With opening day just past, Red Sox versus Yankees is once again the best rivalry in all of sports. And just as surely the battle is paying financial dividends for both teams. But it is Boston that remains the fiscal, as well as competitive, underdog–the cursed franchise that all New England loves to curse (chart, page E12). Apart from the Yankees’ having captured 26 titles since the Red Sox last won the World Series in 1918, Boston plays in a smaller stadium in a less lucrative media market, with owners who ponied up a record $700 million two years ago (compared with the $10 million George Steinbrenner paid for the Yankees back in 1973). Upon purchasing the team, the new Boston owners publicly vowed to reverse the curse–the mythic “Curse of the Bambino,” Boston’s punishment for selling Babe Ruth to the Yankees in 1920–and bring the city a championship. “If I didn’t have reasonable expectations to be playing in October with some frequency, if someone told me it wouldn’t be for another 10 years,” says Red Sox CEO Larry Lucchino, “then I just might have gone off one of those New York bridges.”
The 58-year-old Lucchino–a protege of the late, legendary Washington lawyer Edward Bennett Williams, as well as a past baseball executive with two other clubs–is hardly as visible as the on-the-field members of the Red Sox. But behind the scenes, Lucchino (pronounced loo-keeno) is the central player in Boston’s strategy, not only to compete with the Yankees, but to revolutionize the business side of the game. A young general manager, Theo Epstein, was hired to make the tough baseball-personnel decisions. Baseball-stats guru Bill James was brought in as a consultant to help take the guesswork out of old-fashioned player evaluations. Ancient Fenway Park got some creative new seating–up above the Green Monster in left field–to generate fresh revenue. Around town, there’s a new sense of fan friendliness and community involvement. New ownership typically starts out with bold pronouncements and considerable bravado. But after just two seasons at the helm, Lucchino’s management team has already begun transforming one of baseball’s most stolid franchises.
Reversing the curse, of course, is first a baseball proposition. To that end, Epstein has added two all-star pitchers, Curt Schilling and Keith Foulke, and turned the reins over to a younger manager, Terry Francona, more attuned to a modern baseball culture that views technology as an invaluable tool. Those player moves have breathed new fire into the Boston-New York rivalry, and further elevated the Red Sox into a true national brand around which both Sox fans and Yankee haters can rally.
But overtaking the Yankees–whom an impassioned Lucchino called “the Evil Empire” even before last season’s sorrows–is every bit as much a business challenge. Lucchino’s mandate is to produce the requisite revenues, an ever-escalating number, that will provide Epstein with all the tools necessary to win. Baseball may be about fields of dreams, but sentimentality doesn’t pay the bills. And while a low-revenue franchise like the Florida Marlins can win the occasional World Series, you don’t have to be George Steinbrenner to know that big-money teams usually dominate.
The Red Sox may not face exactly the same problems illustrated in last year’s best seller “Moneyball,” in which Michael Lewis chronicled how Oakland battles baseball’s behemoths with less revenue and a low payroll. Boston is one of the those behemoths: it plays in baseball’s sixth-largest market and, at an estimated $125 million, boasts the second-highest payroll in the game. Yet in trying to compete with the Yankees, whose payroll exceeds Boston’s by some $60 million, the Red Sox are engaged in their own version of moneyball. At Fenway Park, the bottom line is as vital as the famed Green Monster. Lucchino offers as proof a large binder crammed with numbers, charts and graphs detailing team finances, complete with extensive industry comparisons. “We go through a rigorous budget process,” he says. “We take a certain pride that we do what we do in an orderly business fashion.” By contrast, George Steinbrenner’s never been known to fret over fiscal responsibility.
It was that economic rigor ($16 million of it, spread over seven years) that derailed Boston’s would-be acquisition this off-season of nonpareil shortstop Alex Rodriguez, who naturally wound up in Yankee pinstripes. “It was all about the math,” says Lucchino. “We have a plan and we were willing to stretch–but only so far.” The combination of the largest market and the most legendary brand in baseball assures the Yankees local media megadeals that will always give the team a leg up on the competition. Even after Boston boosted its revenues last year by $44 million–the most of any team in baseball, according to league sources–it still fell about $100 million short of the estimated $330 million raked in by the Yankees. “We can’t worry about what the Yankees do,” says Mike Dee, Red Sox executive vice president for business affairs. “We have to be smarter than they are.”
While the baseball team pursues its October strategy–what the Red Sox term “The Hunt for a Red October”–management is on a relentless quest for more revenue. Last year’s success won’t produce any windfall. After the Angels won the 2002 World Series, attendance in Anaheim climbed by 750,000 last year; that’s three quarters of a million more parkers, eaters, drinkers and souvenir buyers. But the Red Sox were virtually sold out last season anyway with what was already the highest ticket prices in baseball.
