shortstop cities final proposal

7/30/2019 ShortStop Cities Final Proposal

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November 21st, 2011

Mr. Jonathan Mariner245 Park Avenue,

New York, NY 10167

Dear Mr. Mariner:

As requested, Six Sigma Consulting has analyzed the current market situation facing

Major League Baseball and researched opportunities to drive growth and create value.

We propose the implementation of ShortStop Cities, a year-round marketing campaign

to build fan loyalty in cities that arent home to an MLB franchise, to increasecorporate revenue.

The projected net present value of this project, modeled after the Louisville pilot

program is $421,934 for the next ten years. Variations in the hurdle rate continued to

show positive yields and show financial promise for the program. ShortStop Cities

will maximize MLB wealth by increasing consumer demand for tickets, merchandise,

and digital media.

We would like to thank MLB executives- Jonathan Mariner, Bob Bowman, and Rob

McGlarry- for setting aside valuable time to answer our questions and help us in ourresearch. We would also like to thank McIntire Block 4 professors- Anthony Baglioni,

Peter Gray, Karen Jansen, William Kehoe, Jeremy Marcel, Marcia Pentz, and Mark

Whitefor assisting us with the creation of this report.

We are very pleased with our research findings and we have enjoyed the opportunity

to work with Major League Baseball. We confidently stand behind our

recommendation to launch ShortStop Cities, and look forward to answering any

questions you may have during our upcoming meeting.

Sincerely,

Alfonso Aguila Sam Beach Stephanie Dexter

Garcia Lam Katherine Selko Kevin Wyckoff

SixSigmaConsulting


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Table of Contents

Executive Summary......1

Introduction......2

ShortStop Cities Overview................3

ShortStop Cities Strategy....3-4

Promoting MLB experience & tradition.3-4Exposing youth to baseball................................4

Financial Analysis...........................................................................................4-7

Calculating net present value.......................................................................................4-5 Analyzing opportunity costs.................................................................................5

Determining revenue sources......................................................................................6

Pricing ShortStop Series tickets...............................................................................6-7

City Selection Criteria...............................................................7-9

Distance........................................................................................7Potential for Loyalty.................................................................8

Established Infrastructure................................................8External Interests..............................................................8-9

Implications for Players...........................................................................................................9-10

Marketing Strategies..................................................................................................11-16

Community engagement...................................................................................11-13 Media push...........................................................................................................13-14

ShortStop Series.......................................................................................,.............15 New fan development.............................................................................................16

Moving Forward.....................................................................................................................16-17

Conclusion...............................................................................................................................17-18

Endnotes...18

Exhibits....19-30Exhibit 1: Google Insights Map ............19Exhibit 2:Decline in Attendance Growth...............20

Exhibit 3:Civil Rights Game Pricing Example ........21Exhibit 4: Potential ShortStop Cities ....22

Exhibit 5:Fan-Interaction Workshop ...............23Exhibit 6:.Lousiville Pilot Program.............24

Exhibit 7: Marketing Strategies Timeline...............25


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Exhibit 8: Twitter Advertising Example............26Exhibit 9: Facebook Advertising Example........27

Exhibit 10: Google Ad Words Example ....28Exhibit11: Radio Script......29

Exhibit 12: In-game activities ...................30

Appendices..............................................................................................................................31-41

Appendix A: ShortStop Cities Financial Analysis....31-35

Appendix B:Louisville Survey and Analysis36-39Appendix C: MLB Environmental Analysis...40

Appendix D: Creative Strategy Platform ..41

Financial Assumptions References.............................................................................................42

Works Consulted......43


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Executive Summary

Major League Baseball should implement what Six Sigma calls the ShortStop Cities Program, ayear-round marketing campaign to expand franchise loyalty into untapped markets. Satellite

cities selected for ShortStop are nearby a franchises home stadium and lack clear MLB teamaffiliation. ShortStop will target these markets by creating an affiliation between the city and thefranchise and introducing the MLB experience with a 2-game series in the ShortStop City.

Introduce tradition-rich MLB culture & live experience to new markets to expand fan base

Games in the satellite city will mirror the current MLB ballpark experience and introduce potentialfans to the culture and tradition of Major League Baseball, motivating them to purchase MLB

products (i.e. tickets, merchandise, subscriptions). MLB fans are geographically concentratedaround each teams stadium, but ShortStop Cities attracts currently untargeted fans by introducingthem to MLBs ballpark experience, culture, and tradition.

Select cities based on city driving distance, culture, stadium capacity & available funds

The primary selection criteria for ShortStop Cities is proximity to an MLB team, culture,infrastructure, and government funding. The program targets areas with a population over onemillion and a baseball stadium that holds at least 10k. The city must also be within 1-4 hours froman MLB team. This criteria ensures that the most revenue-generating fans are reached.

Sponsor little leagues, RBI programs & community events to establish community rapport

Each franchise should invest in programs important to the community to establish itself as a positivepresence. When initially implementing ShortStop Cities, sponsorship of local little leagues, RBIprograms, and major community events will attract youth and families to the MLB team. This directrelationship will foster community support for ShortStop Cities, promote youth baseball

participation, and benefit the long-term growth of MLB.

Market year-round through varied channels to ensure broad market penetration

The ShortStop Cities marketing strategy will employ varied media strategies to reach all targeteddemographics, encourage community engagement, and build lifelong fans of MLB. Year-roundmarketing will take place through a series of player meet-and-greets, youth skills workshops,community sponsorships, traditional media such as television, radio, billboards, and social media,and the ShortStop Series. The marketing cycle will be year round, starting when MLB announcesthe seasons schedule in September. A successful marketing campaign will mean a profitable

ShortStop program and an expanded loyal fan base for franchises.

Positive NPV for Louisville pilot program indicates MLB should implement program

A model of ShortStop Cities based in Louisville suggests an attractive investment for MLB. Theprogram yields a positive NPV of $421,934, over 10 years using a 16% hurdle rate. Revenues weregenerated primarily from ShortStop Series ticket sales, merchandise sales, and local TV contracts.Sensitivity analyses with conservative figures also yielded positive net earnings. Therefore, MLBshould consider the possibility of league-wide success for the program.


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YouknowweallsaytheNewYorkbaseballfanissmarterandmoreperceptivethananyotherfansinthe

country,butifthetruthbetoldweremoreprovincialthananyofthoseotherfans.Whenourbaseball

teamsareout[oftheplayoffs],weshutdownandIguesswhatthatmeansiswearereallynotbaseball

fans,wereYanksorMetsfans.

-Rich Coutinho, CBS New York-

Major League Baseball prides itself on having some of the most dedicated fans in the

world, but it has not yet realized the extent of its potential fan base. As with many sports, MLBs

loyal fans are concentrated in regions near a franchise, as shown inExhibit 1, but many people

living outside of franchise territories lack a sense of affiliation with an MLB team. This affiliation

drives baseball fans dedication and encourages spending that generates long-term profitability for

Major League Baseball. Thus, MLB has an opportunity to create loyal fans by building this sense

of affiliation in cities outside of current franchise territories.

Six Sigma Consulting proposes ShortStop Cities as a strategic marketing plan designed to

capture potential fans who lack loyalty to an MLB team. Using the criteria outlined in this report,

ShortStop Cities matches MLB franchises with cities located outside of its existing fan territory,

just a short stop away. ShortStop Cities implements a marketing campaign focused on community

engagement, franchise visibility, and a two-game series in the selected city, referred to in this report

as the satellite city. MLB teams will benefit financially from creating a larger consumer base

through:

Increased home game attendance Increased merchandise sales Increased value of local TV contracts Increased purchases of MLB media

The following report details how ShortStop Cities will attract new fans and increase revenue from

these four activities, presented in the context of a pilot program for the Cincinnati Reds in

Louisville, Kentucky.


