Running Them Like Nobody’s Business

The New York Yankees all but print their own money. The Boston Red Sox charge NBA-level ticket prices and deliver telecasts through their own cable television network.

And then there are the Angels, with ticket prices below the major league average, no cable channel to call their own and a patchwork TV schedule that nets them barely one-third the television revenue of the Dodgers.

The Yankees, Red Sox and Angels are the only major league teams to start the season with player payrolls of more than $100 million. Yet, as the Angels play their home opener tonight against the Seattle Mariners, new owner Arte Moreno insists he can sustain a payroll close to $100 million while keeping ticket prices near the major league average and without incurring enormous financial losses.

“You can’t put all the pressure on the individual fan to finance the team,” Moreno said.

The Walt Disney Co. said it lost money on the Angels in each of its seven seasons of ownership, with payrolls far smaller. Moreno expects to lose $15 million to $20 million this season but plans to break even next season, with the same fundamentals any business would use -- cutting costs and increasing revenue.

Beyond then, to turn the Angels into a profitable enterprise, Moreno plans to deliver a perennial contender, controlling costs with a revitalized minor league system while selling the Angels beyond Orange County and across Southern California, tapping into the wallets of fans, advertisers and broadcasters.

“He’s built a baseball team to match a business model,” said John Carpino, the Angels’ senior vice president of sales and marketing.

His business plan calls for the Angels to generate $140 million in revenue this season and $155 million next season, which would rank the team among the top 10 in the major leagues. The Angels generated $120 million last season.

In 2001, the Angels ranked 20th among the 30 teams, at $91 million, below such industry weaklings as the Detroit Tigers, Pittsburgh Pirates and Milwaukee Brewers, according to figures provided to Congress.

The cheers might be loudest tonight for outfielder Vladimir Guerrero, 28, the grand prize in Moreno’s $146-million free-agent spending spree.

Said Moreno: “Nobody divides by the number of years. These players are young players. We’re building for the long term.”

Moreno spent $70 million on Guerrero, for five years, and the rest on pitcher Bartolo Colon, outfielder Jose Guillen and tonight’s starter, Kelvim Escobar. Colon is 30, Escobar 28 and Guillen 27, all signed to multiyear deals.

The influx of talent helped the Angels sell a record number of season tickets, retaining almost all the customers who hopped aboard the bandwagon after the 2002 World Series championship. The Angels project 35 sellouts and total attendance of 3.2 million this season; each would set a franchise record.

The signings also inflated the Angels’ payroll to $108 million, a figure Moreno said he expected to be between $90 and $100 million next season. Major league teams typically spend some $40 million to $50 million on expenses aside from the player payroll, and the Angels will owe millions more under baseball’s revenue-sharing program.

The contracts of pitchers Kevin Appier, Aaron Sele, Troy Percival and Ramon Ortiz expire after this season, shaving $30.7 million from the payroll. (The Angels released Appier last year but must pay all but $300,000 of his contract this year, even though he is playing for the Kansas City Royals.)

Percival could return at a reduced rate, third baseman Troy Glaus ($9.55 million) is a potential free agent and outfielder Garret Anderson ($6.2 million) could double his salary in the contract extension Moreno has long promised to him.

But the Angels also have cheap labor on the way, from a farm system ranked among the top three by Baseball America. With first baseman Casey Kotchman, third baseman Dallas McPherson, catcher Jeff Mathis and pitchers Bobby Jenks and Ervin Santana ticketed for Anaheim in coming years, Angel President Dennis Kuhl said breaking even next year and making money thereafter does pencil out for Moreno.

“It really does, the way you look at how he and [General Manager] Bill [Stoneman] will control the salaries,” Kuhl said.

In this model, however, Moreno cannot afford a rebuilding year in the near future. The Angels sold 3 million tickets last season, for the first time in their 43 seasons. Moreno expects to sell 3 million every year. If fans consider the Angels a must-see product, in person and on television, he can persuade advertisers and broadcasters to pay up.

