SB Nation User Blog: benmor78

Weezer + Snuggie = Hipster Irony

benmor78 — Mon, 09 Nov 2009 20:43:06 -0000

Weezer + Snuggie = Hipster Irony

Weezer is cross-promoting their new album with Snuggie. Oh, sweet, sweet Jesus...

This is funny

benmor78 — Tue, 03 Nov 2009 06:08:34 -0000

This is funny

Brooke Hundley only makes 3 or 4 on the top 10 worst sports girlfriends of all time.

I remember this song getting a lot of airplay 8 or 9 years ago. I'd never seen the video before,...

benmor78 — Tue, 13 Oct 2009 01:53:11 -0000

I remember this song getting a lot of airplay 8 or 9 years ago. I'd never seen the video before, it's pretty funny. My girlfriend says the lead singer dresses like Adam.

Commoditizing Your Nachos: A Brief Look at Complements and the Baseball Experience

benmor78 — Tue, 29 Sep 2009 22:06:46 -0000

More photos » by Tony Gutierrez - AP

If my suggestion doesn't work, I've got another one: Cito Gaston mustache rides, $.05. (AP Photo/Tony Gutierrez)

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There have been a number of suggestions about increasing ballpark attendance, including "field a winning baseball team" and "move the team to downtown Dallas."

I'd been thinking about possible alternatives, and you can read my thoughts below the jump.

You know, the Laffer Curve gets a lot of hate, but I don't think it's really such a controversial proposition. At a 0% tax rate, revenues are $0, and at a 100% tax rate, revenues would be approaching $0. There would be an optimal rate between the two which would maximize revenues. If you're to the high side of that optimum, decreasing tax rates would increase tax revenues, as happened with the Kennedy tax cuts in the 60's. But this is something we see in market economics, too, since as the price of a product increases, demand will go down, so we can see how a similar curve could be described for revenues on a product as the price goes up.

Concessions are an interesting area of ballpark economics to me. When I was 16, I worked at a movie theater. The very first thing you learn about the movie theater business is that your managers want you hawking concessions, and upselling concessions, at every possible opportunity. When working behind the concession counter, you are trained to start the popcorn poppers at a specific time, about 15 minutes before the first movie started in a group of movie times. You would place a product called Savor-All in the popper, which was a MSG salting product. You would try to upsell the popcorn and/or drinks. You would suggest complements to whatever product the person was buying. And, as most people know, the reason for this is because movie theaters make next to nothing on ticket sales. They have to make their money on the popcorn and candy and drinks, so you have to pay $5.00 for a hotdog and $4.00 for a drink to keep the theater owners in silk pajamas.

But what of the ballpark experience? Buying a ticket to a ballgame has many complements, i.e., products that you generally buy along with the ticket, either because you have to or it enhances the experience for you. Parking, hotdogs, beer, a coke, some cotton candy. To a greater or lesser degree, all those things are complements of the ballpark experience. But, so far as I know, MLB team owners don't face the same constraints on concession sales as movie theater owners. That is, Tom Hicks isn't buying a product from a distributor to sell to the public that he is contractually obligated to make a nominal profit on, he owns the entire production. Looking at the ticket prices and attendance on the year, an average ticket sold of $25.00 would result in $51,425,000 on a team payroll of $67,000,000.

Generally speaking, as the price of a complement of a product goes down, the demand for the product goes up. I read an interesting post a while back about how this concept is used in the technology sector.

"When IBM designed the PC architecture, they used off-the-shelf parts instead of custom parts, and they carefully documented the interfaces between the parts in the (revolutionary) IBM-PC Technical Reference Manual. Why? So that other manufacturers could join the party. As long as you match the interface, you can be used in PCs. IBM's goal was to commoditize the add-in market, which is a complement of the PC market, and they did this quite successfully. Within a short time scrillions of companies sprung up offering memory cards, hard drives, graphics cards, printers, etc. Cheap add-ins meant more demand for PCs.

When IBM licensed the operating system PC-DOS from Microsoft, Microsoft was very careful not to sell an exclusive license. This made it possible for Microsoft to license the same thing to Compaq and the other hundreds of OEMs who had legally cloned the IBM PC using IBM's own documentation. Microsoft's goal was to commoditize the PC market. Very soon the PC itself was basically a commodity, with ever decreasing prices, consistently increasing power, and fierce margins that make it extremely hard to make a profit. The low prices, of course, increase demand. Increased demand for PCs meant increased demand for their complement, MS-DOS. All else being equal, the greater the demand for a product, the more money it makes for you. And that's why Bill Gates can buy Sweden and you can't."

