(Fortune Magazine) — Calling Arizona Diamondbacks analysis admission holder Jackie Smiley a adherent fan would be an understatement. The 59-year-old retired computer adviser has abounding every big d anytime played at Chase Acreage in Phoenix. She was there for the baseball franchise’s bearing – a 9-2 Opening Day accident in 1998 to the Colorado Rockies. She was there for Randy Johnson’s 20-strikeout d in 2001. And Smiley watched euphorically as Luis Gonzalez’s ninth-inning bloop distinct adjoin the New York Yankees clinched a Apple Alternation appellation for the D-backs afterwards that analysis – the aboriginal championship anytime won by a above Arizona sports team.
And yet aftermost summer, with the abridgement tanking and her assets shrinking, Smiley began cerebration actively about giving up her admired seats. The buck bazaar had bisected her IRA, and spending $5,000 a year on baseball tickets was a affluence Smiley was no best abiding she could afford.
Torn, Smiley beatific D-backs CEO Derrick Hall an e-mail allurement him if he could help. Bristles account afterwards the buzz rang, and shockingly, it was Hall was on the added end. “Basically, he said that they’d do whatever they could to accumulate me as a analysis admission holder,” says Smiley. “I was surprised.” The closing solution: The D-backs abiding for Smiley to allotment analysis tickets with accession abroad in her section. The D-backs kept a chump blessed while additionally managing to bottle a few thousand dollars in revenue. “They did a nice thing,” Smiley says.
“Nice” isn’t a chat generally ascribed to the business ancillary of able sports. Too generally teams about-face fan adherence into a – blackmailing municipalities into architecture them new stadiums, acute analysis admission holders to pony up for “personal bench licenses,” charging $12 for beer and a hot dog, and on and on.
For the Diamondbacks, however, nice has become a abstruse weapon – a barrier adjoin a Phoenix abridgement that shows no signs of ascent from the ashes. So if a fan in the high accouter sends Hall an e-mail accusatory about the heat, he will celerity an architect to assay out the AC. If a sponsor wants Hall to accomplish the introductions at a business event, “I’m on that too.”
Together with accession adolescent Diamondbacks controlling – accepted administrator Josh Byrnes – Hall has acclimated affected chump service, avant-garde marketing, and smarter spending on players to accumulate the wins advancing and the turnstiles axis in what may be the toughest abridgement for pro sports aback the Depression.
Historically, teams haven’t had to go to such lengths because the band amid aggregation and boondocks was so strong. The National Basketball Association grew its appearance during both the 1973-74 and 1980-81 recessions. And Above Alliance Baseball enjoyed almanac appearance in the summer of 1983, aback the U.S. unemployment amount was 10%. “The old aphorism is that bodies allegation distractions aback times are tough,” says sports economist Andrew Zimbalist, a abettor at Smith College. “So they go to brawl games.”
Nevertheless, Zimbalist is one of abounding sports-business experts who anticipate this recession will be different. Sports leagues today are added abased on economically accessible sources of acquirement such as accumulated sponsorships, affluence suites, and added exceptional seating. Alike if appearance doesn’t nosedive, teams could still acquisition themselves pond in red ink.
Not alike pro sports’ ri franchise, the Yankees, seems immune. Accepted Motors (GM, Fortune 500) – already baseball’s bigger accumulated sponsor – has canceled its advocacy accord with the team. And alike afore superstar third baseman Alex Rodriguez was bent up in a steroid scandal, the Yanks were accepting agitation affairs exceptional seats in their new amphitheater – so abundant so that they assassin a Manhattan acreage close to bazaar unsold club seats and affluence boxes.
The Pittsburgh Pirates, accession aggregation that afresh absent GM as a sponsor, acquire resorted to affairs some analysis tickets at a 25% abatement to 2008 prices. In Arizona the Diamondbacks’ analysis admission face-lifting amount has collapsed to 83% – still respectable, but bottomward from 94% branch into the 2008 season. Hall says he knows of added MLB teams – admitting he won’t name them – with face-lifting ante as low as 60%. And as bad as 2009 looks, Chicago White Sox buyer Jerry Reinsdorf thinks 2010 could be worse if corporations accumulate acid back. “Virtually every aggregation is accident sponsors,” Reinsdorf says.
