rays’ ballpark in Florida]. But outside those 21/2 hours we want them to experience and enjoy the culture.” Furthermore, consumer prices have soared on baseball trading cards that feature Japanese players, and the retail food business booms at such sports restaurants as Tokyo’s Dome Baseball Cafe. According to Paul Archey, who is MLBI’s senior vice president, “It became clear we [MLB] really needed to have an anchor [a regional Tokyo office], a true presence in the Far East.” In short, despite the alarm and resistance to sports globalization as portrayed by a portion of Japanese baseball officials, and by some academicians, politicians and a few sports franchise owners, MLB has succeeded to thrill baseball fans, penetrate the marketplace and thrive in Japan, where the national economy has remained relatively stagnate since the late 1980s.⁷

Mexico

Since the middle of the 1990s, various MLB teams have competed in exhibition and preseason games, and played regular season series in Mexico. Specific cities such as Hermosillo, Mexico City, Monterrey and Tijuana were and continue to be especially attractive places to conduct an American professional baseball event. Even so, in their decisions to schedule games and series in Mexico, MLB’s Commissioner and franchise owners must consider several baseball-related economic, demographic and social realities. For example, Mexico’s ballparks and other sports facilities are undersized and therefore are deficient with respect to such commercial amenities and services as adequate outdoor advertising and billboard display areas, enough indoor clothing, merchandise and equipment outlets, an abundant and well-placed number of concessions and restrooms, well-protected and premium parking facilities, and modem clubhouses for players and press boxes for sports writers and television broadcasters. Furthermore, based on the cost-of-living standards in Canada and the U.S., Mexico’s median household income is at the subsistence level. This means that MLB teams are compelled at games to maintain below average ticket prices and to charge customers at their ballparks no more than marginal costs for the purchases of apparel, beverages, food items, game-day programs, merchandise and other salable items. Moreover, whenever the Mexican peso was undervalued on currency markets, those prices and costs in...

Table of contents

• Cover
• Half Title
• Dedication
• Title
• Copyright
• Contents
• List of Tables
• List of Abbreviations
• Preface
• Introduction
• 1 Major League Baseball
• 2 National Football League
• 3 National Basketball Association
• 4 National Hockey League
• 5 Major League Soccer
• Conclusion
• Appendix
• Glossary
• Selected Bibliography
• Index