Minor League Baseball is Big Business in Florida

Despite the many unique aspects of each major league club’s operation, there is one that is common to all. Minor League Baseball (MiLB) is no minor operation. Each club has between 160-250 players training every day and teams have players at all levels (high-A, low-A, AA, and AAA) who attend spring training at the same time as their major league counterparts. Spring training, extended spring, Florida State League, and instructional leagues run from January to October.

All that baseball is means big business for transportation and hospitality industries. Jay Edmiston, Director of Florida Operations for the Houston Astros, estimated that the Astros spend more than $1.6M annually to operate their minor league system in Florida. In 2015 the team spent more than $400K and $900K on food and hotels respectively. Those costs can double during the 6-weeks that the major league players are in town, meaning teams will spend up to $3M on food, hotels, flights, and ground transportation for players alone.

With 15 teams in the state that’s an estimated $15M contribution to the Florida economy from the teams, all before a single hotel room is booked by fans. To say that spring training is an important part of the Florida economy would be an understatement and only time will tell whether or not the communities who are about to lose their team can survive without them.

The End of Spring Training in Central Florida

The departure of the Houston Astros from Osceola County in 2017 could mark the beginning of the end of spring training in central Florida. The Braves will leave Disney’s Wide World of Sports complex in 2017 at the end of their 20-year lease and will almost certainly look to one of the three coastal communities that host 13 other big league teams to find a new home.

The opportunity to save spring training for the community may have come and gone when county commissioners voted down a measure to construct a $98M multi-club spring training facility in 2013. The facility would have housed the Washington Nationals and a second team and included an 8,600 seat stadium, two major league practice fields, eight minor league fields, and both a major and minor league club house. In addition, Nationals ownership had committed to purchasing land adjacent to the site to construct a suitable hotel to house players and staff during the spring.

County officials cited concerns about the risks of financing such a stadium without a commitment from a second team. However, their vote may have been short-sighted. The community will now lose an estimated $46M in annual revenues without a team. Plans are underway to find additional revenue streams by hosting other events throughout the year. Don Miers, Osceola County Sports and Events Director has been charged with “saving spring training for Osceola County” by the county commissioner’s office – something that could have been avoided altogether. 

As the CAD Falls So Does Jays' Profitability

Among the many challenges of operating the only MLB franchise outside the US, currency exchange is top priority for the Toronto Blue Jays. As team president and CEO Mark Shapiro pointed out, the team takes in Canadian dollars (CAD) in ticket, merchandise, concession, and sponsorship revenue. However, player salaries and other expenses such as operating the team’s minor league system in Dunedin, FL are paid in US dollars (USD). In addition, the current revenue sharing model in MLB requires all teams to contribute 31% of their net local revenue which is combined and equally distributed to every team. The current exchange rate is 1 CAD for every .77 USD.

For arguments sake let’s assume that the Blue Jays generated $25M CAD in revenue in 2015. Under the revenue sharing model, the team would be required to pay $7.75M CAD (or just over $10M USD). However at the current exchange rate, the Blue Jays would actually have to pay more than $12.9M, or 51.6% of their total revenue. Almost certainly, addressing this issue by working with the commissioner’s office will be one of Shaprio’s top priorities in his first year with the organization. 

If Dunedin Loses Jays, City May Egret-It

The Florida home of the Blue Jays, Florida Auto Exchange Stadium, has been called “a throwback to the bygone era of spring training, both in size and appearance.” The oldest and smallest spring training site lacks most of the creature comforts found in modern stadiums. The Blue Jays lease expires in 2017 and team president and CEO Mark Shapiro has publicly stated that he will seek a new training facility and stadium from the city of Dunedin. But for a town of just 30,000 people, coming up with $40-50M to finance a new stadium may be an insurmountable task. 