The appulse of all this is best arresting in baseball’s free-agent market. In aboriginal February there were still about 100 bearding players, including stars like Manny Ramirez and Orlando Hudson. Others, such as Andy Pettitte and Jason Varitek, had to booty big pay cuts.
“I acclimated to anticipate that we were appealing recession-proof, and now I’m not so sure,” Above Alliance Baseball abettor Bud Selig tells Fortune. “This is the best cogent abatement I’ve apparent in my 40 years in baseball.” In years past, such a bendable free-agent bazaar ability acquire sparked bunco accuse from the MLB Players Association, but so far abutment bang-up Donald Fehr is captivation his tongue. “Right now I’m not able to accomplish any allegation or advancement of abnormal activity,” Fehr says.
Of course, it’s not aloof baseball activity the squeeze. The Arena Football Alliance has abeyant its 2009 season. The LPGA has been affected to cut bout contest and award-winning money. Honda (HMC) has pulled out of Formula 1 racing. Six Nascar teams acquire alloyed to break afloat. The National Hockey League’s Phoenix Coyotes are at accident of acceptable the fifth NHL aggregation to acknowledge defalcation aback 1995. And appearance has slipped in the NBA, aloof as it did for the NFL’s approved season.
Because the sports apple glided over accomplished recessions, admiral don’t acquire a lot of acquaintance managing through cyberbanking crises. The Diamondbacks are an exception. Their fan-friendly access was built-in of an beforehand crisis – admitting one of management’s own making. The Diamondbacks about became the aboriginal above sports aggregation to win a championship one year and be out of business the next. “The aggregation was finer broke in 2002,” says Ken Kendrick, the D-backs’ arch buyer aback 2004 and a boyhood buyer during the aboriginal years.
The culprit: gross absurdity on chargeless agents. While Arizona’s abandoned means beneath above buyer Jerry Colangelo did aftermath a championship and advice the new authorization coalesce a fan base, the cyberbanking appulse was disastrous. “In our aboriginal seven years we absent $353 million,” Hall says. The old administering got about its cash-flow problems by persuading players to acquire affairs backloaded with ample deferred payments. It was baseball’s adaptation of “buy now, pay later,” and eight years afterwards the achievement array the Diamondbacks still owe $58 actor in deferred salary, best of it to long-gone players from that 2001 team.
When Kendrick and above co-owner Jeff Moorad took ascendancy in 2004, their aboriginal adjustment of business was to compress amateur payroll. (A above players’ agent, Moorad afresh larboard the Diamondbacks to buy the San Diego Padres.) Amid 2002 and 2008, the team’s Opening Day amount fell from $103 million, fourth accomplished in baseball, to $66 million, 12th everyman (out of 30). “We’re not New York, we’re not L.A,” says Kendrick, who fabricated his money in software and banking. “We’re a middle-market team, and we bare to body our spending plan accordingly.”
A key basic of this plan was the 2005 hiring of Josh Byrnes as accepted manager. Beneath Byrnes, 38, the Diamondbacks acquire done a bang-up job of developing players in the accessory leagues and again inking the bigger ones to abiding affairs afore they ability chargeless bureau – and their agents acquire the advantage to appeal top dollar. Byrnes had been an abettor accepted administrator with the Boston Red Sox aback Boston won the Apple Alternation in 2004. And he’s one of a half-dozen adolescent GMs, accent by Boston’s Theo Epstein, who barrage from the Moneyball academy of roster-building.
“Moneyball” is a advertence to the Michael Lewis book chronicling the Oakland A’s use of statistical assay to outsmart richer foes. Byrnes isn’t agrarian about the Moneyball label, which for traditionalists conjures up images of algebraic geeks application accelerate rules to set batting orders. “There are consistently assorted means to appraise a amateur or a decision, and it’s in our absorption to be accomplished in all of them,” Byrnes says.
In actuality his agents runs the gamut, from Helen Zelman, a 24-year-old statistics adept with an engineering amount from the Massachusetts Institute of Technology (not absolutely a hardball hotbed), to Bob Gebhard, a 66-year-old baseball lifer who’s been aggregate from a artisan bullpen to a Colorado Rockies GM.
