8 of 8 people found the following review helpful:
4.0 out of 5 stars
Very good, but not for everyone, August 18, 2007
This review is from: Diamond Dollars: The Economics of Winning in Baseball (Hardcover)
This is a very interesting book that I enjoyed, but there are certainly caveats to those who may be interested in reading this. This book isn't for everyone and there are a couple of recommended prerequisites from my vantage point.
For one, if you're just a casual baseball fan, this book is not for you. It goes into a lot of detail about the business side of baseball and on all levels, and many times I thought to myself that if I didn't know the game and players as I do, I'd probably be lost. It helped me greatly that I have played and coached in addition to having been a serious fan for many years.
Second, it doesn't hurt to understand a little about the business side of anything, as this book is very business-oriented. If you have no business intuition at all, the material in this book will just fly over your head. You don't have to be a Fortune 500 CEO, but at least know a little about how businesses are run and some of the terminology.
In short, while a very good book, it's not light reading and not for everyone. Officials of baseball teams are a primary audience, and this is a must-read for such people. If you're a baseball fan and know a little about business, you'll enjoy it, although even then there will be parts that aren't easy to digest. Early on, I had a little trouble keeping up with all the information being thrown at me, from pure numbers to other facts, and it's almost too much right away. But once I got past that, the rest of the book came much more easily for me.
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3 of 3 people found the following review helpful:
5.0 out of 5 stars
Baseball Meets Financial Analysis, April 5, 2009
This review is from: Diamond Dollars: The Economics of Winning in Baseball (Hardcover)
I am bringing up my background because as you will see it will become important in my view of this book. I graduated Magna Cum Laude with a B.S. in Business Administration with a double major in Accounting and Finance. Also, I have a M.S. in Taxation. As a result, I have a very good financial background.
If you want to have a good understanding of the material in this book, then I would recommend that you have a decent understanding of using basic fundamental analysis to value a business. Finally, I would highly recommend understanding models that are produced by regression. There is tons of data in this book, and the researcher used a lot of regression models. He went back 30 years, and if a team was not around for 30 years, then he used all the data they had since they started playing Baseball. The book is broken into 4 parts.
Part 1:
Discusses how wins effect the future attendance of a team. He uses the term "Win/Curve", and concluded that in general, attendance is maximized when a team wins around 92 or 93 games. The latter is most likely caused by a team in a Pennant Race. Also, the farther a team goes into the Playoffs, the more season tickets that will be sold the following season. Finally, there are different levels of revenue generated from the "Win/Curve" that are broken into different revenue categories, multiple revenue streams and multiple revenue layers. Revenue streams are the daily revenue such as cash from attendance, concessions, local broadcasts and sponsorships. On the other hand, multiple reason layers are broken into 4 categories (1) Win Dollars - represents the change in revenue from daily revenue sources when a team wins over a period of years. (2) Postseason Dollars - Teams do not make money for just making the Postseason because the revenue from daily operations is enough to cover the bonus salaries for the players. Teams make their money by increasing season ticket holders over the next 3 to 5 years. (3)World Championship Dollars are created when a team wins the World Series. More fans by season tickets just to have access to Playoff tickets. When the WhiteSoxs wonthe 2005 WS their seson ticket revenue jumped 12.5%.
The 2nd Part of Diamond Dollars focuses on valuing players. One of the techniques used to value a player is broken down in the following manner. Lets use Vlad. His stats are used to figure out how many additional wins he helped produce. Then, the additional/marginal wins are plugged in to win the marginal revenue he produced. If the amount of marginal wins he helped produce has no effect on the playoffs, then its over, but if his marginal wins helped make the playoffs, then postseason and possibly world series revenue is added.
The 3rd Part discusses the importance of a good Farm System. An MLB team would be hard pressed to define a more important leverage point of its on field and business success than its scouting and player development system. As a result, noting a team does will have a greater impact on their cost structure than a success or failure of their farm systems ability to feed talent to the Major League Team. Therefore, the team with home grown talent (aka Twins, Marlins, Tampa Bay), and does not have to waste money on high priced free agents just a few free agents to fill in missing pieces can maximize their revenue. As a result, a team that can make the Playoffs or World Series under the latter situation will make a higher net profit than a team that chooses to build their team around high priced free agents.
Part 4 discusses the economic value of building a team brand. Some teams such as the Cubs, Yankees, and Cardinals, realize a revenue cushion in form of loyalty of their fans in years when the team is less than competitive. AS a result of the latter, teams with strong brands are ore likely to spend to win because their revues sag less in down years. Also, there is a theory of a 3 phase program to build a brand (1) BUILD CREDITABILITY though ownership showing a commitment to win, team never quits, Front Office acquires several big name free agents (2) COMPELLING ENTERTAINMENT VALUE - ownership demonstrates their commitment to win in part 1 by adding more big name players, the farm system begins to produce a few quality players to go with their free agents, and as a result fans begin to feel optimism. Also, entertainment value can be increased by a new ball park, or add attractions to the park for families (3) CREATING AN EMOTIONAL BOND WITH FANS Fans believe that the owners are want to win as much they do, team maintains continuity with key players, team has several "likable" players, Ballpark has feel of a baseball theme park, team owns their own broadcast network so they not only have control of how information is presented they have the ability to bring back legends to call the game
Finally, the book has some fun, and discusses some unique topics such as the YES Network, and the effect it has had on every MLB team to broadcast their games. There is a chapter devoted to Babe Ruth, and how he would be valued in today's game. The author even pokes holes in the "Moneyball" philosophy of Billy Beane. First, he believes Beane's on ego hurt him in that he let the cat out of the bag too soon by writing "Moneyball", and basically rubbing his success in everyone's face. Another flaw is that Beane does not give enough credit to the players on the team that are not homegrown, or in other words the homegrown kids alone would not have been able to win solely on their own. Finally, Beane lets go of his arbitration players too soon. Yeah, he gets more value back this way, but why give up a Hudson, Zito, and Blanton when they have still have a chance to go far in the playoffs. Is an extra draft pick really enough of a reason to give up a chance at winning the World Series.
Diamond Dollars is a phenomenal book, and I would recommend it to anyone who wants to understand theories about the Front Office. Its nice to see well thought out theories backed up with real data. However, this not a book to read on the beach or for leisure. Each section is very similar to reading an article in an academic journal. Therefore, I would recommend to read about 20 to 30 minutes at a time so your brain can absorb what you just read. You can read it in one sitting, but it would be a waste.
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