According to Blue Jays’ Director of Florida Operations Shelby Nelson, the state has earmarked $25M for the project on the condition that the team signs a 25-year lease. That’s certainly a start, but the lengths that Dunedin is willing to go to remain to be seen. Spring training coincides with Canadian March break and each year thousands of families flock to Dunedin. The city has been the Blue Jays only spring training home since 1977 and losing the team could be costly. 

The Baltimore Orioles – Business Partner and Neighbor

In 2008 Sarasota County spent $16.6M to upgrade Ed Smith Stadium. The 8-month project created an estimated 223 temporary jobs in the area with a total compensation of just over $9.7M. After the renovation the county retained ownership of the stadium and the team agreed to a 30-year lease which included operation and maintenance. Sort of.

As Orioles’ Vice President of Spring Training Operations David Rovine explained, the team and the county split the maintenance costs 50/50, but only up to $300,000. Anything above $300,000 would be considered a capital expenditure and would be the responsibility of the county. Rovine also stated that all the grounds keepers and facilities personnel are actually employed by the county not the Orioles organization.

So just how much does the county spend on Ed Smith Stadium each year? It’s tough to know for sure, but a quick search of public records revealed that in 2009 (prior to the renovation) the adopted budget in Sarasota County for parks and recreation, which includes care and maintenance for athletic fields like Ed Smith Stadium, was $19.5M. In 2016, that budget has soared to $196.9M. Certainly that entire cost can’t be attributed entirely to Ed Smith Stadium but it seems just a bit too coincidental. Either way, if Rovine's statement that the Orioles lose money each spring training and their annual operating budget is only $1M, how much is the county losing each year?

Tampa Bay Rays are going to Cuba!

This Sunday, March 20^th, the Tampa Bay Rays are off to Cuba for an exhibition game, against the Cuban National Team. The game will be held on Tuesday, March 22^nd in Havana, Cuba. This game holds significant importance, as it will mark MLB’s first trip to Cuba, since the Orioles in 1999.  The selection process consisted of seven Major League teams applying and the Rays were selected by Commissioner Rob Mansfred via lottery. Given the recent lottery win, the Rays have had to do organize everything quite quickly. Baseball is a very important sport in Cuba and it has become an important part of the Cuban national identity. The players are very excited for the opportunity to play in Cuba and have also gathered clothing and equipment, as donations. This is definitely a once in a lifetime opportunity for the Rays and it is an opportunity for their brand to get exposure internationally.

 

The Boston Red Sox – Embracing Change

Day 1 of our #GWMLBgrapefruit trip was truly a treat. Being a Red Sox fan and being able to see the beautiful park packed with New Englanders feels like home. We were able to meet with some key folks in the Red Sox organization including Adam Grossman, Chief Marketing Officer, Katie Haas, Vice President, Florida Business Operations and others who brought a variety of perspectives, insight, and honesty.

During the presentations, I found myself thinking about change and how Major League teams are always embracing it, adjusting to it, adapting to it, or creating it. There are changes in ballparks (the Red Sox making the move to Jet Blue Park), changing of types of players (incorporating Japanese players onto the roster), changes in strategies (embracing social media, and fan engagement as marketing strategies) and more.

         

Listening to Katie, she shared information with us about the process of moving to Jet Blue Park and was incredibly insightful and honest with us about the challenges and the position the team was in. She spoke of the fact that the Red Sox had a lot of leveraging power with Lee County, and how the team could have easily landed in Sarasota if the county hadn’t given them what they wanted. She also spoke about the leadership transitions since she has been there and how much that changed the team for the better.

Adam Grossman was also very interesting, as he spoke at length about the way the team engages fans by using two big areas: content and experience. He shared how all of these things have changed so much with social media, but that their core objectives remain the same and simply their strategies to achieving those change. The Red Sox and all MLB teams need to constantly be innovative to continue to keep their fans engaged.

It was incredible to be able to hear so much of the behind the scenes work being done to continue to uphold the Red Sox brand and make improvements to continue to attract fans and players alike.