The beauty of owning a major league baseball team is that you own a product with no direct equivalents, and likewise own the vendors of all the complements. The problem, though, is that I think owners have a tendency to price their complements on the high side of the curve, decreasing the demand for their core product. Just because the Texas Rangers have no direct equivalents does not mean that the principle of substitution does not apply. If you and your girlfriend have the choice of spending $10 apiece on tickets and $5 apiece on drinks, you might just elect to do it at your air conditioned local movie theater and not at hot as Jessica Alba's ass Ballpark in Arlington, especially considering you can park less than 100 feet from the movie theater door and get there in less than 20 minutes. So, it would seem that a wise plan would commoditize all of the complements to the ballpark experience except the tickets, which would be your core product.

Average attendance at RBiA was 26,372 in 2009. Average attendance on Tuesdays was 21,348, Wednesdays was 30,615, and Thursdays was 21,668. Why the big spike in attendance on Wednesday nights? Well, Wednesday is dollar hot dog night. And it's popular.

As could be expected, average attendance for Wednesday night is almost half again the average attendance for Tuesday and Thursday night games. A whopping 0% of the Tuesday and Thursday games were above the season's average attendance. So lowering the price of a complement (hot dogs) obviously increases demand for the core product. There are a lot of variables to consider in this equation, since we don't know the fixed costs associated with running the concessions, and I don't know the specific marginal value of a dollar of concession sales vs. a dollar of ticket sales. But instinct would tell you that the marginal value of a dollar of ticket sales is greater, because it's the only obligatory expense if you're going to the ballpark, and, in addition, larger attendance numbers garner attention in the league, among knuckleheads like Josey Wales, in the metroplex fan base, and, apparently, with Ian Kinsler's pop-up hitting, Bob-Sturm-complaining ass.

Let's say that you started steeply discounting concessions on Tuesday - Thursday nights. How much of a rise in ticket sales do you think would be needed to offset the loss in concession profits? And, let's say you sell sponsorship of discounted food night ("Welcome to Low Cost Munchies Night at the Ballpark, brought to you by Josey Wales Brand Tampons"), where would that put the price point? Obviously, the Rangers are experimenting with a similar concept with the all-you-can-eat-seats, and I hope it's something they expand.

I'll close with something else to illustrate the idea of complements. Google's primary revenue source is web advertising. Anything they can do to lower the cost of web browsing will translate to increased ad revenues for them. As netbooks have become more common, the license for the operating system has become a larger and larger share of the total cost of a web-capable machine. So what is Google doing? They're releasing Google Chrome, thereby commoditizing a cost barrier to extremely cheap web-capable computers. Whence Google Chrome, whither ballpark nachos?

85-69

benmor78 — Sun, 27 Sep 2009 03:34:33 -0000

More photos » by Henny Ray Abrams - AP

Former New York Gov. Eliot Spitzer wonders if there's any way he can get Hannah Giles' phone number. (AP Photo/Henny Ray Abrams)

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Don't know where Adam is. But is that 90 wins I see on the horizon?

So... here's my Expedia link... here's my credit card...

benmor78 — Sun, 27 Sep 2009 01:13:10 -0000

I think this is pretty cool:

"In the Ukraine, a country where females are victims of sexual trafficking and gender oppression, a new tribe of empowered women is emerging. Calling themselves the “Asgarda”, the women seek complete autonomy from men. Residing in the Carpathian Mountains, the tribe is comprised of 150 women of varying ages, primarily students, led by 30 year-old Katerina Tarnouska."

There's some pictures at the link of the girls training and holding their weapons and stuff. Let's hope they don't start cutting off their boobs so they can draw bowstrings.

84-69

benmor78 — Sat, 26 Sep 2009 03:02:19 -0000

More photos » by Tony Gutierrez - AP

Tampa Bay Rays starting pitcher James Shields shooting a deuce in the first inning of a baseball game, Friday Sept. 25, 2009, in Arlington, Texas. (AP Photo/Tony Gutierrez)

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Yay! I've still got my playoff tickets!

Option Pricing Model for Prospect Valuation

benmor78 — Thu, 24 Sep 2009 06:29:32 -0000

So, I've talked to Adam a few times about developing an options pricing model for prospect valuation. As I see the business side of prospects, their primary value is in years of team control, i.e., the time a team has benefit of the player's services at below open market prices. In this way, a prospect is similar to an equity option (for instance, purchasing the option to buy a stock at potentially below market rate, at a premium). Below the jump is my attempt to create a pricing model for prospects.

An option is valued, in its simplest sense, as the time value of the option plus the inherent value. Google closed 9/23/09 at $498.46. The Google $500 Oct call is out of the money (i.e., it has no inherent value) and on 9/23/09 was trading at an ask of $16.50, which represents purely time value. The Google $490 Oct call is in the money and on 9/23/09 was trading at an ask of $21.70; the option has an inherent value of $8.46 and time value of $13.24. Various option pricing models are used, but time value can be greater or lesser depending on the volatility of the underlying asset (among other things). That is, all other things being held equal, Google will have greater time value than General Mills because its volatility is greater. This situation is analogous to, say, live arms or toolsy outfielders, with the staid and boring Marcus Lemon's of the world taking the place of General Mills and the Lasting Milledge's of the world taking the place of Google.