But necessity has once again proved to be useful. Prior ownership had dismissed Fenway as a decaying relic unworthy of new investment. A new ballpark was its only solution. It was widely assumed that the new principals, John Henry and Tom Werner–both baseball veterans as chairmen of the Florida Marlins and San Diego Padres, respectively–would echo that view. After all, Lucchino had built new ballparks in both Baltimore (Camden Yards) and San Diego (Petco Park). Lucchino won’t rule out a new park, but in the meantime he has opted for a Fenway makeover every bit as dramatic as if “Queer Eye” were on the case. “With Camden Yards, the challenge was to create the retro along with the new,” says Stephen Greyser, a Harvard Business School professor who has taught the business of sports. “With Fenway they had the retro. What they had to prove was that they could go modern.”
On a sunny spring day just two weeks before the Red Sox home opener, Lucchino dons a hard hat to give a reporter a tour–“Fenway, Year 3”–of the reconceived ballpark. It is also a pep talk for all the workers whom Lucchino greets with a pat on a shoulder and a friendly reminder: “Less clutter, more revenues.” Under the new owners, Fenway’s capacity has actually been boosted from 33,500 to around 35,000–not by cramming in more bodies, but by putting seats where nobody had ever envisioned them. They began by adding two premium-price front rows that are closer to the action than the players’ seats in the dugouts. Then last year the Sox defied traditionalists by replacing the netting above the Green Monster in left field with a section of 274 barstools at $50 each. The bird’s-eye perch, dubbed “Monster Seats,” became a sensation; and even after the team doubled prices this year, 95,000 fans jammed its Web site to sign up for them.
The Red Sox hope to replicate that success this year with a different aerial view, adding several hundred picnic tickets–each four-seat tabletop above the right-field grandstands comes with $100 in food and drink. Even as Lucchino pursues more seats, he is determined to simultaneously increase what he calls “milling around” room–open space that both enhances the ambience and facilitates the march to the concession stands. “We fight for inches,” he says, describing how the Sox have knocked down walls and obstructions wherever possible, even pushing out into the adjacent Yawkey Way. “We look at every improvement to see if it has a revenue component,” he says. And while the Sox have boosted the corporate signage in the park, they are not yet selling ad space over the urinals in the new bathrooms. Yet the larger facilities should turn what was a two-inning ordeal into a quick pit stop, leaving more time to visit the adjacent concession areas. Last season they renamed one luxury suite the “Legends Suite” and sold it as an experience: watching the game alongside a rotating group of former stars like Carlton Fisk or Carl Yastrzemski. “What went for X per game now goes for 2.5X,” says Lucchino. This season the team will dedicate Ted Williams Plaza, complete with a giant statue of “Teddy Ballgame” outside the ballpark. “We never forget what is so special about this franchise,” says Dee. “When you’re in baseball and you come to work in Boston, it’s like a priest being summoned to Rome.”
Previous management was famous for its indifference toward the parishioners. These days, 18 charts adorn the office wall of Charles Steinberg, vice president of public affairs, tracking every element of how the fan is served. They monitor hundreds of service subcategories on which the team grades itself, like how fast ticket-takers move people through the gates. Perhaps the most dramatic change for fans was making Fenway, always a look-but-don’t-touch museum piece, accessible. Kids are invited onto the field for a free run of the bases after games. On Father’s Day, the Sox opened the park for parent-child catch in the outfield. And last summer the team put on Fenway’s first concert, as Bruce Springsteen took center stage and center field. Season-ticket retention has risen to 98.5 percent from 92 percent when new ownership took over. The team’s cable arm, NESN, had a 6 percent ratings increase for Sox games last year and is aggressively pushing into all corners of New England, even challenging the Yankees for the southern Connecticut territory it once ceded to New York. “I’d love to see the Battle of New Haven, where we’d draw a line right across the Merritt Parkway,” says Dee.
But New Haven is not really the line in the sand any longer. The Red Sox, with so many twentysomethings who attended college in Boston and all the snowbirds who flee the city’s winters, has a large national constituency that has been reinvigorated by the prospect of Red Sox supremacy. “People say the new owners overpaid for the Red Sox,” says David D’Alessandro, chairman of John Hancock Financial Services, who last year joined them as a minority partner. “But if anyone had fully understood what could be unleashed here, the price would have been $900 million.”
Sustaining all the momentum will likely prove much harder than unleashing it. In a few years, Fenway will be tapped out and ownership will have to find even more creative ways to maintain revenue growth. Still, in a city where contentiousness is a birthright and change is resisted at all costs, the new Sox ownership has, in remarkably rapid fashion, won over the fans. So far the consensus has the Red Sox pretty much making all the right moves. Except, of course, leaving Pedro in to pitch too long in that heartbreaker against the Yankees. Yet even that bitter loss adds poignancy to the Sox legend. “Truth is, were this about marketing and not about winning,” says Lucchino, “that last game would have been the perfect business plan.” Truth is, it may not have been about marketing then. But it surely is now.