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ShortStop Cities expands customer base by creating franchise loyalty in satellite cities

ShortStop Cities engages potential fans in satellite cities by bringing a nearby MLB team to them

through a year-round marketing campaign. Each of ShortStop Cities marketing activities focuses

on promoting the franchise and building an affiliation between the satellite city and the MLB team.

Specifically, the marketing activities will occur in a yearlong cycle consisting of four phases:

community engagement, local media push, a two-game series played in the ShortStop City, and

new fan development. This marketing strategy develops potential fans in satellite cities into loyal,

active fans, who spend money on Major League Baseball.

ShortStop Cities defines its target market using the terms inactive and active consumers

This report uses the term active to define fans that follow MLB games, purchase tickets, spend

money on digital media packages, and buy merchandise.Figure 1 illustrates Six Sigmas

distinction between active MLB fans

and potential fans, who we divide into

three groups: satellite city residents,

baseball fans, and inactive MLB fans.

Converting potential fans will increase

MLBs revenue, as these three groups

will begin to attend games and

purchase merchandise and media.

Exposure to MLB tradition and in-game experience converts inactive fans to active fans

ShortStop Cities brings MLBs rich culture and unique in-park experience to satellite cities to foster

a passion for MLB in domestic areas less exposed to professional baseball. With over 140-years of

history, MLB has kept fans coming back to stadiums to experience an American tradition, eating

Satellite city residents:

low interest in MLB

but are curious to

attend a baseball game

Inactive MLB fans:

interested in an MLB

team, but rarely

attend games and

purchase media or

merchandise

Fans of baseball:

appreciate baseball (i.e.

enroll their children in

little league), but arent

loyal to a MLB team

Active MLB fans:

routinely follow and

attend MLB games,

own merchandise and

purchase MLB media

Sustainable lo

term profitabi

(repeat ticke

MLB media

merchandise sa

Short-term

profitability(1X ticket sales)

Long-term

profitability

Figure 1: Shortstop Cities goal is convert potential fans into active fans


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the same snacks and singing the same song every 7th inning stretch. However,Exhibit 2 shows that

MLBs growth, based on regular-season home game attendance, has been stagnant over the last

decade, with a 0.43% eleven-year average.i ShortStop Cities can break this trend by reaching out to

untapped markets, giving potential fans a taste of MLBs unparalleled in-game entertainment and

motivating them to attend games in the future.

Exposing youth in satellite cities to MLB early in life creates potential for lifelong fans

ShortStop Cities will boost youth interest in baseball by

increasing kids direct exposure to the sport through a two-

game series and sponsorship of little leagues. Youth

participation in little league baseball, as charted inFigure 2,

has been declining for 15 years. Furthermore, youth

baseball participation has faced the largest decline of any

major sport. Baseball participation decreased over 24% in

the past decade as compared with a 21% increase in football participation and 38% increase in

hockey participation.ii ShortStop Cities addresses decreasing youth engagement and builds lifelong

fans by sponsoring little leagues, exposing kids to the live ballpark experience, and giving them

direct access to relatable players who serve as role models.

MLB should adopt ShortStop Cities Program because of pilot programs positive NPV

Six Sigma Consulting projects a ten-year NPV of $421,934 based on our hurdle rate of 16% for the

pilot program in Louisville. This hurdle rate was derived from a proposal to move the Oakland As

to the city of Fremont, California, a project we consider approximately as risky as ShortStop Cities.

Figure 3 shows the sensitivity of the NPV to the hurdle rate, with both 12% and 20% yielding

positive results. Our projections show net losses of $171,823 and $147,132 in the first two years,

Figure 2: Little League participation has been declining for 15 years

Little League participation over the years


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with net income turning positive in year 3 when the

Reds local TV contract is revaluated. The accuracy of

our forecasted NPV is dependent upon a number of

assumptions outlined inAppendix A. We made a

significant estimation when calculating the

opportunity cost of two forgone home games based on

the game-day revenues and expenses from the four

leaked MLB financial statements. Differences in

accounting practices between teams made accurately predicting average net income per game is not

feasible. We concluded on a per-game opportunity cost of $725,215. The majority (~55%) of the

programs incremental costs come from advertising, a necessary expense to build excitement about

ShortStop Cities and Reds baseball.

Further rollout of ShortStop Cities should be made on a case-by-case basis

ShortStop Cities will be most profitable for teams who are currently less successful in their home

markets because the opportunity cost of missed home games will be much lower. The variable

market size and profitability of each franchise makes accurately forecasting the viability of

ShortStop Cities across all thirty teams impossible, so MLB needs to analyze the prospects of each

team individually. For some of MLBs most successful teams, such as the New York Yankees and

Philadelphia Phillies, it is likely that ShortStop Cities will be unable to make up for the forgone net

income. However, for many franchises that struggle to fill their stadiums at every game, ShortStop

Cities is a profitable strategy because it creates more fans willing to buy tickets.

Figure 3: A sensitivity analysis of the NPV to the hurdle rate shows positive yi

HurdleRate

NPV

Current(16%) $421,938% $846,61

10% $713,40

12% $600,37

14% $504,13

16% $421,93

18% $351,51

20% $291,00

22% $238,87

24% $193,85


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ShortStop Cities raises revenue through ticket sales, media packages, and merchandise

ShortStop Cities grows demand for MLBs full set of revenue sources, namely home game ticket

sales, television programming, sales of digital media packages like MLB.TV, and merchandise

sales. In total, we expect revenues of $1,488,918 in the first year from the Louisville ShortStop

Cities program. To reach these projections we assume both series games will and that the demand

that ShortStop Cities creates for MLB will increase home-game ticket sales. In Louisville, which is

less than 2 hours from the Cincinnati Reds stadium, we predict an increase of 11,909 in home-

game ticket sales, with a slowly increasing growth rate starting at 1% and rising to 4% in the fifth

year. ShortStop Cities also increases demand for team coverage on local TV, which will be realized

during the revaluation of TV contracts. In Louisville, we have forecasted an increase in demand

worth $573,975 per year when the contract is resigned in year 3 and $847,477 in year 7. The

program will also increase sales of MLBs digital products such as MLB Extra Innings, MLB.tv

and the MLB At Bat app. In Louisville, we forecast total revenues of $11,724 from increased

demand for digital products in the first year. Finally, satellite cities new loyalty to their team will

boost sales of MLB and team-specific merchandise. In Louisville, we predict total additional

merchandise sales of $87,982 in the first year. Long-term achievement of these financial goals will

provide evidence that the project has successfully expanded MLBs fan base into new markets.

Ticket prices are based on the Civil Rights Game and MLB average prices

Six Sigma uses the 2008 Civil Rights Game in Memphis and the national MLB ticket price average

to determine the ShortStop Series $35 ticket price.Exhibit 3 illustrates the 2008 preseason Civil

Rights Game and should that MLB charged $50 for standard tickets and upwards of $120 for

premium seats. The game failed to sell out, with sources citing high ticket prices above the national

average of $26.91 for standard tickets and $85.16 for premium tickets as the primary reason. iii


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However, since attending an MLB game in a more intimate setting is a unique opportunity, Six

Sigma assumes it is reasonable to charge an eight-dollar premium above the standard ticket average.

Louisville survey suggests fans willingness to pay the ShortStop Series $35 ticket price

The results of Six Sigmas survey in Louisville, included inAppendix B, indicate that survey

participants are willing to pay an average price of $30.14 to attend the ShortStop Series. Out of the

total survey pool, 64% of participants were female and only willing to pay $22.63 on average to

attend a game. However, male respondents, in comparison, indicated a willingness to pay $38.63

on average but only made up 36% of the pool. Therefore, we forecast that the Reds can charge a

price slightly above the surveys recommended value and still sell out the game. Based on this data,

we confirm that $35 for a regular ticket and $90 for a premium ticket are reasonable prices.