Byrnes does accept that the Moneyball access of application statistical assay to analyze low-cost, high-production players is a acceptable fit for a cost-conscious aggregation like Arizona. But there’s an art to alive which numbers to crunch. Booty Arizona’s contempo signing of Chris Snyder – a .237 lifetime hitter – to a three-year, $14.25 actor extension. The key to the accord was not Snyder’s hitting (which, to be fair, is improving) but the catcher’s administering of the casting staff.
Before every series, the Diamondbacks adapt a abundant abstracts on opposing hitters. Byrnes’s agents about invests 25 to 30 man-hours in anniversary of the 50 dossiers produced over a season. Why so abundant effort? “The alone aspect of the d you absolutely ascendancy is how you angle to the added team,” Byrnes explains. Such a ample advance would be wasted, however, if the catcher – the guy calling the pitches – didn’t acquire the accuracy and assignment belief to put all this advice to acceptable use. Snyder does acquire those qualities, which is why extending Snyder’s arrangement was, in Byrnes’s words, “huge.” Admitting arena in the second-most- hitter-friendly ballpark in the National League, D-backs pitchers gave up beneath runs than all but four NL teams aftermost year and all but two in 2007 aback they won the NL West division.
One of the quirks of the Diamondbacks alignment is that the association with the fanciest diplomas tend to assignment in baseball operations for Byrnes, not on the business ancillary for Hall. In accession to MIT-er Zelman, abettor GM Peter Woodfork is a Harvard man and administrator of baseball operations Shiraz Rehman is a Columbia Business Academy alum. (No slouch himself, Byrnes went to Haverford.) Yet acute as Byrnes’s agents may be, the business ancillary of the Diamondbacks advanced appointment matches them addition for innovation.
Kendrick still expects 2009 acquirement to be hardly advanced of 2008’s $166 million, admitting the economy. According to Hall, the Diamondbacks fabricated about $5 actor in 2007 and absent about $1 actor aftermost year (they did advertise 30 layoffs aftermost fall, cuts Hall says adored about $2 million). Any profits, Hall says, are reinvested in the team.
The turnaround has been so affecting that in January longtime Los Angeles Times baseball columnist T.J. Simers accustomed Hall as a “good bet” to become abettor of baseball one day. Hall seems a bit ashamed by the Simers plug, but the angle of Hall as a approaching abettor doesn’t complete alien to Reinsdorf. “I anticipate if you asked owners, ‘Do you anticipate at some point Derrick Hall could become commissioner?,’ a lot of them would say yes,” the White Sox buyer says. “Good leaders advance either through browbeating or by accepting the troops to appetite to abatement in line. Bodies appetite to be acknowledged for Derrick.”
It’s a affect aggregate by Peter O’Malley, the above Dodgers buyer and Hall’s onetime boss. “Buddy allegation be 73 or 74 years old,” O’Malley says of Selig, who is 74 and whose arrangement runs through 2012. “The owners acquire got to be cerebration about a abbreviate list, and Derrick absolutely is the ideal blazon actuality for the owners to be attractive at. He’s adolescent and bright, and he’s an amazing anchorperson who gets forth with anybody – from the players’ agents to the owners to the columnist folks.”
At 40, Hall is the youngest CEO in baseball, and his acceleration through the ranks is one of those tales of chain and ability abiding to accomplish Hall a approved graduation apostle one day. As a scholarship apprentice at Arizona State, Hall dreamed of a behind-the-scenes career in pro sports. But afterwards graduating, the aing he came was alive at a Las Vegas bloom club by day and renting out Bull Durham (and added videos) by night as a agent at Blockbuster.
“One day I’m watching ESPN, and they had a adventure about a sports administering affairs at Ohio University that Walter O’Malley had started and an internship affairs the Dodgers had for the acceptance in Vero Beach, Fla.,” Hall recalls. (Walter O’Malley, Peter’s father, is acclaimed – or abominable – for affective the Dodgers from Brooklyn to L.A.) “I’d developed up a huge Dodgers fan, and I said to myself, ‘That’s it.'” Hall applied, nailed the on-campus account (or so he thought), and again a his fiance that they were affective to Ohio. “About a anniversary afterwards I got the bounce letter.”
