This is usually a huge criticism of small market teams that are collecting shared revenue, and don’t put it directly back into their payrolls. Is it done? Probably. But as a long term strategy, it’s a huge mistake, and the owners of those teams will end up losing money because of it.

Thinking about it on a general level, owners will make most of their money through capital gains, not operating profits. Because costs and profits are so hard to project year to year (since it’s impossible to say how competitive the team will be in one year, let alone five years), teams are generally valued based on their future potential revenue intake, not their net income. If teams can keep their costs down while growing revenues (as they’ve done the past couple of seasons), that’s a bonus.

So while pocketing revenue sharing dollars helps boost profits, it can severely stunt revenue growth, which hurts the long-term franchise value. That’s a pretty miserable strategy, as Rachel Phelps will probably tell you (I never really understood how Dorn could afford to buy the team in II; maybe this is why).

While we’re at it, let’s shoot down another misconception: the Major League payroll is just one of many places a team can spend its money, and for teams at the beginning of the success cycle, it’s the most inefficient place. And while Forbes’s numbers show a number of small market teams being extremely profitable (I don’t doubt that this is true), that says nothing about actual cash-flow. If a team builds a new Dominican academy, or makes improvements to its stadium, that’s a capital expenditure that isn’t taken into account when calculating EBITDA profits. And it’s those areas — along with the draft — that these teams should be spending their money on.

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com

Give the broadcast networks credit: at least they’re consistent. In February, Hulu cut off access to its content from Boxee, which is essentially a web browser optimized for your television. Hulu cited the wishes of their content partners, i.e. Fox, NBC, etc, who figured their advertisers and cable providers would be pissed if people could easily bypass the standard TV channels, but still get the benefit of the bigger screen. Taking this one step further, Hulu just introduced Hulu Desktop, a native PC app that can be used on any computer, but won’t be accessible from a TV unless you have a computer science degree:

Note how the company describes it: “A lean-back viewing experience for your personal computer” that will work on Macs and PCs with “standard Windows Media Center or Apple remote controls” - but not Microsoft’s Windows Media Center (MSFT) machines or Apple’s AppleTV (AAPL) boxes. And it also isn’t designed to work with any other Web-to-TV software or boxes, like Vudu.

In other words, the networks are still doing their best to rearrange the deck chairs on the Titanic.

Sports leagues are much luckier. Their programming is basically Tivo-proof, and if broadcast/cable television is ever beaten by IPTV, they’d probably be able to make even more money distributing the games themselves (there wouldn’t be many other mass ad channels at that point, making sports games that much more valuable). So whether people are watching on a computer, or a TV, or an internet-enable quasi-PC that looks like and is called a television, sports leagues really shouldn’t care.

But for individual teams, this might become a very tricky issue. Large market teams, especially those that own their own RSNs (the Yankees, Red Sox, Mets, etc.), make incredible amounts of money from cable. Small market teams don’t. As it stands now, all digital broadcasting revenue is shared equally among the thirty MLB franchises, via MLB Advanced Media. So the higher the percentage of total broadcasting revenue that is generated digitally, the higher the share for small market teams.

And that’s where the battle will be. What if IPTV becomes standard practice, and 80 or 90 percent of broadcasting revenue is generated digitally? Who will control the local broadcasting rights, in that case (right now, it’s presumed to be MLBAM, but local games are still blacked out on MLB.tv)? When do we reach a point when this will be the top issue dividing large- and small- market teams?

We’re still a ways off, but these are questions that all teams should be considering and preparing for right now.

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com

This is such an obvious idea, I can’t believe it’s not being done already. Teams pay tens (or even hundreds) of thousands of dollars to companies that edit, tag, splice, and format video into nicely wound packages, so that the team can see, for example, every fastball Johan Santana has thrown in a given season, month, to a given batter, etc. Or the teams have people who actually watch every game, cutting and tagging every single pitch as they go. Many of these people have no doubt had their eyes fall out.

Why isn’t BAM handling all this? BAM has someone at every Major League game; they have a state of the art online video product which has every game in at least the last 6 seasons archived; they also have an automated system that tags every pitch’s location, velocity, movement, release point, and outcome.

So why isn’t pitch f/x being integrated with MLB.tv? This seems like an obvious application that would immediately save all thirty teams some cash. But even more than that, it could also be a great way to market MLB.tv, while also monetizing pitch f/x for the first time.

