Now’s the time for Royals to double-down on success

It was following a half-decent season in 2013 that Royals general manager Dayton Moore said he felt a little like he’d won the World Series. The remark didn’t go over very well locally or nationally, and Moore conceded later he could’ve chosen better words, but at the core of a poorly-worded sentence was a legitimate message. Moore sensed that people were getting into the Royals again. Even though the team that season had fallen a little short of the playoffs, the roster was at least competitive, and the fans at least had a product to watch. What Moore meant to say was that the franchise was restoring its bonds with the city around it, after too many years of two-way neglect.

The bonds are restored now. They maybe have never been stronger. After a year of no playoffs, Moore felt like he’d won a title, so I can’t imagine how he feels after a year of coming one win away. The fans are in love again. Many of the fans, they were always in love, but they’re once again willing to act on it. And new fans have been gained, as well, fans who previously never gave baseball a second thought. Consider one anecdote, to represent many:

People are wearing blue proudly again. People filled Kauffman Stadium proudly again. People are chanting proudly again. Last year put the Royals back on the map; this year circled the Royals with dark ink and arrows. The fans sense an opening window of contention, and as heartbreaking as it is to lose in a seventh game, this doesn’t have to have been the last chance. The Royals could be back, and they could be powered in no small part by gains from having made so deep a run.

All that success, all that restored loyalty and enthusiasm — that’s money. What’s more, that’s money the Royals weren’t even budgeting for. I’ve never been confused for a financial wizard, or for any kind of wizard, but what the Royals have been gaining is pure profit, and the gains aren’t going to end with the playoff run. As a matter of fact, the Royals will be benefiting from this past month for a good while yet.

To start with, we can just consider the games themselves. From the wild-card game to Game 7 of the World Series, Kauffman Stadium hosted eight playoff contests. It could’ve, in theory, hosted more, but it couldn’t have hosted many more, and all those games drew enormous sellout crowds. According to Sam Mellinger, each game was worth a little over a million dollars, so we could call it about $10 million even. Maybe more, given the World Series ticket prices, but $10 million feels like a fine estimate. That’s money the Royals didn’t know they’d be getting. So, that’s money that’s ready to be spent.

But there’s more, so much more, that comes out of a run to the championship. Mellinger also noted an expected attendance hike of something like 200,000, and that was before the Royals got as far as they did. Basically, more people care, and more people care more, which means more single-game tickets sold and more season tickets sold. Ticket prices might go up, at least in certain areas, and the Royals stand to sell more merchandise. They’ll draw higher television and radio ratings, which might somehow be monetized. The Royals didn’t create a brand-new fan base, but they’ve turned an ember into a flame, and that’s going to boost their revenue immediately, and in 2015, and in years after that, to a currently unknown extent.

In large part that last bit is unknown because we don’t know where the Royals will go from here. If they continue to contend, they’ll continue to draw more and more attention. If they sink back into the middle of the AL Central division, enthusiasm will gradually wane. So the Royals can either build off this, or they can stand pat, and the more they accomplish, the more they might stand to bring in.

Vince Gennaro is probably the foremost authority on the relationship between performance and revenue. He’s spent a lot of time looking at the link between winning and money, and this is a link to just one of several things that he’s published. Let me share with you a particular excerpt:

When you combine all of these incremental revenues […] a team can generate from $25 million to say, $70 million, over a 5-year period, from reaching the playoffs just one time.

That was written a couple years ago, but little will have changed. For the Royals, this run could be worth as much as $70 million over five years, and that’s just an estimate. The particulars depend on too many variables to count and factor in, but the Royals got as deep as you can without winning it all, and the total boost could be worth about as much as, for example, James Shields’ coming free-agent contract. Not that I think the Royals should give him that, but it’s the first name that came to mind.

This is important revenue. The Royals have acted as a smaller-market team, and for a while yet they’re stuck with a woefully small TV contract. They’ll never be confused with the Dodgers or even the Tigers, but the Royals should take all this free money and invest it back in the product. For ownership, spending more money could make more money. For the front office and the fans, spending more money improves the chances of sustained success. A playoff run ends when a playoff run ends, but the green spirit lives on, because fan loyalty rebuilds a lot faster than it deteriorates.

The Royals, this month, should have made something like $10 million. Next year, with greater attendance and potentially more expensive tickets, they could make another "extra" $7.5 million or $10 million or $15 million. It just so happens that the active roster is losing a starting pitcher, a designated hitter, and a right fielder. Jarrod Dyson can step right in for Nori Aoki, but Shields and Billy Butler call for replacements, and other areas call for upgrades. One hopes that Dayton Moore will be given greater flexibility.

 

We can examine some recent real-world examples. The Pirates, a year ago, busted a too-long futility skid, and they upped payroll about $5 million even though they lost in the NLDS. After the Orioles finally made it back to the playoffs in 2012, they upped payroll about $8 million even though they lost in the ALDS. When the Rangers did something similar in 2010 to what the Royals just did, they upped payroll about $27 million. After the Rockies’ run in 2007, they upped payroll about $14 million. The White Sox shot up about $28 million after 2005. After the Phillies got swept in the first round in 2007, they upped payroll about $9 million; it went up another $15 million after winning the World Series the next year. After the Rays’ lost the World Series, they upped payroll about $20 million. The Tigers, about $13 million, and then a year later another $43 million.

Payrolls go up after accomplishments like this. The effect is bigger for franchises coming off hard, dark times, like the Royals. Granted, the league-average payroll increases every season. Over the past decade, we’ve seen an average year-to-year bump of four or five million dollars per team. The Royals should have the capability to do more than that, and so they ought to do more than that, so that more good memories can be created.

The Royals, already, have been trending in a good direction. They spent more in 2014 than they spent in 2013, which was more than they spent in 2012, which was more than they spent in 2011. As the level of talent on the roster has increased, so, too, has the payroll, even without a single playoff game. Now the Royals have come within a single swing of winning it all, and from a business perspective, that’s almost as good as it gets. This money needs to be re-invested in the team, with the division eminently winnable. Oh, also, it needs to be re-invested wisely. That’s an important part, too, but that’s an article for a later date.