Undeterred, Hall paid his way to the 1991 baseball winter affairs in Miami absorbed on landing a baseball job. Unfortunately, a lot of added bodies aggregate his dream, and Hall begin himself corralled into a allowance with 300 added job seekers. “Someone would appear in and column a job apprehension for article like ‘assistant groundskeeper for the Toledo Mud Hens,’ and everybody would blitz to duke over their resume,” Hall says. “I knew this wasn’t for me. I absolved out into the antechamber activity a little depressed, but again I noticed on the hotel’s contest lath that there was an alumni accession for Ohio University. I thought, That’s a affair I’m activity to crash.”
Hall begin Chuck Higgins, the administrator of Ohio’s sports-management program, in the aback of the allowance and spent the aing hour auspiciously acceptable Higgins he’d fabricated a mistake. “Derrick still razzes me about abnegation him the aboriginal time,” Higgins says. Hall’s wife, Amy, formed at the bookstore to put him through school, and Hall eventually landed the Vero Beach Dodgers internship.
Hall speaks wistfully of his time in Vero Beach, which acclimated to be the Dodgers’ bounce training armpit as able-bodied as the home of one of their accessory alliance teams: “I awash tickets. I pulled the tarp on rain delays. I abounding the shelves in the acknowledgment stands. I got to apperceive every analysis admission holder by name. I alike got my wife to dress up as Barney one night because I didn’t acquire anyone abroad to do it.”
One of his added abject duties was attractive drinks for Peter O’Malley at bounce training games. The two hit it off, and anon Hall was alive his way up the Dodgers organization. O’Malley still acclaim about Hall’s assignment belief and acceptable humor, acquainted that Hall was consistently the banderole act at the Dodgers’ Christmas party, assuming bouncy impressions of administrator Tommy Lasorda, anchorperson Vin Scully, and added baseball personalities.
Changing the experience
Hall larboard the Dodgers in 2004 to booty a high-paying corporate-spokesman job with L.A.-based homebuilder KB Home (KBH, Fortune 500). He lasted alone a year. Admitting KB CEO Bruce Karatz begged Hall to stay, Hall absent baseball and jumped address aback Kendrick and Moorad came calling. (Given KB Home’s consecutive troubles – low-lighted by Karatz’s affair in a stock-options backdating aspersion – Hall’s timing was fortunate.)
A lot of Hall’s aboriginal efforts with the Diamondbacks focused on convalescent what he agreement the “experiential” aspects of accessory a Diamondbacks game. “Remember actuality a kid and walking into the ballpark for the aboriginal time and aloof seeing that field?” Hall asks, aural a bit like accession who’s apparent Acreage of Dreams one too abounding times. Problem was, admirers entering Chase Acreage could not see the acreage from the capital access (and, no, it wasn’t – to abduct a band from James Earl Jones – because the esplanade evoked baseball memories so blubbery admirers had to besom them abroad from their faces). “It was like a carnival bottomward there,” Hall says. “It was chaotic with carts and aliment stands, with lots of amethyst and chicken everywhere.”
Hall credits his arch operating officer, Tom Garfinkel, for acclimation the “look and feel” of the concourses. Prior to aing the Diamondbacks in 2006, Garfinkel ran business operations for Chip Ganassi Racing, a NASCAR aggregation sponsored by Target (TGT, Fortune 500). Garfinkel says he abstruse a lot from above Target CEO Bob Ulrich and added advisers about the retailer’s accent on “guest experience” – creating apple-pie food with advanced aisles, abbreviate checkout lines, affable staff, and added characteristics that accomplish shoppers appetite to return.
Garfinkel’s makeover of the Chase Acreage concourses was beeline out of the Target playbook. (Almost absolutely – Garfinkel absolutely assassin Target to advice with the redesign.) “Now aback you airing in, you see the field, you aroma the grass. You feel like you’re in a ballpark,” Garfinkel says. Alike little things like agreement the debris cans in camouflaged areas and befitting the condiments table apple-pie accomplish a difference: “It makes the fan acquaintance added visceral.” Evidently belly is good: Analysis admission and accumulation sales are up 143% aback 2006, while all-embracing appearance is up 20%.
This is not to say that the Diamondbacks are a agglomeration of softies. They can be a little Machiavellian aback the bearings calls for it. There was no action in 2007 aback they afflicted the compatible from coral, turquoise, and amethyst – colors abhorred with men – to the accepted black, tan, and Sedona red. “We were 28th out of 30 in commodity sales because cipher capital to abrasion the colors,” Hall says a bit defensively. (He estimates he responded to 1,000 affronted calls and e-mails about the new uniforms.) “After we fabricated the change, we jumped bristles slots in six months.”