City will be within 1-4 hours of MLB franchise to motivate new fans to travel to games

The first criteria in the city-selection process requires satellite cities to be a one to four hour drive

from the teams home stadium in order to make traveling to regular-season games a realistic option

for new fans. For example, ShortStop Cities

pilot city, Louisville, is less than two hours away

from the Reds home stadium in Cincinnati.

Distance is the most important factor that MLB

must consider because new ShortStop city fans

can add to home-game ticket sales revenue if

they are within driving distance of the stadium,

as shown inFigure 4.

Figure 4: ShortStop Cities selects satellite cities using a hierarchy of 4 criteria


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Cities must have existing sports culture and potential for common loyalty around a team

Aside from proximity, satellite cities should demonstrate that they have unified around a common

movement or team and have ties to baseball. ShortStop Cities looks for cities that demonstrate the

ability to rally behind a community event, for example, Louisvilles ability to come together to

celebrate the Kentucky Derby. Louisvilles successful Cincinnati Reds AAA affiliate and history of

bat production also make it an ideal city. The main goal of ShortStop Cities is to create loyalty

among the greatest number of potential fans, so the largest markets should be the first considered.

However, the most populous metro areas may not always be ideal environments to build unified

support. For example, the Houston Astros might have a difficult time increasing the number of

active MLB fans in San Antonio where there is an excess of diverse interests and entertainment

options. Thus, MLB will consider city culture in relation to population size on a case-by-case basis.

Shortstop Cities requires cities with 10k+ capacity stadium to maximize game attendance

Next, ShortStop Cities must have an existing 10K+ stadium to eliminate the need for construction

and allow for a large number of fans to attend the two-game ShortStop Series. This 10,000-seat

stipulation is based on existing minor league stadiums in cities that meet the location and loyalty

requirements.Exhibit 4 lists potential satellite cities with an existing ballpark that meets this 10k+

criteria. Cities with larger stadiums are more attractive because they allow a greater number of

people to experience a live game and MLBs unique in-park atmosphere. The Louisville pilot

program will hold its series at Louisville Slugger Field, which holds 13, 131 fans. iv

MLB will choose cities willing to help fund ShortStop Cities

Finally, selecting cities with governments that are willingly to subsidize ShortStop Cities costs will

reduce MLBs program expenses such as stadium rental fees, traffic control, and ballpark security.


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This sponsorship will benefit both the team and the community by bringing additional revenue into

the city and cutting the franchises costs. For example, in 2007 Alameda County in Oakland,

California budgeted roughly $3 million dollars to bring the Oakland Athletics to a new stadium.

Local officials allocated this sum from local tax dollars because they believed that Alameda

County [would] be able to retain the quality of life, entertainment value, and sense of identity that

comes from being host to a major league sports franchise.v The government of Goodyear, Arizona

also invested $76 million in 2007 to build an MLB spring training site in their town because they

believed it would increase tourism revenue.vi Local governments like Alameda County and

Goodyear recognize the goodwill and financial benefits of bringing professional sports teams into

their city. Therefore, MLB will look for local governments that are willing to sponsor portions of

ShortStop Cities. This criteria was not included in the financial analysis because it is unclear which

portions, if any, the Louisville government would be willing to invest in ShortStop Cities.

MLB will motivate players with intrinsic rewards of promoting baseball, not with money

ShortStop Cities will motivate players to participate in the program with the intrinsic rewards that

come with promoting their sport. MLB player support is vital to the success of ShortStop Cities

because the program counts on them to help engage satellite cities. ShortStop Cities requires

players to spend more time traveling and interacting with fans, but MLB should not provide

additional financial compensation for players. Instead, MLB should emphasize the intrinsic rewards

gained from serving as positive ambassadors of MLB. Aside from increasing the expenditures of

the program, it is proven that monetary extrinsic rewards, or hygiene factors according to

Frederick Herzbergs two-factor theory, will not make [players] truly satisfied or motivated to

spread the game of baseball.vii MLB must clearly articulate to players its long-term intent to expand

fan bases, and explain how achievement of this goal is a direct result of players interaction with


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Announcement of ShortStop Cities begins a year-round, 4-phase marketing campaign

The ShortStop Cities marketing campaign will

commence with an announcement at a major

community event in early September and

include a four-phase marketing strategy, shown

inFigure 5, specific to each city. Each phase

will reach targeted segments at opportune touch

points. The timing of the announcement will

coincide with the release of the coming seasons schedule. Additionally, the location will ensure

that people that already attend community events will hear about ShortStop Cities first. Exhibit 6

shows how the Reds will announce ShortStop Cities in Louisville at a University of Louisville

home football game. Announcing ShortStop Cities in this way will reach a large number of the

areas sports fans as U of L home football games boast an average attendance of 45,000. ix From

there, word of mouth will help preliminary news of ShortStop Cities penetrate the market. After the

initial announcement, a cycle of four marketing phases, detailed with specific strategies inExhibit 7,

will ensure that new fans maintain enthusiasm for the program and the franchise year-round.

Marketing Phase 1: Community EngagementSponsoring a community event builds sense of partnership and increases publicity

By supporting an event central to the satellite city community, the franchise will show that it is

aligning its own goals with the needs of the community, which will encourage potential fans to

support their team. For example, The Derby Festival in Louisville, an annual two-week long event

at the end of April leading up the Kentucky Derby, is one of the most exciting times of the year and

brings the community together. The timing of The Derby Festival is ideal in that it offers a final

Figure 5: ShortStop Cities uses 4 phases of year-round to engage new fans


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publicity push for ShortStop Cities leading up to the ShortStop Series that will increase ticket sales.

Sponsorship of community events will be crucial for ShortStop Cities to build connections with

potential fans and increase ticket sales.

RBI sponsorship engages youth, creates awareness of teams community involvement

Increasing youth interest in the game through RBI

will combat declining participation in youth

baseball and increase the likelihood that youth will

contribute to MLB revenue when they are older.

Sponsoring the Reviving Baseball in Inner Cities

(RBI) program, shown inFigure 6, may not create

immediate income, but it will increase youth interest in baseball and create awareness of MLBs

dedication to serving Americas youth. For cities that already have an RBI program, each franchise

need only make a donation to become a sponsor of the program and publicize the teams

community support. In satellite cities that do not already have RBI, franchises will sponsor another

pre-existing youth program, such as the Urban Youth Academy in Louisville or the local Boys and

Girls Club.x Six Sigma suggests an annual donation of $10,000. This funding will provide for

jerseys to participants and clinics run by MLB players and coaches. Each of these initiatives is low-

cost and increases the visibility of the franchises involvement in the community.

Little League sponsorships expose ShortStop Cities to families with disposable income

Franchises can market to families with disposable income by financially supporting the local little

league. For example, providing little league uniforms with the franchise logo printed on them will

cost about $10,000 per ten-team league and ensure that community members with an existing

interest in baseball, namely little league players and their parents, are exposed to the program. xi

Figure 6: Teams will sponsor RBI programs in satellite cities to engage youth


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Logos on jerseys and outfield advertising will make franchises visible to parents and youth

throughout the season. Little league parents new awareness of the franchises support will increase

their likelihood to buy tickets to the upcoming series, MLB merchandise, and MLB media

subscriptions for their families.

Marketing Phase 2: Media Push

Player visibility on Twitter will build rapport with younger potential fans

Twitter communication will initiate player-fan dialogue, which will build the satellite citys

connections with the MLB team. As game days approach, owners, athletes, and coaches will be

encouraged to update their social media pages with various statuses local fans can relate to, such as

asking for restaurant recommendations, as shown inExhibit 8, in the satellite city and encouraging

fans to attend ShortStop Cities events. Teens and young adults in the satellite city may feel

prompted to tweet back their favorite local restaurantand continue engagement with players.

