Reds score with amenities, attendance, media fees
Operating income of $22.4M is increase of 22 percent
Cincinnati Business Courier - May 11, 2007 by Steve Watkins Staff Reporter
The ownership rule of Bob Castellini has not only improved the Cincinnati Reds' on-field performance, it's improved the financial results, too.
The Reds were the seventh-most profitable team in Major League Baseball last year, despite playing in one of its smaller markets.
The club netted $22.4 million in operating income last year, according to Forbes magazine's annual estimate of Major League Baseball teams' financial results. That's up 22 percent from last year's $18 million figure and is just $1 million shy of the highest level since at least 1998, Forbes said.
The profit came in a year that saw the Reds place 22nd among the 30 teams in revenue, with $146 million.
But considering the team plays in the 28th-largest Major League Baseball market - only Kansas City and Milwaukee are smaller - that ranking doesn't look bad, either.
John Allen, the Reds' chief operating officer, declined to comment, adding that the Reds and Major League Baseball don't put any support behind the Forbes findings.
Don Schumacher, president of Cincinnati-based sports marketing, management and consulting firm Don Schumacher & Associates Inc., attributes the financial results to improvements made since Castellini bought the team before the 2006 season.
"It's a whole new ball game," he said. "Everything they've done seems to me to lead to improved valuation."
He credits Castellini's approach with changing the culture surrounding the team and its relations to the community.
"All the modifications they've made start with communications," Schumacher said. "When you're communicating, you start increasing your profile and you start increasing sales."
None of this surprises Schumacher, who worked with Castellini when Schumacher managed Riverfront Coliseum and Castellini was part of the arena's ownership group.
"You could see his integrity and his attention to detail," Schumacher said.
The Reds have taken steps to boost revenue since Castellini took over. The team added the Cincinnati Bell Riverboat Deck beyond center field this season and the Frontgate Outdoor Luxury Suite in the upper-deck gap near home plate last year. Both offer premium-priced seating. It also expanded party decks and pavilions at four-year-old Great American Ball Park.
Those fit with typical strategies to boost local revenue, said Don Hinchey, vice president of communications at the Bonham Group, a Denver-based sports and entertainment marketing firm. Teams are looking to expand advertising in the ballpark and create special clubs and hospitality areas, he said, noting the Colorado Rockies' TV broadcasters recently gave positive reviews for the Cincinnati Bell Riverboat Deck.
"The Reds have recognized the marketing potential that team and facility represent, and they're really capitalizing," Hinchey said.
Attendance plays a big role in revenue. Reds home attendance through May 6 this season ranked 24th, at 23,559 per game. But that was 6 percent ahead of last year's average at this point in the season. Further, last year's full-season attendance rose 10 percent from the prior year, to 26,351 per game. Still, this year's total is well off the league average of 30,350.
National media rights fees, split among all teams, make up another big chunk of revenue. That shot up by about one-third this year, to more than $800 million, according to a report from Baltimore-based sports investment bankers Moag & Co.
Schumacher figures the Reds will continue to grow. The top-notch broadcast group the team has assembled points to the Reds getting into the broadcast business, he said. That could mean taking a stake in radio or TV broadcasting entities, steps other major league teams have taken.
Ultimately, more money in the Reds' coffers could mean more money spent to improve the team. Castellini has said he would plow any profits back into the team.
There's already evidence of that. This year's Reds player payroll of $69 million ranks 21st in the league. That's up 13 percent from last year's $60.9 million figure.