So far, so good, at least on one front: Moreno, who made his fortune in advertising, has added a ring of ads in front of the terrace level at Angel Stadium and more than doubled the team’s ad revenue this season, to $18.4 million.

But revenue from TV, the most critical hurdle toward profitability, lags far behind the Dodgers’. Fox Sports Net draws more viewers for the Dodgers and, accordingly, pays them more than the Angels for TV rights -- $23.9 million more this year.

The Angels’ contract with Channel 9 expires next year, and the contract with Fox Sports Net expires in 2008. The Fox contracts with the Lakers, Mighty Ducks and Clippers all expire by 2008, and the Angels have considered the possibility of starting their own cable channel -- or threatening to -- in partnership with other local pro teams. Disney lost interest in owning the Angels and Ducks after its plans for an ESPN West cable channel collapsed.

“We are exploring everything,” Moreno said. “There are some great teams in L.A. You’ve got showtime there.”

In commercials on Channel 9, the Angels bill themselves as “L.A.’s team.” Their billboard campaign includes ads on Wilshire Boulevard and Ventura Boulevard, at Hollywood and Vine and along the San Diego Freeway near Los Angeles International Airport.

Under the ownership of the Autry family, the Angels once commissioned a UCLA study that revealed the team could not sell 3 million tickets a year without attracting fans from L.A. County to attend six to eight games, not just one or two, former president Richard Brown said. Moreno needs that L.A. audience to buy his tickets and watch his games, same as the Orange County audience watches the Lakers in person and on television.

The NBA’s Vancouver Grizzlies considered moving to Anaheim three years ago, before deciding to become the lone major sports franchise in Memphis, Tenn. Andy Dolich, president of business operations for the Grizzlies, says he believes Moreno can successfully sell the Angels to all of Southern California.

“Look at the region. Don’t just look at the county,” Dolich said. “I don’t need to be a demographer or Alan Greenspan to understand the resources within 70 miles.”

Moreno believes the market is more than large enough for the Angels and Dodgers to prosper, although he would just as soon overtake the boys in blue. Although the Dodgers boast five World Series titles and 47 seasons of tradition in Los Angeles, they have not won a playoff game in 16 years, and the increasingly common sight of a half-empty Pauley Pavilion, home of UCLA basketball, is testament to the erosion of a championship brand.

“Look at all the years the Dodgers were the bedrock foundation, even with football. Arguably, the Lakers are the premier brand right now,” Dolich said. “Whoever gets the market more aggressively, more intelligently and more successfully is going to win.”

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(BEGIN TEXT OF INFOBOX)

TV Rights Fees

The revenue disparity between the Dodgers and Angels is most apparent in the rights fees paid by local TV outlets. The Dodgers receive $35 million a season from Fox Sports Net, in a contract that extends through 2013, and $8 million from Channel 13, in a contract that extends through 2005. New Angel owner Arte Moreno inherited deals with Fox Sports Net and Channel 9 that pay far less. The Fox contract expires in 2008, the KCAL contract in 2005. Annual Angel rights fees:

*--* Year Fox Sports Net KCAL 2004 $11.1 million $4.3 million 2005 $12.5 million $5.2 million* 2006 $14.5 million N/A 2007 $16.9 million N/A 2008 $19.8 million N/A

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*Note: Increases to $6.5 million if 2004 ratings increase to level specified in contract; Sources: Times research, Anaheim Angels

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Angel Revenue

The Angels expect to generate a record $140 million in revenue this season, with ticket sales accounting for less than one of every two dollars. Where the money is expected to come from:

* Gate receipts: $62 million.

* Local broadcast revenue: *$22 million.

* Concessions, parking, stadium merchandise sales: $21 million.

* Advertising: $18.4 million.

* Share of national MLB revenue: **$16.3 million.

* Total: $139.7 million.

Note: *Includes revenue from rights fees and sponsorship agreements with Fox Sports Net, KCAL, KDOC, KPXN, KWHY in television and KSPN and KTNQ in radio. **Includes revenue from national licensing and merchandising and MLB contracts with Fox and ESPN

Source: Anaheim Angels