Teams will use Facebook & Google ads to tailor message to segments of new marketTo best customize marketing, MLB should advertise on Facebook to those who have liked certain

pages and on Google to people searching specific, relevant terms. Through Facebook advertising,

shown inExhibit 9, teams can easily reach the most promising potential fans in a satellite citys

metropolitan area by requesting the ad go out to nearby users who have liked an MLB franchise

or listed baseball as an interest on their profile. Google AdWords can also be used to inform a wide

spectrum of fans of the ShortStop series, while also customizing the message to target markets. As

Exhibit 10 details, franchises could provide messages catered toward Louisville high-schoolers

searching terms like DuPont Manual baseball scores (a Louisville high school) while displaying

more traditional messages to searchers of general terms such as ESPN. In all cases, local internet


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users will receive a link to purchase tickets in a convenient manner, increasing awareness and

expediting ticket and merchandise sales.

ShortStop Cities uses traditional media to reach mass satellite city audience

Franchises will incorporate television, print, and radio advertising to increase MLBs presence in

satellite cities and reach a wide audience of potential fans.Exhibit 7illustrates the specific

communication vehicles that MLB teams will use, including both broadcast and interactive

techniques to reach out to potential fans. For example, the Reds will employ the following

community-specific advertising activities in the Louisville ShortStop Cities pilot program:

Commercials on local television station WHAS Billboards at Spaghetti Junction Fliers distributed throughout Jefferson County Public Schools

From early April to mid June, teams will

advertise the two-game series on local TV to

reach a high volume of consumers and maximize

franchise visibility. During this time, teams will

also use print media, like the billboard inFigure

7and fliers in Louisville, to enhance ShortStop

Cities name recognition within the community. Finally, teams will use radio broadcasts with

tailored messages like the radio script shown inExhibit 11. Theexhibit illustrates how Cincinnati

Reds player Aroldis Chapman will encourage fans to come watch him play at Slugger Field, which

will make fans feel personally invited to the two-game series.

Figure 7: Billboard over Louisville will reach mass audience with customized message


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Marketing Phase 3: ShortStop Series

Pre-game activities will incorporate elements of city culture to increase event appeal

Teams will incorporate local culture, food, games, and other attractions at a pre-game tailgate event

to add even greater appeal to the ShortStop Cities experience. Pre-game activities will begin at the

stadium around noon and are designed to build excitement among fans of all demographics. Exhibit

12 shows how teams will incorporate local flare with live concerts by local bands and regional

food from local vendors, so the event will reflect a communitys specific culture. In Louisville, the

Reds will host a community tailgate at Waterfront Park, a spacious area next to Slugger Field, to

generate excitement before the game and bring the community together. The Reds will also work

with radio station 91.9 WFPK to bring in a popular local artist to play at the pre-game barbeque and

enhance the events entertainment value.

In-game activities will mirror the traditional MLB experience & collect fan information

In-game activities will recreate the traditional MLB game atmosphere while incorporating

strategies to compile fan data. As soon as stadium gates open, fans will appreciate the interactive

nature of MLB games as they will be encouraged to text to win free merchandise, keep player stats,

and answer trivia questions. Teams will use this information to generate customer lists to reach fans

in follow-up marketing activities. MLB will also compile demographic data provided by fans texts

from multiple satellite cities and use it to evaluate current marketing strategies, and better market

the program to the community in the future.


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Marketing Phase 4: New Fan Development

Post-game marketing is essential to sustaining partnerships with satellite cities

Post-game marketing will increase brand awareness and reinforce positive public opinion of

ShortStop Cities after the series is over. Continued franchise presence in the community is vital to

maintaining loyalty with fans in satellite cities. ShortStop Cities fourth-phase of marketing uses

the following strategies to keep fans engaged with their MLB team:

Email promotions Radio thank-yous by players Shuttle buses to home games

Each of these follow-up strategies will ensure that the franchise can continue to build upon the

relationships created over the course of each year and profit from the new fan base. Teams will use

customer lists to email new fans about upcoming home games, merchandise promotions, and new

MLB digital media offerings. The franchise will also keep in touch with the satellite city through

radio segments that have MLB players thanking fans for attending the two-game series and

encouraging fans travel to watch a game in their teams home stadium. To encourage home game

attendance, teams will offer an inter-city shuttle that will travel between the satellite and the

franchise city on select weekends, making home game attendance more convenient. Fans will pay

to ride the shuttle, eliminating additional costs to MLB teams.

MLB will extend pilot program to 5 other cities after ShortStops success in Louisville

Moving forward, MLB will extend ShortStop Cities to the following cities to capture potential

MLB fans:

Oakland As in Sacramento, CA Toronto Blue Jays in Buffalo, NY Cleveland Indians in Columbus, OH St. Louis Cardinals in Memphis, TN Kansas City Royals in Omaha, NE


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While these areas may not have the largest metro populations of all American cities without an

MLB team, they fit the criteria of the ShortStop program. Sacramento, Buffalo, and Columbus

each have one million+ populations, 10k + stadiums, and are within about a 2 hour drive of the

closest MLB team.xii Of all cities listed inExhibit 4, these three cities show the most potential to

generate substantial revenue because they are nearby to MLB franchises that consistently struggle

to fill up their ballparks. By expanding their fan base to the ShortStop cities, the Blue Jays, Indians,

and As will attract more fans willing to commute to home games and increase the value of local

TV contracts.

The city of Memphis provides an example of how the ShortStop program can benefit teams with

strong home game attendance. Though forgoing weekend games in St. Louis may not be profitable,

one weekday series a year in Memphis could inspire greater loyalty to the team and substantially

increase MLB consumption in the area. Finally, Omaha would also be a strong fit for the program

because of the citys cultural ties to baseball. The Kansas City Royals, another team that has

traditionally struggled to fill its stadium, could greatly benefit from converting fans of the College

World Series into year round fans of MLB and more active consumers of their products. Selling out

the 24,505 seat TD Ameritrade Park could also easily make up for revenue lost from foregone

home games. xiii

Major League Baseball should take advantage of the opportunities presented in this report to

expand fan bases for teams and increase popularity for MLB as a whole. Creating active fans over

the next decade will be vital to MLBs future success as other sports begin to gain popularity,

especially among youth. Six Sigma believes that MLB should implement ShortStop Cities


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immediately to engage potential fans in satellite cities and continue its tradition of attracting the

most dedicated fans in the world.

iMLBRedandGreenBooksESPN.comiiMatthew Futterman. As Baseball Season Begins, Kids Are Losing Interest in the National Pastime The Wall Street Journal.

iii Jim Masilak, Baseball says Civil Rights Game will move to Cincinnati for 2009. The Commercial Appealivhttp://www.minorleaguebaseball.com/team1/vLewisWolff.EconomicandFiscalRevenueImpactsofaProposedBallparkVillageonTheCityofFremontand

theEconomicBaseofAlamedaCountyEconomicsResearchAssociates. viGaryThorne.Springtrainingnolongersimple,it'sbigbusinessFloridatoday.com viiAlanChapman.FrederickHerzbergMotivationalTheorywww.businesballs.com.viiiSteveHenso.ChapmanthrowsfastestpitcheverrecordedYahooSports.ixUofLCardGame,FootballAttendance.CardGame. .xhttp://www.bgca.org/whatwedo/SportsFitnessRecreation/Pages/RBI.aspxxiyouthbaseballuniforms.comxii"SacramentoRivercatsAttendanceRecord."Rivercats.com xiiiAldenGonzalez,"RBICreatingLastingMemories."MLB.com.


24/49

Exhibit 1:

GoogleInsights indicate that MLB fans are concentrated within short distances of MLB franchises


25/49

Exhibit 2:

MLBs stagnant attendance growth shows a need to create new fans

Sources:MLBRedandGreenBooks,ESPN.com

MLB,NBA,NFLAttendanceGrowthRates:2006-2011*

Sources:MLBRedandGreenBooks,ESPN.com

*NFL2011dataisincompleteandnotvalid

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

2006 2007 2008 2009 2010 2011

NBA

MLB

NFL

60,000,000

65,000,000

70,000,000

75,000,000

80,000,000

85,000,000

Year20002001200220032004200520062007200820092010

MLB Attendance 2000-2011

TotalA>endance


26/49

Abstract:The Civil Rights Game began as an exhibition game in 2007 to honor baseballs black historyWith MLBs African-American demographic declining from 17% to 8% since 1996, the game is designe

to raise awareness about MLBs African-American history to encourage black youth participation. Theoriginal marketing campaign included a Spike Lee documentary, event-branded merchandise, and speciauniforms. All proceeds from the game go to a different civil rights charity each year.

