Members of the Eisner TIMES editorial staff recently had the opportunity to interview Bill Giles, chairman and co-owner of Major League Baseball’s Philadelphia Phillies. To find out what Bill had to say, read on.

 

E: What changes have you seen in baseball and with the Phillies since you began your involvement with the sport?

BG: Baseball has changed dramatically. I first joined the Phillies in 1970; then in 1981 I put a group together to buy the team. The playing of the sport on the field and players have not changed much, even though recently the Phillies have become more successful on the field. We were also a very successful team from 1976 through 1983. Team success goes through cycles on the ball field. The dramatic change has been in revenue. There are so many teams now. In 2000, our gross revenue was roughly $60 million and now our gross revenue is $240 million. So there has been a great evolution of economics and revenue streams in baseball in the past 60 years, over the years in which I have been involved with the sport. When I first started out, the only revenue that the team received was for ticket sales, the scorecard for $0.10, then the price of a hot dog and a coke. We didn’t get paid for radio, didn’t have television. In the last 5 to 10 years, we have had the introduction of many types of revenue streams related to electronic media. We now have MLB.com, the baseball channel, and live baseball on the computer. XM radio provides $60 million to baseball, $2 million to each team. I don’t see anything out there in the future that is going to give us a big jump like the internet and XM radio have. Our new ballpark, Citizens Bank Park, which opened in 2004, has made a big difference to our revenue, as we had a bad lease with the city of Philadelphia in the old stadium. For example, our concession income was $3 million in 2003 and jumped to $19 million when we opened the new park in 2004.

E: What are your views of the evolution of the broadcasting of baseball on television?

BG: I was the chairman of the TV and Broadcasting Committee for many years, from 1980 through 1998. We also had the Baseball Network, which was a partnership between ABC, NBC and MLB. Back in those days in the late 1980s, nobody wanted to buy the rights to the World Series and the Game of the Week wasn’t popular. So we formed this entity called the Baseball Network, which was really a package of games that we provided to ABC and NBC and they regionalized the playoffs. They would have 2 or 3 games on at the same time. That lasted for 2 years and then FOX came along. FOX was trying to become the fourth network, competing with ABC, NBC and CBS, and thought that the way to do it was with sports properties. So they gave us a big piece of change for the All-Star Game, the World Series and the Game of the Week. That changed the economics dramatically. And they were very aggressive in getting not just baseball, but football and NASCAR as well. FOX has been getting great ratings in the playoffs this year and hopefully they’ll be involved for a long time.

E: What have you enjoyed most about being a part of the Phillies?

BG: The association with the people is probably the number one thing. There are so many good people that work in baseball and the players are good guys and fun to be around. The thing that has always driven me the most is that all my life I have wanted to make people happy. It makes me feel good before the games when I see families coming into the stadium. To me baseball is truly a family sport. Sixty-six percent of the people who come to Phillies games come with another member of their family. I don’t think that the same is true for the other professional sports. So I’m most proud of the fact that baseball is a family attraction and when you win, you make people happy.

E: How do you see baseball continuing to expand globally and what other opportunities do you see? BG: We have the World Baseball Classic every other year, which has 16 teams now. Baseball has always been popular in Latin America, Japan, Korea and Taiwan. We are working hard now in China, which never had baseball and is the largest country in the world. We are working to get kids and young athletes interested in baseball and it is growing. We’re also working in other countries such as Italy and the Netherlands and the World Baseball Classic has helped in that regard. It not only promotes baseball as a game and a business but hopefully we’ll get young talent out of these countries in time.

E: What are the biggest challenges facing baseball as a business today? And the Phillies?

BG: One of the biggest challenges is the disparity in revenue and the disparity in team payrolls. It is becoming difficult for small market, small revenue teams to compete with the Yankees, Red Sox, Angels, Dodgers and ourselves. Of the 30 teams, we are about the sixth in terms of revenue. We have revenue sharing in place, which is very helpful to the smaller market teams, but it is still very difficult for them to compete on the same field of play. The sharing is not great enough and whether we can over time change the revenue sharing to give the lower revenue teams more hope remains to be determined. On the other hand there are teams, such as theTampa Bay Devil Rays and the Florida Marlins, who have been successful as a result of their scouting and getting good players who weren’t too expensive. I think the greatest challenge is the balance of competition. One of our greatest challenges a few years ago was the collective bargaining agreement. We seem to be in agreement and the understanding between the union and ownership is much better than it used to be. I think that baseball has learned not to reach for the goal of a salary cap. I think most everyone in the baseball hierarchy understands this is going to be too difficult to do, so we’ll just tweak the deal that we now have. One of the problems with the economics used to be that clubs would overspend. Until the last four years, the industry lost money almost every year. The industry as a whole is making about $300 million a year and one of the reasons for this is that a debt-to-equity rule was initiated. It’s difficult under the new rules to spend more than you make because EBITDA is one of the guidelines and owners have to be more careful about borrowing money in order to cover expenses.

E: When assessing the value of a professional baseball team, what do you believe are the top three factors to consider?

BG: A lot of owners used to say to themselves, "I lost $10 million this year, but the value of my team went up by more than $10 million so I’ll make it up when I sell the team." That was the philosophy. A ballclub is generally valued at two and a half times gross revenue. The three factors which come into play in valuing a team are revenue, marketplace and attendance history. If you look at the Chicago Cubs or the Boston Red Sox, no matter how good they are they still almost always have a full house. These clubs are certainly worth more than a team for which the attendance fluctuates a lot depending on what their win-loss record is.