Think about it. Pitch f/x has become a pretty mainstream tool (at least in the baseball blogosphere’s mainstream, if that makes sense). Many, many blogs incorporate it into their posts. Now imagine if you could integrate video with it too. Instead of simply charting a pitcher’s sliders, you could also watch all of his sliders in that game in an embeddable video clip. You could create these clips through an MLB.tv api, or BAM could create a simple UI for it.

This would add a lot if value to pitch f/x blog posts, and it would really boost MLB.tv’s presence in the blogosphere. Of course, the videos would have to be embeddable, so I’m probably getting ahead of myself.

Regardless, just as a money saver for the teams, this seems like an obvious move for BAM. It wouldn’t shock me to see it at some point, although I’m not holding my breath on the embeds.

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com

ESPN is infiltrating YouTube in a big way this summer. Not only will it have its own channel (it already does, although it’s a bit weak right now), but it will be the first content producer to have its own player used on YouTube. Even more importantly, it will also be the first content producer to run full on pre-roll ads on YouTube, possibly paving the way for every other major media company to do the same.

Let’s get something totally clear: pre-rolls work. Yes, the audience for a single online video is limited, especially compared to broadcast networks. But think about it from both sides: advertisers get greater attention than they would for a TV commercial, as well as a more targeted audience. Content producers monetize their audiences, usually at a higher CPM than they would get on television (for the reasons mentioned above). If there’s a loser, it’s the viewers themselves. But if the content is valuable and unsubstitutable, we’ll deal with 15-30 second pre-rolls (Hulu has proved this without a doubt).

So why isn’t MLB.com running pre-rolls? If I had to guess, it’s a couple of different factors:

• BAM has a somewhat limited sales staff, and teams can only sell online sponsorships if they jump through about 14 hoops.
• MLB.com videos don’t have enough streams to justify a large-scale ad network.

The first issue can be solved, but only with some politics. The rules are in place to keep BAM independent and autonomous. But there’s money being left on the table, and all involved would be better served with a set 80/20-or-so arrangement. This would make it far easier to monetize the space, even if it’s only for video ads (which, at this point, still don’t exist on MLB.com).

As for the second issue, the solution is pretty obvious: embeds, along with distribution deals. This is what ESPN is doing, and it’s about as obvious a strategy as you can get in this space. You simply can’t maximize your company’s mindshare with a closed strategy anymore. ESPN — and Disney — realize this, and I think MLB will eventually also. But it’s better to do it by choice and get ahead of the game, than to have to do it out of necessity later.

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com

In case you missed it yesterday, how MLB can learn from the NFL’s labor mistakes. This is a very important issue, because the NFL’s policies would kill small market MLB teams, and baseball’s owners are much better off fighting the bigger battles. Now somebody explain that to Mark Attanasio.

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com

It’s not exactly what they wanted, but it’s still a pretty good shot in the arm. Comcast will put the NFL Network on its basic tier for 10.8 million customers, with a monthly sub fee of about 50 cents. That equates to about $65 million annually, a nice boost for a network that’s been pushing against a brick wall for distribution.

The NFL has taken a very different approach than MLB. NFL Network has charged subscribers as much as 88 cents per month (it had been looking for 70 cents from Comcast), and has refused to give the cable providers any equity. MLB Network, on the other hand, charges 24 cents, and gave up 1/3 of the company in order to gain broader distribution. MLBN had the biggest cable launch in history, while the NFL has gone through legal battles and other headaches, while still trailing MLBN in total subscribers.

And yet, NFL Network will likely blow away MLBN in terms of revenue for the next several years. NFLN will now have 45 million subscribers, compared to 52 million for MLBN. But the average sub fee for NFLN is likely around 2.5 times higher than MLBN’s — and that’s probably a low end guess. So assuming an average of 60 cents, NFLN will bring in $324 million in subscriber fees in the next year. Meanwhile, MLBN is projected to bring in around $200 million in total revenue this year, and $300 million in 2012. That’s a blowout by anybody’s standards, although we don’t know much about either side’s cost structure (MLBN will supposedly be cashflow positive this year).