Exhibit 3:

Low ticket sales in 2008 Civil Rights exhibition game reflect high ticket prices above MLB average

Year Location Participating Teams Seats filled/Seats

Available

Key Event Details and Implications forShortStop Cities:

2007 Memphis St. Louis CardinalsVs. Cleveland Indians

12,815/15,000 The Civil Rights Game was created as onebusiness journalist described for MLB to:

|engineer its own renaissance despite stillbeing shell-shocked by lingering steroid

scandals that could undermine nearly allmajor milestones and records achieved over

the last 15 years and consistently losingground to football as the countrys newfavorite pastime.|The inaugural game was considered a success

and it was marketed as a full-day event withmultiple activities to commemorate the CivilRights movement. ShortStop Cities hassimilar intentions to generate hype and

increase MLBs fan base. To mimic the highticket sales of the 1st Civil Rights Game,ShortStop Cities will also feature a range of

series attractions.

2008 Memphis New York MetsVs. Chicago White Sox

7,717/15,000 Memphis was chosen for its historicalsignificance (its the city where MLK was

assassinated and the home of the Civil RightsMuseum), not for its relevance to competingteams. The low ticket sales reflect the highticket price of $50 for standard tickets and$120 for premium seats. This emphasizes the

importance of selecting relevant teams and

charging fair ticket prices.

2009 Cincinnati Cincinnati RedsVs. Chicago White Sox

In 2009 the event was made into a regular season home game soMLB could expand upon promotional and sponsorshipopportunities. ShortStop Cities will model MLBs strategychange and also make the event a recorded, regular season

game. This way teams ensure consistent fan attendance andaccount for stadium and operational expenses as part of the

initial franchise budget.

2010 Cincinnati Cincinnati RedsVs. St. Louis Cardinals

2011 Atlanta Atlanta Braves

Vs. Philadelphia Phillies


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Exhibit 4:

City selection requires city to have a stadium with 10K+ capacity

SatelliteCity MetroPopulation PotentialBallpark StadiumCapacity MinorLeagueAffiliation MajorLeagueAffiliation

Austin 1,716,289 Dell diamond 8,722 Texas Rangers Texas RangersAlbuquerque 907,755 Isotopes Park 12,379 Los Angeles Dodgers Arizona DiamondbaBirmingham 1,128,047 Regions Park 10,800 Chicago White Sox Atlanta Braves*Buffalo 1,135,509 Coca-Cola Field 18,025 New York Mets New York MetsCharlotte 1,758,038 Knights Stadium 10,002 Chicago White Sox Atlanta Braves*Columbus 1,836,536 Huntington Park 10,100 Cleveland Indians Cleveland IndiansFresno 930,450 Chukchansi Park 12,500 San Francisco Giants San Francisco GiantIndianapolis 1,756,241 Victory Field 14,500 Pittsburgh Pirates Chicago CubsJacksonville 1,345,596 Baseball Grounds of Jacksonville 11,000 Miami Marlins Tampa Bay Rays*Louisville 1,307,647 LouisvilleSlugger Field 13,000 Cincinnati Reds Cincinnati Reds*Memphis 1,316,100 AutoZone Park 14,320 St. Louis Cardinals St. Louis CardinalsNashville 1,589,934 Herschel Greer Stadium 10,700 Milwaukee Brewers Atlanta BravesNew Orleans 1,167,764 Zephyr Field 10,000 Florida Marlins Houston AstrosOklahoma City 1,252,987 RedHawks Ballpark 13,066 Houston Astros Houston Astros*Omaha 865,350 Werner Park /TD Ameritrade Park 9,023/24,505 Kansas City Royals Kansas City RoyalsOrlando 2,134,411 Champion Stadium 13,000 Braves Spring Training Rays or Marlins

Portland 2,226,009 New park in 2012/13 *TBA *TBA Seattle MarinersRichmond 1,258,251 The Diamond 9,560 San Francisco Giants Washington Nationa*Sacramento 2,149,127 Raley Field 14,414 Oakland A's Oakland A'sSalt Lake City 1,124,197 Spring Mobile Ballpark 15,500 LA Angels of Anaheim Colorado RockiesSan Antonio 2,142,508 Wolff Municipal Stadium/Alamodome 9200/20,000 San Diego Padres Texas RangersVA Beach/Norfolk 1,671,683 Harbor Park 12,067 Baltimore Orioles Baltimore Orioles*One of the reasons Six Sigma Consulting selected Louisville, highlighted in yellow, as ShortStop Cities pilot program is because Slugger Field meets the

stadium size criteria of over 10k. The cities highlighted in blue are next 5 choices for satellite cities and each citys stadium meets the 10k criteria.

22


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Exhibit 5:

Fan interaction workshop will help ShortStop Cities receive positive media attention

23


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Exhibit 6:

Louisville pilot program mirrors ShortStop marketing strategies

ShortStop Cit ies pi lot program proposal : Louisvi l le , KentuckyAnnounce program at U of L football game to immediately reach large sports populationTo quickly spread word of ShortStop Cities, the Cincinnati Reds would announce the Louisvilles

selection as a satellite city during a University of Louisville home football game in September when the

official MLB schedule is released. The announcement will be made by a Cincinnati Reds player or a

former MLB player from the Louisville area like St. Xavier High School alumnus Paul Byrd.

Announcing ShortStop Cities in this way will reach a large number of the areas sports fans because

college football is very popular in Louisville, with an average home attendance of 45,000.

Target Louisville specifically through focused local advertisement

In the weeks following the announcement, the Reds will begin early marketing activities specific to

Louisville. Tickets will go on sale and MLB will place customized ads for the event using Facebook

and Google technology. Because baseball has been integral to the history of Louisville, the Reds mightconsider creating a YouTube series explaining the important rules and concept of the game and

incorporating the history of baseball in Louisville. For example, it might mention Pee Wee Reese and

the production of Louisville Slugger bats. To benefit and increase ties to the community, the Reds and

their AAA team, the Bats, could team up to sponsor an initiative through the Boys and Girls club of

Louisville. For instance, the two teams might choose to start an RBI (Reviving Baseball in Inner

Cities) program in Louisville or an Urban Youth Academy as the Reds have already done in Cincinnati.

A large billboard should also be placed by Spaghetti Junction located next to Louisville Slugger Field.

Finally, the Reds could cater to youth by distributing flyers to local schools and running commercials

for ShortStop Cities on local networks with Saturday morning cartoons like channel WHAS.

Derby Festival will serve as last major marketing push to sell tickets and merchandise

The Reds will sponsor The Kentucky Derby Festival, an event popular in Louisville, in an attempt

to make a major marketing push before the ShortStop Series. The Derby Festival is an annual two-

week long event at the end of April leading up the Kentucky Derby and one of the most exciting

times of the year in Louisville. To kick off the festival, the city sponsors Thunder Over Louisville,

one of the largest annual fireworks displays in North America with an average attendance over the

last 3 years of 750,000+. During the festival, the Cincinnati Reds will profit from setting up a

merchandise booth next to a high traffic area such as Louisville slugger field. The Reds would also

gain brand name exposure from sponsoring this event because their logo would appear on all

published material and their name would be associated with various events within the Festival.

