Speakers of Note is a series of articles where we provide summaries of great talks we’ve heard from business leaders around the country.
Who: Bill DeWitt III, President of the St. Louis Cardinals
Where: UHY Advisers Next Executives Breakfast Seminar, May 8, 2012, St. Louis, MO
Topic: The Business of Baseball
St. Louis is definitely a baseball town; sure, you’ll find your Blues hockey fans, your Billikens basketball fans, or perhaps, if you look hard enough, your diehard Rams football fans. But get out your red shirt with the Cardinals logo and tell your friends and co-workers that you’re headed down to Busch Stadium to see a game, and you’ll stir the envy of everyone around you.
For that reason, it was hardly surprising to see a packed room of young professionals waiting to hear Bill DeWitt III, President of the St. Louis Cardinals franchise (and son of principal owner Bill DeWitt, Jr. and grandson of Bill DeWitt, Sr., who managed and owned several different teams over a 50-year career). DeWitt spoke for around 30 minutes before opening up the floor to questions. And in that time, he provided a lot of interesting information about the behind-the-scenes business of baseball.
>St. Louis is a unique market, said DeWitt, because it’s only 24th in terms of its media size, and yet hosts a top 10 (out of 30) ball club due to its passionate fanbase for Cardinals baseball. There’s a tradition and a legacy for the team that runs deep in the town, but that extends far beyond the city’s borders out into the country, where St. Louis is the closest large city for many hours in any direction. The influence of St. Louis’s popular and far-reaching AM radio station KMOX made it easy for Cardinals baseball games to penetrate deep into areas remote enough that going to see a Cardinals baseball game could be a part of a family vacation to the city.
>Cable TV is offering some major growth opportunities to Major League Baseball clubs because contracts that were more favorable to the cable channels are expiring and allowing the clubs to renew at much higher rates. There’s a much higher demand for getting access to games via cable television, and the service has proved itself to be resilient during a recession (since television provides a form of cheap entertainment that people are reluctant to give up during hard times). Right now, cable is providing an important revenue stream to baseball clubs that’s actually rising faster than prices from ticket sales.
>DeWitt said that he doesn’t see online streaming as a disruptive influence at this point, but that the MLB has set things up so that those who use the official online streaming service pay into a central pool that’s distributed evenly among the teams. This provides an opportunity for the MLB to operate in a way that’s favorable to everyone, strengthening the benefits provided to the industry.
>One of the things the Cardinals have implemented as an organization have been technological platforms that allow for customer relationship management and dynamic ticket pricing. DeWitt made sure to note that dynamic pricing tends to bring ticket prices down rather than up; while popular games (such as weekend battles with the Cubs) may draw in slightly higher prices, dynamic pricing is often used to lower prices to make less popular match-ups more affordable to families who’d just like to go see a game live. The Cardinals organization really wants to find a way around the common excuse that “it’s just too expensive to go see a ball game with my whole family” — this helps to ensure that the stadium is more full more often, benefiting everyone involved.
>DeWitt also emphasized that while his organization does have a strong sales force, they have an equally strong service team that’s on hand to assist season ticket holders. Service is part of what makes the experience so much fun for the diehard fans, and DeWitt said that this is one of the reasons that the Cardinals have been so successful as an organization.
>Concession prices, said DeWitt, are high not because of a constant desire to raise prices, but because that is how the industry standard has evolved. He said that he feels that aside from inflation, concession prices probably won’t rise significantly in the near future simply because every price increase has an effect on the sell-through quantities of products being offered. And, he noted, there are ways for families to get around high concession prices, such as days where families can bring their own food inside or promotions at the family pavilion.
>The secret to having a strong team is having a mixture of “kids” and “veterans” – new players and experienced ones. DeWitt said it’s nearly impossible to keep the same roster for a five-year period due to the way that salaries scale up and that contracts work. Turnover has to happen for clubs to remain profitable. Every player has to be evaluated in terms of what they’re offering the team, and since no single player can win a game, it’s important to have a strong team and not just one or two high-priced stars. DeWitt acknowledged that ever team has its own “Moneyball guys” to help value players, and that often, trades are made to try to maximize resources and potential for the season.
>Winning is a crucial part of success, because it does allow the club to charge more for tickets and helps to draw in more fans. Getting to the playoffs can help fans keep up their confidence, even if it doesn’t translate into winning a pennant or World Championship. As DeWitt said at the beginning, “If you make it to the dance, you have the chance” to increase your profile, both among fans and cable television carriers.
>The way in which the Cardinals organization uses social media is to offer insights into the organization that fans will appreciate rather than to try to offer live scores or sales information. Social media can be used to create interest in happenings at the ballpark or during the season, and the Cardinals keep that stream official to maximize exposure and exert some control. Still, they encourage the people working for the club to contribute to the official stream, creating opportunities for unique content that will help the fans to share in the passion of the people working behind the scenes. It’s all about balance.
>DeWitt also addressed the issue of Ballpark Village, a planned addition to the stadium area that will add retail space, offices and attractions for Cardinals fans and tourists. While this project has been stalled several times by all sorts of circumstances, DeWitt assured everyone in the room that it’s coming, and he said that when he looks out in the left field area, even with its breathtaking view of the St. Louis Gateway Arch and the courthouse, he feels like something is not quite right yet (“like a missing tooth,” he said).
Our takeaways: Baseball is a lot of fun, but it’s still a business at the end of the day. It’s important whenever you’re selling fun to a broad market to be sure that you understand the experience and are able to offer different pricing options to your customers so that you can expand your opportunities.
Baseball teams have to constantly change and evolve in order to be profitable, but this translates into excitement for the fans as well. Seeing a veteran player enter into a period of reinvention can be just as exciting as watching an up-and-comer with great potential deliver. Understanding that the players all contribute to the whole (rather than allowing one or two stars to have all the resources) is the key to keeping the teams fresh and new so that fans won’t feel the experience is growing stale. The same could be true for products and services; diversity is important, and aging cash cows need to be augmented with rising stars to keep the product or service line modern.
Having diversified revenue streams helps to ensure that you always have the capital to reinvest in your organization, and using modern technology such as CRM and dynamic pricing can help boost sales by targeting those who are more price-conscious.