Reds could hear new media pitch
Radio, other deals could be on table
By Dan Monk
Cincinnati Business Courier
Updated: 7:00 p.m. ET Nov. 27, 2005
A player to be named later in the Cincinnati Reds' new ownership group could help baseball's oldest franchise lock in future profits with a savvy new media strategy.
Robert Lawrence is a former Taft Broadcasting executive who helped the St. Louis Cardinals team this year buy its own radio station. Now, the Indian Hill resident is said to be pursuing a similar deal for the Reds on behalf of his friend and soon-to-be controlling owner, Robert Castellini.
Lawrence won't discuss his plans, except to say, "It's every kid's dream to be part of a Major League baseball team."
Castellini, through a spokesman, also declined comment on whether Lawrence will join the Reds investment group.
On Nov. 2, Castellini announced plans to buy a controlling interest in the Reds from Cincinnati financier Carl Lindner Jr. Terms of the deal weren't announced but are based on a franchise value for the Reds of $270 million. Castellini is joined in the deal by Thomas and W. Joseph Williams, the son and nephew of former Reds owner William J. Williams. Other investors are expected to join the Castellini group but so far have not been identified.
Local media observers speculate that Lawrence will join the ownership group with the goal of revamping the team's approach to media and marketing,
"He's a creative genius," said Rob Riggsbee, owner of Inside Media, a Newtown-based media-buying consultant. "He knows sports marketing better than anybody. I believe big changes will come."
Lawrence is a local media investor who built a fortune while merging local radio stations over a two-decade span that ended with Clear Channel Communications Inc. as the dominant player in the Cincinnati market.
A few months ago, Lawrence put together a deal in which the Cardinals bought a 50 percent stake in a St. Louis radio station, KTRS-AM 550. As part of the deal, the Cardinals signed an eight-year contract to broadcast Cardinals games. The move was controversial in St. Louis, where Cardinals games had been broadcast on KMOX-AM 1120 for more than 50 years. The relationship had become part of the cultural fabric of St. Louis and produced some of baseball's best play callers: Jack Buck, Harry Caray and Bob Costas among them.
The Reds' ties to WLW date back to 1969 and also have featured some of the game's great broadcasters, including Waite Hoyt, Marty Brennaman and Al Michaels. The team's contract with WLW expires in 2007. The relationship has been strained in recent years, first when Major League Baseball signed a national distribution deal last fall with XM Satellite Radio. More recently, the Reds this year angered WLW's parent, Clear Channel Cincinnati, when it hired away one of WLW's top sales executives, Dave Collins.
Reds Chief Operating Officer John Allen declined to comment for this story.
While Lawrence declined to discuss the particulars of the Reds' rights arrangement with WLW, he was willing to talk about the Cardinals' arrangement with KTRS. He said the KTRS deal makes sense because it allows the Cardinals to maximize local media revenue by cross-selling its in-stadium advertising, promotions and sponsorship packages with air time on KTRS.
"I've been trying to pitch this concept for years," said Lawrence. "There's a natural conflict between the team and the media outlet. The team has a lot of in-stadium opportunities that they're trying to sell to the marketplace. So does the radio station. Intentionally or not, one sells against the other."
Reds radio broadcasts generated about $5.4 million in ad revenue in 2005, according to Riggsbee, who estimates WLW pays $4 million a year in rights fees to the Reds. In addition, the contract has incentive clauses in which the Reds can make up to $750,000 more by winning the World Series.
The Cardinals received $6.7 million in rights fees from KMOX last year, but the Infinity Broadcasting Corp.-owned station wanted to cut that fee to $4.7 million this year, according to published reports. KTRS General Manager Tim Dorsey wouldn't discuss terms of the rights arrangement but said the team and the station regularly make joint sales calls and are "ahead of our pacing" to meet sales projections and profit projections.
"It should mean more money for both of us," Dorsey said.
Using media ownership to maximize revenue opportunities isn't a new concept in baseball. The Chicago Cubs, Atlanta Braves, New York Yankees and Baltimore Orioles all have squeezed hefty profits from their ownership of cable companies. Local radio deals don't generate the numbers that cable networks do, but they can offer baseball owners other advantages, said Dennis Coates, an economics professor at the University of Maryland, Baltimore County.
"You have the ability to move profits from one business to another," said Coates. "The combination of the two might be more profitable, but they don't look as profitable. That helps you with revenue sharing and taxes. Accountants are smart. They'll figure out how to get the income generated in the entity that is taxed the least."
Coates said Major League teams that do not own their own cable operation are looking at ways of developing or buying them. He said ownership of a radio outlet could be a cheaper path to the same goal. While the strategy would depend on finding a willing seller, Coates has no doubt the new ownership group will explore it.
"If I was the current holder of the rights, I would believe there's a good chance I was going to lose them," he said.