The ShortStop series should occur on a day when attendance is likely to be high

The actual two- game weekend series will occur on a Friday and Saturday night after the Kentucky

Derby in late May or early June but could be successful on any summer weekend night the Reds

deemed appropriate. However, if the Reds were unwilling to give up two summer weekend home

games but agreed to give up one weekday game, the team could still likely sell out Louisville

Slugger Field on Wednesday May 30th

, 2012, the last day of school for Jefferson County PublicSchools. Hours before the event the Cincinnati Reds would host a community tailgate in Waterfront

Park, a spacious area next to Louisville Slugger Field, and work with radio station 91.9 WFPK tobring in a popular local artist to play. After fans make the 5-minute walk from the tailgate to the

field, MLB would shoot off fireworks to commence the ShortStop Cities before a local hero threw

out the first pitch around 7:30. Capping off the ShortStop Series, the Cincinnati Reds might

sponsor a post-game celebration at 4

th

Street Live, Louisvilles downtown district.


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Exhibit 7:Marketing timeline describes specific strategies teams use to maintain enthusiasm for the program

CommunityEngagment

(October - March)

Press Releases and coverage in local and national newspapersannouncing the game

ShortStop dates/description posted on/in: MLB.com and team website City Council/local government websites Community events calendars Sponsors websites & distributed literature

Media Push

(April - May)

Player voice-over radio adsLocal newspaper/magazine articles

Local TV news event announcement Billboards (strategically placed) Facebook and YouTube advertising Little League Sponsorship Community service project (i.e. support of the Boys and Girls Club of

America)

ShortStop Series

(June)

Player autograph signing Player press conferences Local restaurant promotions Front page newspaper story Segment on local TV news Full-day MLB experience

New FanDevelopment (July

- August)

Newspaper articles reviewing the event Radio thank you player voice-overs Direct mail promotions (i.e. voucher for a discounted team t-shirt) Email promotions (link to MLB AtBat App) Welcoming Guide to attending an MLB game in the original city

(parking voucher, restaurant suggestions, hotel recommendations)


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Exhibit 8:

Player visibility on Twitter will build rapport with younger potential fans

26


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Exhibit 9:

Facebook advertising customizes marketing to users who have liked MLB pages

27


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Exhibit 10:

Google Ad words uses keyword searches to market ShortStop Cities to specific consumers

28


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Exhibit 11:

Personalized radio advertisements from MLB players will build rapport with community

Radio Script:

[The sound of an organ playing the Charge cheer, the crack of a baseball bat, and fans cheering

precede the voiceover]

Analysis and explanation:

The radio script is a detailed example of how we recommend

teams participating in ShortStop Cities advertise and promote

their games to fans. The underlined words are city-specific and

logistical and will be interchanged per satellite city; however

this in a template we believe all teams can use. Features:

We chose a big-name athlete to address the city so fans get the sense that the MLB athletes

genuinely want to come visit and get to know them.

We identified an actual restaurant and band to show the city that the team took time to

research aspects of that citys culture that makes it unique.

Specific game-day attractions are specified so radio listeners understand that this isnt just a

regular-season game but a full-day attraction.

The words friends and family are specially used to convey that this is a family-friendly

and community-friendly event, which implies that all demographics are welcome.

The phrase regular-season is repeated to clearly differentiate from an exhibition game. We want

fans to understand that is game counts toward the teams record and will therefore be competitive.

Hey Louisville! This is pitcher Aroldis Chapman from the Cincinnati Reds inviting

you to our regular-season, home games, Friday, June 8th

and Saturday, June 9th

against the

Milwaukee Brewers. Dont worry about traveling to Cincinnati to watch us play because

this time were bringing the game to your backyard! As a part of ShortStop Cities, the Reds

and I are coming to Louisville to play two of our regular-season games at Louisville

Slugger Field. As much as my teammates and I love our fans in Cincinnati, were excited

to meet our fans in Louisville, eat at Pats Steakhouse and explore what your city has tooffer. So bring your friends and family out to Slugger Field on Friday, June 8th and

Saturday, June 9th

to watch the Reds and I make history as we play our first home gamesever in Louisville! Come early to clock the speed of your Fastball and hear Louisvilles

own The Elect perform live. Stay late to watch the post-game fireworks show. Louisville,

we hope to see you at the first big event of the summer! Tickets go on sale Wednesday,

April 11th online at MLB.com and at the Slugger Field box office at 10amcant wait to

see you there!


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Exhibit 12:

ShortStop events will reflect both local and MLB tradition, enhance in-game experience

Games,Contests,

Giveaways

Test the speedof your Fastball

Little LeagueScrimmage

between innings

Race vs. Mascotaround the

bases

Jumbo screentrivia questions

Text-to-Wingames

MLB. TV

signupsweepstakes

Local Flare

Pre-game BBQwith catered

food from Pat'sSteakhouse

Tailgate atWaterfront

Park

NationalAnthem byLouisville

children choir

Live concert byLouisville's The

Elect

Local herothrows out the

first pitch

Deserving youth

as batboy orgirl

Misc.

Designatedseating for

families, littleleague & adults

Merchandisestands

MLB.TVsubscription

booth

Post-gamefireworks

Post-game Redsand fan meet

and greet

Post-game

autographsignings

In addition to popular games, contest, and giveaways, MLB teams will incorporate local

elements listed in local flare into the ShortStop Series. Baseballs in-park experience is

already differentiated within the sports industry, so adding components of Louisville

culture will set baseball apart from other sports in the satellite city.


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IncrementalCashflowAnalysis Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10

IncrementalRevenuesfromProgram

1 TotalShortStopGameRevenues 1,488,918$ 1,506,785$ 1,524,866$ 1,543,164$ 1,561,682$ 1,580,423$ 1,599,388$ 1,618,580$ 1,638,003$ 1,657,659$

2 To tal A ddi ti ona l Ho me Game Re ve nue 306, 541$ 309,606$ 315,798$ 325,272$ 336,657$ 350,123$ 364,128$ 378,693$ 393,841$ 409,594$

3 RealizedTVcontractgains* - - 573,975$ 573,975$ 573,975$ 573,975$ 847,477$ 847,477$ 847,477$ 847,477$

4 In-gamemerchandisesales 115,396$ 115,396$ 115,396$ 115,396$ 115,396$ 115,396$ 115,396$ 115,396$ 115,396$ 115,396$

5 I ncr ea se i n ou t of g am e me rc ha nd is e sa le s 10 4, 560$ 106,346$ 109,233$ 113,299$ 118,086$ 123,671$ 129,519$ 135,644$ 142,059$ 148,777$

6 TotalMLBAMRevenue 11,724$ 11,841$ 12,078$ 12,440$ 12,876$ 13,391$ 13,926$ 14,483$ 15,063$ 15,665$

7 TotalAdditionalRevenues 2,027,138$ 2,049,973$ 2,651,346$ 2,683,547$ 2,718,672$ 2,756,978$ 3,069,834$ 3,110,274$ 3,151,838$ 3,194,568$

IncrementalExpensesfromProgram

8 TotalSeriesOperations (31,500)$ (31,878)$ (32,261)$ (32,648)$ (33,039)$ (33,436)$ (33,837)$ (34,243)$ (34,654)$ (35,070$

9 AdvertisingExpense (522,945)$ (522,945)$ (522,945)$ (522,945)$ (522,945)$ (522,945)$ (522,945)$ (522,945)$ (522,945)$ (522,945$

10 CommunityEngagementExpense (57,000)$ (57,000)$ (57,000)$ (57,000)$ (57,000)$ (57,000)$ (57,000)$ (57,000)$ (57,000)$ (57,000$

11 ConcessionsExpense (146,441)$ (148,198)$ (149,977)$ (151,776)$ (153,598)$ (155,441)$ (157,306)$ (159,194)$ (161,104)$ (163,037$

12 MerchandiseExpense (131,973)$ (133,045)$ (134,777)$ (137,217)$ (140,089)$ (143,440)$ (146,949)$ (150,624)$ (154,473)$ (158,503$

