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And here is yet another cover story on our boys from this week's Crain's, New York Business
Mets swing for fences
Resurgent team beefs up books with TV network; planned ballpark risky but could double revenues
by Aaron Elstein
Last Wednesday, on a perfect evening for baseball, 38,000 people filled Shea Stadium to watch the New York Mets win a 13-inning thriller when a backup outfielder singled home the game's only run.
The victory helped solidify the team's grip on first place, and success on the field is rapidly translating into a financial windfall. Attendance is up 17% from last year; television ratings have jumped 56%. What's more, the Mets' new network, SportsNet New York, boasts 11 million subscribers nationwide--the same number as the Yankees' highly successful YES Network.
For the first time in years, the Mets may contend with their Bronx rivals in the accounting ledgers as well as in the standings.
"The Mets are doing it all right," says Lee Berke, the president of consulting firm LHB Sports Entertainment & Media Inc.
The game plan for the Mets is the financial equivalent of swinging for the fences: spending heavily to sign players, anteing up to start a cable network and building a new stadium. The last move is especially hazardous: To build the stadium--scheduled to open in 2009--the Mets will borrow $600 million, more than three times last year's revenues, according to Forbes. The increased debt will add about $40 million in annual interest expense to an organization whose costs already include a $100 million payroll.
Team management declined to comment for this story, but experts say that if the Mets can string together several winning seasons, demand for seats and suites in the new ballpark could double the club's revenues. That would help close the fiscal gap with the Yankees.
"The Mets are about to take large financial risks, and it's not a slam dunk that they'll succeed," says Marc Ganis, president of Chicago consulting firm Sportscorp Ltd. "To make it work, they have to win consistently and get significantly higher levels of fan interest than they've had over the last few years."
Boost from cable network
In the meantime, the new cable network provides an economic boost. The team owns about 60% of SportsNet New York, which launched in March. It charges cable carriers just under $2 per subscriber per month. The team gets about $140 million a year in subscription revenues, more than double its annual fee last year.
Ironically, SNY owes thanks to the Yankees. YES, which launched four years ago, had to fight a long legal war before Cablevision bowed to pressure and agreed to carry the network. The Mets seemed poised for their own battle with Cablevision, until it decided it didn't want a second controversy and agreed to put SNY in its 3 million homes.
"Precedent is helpful," says SNY President Jon Litner, a Boston native who grew up rooting for the Red Sox. "Very quietly and out of the newspapers, we worked hard with Cablevision to negotiate a deal that works for everyone."
The high subscriber base will help sell advertising as SNY matures. Kagan Research analyst John Mansell says ads typically account for no more than 15% of revenues during a regional sports network's first few years, though they can eventually generate up to 40%. Seventeen percent of the YES Network's $257 million in revenues last year came from ads.
With the cable network humming, the next step for the Mets is to keep a successful team on the field to maximize revenues from the new stadium. A new ballpark can lift a club's revenues by anywhere from 30% to 100%, according to one investment banker.
The $800 million ballpark will contain 45,000 seats, 12,000 fewer than Shea. But the team hopes to sell the naming rights for a record $15 million a year; the number of luxury boxes will increase by almost a third, to 58; concession stand points of sale will rise by 41%; and restaurant space will expand sixfold.
A giant gap
Many doubt the Mets can ever equal the Yankees, whose $277 million in revenues and $200 million payroll are far larger than any other teams'. Even with the Mets' success this season, their games on SNY generate an average rating of 2.4, or 177,000 households. The Yankees average a 4.1 rating on YES.
Even so, the investment banker says the team can emulate another rival: the San Francisco Giants. The Barry Bonds-led team, which is competitive most years, has nearly doubled its value since moving to a new ballpark in 2000.
"San Francisco experienced a transformational change with their new park," the banker says. "Guess what the Mets have in mind."
Comments? AElstein@crain.com
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