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Changing of the Guard: MLB is on Deck

(Rob Grabowski/USA TODAY Sports)
(Rob Grabowski/USA TODAY Sports)

It is often stated in sports and in business that, “It’s not how you start, it’s how you finish.” But when it comes to being the commissioner of a major sports league, the two are inextricably linked because a commissioner’s legacy is rooted in what he has been hired by his bosses, the team owners, to initially address and eventually accomplish.

This will soon be abundantly clear to those hoping to become the next MLB commissioner. Moreover, those hoping to ascend to the top job in baseball can learn from the recent transitions of their peers.

Candidates for MLB’s top position recognize that their success is primarily measured by how they increase franchise values during their tenure. In order to increase these values, commissioners must consider what is in the best interest of the league in perpetuity, while recognizing the impact that daily policy decisions have on asset appreciation over time.

To oversimplify the matter, building franchise value requires strong media distribution, a stable labor force, and the ability to successfully manage government relations. Until or unless these three pillars are squarely in place, revenue cannot be maximized. Nor can franchise values steadily increase over time, as has been the case across the major leagues, including MLB where average franchise values increased 9% over the last year to $811 million according to Forbes.

And because perpetuity begins on day one, so too does the opportunity to shape legacy. The two most recent transitions, from NFL Commissioner Paul Tagliabue to Roger Goodell in 2006, and from NBA Commissioner David Stern to Adam Silver earlier this year, could not have been more seamless had each used a telestrator.

In both of these transitions, owners largely sought more of the same; steady leadership on key initiatives where early buy-in was apparent, if not explicit. Goodell needed to address labor relations, extend broadcasting and cable TV deals, and focus on stadium development, especially the gameday experience, among other imperatives. Out of the gate, Silver has been focused on the ever-evolving media landscape, as well as on sponsorship opportunities, international market development, and the enhanced use of technology. Ultimately, both are keenly aware of the need to focus on the fans, whether these fans are consuming content at home, while on the go, or at the venue.

In the short run, one way to measure just how well a commissioner is doing is to take a look at his league’s estimated revenue, as well as his paycheck.

According to Forbes, NFL franchise values have grown steadily under Goodell. The average value of a franchise when he took over was just less than $900 million. Today, more than 70% of teams are now worth in excess of $1 billion. Silver took over the NBA at a time when average franchise values exceed $600 million, and continue to grow steadily, if not rapidly, due to the revenue generated by regional TV networks and “new and improved” arenas.

Much has been made of Goodell’s controversial 2012 salary of $44 million. Regardless of the pension and bonus components of this compensation, it suffices to say that he has delivered on owner’s mandates; mandates that have escalated league revenue to approximately $10 billion annually.

Stern, for his part, earned an estimated $23 million his final year, a year in which league revenues approached $5 billion, up from the estimated $118 million when he began in 1984.

The lessons learned during these transitions will no doubt serve MLB well when Commissioner Bud Selig steps down at season’s end following more than twenty years guiding the sport. His replacement will likely result in those throughout the industry, as well as the sport’s fans, reminding themselves of the classic lyric by the Who, “Meet the new boss, same as the old boss.” But this time around, more of the same may not be enough.

While baseball indeed remains America’s pastime, it has much work to do to reclaim its title as America’s sport. Addressing issues ranging from the game’s pace and its aging fan base, to lagging attendance in many markets and an ever-burgeoning large market/small market divide caused by regional TV deals, will be among the next commissioner’s initial undertakings. With league revenue surpassing $8 billion, there is much to be bullish about regarding MLB.

Nevertheless, the sport’s next leader will need to be proactive in tackling these challenges, while simultaneously taking further advantage of the opportunities associated with Major League Baseball Advanced Media, the internationalization of the game, and its recent approach to performance enhancing drugs.

As is always the case this time of year, baseball fans look forward to perfectly manicured fields and the smell of clean cut grass. And, as is the case this year, commissioners in-waiting are paying close attention to two other forms of green.

***

David Carter is the Executive Director of the USC Sports Business Institute and is an associate professor of sports business at USC’s Marshall School of Business. Bio

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