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Even in baseball, winning isn’t everything

In at least one major-league ballpark, technology will play a bigger role in boosting sales

San Francisco Giants President Larry Baer (left) talks with USA Today's Jon Swartz, Fortune's Jon Fortt and KNTV's Scott McGrew. Photo: KNTV and Jon Fortt.

Quick: What makes a baseball team a great business? If you said winning, you’ve only got part of the picture. Teams make money when lots of people consistently turn out or tune in to watch them – whether they win or not.

Of course, Larry Baer wants to win, too. But as president of the San Francisco Giants, he’s got a franchise to run. On the field, the Giants are just decent these days – last season they won 54% of their games – but the balance sheet is a different matter. From a financial standpoint the Giants are among the best, with 10-year attendance figures in the upper echelon of Major League Baseball – just behind the Yankees, Dodgers and Cardinals.

Baer, who oversees both baseball and business operations, has played a significant role in delivering those results. Not only did he have a hand in designing the team’s gorgeous ballpark on the Bay, but he’s also known to manage its operation down to the niggling details.

I had a chance to sit down with Baer this week for a taping of Press:Here, a TV show on the San Francisco NBC affiliate where I’m a frequent contributor. (It airs Sunday, but should be available online at today.) I’m not the biggest baseball fan, so I wasn’t interested in talking about the roster or the cross-bay rivalry with the Oakland A’s. Instead, I wanted to quiz him about what makes his business tick, and how things are shifting in the digital age.

The first question I had for Baer: Where does the money come from these days? Traditionally teams get most of their revenue from ticket sales, merchandise and concessions – but I figured some of that could be changing now that more fans watch games online and track them through smartphone apps.

As it turns out, things aren’t changing as much as one might think. Baer says the team now gets nearly 65% of its revenue from ticket-related sales – things like merchandise, food and parking. Another 25% comes from local TV, and the rest from national TV and other sources.

That ticket revenue percentage is somewhat higher than normal, which in Baer’s case is a good thing. The Giants’ average annual attendance during the last 10 years at nearby Candlestick Park was about 1.5 million. For the 10 years at AT&T (T) Park it’s over 3 million. By Baer’s calculation, the difference isn’t the hard-core fans – those folks have been coming all along. It’s the casual fans who would have skipped it before, but will now come to four or five games because it’s an experience that can compete with a night at the movies.

“Not that many people are going to walk down the street memorizing batting averages and earned run averages,” Baer says. “That’s OK.”

As part of a strategy to get more of those casual fans through the gates, Baer is launching a new variable ticket pricing system this year. Rather than have fixed prices for seats based on location, software will determine the best price for the ticket based on a number of factors. Baer believes it could be the most important technological advance in his business this decade.

“You go online, we have 1,800 different ticket prices depending on when you buy the ticket, when the game is and where the seat is,” Baer says. “For 75% of the games the price is going to be lower than the fixed-price ticket.”

If it works, that should translate into more butts in seats for more games this season. Which, of course, also means more garlic fries, more cups of beer … and more money for the franchise.