I experimented with adapting Black-Scholes or the Monte Carlo option pricing models to the prospect world, but decided instead on a Drake equation style open-ended solution. If an option value is equal to time value plus inherent value, that seems to give us a decent framework for valuing a prospect (or other young player)... time value plus inherent value.

Inherent value should be easy enough to value: for players that are currently playing in the Major League, +WPA gives us a value. So let's say a player is a 2nd year player, producing at 2 +WPA, we could assign an inherent value of $9 million based on 2008's $4.5 million per win estimate at fangraphs.

What of time value? The most straightforward calculation would be P[S-(tc)], where P is equal to the probability of success, S is equal the open market salary of a comparable free agent, t would be equal to the years of control, and c would be equal to an annualized salary over those years. For our purposes here, we can call "success" purely subjectively; for instance, if we're using a Type A pitcher as a prospect's ceiling, it's going to affect the other variables. You can see how high ceiling, toolsy types that are projectable but have a high probability of failure would nonetheless still have a lot of time value.

Prospect/Player value = P[S-(tc)] + I

So, to use an example here, Elvis Andrus had a +WPA of 6.58 for 2009. At $4.5 million per win, that gives him an inherent value of $29.6 million. That seems really high. Let's say we think Elvis' success was predicated on repeatable phenomena and we think there's a low likelihood of regression, that we think his annualized average salary will be around $2.6 million over his remaining 5 years, and that a type A free agent shortstop would earn $15 million / year. That gives us time value of .75[75mm - (5*2.6mm)]= $46.5 million.

So this formula gives us a value of Elvis as $46.5 + $29.6 = $80.2 million. Strictly from a financial point of view, any trade involving Elvis would have to bring $80.2 million in value back to the Rangers for it to make sense, either through time value in prospects, inherent value in +WPA, and/or some other variable, like, say, increased fan recognition due to a title.

Let's say you want the Cubs to eat 2/3's of Milton Bradley's remaining contract, which would be $14 million (I did a search for "bradley eat salary" and that was a proposal, facetious or not I don't know, from trza, so let's use it). What kind of prospect would you have to kick in? It seems like most of what I have seen is proposals of lower ceiling arms. So let's say we want to kick in a player of the Jon Garland/Nate Robertson/Jarrod Washburn ceiling. Those players had an annualized average salary of around $8 million for the past 4 seasons. The names that I've seen kicked around are Kiker and Beavan. So lower level arms, lots of time still to flame out, let's call it a 25% probability of reaching that ceiling (that's probably being pretty generous). That gives us P = .25($48 mm - (6*1.04 mm)) + 0, or $10.4 million. So by that analysis, the Cubs would be paying us about $4 million to free up a roster spot. Maybe that's fair, I'm not sure.

So what do you think? Adequate way to quantify a trade involving players under team control?

Josey Wales - The Contest

benmor78 — Mon, 14 Sep 2009 15:08:25 -0000

Do you know what a logical fallacy is? "A fallacy is an argument which provides poor reasoning in support of its conclusion. Fallacies differ from other bad arguments in that many people find them psychologically persuasive. That is, people will mistakenly take a fallacious argument to provide good reasons to believe its conclusion. An argument can be fallacious whether or not its conclusion is true." I was thinking the other day how Josey is like an almanac of logical fallacies.

Budding lawyer? Took philosophy in college? Recognize the tortuous bending of logic of a tired old man with a tired old bit? Since it's a dreary day, and kind of a downer for Ranger fans, I'm holding a contest. This post will remain open for the next two days. We're going to play Josey Wales logical fallacy bingo. The person who posts the most Josey Wales' examples of logical fallacies from the list in the above link (and no double dipping -- you can't just post the same logical fallacy over and over again with different examples) will win one of DShepp's t-shirts courtesy of yours truly. Post a link to the comment when you provide your examples.

80-62

benmor78 — Mon, 14 Sep 2009 03:38:16 -0000

More photos » by Tony Dejak - AP

Texas Rangers' Ivan Rodriguez puts in his contact lenses before a game on Wednesday, Sept. 9, 2009, in Cleveland. (AP Photo/Tony Dejak)

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Hey guys, the earlier the season ends, the earlier Adam continues his Sammy Sosa is not a HOFer and Greatest Rangers of All Times series. Go Rangers!

Edit - Josey pointed out our record is 80-62, so in the interest of accuracy, I'm changing the headline.