“MLB `06: The Show” Franchise Management FAQ
By MR. Kim Dalton Rodieck
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TABLE OF CONTENTS
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Version history
Introduction
Explanation of cost structures
Viewing your financial health
The Save-Test-Load method
PRESEASON MANAGEMENT
Franchise goals
Editing Players
Releasing players
Setting rosters
Free Agents
Hiring a staff
Training and rehabilitation budgets
TV contracts and primary advertisers
Billboard advertising
Loans and banking
Transportation
IN-SEASON MANAGEMENT
Player fatigue
Player morale
Player advertising
Team advertising
Promotions
Ticket prices
Concession prices
Overhead
Adding vendors
Parking prices
Adding seats
Loose Ends
OFF SEASON MANAGEMENT
Shared revenue tax
Resigning players
Trading players
Amateur Draft
Signing Free Agents
How Did I do In Season 1?
Last Words
OTHER STUFF
Appendix 1: Elasticity
Appendix 2: Accounting for the shared revenue tax
Wish List for Future MLB Games
Reader questions
Contact information
Music List
Credits and thanks
Legal stuff
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Version History
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v.1.0 3/9/06
-First version complete.
V.1.01 3/20/06
v.1.02 4/02/06
v.1.03 5/10/06
-Corrected as many spelling errors as I could find.
-Added "Overhead" section.
-Updated "Releasing Players" section
-Added "Editing Players" section
-Updated "Setting Rosters" section
-Updated "Resigning Players" section
-Updated "Promotions" section
-Updated "Reader Questions" section
-Added "How Did I Do In Season 1?" section
-Added a personal music list at the end
-Updated "Amateur Draft" section
-Updated "Ticket Price" section
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INTRODUCTION
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Hello, once again, baseball fans to another season of MLB video
games. The year is 2006 and we are going to take a look at MLB `06:
The Show. More specifically, we are going to take a look at how to
manage a successful franchise in this game.
In my FAQ for MLB 2006, I focused on, for the most part the
business side of running a franchise. This FAQ will contain all the
business know-how that you need to run a profitable franchise, but I
have also added a few sections that have nothing to do with
business. This makes this FAQ more about being successful at more
aspects of franchise mode as opposed to just making money (which is
actually the point of franchise mode). I also wanted to be a lot
more thorough because I believe that there will be many players out
there who are totally unfamiliar with the MLB franchise mode, and I
would like to give them as much information as possible to see what
this game has to offer and what you can do.
Most of this FAQ is brand new, but there were some sections that I
simply copied from my MLB 2006 FAQ and pasted (with negligible
modifications) them here because I really have nothing new to say.
In such cases, I like what I previously wrote, and I am going to
stick with it. In those cases, the rules still apply, and it just
saves me a lot of time. However, I really wanted to write a new FAQ
because, since the competition for new baseball games has been
narrowed, many of you will be playing an MLB game for the first
time, as opposed to some of the other baseball games on the market.
If you are playing a baseball game from this series for the first
time, then this FAQ is really for you. I try very hard to make sure
that my strategies are understandable and clear to the average
gamer. This FAQ is, after all, about Franchise mode, which can be
rather complicated to manage. Therefore, I hope that new players of
this series can be helped by my FAQ.
Many of you are already familiar with the MLB series and I hope that
my last guide was helpful to you in being able to run a successful
franchise. If that is the case, then I should mention that there is
little change in franchise mode from MLB 2006 to MLB 06: TS. If you
gained a lot of financial success in the previous game, then all you
have to do is apply the same rules and you will continue to be
successful. However, I strongly recommend that you at least skim
through this FAQ to pick up on any new strategies and
recommendations that I have made so that you can compare strategies.
There are two major improvements in this FAQ that I have made since
the last one, and I hope that you will take a look at them.
First, I added a little section about what the Save-Test-Load method
is all about and how to use it. That way, I don’t have to
painstakingly describe how to properly employ this method in each
relevant section. I can just refer to the STL method, and you should
be able get the hang of it.
Second, I added two lengthy appendices at the end which will give
you an even deeper understanding of how the business side of this
game works. Appendix 1, which is about the economics concept of
elasticity, will give you some insight into the dynamic relationship
between price and revenue. Appendix 2 is about using a real life
example from MLB 2006 to calm everyone’s fears about the dreaded
shared revenue tax. In that section, I explain why it doesn’t matter
that your income statement shows a loss of $47,000,000.
Lastly, as I said before, I am sure that there will be many of you
out there who will be playing a game from the MLB series for the
first time. I hope that this guide is helpful to you, and even more
importantly, I hope that I have written this guide clearly enough
for anyone to follow.
Play ball!
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EXPLANATION OF COST STRUCTURE
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Understanding this section is very important to having a good
understanding of how costs are paid.
First, almost all costs and revenues are tracked on a daily basis. In
other words, you will have to pay out money for salaries, training,
rehabilitation, and other things for every day of the season (including
the playoffs if you are skilled enough to make it to the post season).