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com

I wrote about affiliate systems on BP last week. Essentially, third party publishers advertise products, and receive a commission when one of their users clicks through and buys something. Amazon and Netflix, among others, use these programs to increase their advertising presence, while also cutting costs (the commission rate is generally much less than what companies spend on advertising, relative to the return they can expect to get).

MLB has this system in place for merchandise, but I’m not sure I’ve actually seen it used anywhere. That probably means a) MLB isn’t pushing it to the right third parties, and/or b) they’re not pushing the right products. I think it’s more a) than b), but there’s another important factor here: using this system for tickets would actually be much more profitable than using it for merchandise, assuming the relative demand for each goes up equally.

Here’s why: the greater the costs of goods sold, the more an affiliate system cuts into profits. The costs involved with selling an additional ticket are very low, so paying out a 10% commission on ticket sales reduces the team’s profit on each by close to 10%. But paying the same commission for a $20 t-shirt that costs $10 to make and ship actually decreases profits by 20% (20 - 10 - (20/2) = $8). Ideally, an affiliate system works best with low-cost items; Amazon would much prefer you to buy a third-party vendor’s product after coming from an affiliate’s site than something it ships itself.

In MLB’s case, tickets are a natural for this, especially if teams could lower their advertising costs as well. Digital products may be as well, although that’s tough to say for sure without knowing how BAM pays for bandwidth, streaming, etc.

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com

Do you know how famous you are in fantasy circles right now?
I hear it in the bullpen a lot now, that I better not screw up or I’ll kill their fantasy teams. Somebody told me I was owned in 99.7% of leagues, so I guess I need to advertise myself better to the other .3%.

If you save 50 games every year until you’re 43, you’ll have almost reached Trevor Hoffman’s record. What can you tell us about the years you spent with the all-time saves king?
He’s the best there is. Just getting to see how he goes about his business everyday, his daily routine, that really helped me. It would help anyone, any pitcher. I couldn’t have asked for a better teammate, a better mentor. It’s definitely a big pair of shoes to fill, but I’m just glad I got to be around him.

You’ve been pretty outspoken this year. Have you changed, or are people just listening more?
I guess the fantasy guys have heard of me now, so it’s a story if I say something ridiculous. I don’t know, I’m a little crazy, but I don’t think I’ve ever been any different. I don’t take myself so seriously. I’ve always tried to keep one face with everybody, and that goes for my friends, my family, my teammates, the press — everyone close to me knows I’m a playful guy, I like to joke around with people, and I think sometimes when it’s printed out it loses its context.

It’s gotten you into some trouble. Do you really have a problem with, among others, ESPN and the Mets?
(Laughs) I really don’t have a problem with anyone. A lot of it is me just joking around and having fun, and I think people are taking it too seriously because the press and the fans are just getting to know me. I don’t have a Mr. Met voodoo doll at home. But I’m very competitive, and I think it’s natural to want to beat your old team and prove people wrong. The guys on ESPN have been picking us to be dead last — of course I’m not going to like that.

You closed at Triple-A Norfolk for a number of years, and you dominated like Danny Almonte dominated Little League. In 2006 you struck out 56, walked 8, and let up 5 earned runs in 35 innings. Why do you think you didn’t get a real shot with the Mets?
I’m not really sure. I think I ran into some bad luck when they called me up a couple times. I didn’t have a great ERA, but when you’re a reliever one bad inning kills your ERA. (New York) is a pretty high-stress environment — if they don’t win every day, the papers get on them, so they probably can’t be as patient as some other teams. I would’ve loved to make it there, and I think I could’ve helped them the past couple years. But no complaints, they sent me to a team that really wanted me. I love San Diego, I love the Padres, and it’s all worked out great.

Have you ever heard of pitch f/x? Did you know that your fastball is averaging 93.9 MPH this year?
What was I hitting last year?

93.8. And you’ve got more vertical movement this year.
Well that’s good to know. I’ve heard of it, but I don’t know what it all means. As long as I’m getting guys out, I don’t care if I’m throwing 75 straight down the middle.

You’ve been throwing your fastball a lot more this year, about 75% of the time, as opposed to 69% last year, and 62% in 2007. Is this a deliberate change?
It’s cold out. It’s hard to hit a 93.9 mile per hour fastball in cold weather. Once it gets warmer I’ll probably throw more breaking balls. But in the cold, guys are just waiting to get something off-speed.