13 TeamTravelExpense (19,040)$ (19,040)$ (19,040)$ (19,040)$ (19,040)$ (19,040)$ (19,040)$ (19,040)$ (19,040)$ (19,040$

14 TotalIncrementalExpenses (908,899)$ (912,106)$ (915,999)$ (920,626)$ (925,711)$ (931,302)$ (937,077)$ (943,046)$ (949,216)$ (955,596$

15 T ot al S ho rt St op S er ie s F or eg on e Ne t In co me ( 1, 45 0, 43 0)$ (1,467,835)$ (1,485,449)$ (1,503,275)$ (1,521,314)$ (1,539,570)$ (1,558,045)$ (1,576,741)$ (1,595,662)$ (1,614,810$

16 EarningsBeforeIncomeTaxes (332,192)$ (329,968)$ 249,897$ 259,646$ 271,647$ 286,106$ 574,712$ 590,486$ 606,960$ 624,163$

17 -TaxExpense (132,877)$ (131,987)$ 99,959$ 103,858$ 108,659$ 114,443$ 229,885$ 236,195$ 242,784$ 249,665$

18 IncrementalNetIncome (199,315)$ (197,981)$ 149,938$ 155,788$ 162,988$ 171,664$ 344,827$ 354,292$ 364,176$ 374,498$

19 D is co un te d Ca sh F lo ws ( 12% H ur dl e Ra te ) ( 177 ,960)$ (157,829)$ 106,723$ 99,006$ 92,484$ 86,970$ 155,982$ 143,093$ 131,326$ 120,578$

20 Di sco un te d Ca sh F lo ws ( 16% Hu rd le Ra te ) ( 171 ,823)$ (147,132)$ 96,059$ 86,040$ 77,601$ 70,458$ 122,010$ 108,068$ 95,761$ 84,892$

21 D is co un te d Ca sh F lo ws ( 20% H ur dl e Ra te ) ( 166 ,096)$ (137,487)$ 86,770$ 75,129$ 65,501$ 57,490$ 96,235$ 82,397$ 70,580$ 60,483$

NPVCashFlowAnalysisAssumptions NPV-12% 600,372$

22 HurdleRate-LowRiskEstimate 12% NPV-16% 421,934$

23 HurdleRate-AverageRiskEstimate 16% NPV-20% 291,002$

24 HurdleRate-HighRiskEstimate 20%

25 TaxRate 40%

IRR 39%

SensitivityAnalysisforSelectedVariablesAffectingNPV

HurdleRate NPV

IncreaseinLocalTV

Viewership(Year1) NPV(16%)

%whoattend1

Redshomegame

afterSSgame NPV(16%)

%whoattendReds

homegame,notSS

game NPV(16%)

421,934.27$ 0.10% (556,839)$ 10% (140,668)$ 0.04% (348,070

8% 846,611$ 0.20% (233,035) 15% (17) 0.06% (145,438

10% 713,404 0.30% 93,218 20% 140,633 0.08% 57,195

12% 600,372 0.40% 421,934 25% 281,284 0.10% 421,934

14% 504,135 0.50% 753,127 30% 421,934 0.12% 447,681

16% 421,934 0.60% 1,086,812 35% 562,585 0.14% 462,461

18% 351,510 0.70% 1,423,002 40% 703,235 0.16% 624,567

20% 291,002 0.80% 1,761,712 45% 843,886 0.18% 665,094

22% 238,876 50% 984,536

24% 193,857 55% 1,125,187

ScenarioSummary

%whobought

merchandise

outsideSSgame NPV

CurrentValues: WorstCaseScenario BestCaseScenario

0.02% 299,376

ChangingCells: 0.05% 319,692

SSplus1game 30% 15% 50% 0.08% 340,052

NoSSplus1game 0.10% 0.05% 0.20% 0.14% 380,905

LocalTVincrease 0.40% 0.20% 0.80% 0.20% 421,934

Merch-outsideSS 0.20% 0.10% 0.50% 0.25% 456,261

ResultCells: 0.35% 525,288

NPVc 421,934 (787,638) 2,660,879 0.40% 559,988

Notes:CurrentValuescolumnrepresentsvaluesofchangingcellsat

timeScenarioSummaryReportwascreated.Changingcellsforeach

scenarioarehighlightedingray.

Appendix A:

Positive Incremental Cashflow Analysis indicates attractive returns on investment

31


37/49

Appendix A (continued):

ShortStop Cities Pilot Program Financial Assumptions

32


38/49


ShortStop Cities Pilot Program Financial Assumptions

33


39/49


ShortStop Cities Pilot Program Assumptions

34


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ShortStop Cities Financial Assumption Explanations

Assumption # Title Value Explanation

1

2

3

4

5

6

7

8

% who attend ShortStopgame and at least 1

home game

% of satellite city who

didnt attend ShortStop

game but attend at least

home game

Weighted average cost

per Reds home game

ticket

Total % increase in

satellite city TV

broadcast viewership

% who didnt attend

ShortStop game but still

buy team merchandise

Average amount spent

on merchandise

% of metropolitan

population who

purchase: MLB.TV,

Extra Innings, AtBat

Total ShortStop Series

forgone net income

30%

0.1%

$25.74

0.4%

0.2%

$40

0.005%

0.002%

1%

$1,450,430

This number was based on the survey results in Appendix B,regarding the individual responses to questions 3,6, & 11.

Weighing the distance willing to be driven by fans to theShortStop game with the drive from Louisville to Cincinnati,

we then added a premium due to direct contact, ShortStoppromotions, and the new bus service.

This proportion was derived using the % of total metropopulation who attends the series. Following the 30%assumption from above, the % of metro population who weassume to attend a homegame resulted in 0.6%. This numberwas halved to account for those segments of the populationnot in MLBs typical target market. We further discountedthis proportion to be as conservative as possible in thissensitive variable. The analysis in the appendix presents the

NPV results for different levels of this variable.

This number was based on the average Reds regular andpremium ticket prices in 2010. The prices were weightedaccording to the MLB average of 87% regular and 13%

premium seats in a stadium.

This rate was forecast based on the average growth of theNationals in the first few years in their new location. Weadjusted for metro population differences and added a small

premium due to the markets moderate familiarity with theReds while discounting overall average growth rate.

Based on total merchandise revenues in Tokyo for 2000,when the first MLB game was played in Japan. Assuming a$40 average purchase, we divided the number of purchases

by the total population and subtracted 50% to account for thepartially saturated US market. MLBs opening series in Japansomewhat parallels the ShortStop Cities model.

This amount was based on retail prices of merchandise onMLB.com, taking into account estimated likelihood of

purchase of each major item(Baseball hats, jerseys, varsity jackets, and t-shirts)

We estimated a very small percentage of population wouldpurchase MLB.tv because the majority of Cincinnati Redsgames will already be on FSN Ohio. Additionally, weestimate that even fewer people would pay the extra $130 forExtra Innings as a result of ShortStop Cities. The AtBat

project is based on question4 and the fact AtBat is cheaper

and more convenient for new fans to adopt, yielding a higherprojection for purchases.

This number was calculated based on net income per fan asindicated by the leaked financial statements of the Marlins,Rays, Pirates, and Angels. The rate was then applied to Redsattendance for 4 weekend games in May/June

35


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Appendix B:

Louisville survey shows interest in event, high potential to increase fan base

The following survey was taken of 67 students and adults in the Louisville metro area. Theresults indicate the Cincinnati Reds only have a moderate following in Louisville as 71.64% ofrespondents indicated they had not watched more than 3 innings of a Reds game in the past year,despite the local cable package broadcasting most Reds game on Fox Sports Ohio. In addition,very few respondents indicated consumption of MLB digital media. However, these statisticsshow the high potential for revenue growth in the Louisville market. With less active fans thanCincinnati, MLB stands to gain new fans by increasing citizens proximity to professionalbaseball in the area.