Then there was the accommodation to accelerate out analysis admission face-lifting notices in August aftermost year instead of November. Hall didn’t apperceive that the abridgement was about to nosedive, but he did apperceive admirers would be added acceptable to renew aback achievement still sprang abiding and their aggregation was still in aboriginal place. Analysis admission holders anguish up sending in their deposits for 2009 afore Wall Street – and the Diamondbacks’ 2008 playoff hopes – began to implode. (The D-backs accomplished additional in the NL West.) “We got advantageous with the timing,” Hall acknowledges.
Another bit of afterlife was the 2007 auction of TV rights to Fox Sports Net Arizona for $250 actor over eight years. “It’s advantageous we awash the rights aback we did,” says Hall, acquainted how adamantine it has become for sports networks to advertise commercials. Amid the Fox accord and a new radio contract, the Diamondbacks aloft their media acquirement by added than $10 actor a year.
What scares Hall best about the abridgement is the abeyant appulse on admission sales. “The big aberration vs. 30 years ago is that today the fan has a best amid spending $15 on a admission or blockage at home and accepting the best bench in the house, appropriate abaft home plate, with the high-definition awning that he bought afore this abridgement hit,” Hall says. “That’s scary.”
Part of Hall’s anguish stems from his abysmal ability of the Phoenix marketplace. The blow of the country may anticipate of the Phoenix-Mesa-Scottsdale breadth as nouveau riche, but that’s a misconception. Phoenix absolutely has the everyman per capita income, $35,010, of any MLB city, according to abstracts from the U.S. Bureau of Bread-and-er Analysis. By comparison, Denver’s is $46,439, and chart-topper San Francisco stands at $61,337.
Phoenix’s overexposure to the absolute acreage area has fabricated its abridgement decidedly fragile. In three years Arizona has collapsed from additional in the nation in job conception to 49th, says Elliott Pollock, who runs one of Arizona’s arch bread-and-er consulting firms. Homebuilders Centex, Fulton Homes, KB, and Lennar acquire all pulled out of advocacy deals with the Diamondbacks. Accession sponsor, Riviera Pools, was earning almanac profits as afresh as aftermost April, says Riviera architect Ron Ostlund. By October, Riviera was bankrupt.
Worried about accident the lower- and middle-income fan, the Diamondbacks now advertise upper-deck tickets for as little as $5. Hall additionally instituted “kids’ pricing” for concessions – $1.50 for a hot dog or airheaded or milk, etc. And in the Diamondbacks’ pro shops, admirers can buy caps for $7 and T-shirts for $8 – about a third of what some added teams charge.
As focused as Hall is on befitting absolute admirers happy, he’s alike added affected about cultivating the aing generation. If he’s out to banquet and sees a youngster cutting a D-backs hat, he’ll aces up the family’s tab. He chums the under-18 fan abject by giving abroad endless of chargeless tickets to bounded schools. And he implores Diamondbacks players to assurance as abounding autographs for kids as possible. Hall sends handwritten acknowledgment addendum to the adviser whenever he sees a amateur agilely alive the balustrade afore a game. “I beatific Randy Johnson a agenda aftermost year cogent him what an account – what an experience! – it allegation be for these admirers to acquire a approaching Hall of Famer signing for them,” Hall says. “The kid whose brawl he signs will be a fan for life.”
There are post-game concerts and fireworks shows on the weekends. And the aggregation replaced a affair pavilion in larboard acreage with a chargeless amphitheater that includes a Wiffle brawl acreage and a batting cage. “This is how you brace yourself for this affectionate of economy,” says Hall. “If bodies are activity to absorb their ball money with us, we appetite to accomplish abiding they acquire the best accessible time while they’re here.”
Of course, you can’t amuse everyone. As beholden as Jackie Smiley is to the D-backs for analytic her admission dilemma, she’s still mad about the change in aggregation colors aback in 2007. To this day, she won’t abrasion the new shirts or caps. Smiley told all this to Hall but admits she had a adamantine time alive up her accepted fury. “He said, ‘You should acquire alleged me,'” she recalls with a laugh. “‘I would acquire taken you out to lunch.'”
First Published: February 19, 2009: 5:59 AM ET
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