You also have a two-seam fastball and an offspeed pitch which is sometimes called a slider, sometimes a curveball. What exactly is it?

It’s a curveball. I hold it like a curve, at least. Most people think it’s a slider, because it’s harder than a typical curveball, and sometimes it moves more horizontally than 12-to-6. But I’ve always called it a curve.

Do the Padres have a chance this year?
Don’t put anything past us. We’ve got some great players on this team, some guys who have been to the playoffs, some young guys — we expect to win.

You’re a newly-minted millionaire. What’s the coolest thing you’ve bought since you signed your contract?
I got a super-fast remote control Porsche, goes about 50 miles per hour. But I’ve been wasting money on useless toys for years, so now I’m just buying the cool kids’ version.

Now here’s an interesting guy. Heath Bell is in his first year as Padres closer, doing his best to follow in the footsteps of all-time saves leader Trevor Hoffman. Closing is nothing new for him, though; in nine minor league seasons, Bell recorded 108 saves, including 42 at Triple-A Norfolk. All told, he pitched 468.2 innings in the Mets’ system, with 544 strikeouts and 128 walks. The Padres noticed, shipping Ben Johnson and Jon Adkins to New York for Bell following the 2006 season. Since coming to San Diego, Bell has established himself as one of the best relief pitchers in the game, racking up 187 strikeouts against 60 walks in 183.1 innings, with a 2.55 ERA. He’s yet to allow a run this season, as he’s eight-for-eight in save opportunities, and has struck out 14 men against just two walks in 11.2 innings.

Heath sat down with us last week, and we talked about what it’s like to follow a legend, his apparent dislike for ESPN, pitch f/x, and a number of other things. Check this space tomorrow morning for our exclusive interview.

Let’s get the most important point out of the way first: it’s impossible to prove a negative, so Selena Roberts or some other reporter can say A-Rod was taking steroids during naptime in nursery school, and there’s really nothing A-Rod can do about it (even negative steroid tests are useless; he could have gotten undetectable drugs from his formula dealer). Roger Clemens was vigilant, and that approach failed miserably. Sammy Sosa — who, keep in mind, there was no real evidence against, except that he hit a lot of home runs — kept quiet, and that didn’t really help either.

So A-Rod is essentially a walking punching bag at this point, and Selena Roberts is taking advantage. She is pushing the idea that A-Rod must have been taking steroids in high school, because it’s “impossible” that he could have increased his bench press from 100 to 300 pounds in six months. I know a lot of people who lift weights — I was a personal trainer in college — and my own experience has been fairly typical. For comparison’s sake:

• I started lifting when I was 20 years old, and I’m about eight inches shorter than A-Rod. On my first day, I benched 95 pounds. If he was lifting ~100 pounds during his sophomore year, it was because he had never lifted weights before.
• Within 6-8 months, I was benching about 200 pounds. At that age, I obviously wasn’t growing anymore, and the biggest change to my diet was that I stopped eating Hershey Bars for breakfast. If A-Rod started lifting when he was 16, and grew even 2-3 inches soon thereafter, it would be normal for him to be benching well over 200 pounds, and possibly over 250, even if he wasn’t a full-time athlete, and without a major change in his eating habits.
• When I started lifting, I was dedicated to it, in the sense that I made it a habit to go three times a week religiously. But I didn’t have millions of dollars at stake. When A-Rod was in high school, he was already an athletic freak, and had a direct financial incentive to get bigger, stronger, faster. Even without steroids, there are lots of ways you can make significant advances in the weight room: protein shakes, supplements, etc. And playing sports full-time creates a ton of testosterone in your body to start with, especially for teenagers. The idea that a high-school aged Alex Rodriguez needed more testosterone in his body in order to bench ~300 pounds is, in my mind, absurd.

So take from that what you will. Yes, to a certain extent, A-Rod got himself into this situation; considering his place in the game, he hasn’t been nearly careful enough in his private life. But everyone has skeletons, everyone has insecurities, and everyone has things they’d rather not be written about in books. Selena Roberts is going to make a lot of money off of this, and her Q score is already way up, so on a purely capitalistic level, good for her. But last night’s interview was a pile on, and most of the new accusations are impossible to substantiate, right or wrong. There’s a fine line between journalism and pushing your own agenda, and she’s toeing it very closely right now.

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com