Participants in the survey also showed strong interest in a potential Reds game at LouisvilleSlugger Field, with 85.07% stating they would like to attend the ShortStop Series. The averageprice respondents answered they would be willing to pay for general admission tickets to the

ShortStop Series was $30.16 which is better than might be expected for a predominately youngand female pool. Furthermore, the average price the 24 male survey participants answered theywould be willing to pay for general admission tickets to the ShortStop Series was $38.63, a goodbit higher.

ShortStop Cities Louisville Survey & Results:1. How old are you?

0-20 50.75%21-30 10.45%31-40 1.49%

41-55 23.88%55+ 13.43%

2. What is your gender?

Male 35.82%Female 64.18%

3. Approximately how long does it take you to drive from your home to Louisville Slugger

Field?

0-15 Minutes 55.22%16-30 Minutes 41.79%

31-59 Minutes 1.49%1-2 Hours 1.49%

4. Do you own the MLB.com at bat app?

I do not own a smart phone 65.67%I own a smart phone but do not have the MLB.com at bat app 25.37%I own the MLB.com at bat lite app 7.46%I own the MLB.com at bat paid app 1.49%

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Louisville survey & results continued

5. Do you subscribe to MLB.TV?

Yes 2.99%

No 97.01%

6. many baseball games (any level) have you attended in the past year?

0 games 44.78%1 to 3 games 43.28%4 to 6 games 8.96%7 to 9 games 1.49%10+ games 1.49%

7. How many Cincinnati Reds baseball games have you tuned into (TV/Radio/MLB.TV) for

3 innings or more in the past year?

0 games 71.64%1 to 3 games 14.93%4 to 6 games 5.97%7 to 9 games 4.48%10+ games 2.99%

8. How much interest would you have in attending a meet and greet/ball signing with Reds

players in Louisville?

Would definitely attend 10.45%Would probably attend 11.94%Would maybe attend 11.94%

Would probably not attend 19.40%Would not attend 46.27%

9. How much interest would you have in attending a Community tailgate with a local band

on Waterfront park before the Reds play at Louisville Slugger Field?

Would definitely attend 20.90%Would probably attend 11.94%Would maybe attend 29.85%Would probably not attend 22.39%Would not attend 14.93%

10. How much interest would you have in attending an MLB-sponsored celebration at 4th

Street Live after the Reds game?

Would definitely attend 22.39%Would probably attend 13.43%Would maybe attend 25.37%Would probably not attend 16.42%Would not attend 22.39%

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11.IftheCincinnatiRedsweretoplayaregularseasongameatLouisvilleSluggerFieldonan

earlysummernight,wouldyoubeinterestedinattending?

Yes 85.07%

No 14.93%

12.Ifyouindicatedyouwouldbeinterestedinattendinghowmuchwouldyoubewillingto

payforageneraladmissionticket?

The50answerstothisquestionrangedfrom$5to$100withameanof$30.16,medianof25,

standarddeviationof17.836,skewnessof1.86,andkurtosisof4.37.Asthekurtosisisabove2,

thedataisnotnormallydistributedbutratherpositivelyskewedandleptokurtic,meaningthe

largemajorityofparticipantsindicatedtheywouldpaytheaverageprice,fewindicatedthattheywouldpaylessandtherestindicatedthattheywillpayavariety.

HypothesisTest:MalesurveyparticipantsarewillingtopayahigherpriceforShortStop

Seriesticketsthanfemalesurveyparticipants.

Inthesurvey,theobservedmeanpricefemaleparticipantsindicatedtheywouldbewillingto

payforatickettoaShortStopSerieswas$22.63whiletheaverageformaleparticipantswas

$38.63.Thefollowingaretheresultsforthehypothesistestbetweenthetwoindependent

groupsofmalesandfemales:


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HypothesisTest:IndependentGroups(t-test,pooledvariance)

Female Male22.63 38.63 mean

15.68 19.62 std. dev.

43 24 n

65 df

-15.997 difference (Female - Male)

295.164 pooled variance

17.180 pooled std. dev.

4.378 standard error of difference

0 hypothesized difference

-3.65 t.0003 p-value (one-tailed, lower)

Fromtheresultsofthetest,wecanconfirmata95%confidenceintervalthatmalesarewilling

toplayahigherpriceforShortStopSeriesticketsthanfemales.Thus,as64.18%ofthesurvey

participantswerefemales,SixSigmaConsultingbelievesthepricechargedforaregular

ShortStopSeriesticketshouldbegreaterthanthe$30.16averagepriceforthissurvey.

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Appendix C:

Tradition & culture make MLB in-game experience unique within the sports industry

Force Justification Further Analysis

MacroEnvironment

ATTRACTIVE

- lower disposableincome but presents shifttowards media outlets- MLB showed resiliencethrough recession (08-10)

Advances in delivering the game through new medialoses focus on capturing new fans in domestic market

Pro sports moving abroad for new fans

Baseball targets range of socioeconomic classes

Stability of MLB compared to NFL/NBA lockouts

NFL attendance also dropped 3 years in a row

Encouraging MLB attendance figures

Threat of NewEntrants

LOW

- significant productdifferentiation- low switching costs

- strong brand identity

Individual franchises have their own brand loyalty

Baseball rooted in American sports traditionAmericas pastime

MLB is only U.S. professional baseball league Pro sports fans are not exclusively loyal to one sport

Degree ofRivalry

HIGH

- low switching costs- many competitors ofroughly equal size- strong brand identity- diversity amongcompetitors

Strong rivalry among competitors in new mediaoutlets especially when attracting youth

NBA, NFL, MLB compete in similar markets

Offerings exclusive to each sport are similar throughoutthe leagues

Overlap between cities, demographics, seasons

MLB has unique tradition, background, culture

Threat ofsubstitutes

MODERATE

- moderate to largenumber of closesubstitutes- low switching costs- low relative value ofsubstitutes

Ballpark experience has differentiated value that has

the least threat for substitution

Culture and history around the game difficult to

substitute

Game substitutes: family-friendly activities, concerts Media substitutes: primetime and online networking

Media channels have lowest switching costs

Power ofBuyers

MODERATE-HIGH

- strong brand identity- moderate switchingcosts- largely availablesubstitutes- low buyer concentration- strong buyer info

Fans without strong loyalty have manyentertainment options

Young athletes are starting to specialize and movetowards other sports

Regional affiliations increase switching costs

Millions of potential fans: U.S., international, online

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Appendix D:

Creative strategy platform outlines how ShortStop conveys its brand

TheobjecveoftheShortStopCiesadversingcampaignistobuildbrandawarenessaroundaspecificMLBfranchiseleadingtoincreasedhome-gamecketsales,merchandising,andsalesofcketsatthetwo-gameShortStopseries.

AdversingObjecve

Intheory,ourcampaigntargetstheenresateliZe,butwewillplaceemphasisonreachingyouthandtheirfamilies,MLBfanswhoarenotacveconsumersofMLBproductsandservices,andfansofbaseballwhoarelackinganaffiliaontoaspecificfranchise.

TargetAudience

ShortStopCieswillculvatealong-termteamaffiliaonwithfanswhootherwiselackgeographicaccesstoanMLBfranchise

Strategy

Access,affiliaon,community,engagement,tradionShortStoplogo,tradionalbaseballimagery,teamlogo

KeyWordsandImages

ShortStopadversingshouldbelightheartedandenthusiasc,evokingthenostalgictradionofbaseball.

Tone/mood

Bringingtheteamtoyou!JustashortstopawayfromYOURballpark!

Slogans

Visitmlb.com/ShortStopformoreinformaon!CheckyourcommunityboxofficeforShortStopseriesckets!SubscribetoMLB.tv!CheckouttheMLBAtBatapp!Shopforgearatshop.mlb.com!GrababuspassandwatchaRedshomegame!

CalltoAcon

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Readability Statistics

shortstop cities final proposal

Documents