For example, if you have a player who has a yearly salary of
$10,000,000, then you will have to pay $55,555 per day to that player.
This same rule applies for all players as well as coaches and scouts.
Training and rehabilitation follow the same rule. If you decide, at the
start of the season to, devote $30,000,000 to training, then that will
cost you $166,667 per day.
The above principal is very important to making decisions about hiring
new personnel (which is discussed later). Here is how to view costs
with a simple example. Suppose that you have a hitting coach who is
being paid $1,500,000 per year. You decide that you want to hire a new
hitting coach who wants $2,000,000 per year. What is the cost of the
new coach? The answer is $500,000 because that is how much more money
you have to spend in order to upgrade your coach. But we want to view
this upgrade in terms of daily costs. Since the cost of the upgrade is
$500,000, that added amount spread out over the period of
(approximately) 180 days is just $2,778 extra per day.
Costs like those mentioned above have to be paid every single day of
the season, no matter what. You will notice that your balance sheet
will be in decline when you have a day off or if you are playing games
on the road. That's because you are paying the cost of salaries and
such during this time.
When you are playing home games, you will be able to collect revenue
from concessions, tickets and parking. This is when you earn your
profits. You are still paying out the costs mentioned before, but you
will also be earning revenue from which costs will be deducted. The
difference between revenue and cost is your daily profit. Just remember
that you can only earn profits when you are playing at home.
The cost of things like new vendors, additional seats, training and
rehab facilities are one-time costs, and you do not pay for these over
a time period(aside from maintaining the facilities of course).
Transportation is a cost that is paid in full at the start of every
year. This will be discussed more later.
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VIEWING FINANCIAL HEALTH
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There are two ways to check the financial health of your franchise. The
first way is by checking your balance sheet and the second way is to
check your funds. Let me talk about the balance sheet first. You can
access this information by pressing the circle button when you are in
the franchise menu screen.
Your balance sheet (Actually, what you are looking at is not a balance
sheet, it is an INCOME STATEMENT, and it annoys me to no end that it is
referred to as a balance sheet, because you don’t want this to balance!
If it balanced, your net income would be zero. That’s enough of my
little accountant rant) has two major categories which are INCOME and
EXPENSES. Your NET INCOME is income minus expenses. The balance sheet
is just a year to date snapshot of your profits (or losses) for the
year. The only real reason to be concerned with the balance sheet is
that it can be used as a tool to determine how much money in profits
you are earning per home game. When you are about to play a home game,
write down how much net income you have earned to date. Play the next
game and take a look at your new net income figure. The difference
between those two figures is the profit that you are earning per home
game. Thus, every time you play a home game, your funds will increase
by that much in the short run. Ultimately, every dollar of revenue that
you take in and every dollar of expense that goes out is logged
somewhere on the balance sheet. Let’s take a look at it the balance
sheet and see where your business activities will be logged.
INCOME
FACILITIES: money earned by selling concessions, tickets and parking.
LICENSING/AD SALES: money earned from TV, billboard and primary
advertising contracts.
SHARED REVENUE: this is the rebate that you get at the start of the
year from the shared revenue tax.
LOANS: If you took out a loan, then the amount of that loan is logged
here.
EXPENSES
STAFF SALARIES: this is where the salaries of your coaches and scouts
is logged.
TRAINING/REHAB: the amount of money that you spend on training and
rehabilitation is logged here.
FACILITIES: When you spend money on new vendors, new seats, training
facilities, rehab facilities, the cost will be logged here. The cost of
transportation is also logged here at the start of every year. Overhead
costs are also logged here.
MARKETING: Money spent on player advertising, team advertising and
promotions.
BANKING: Money spent on repaying any loans that you have taken out.
SHARED REVENUE: At the start of every year (except the very first
year), the amount of shared revenue tax paid is logged here. The shared
revenue expense, for you, will almost always be higher than the shared
rebate resulting in a large negative balance sheet at the start of the
year.
PLAYER SALARIES: Money spent on player salaries.
Whenever you play a home game, you will notice that your net income is
rising. That's the income that you earned for a home game minus the
expenses paid. When you add a new facility, like a vendor or additional
seats, your net income will fall because you added an immediate expense
without adding any immediate income.
In my opinion, your funds are the best way to judge your financial
health. This tells you how much money you have to add vendors and seats
and such as well as your ability to absorb the hit from the shared
revenue tax and transportation costs. The balance sheet simply tells
you how much money was added to the amount of funds that you started
the season with.
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THE SAVE-TEST-LOAD (STL) METHOD
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The Save-Test-Load method is something that I came up with in order
to make sure that it is worth it to make a certain business
decision. Basically, this works by saving your game at a strategic
time, and then simulating the next game as a control test. Once that
is done, you load your game back to where you started. Now that you
have two data figures (your starting data, and your control test
data), you can test the effects of changing certain variables in
your franchise such as ticket prices and concessions.
For example, suppose I want to see what will happen to attendance if
I raise the price of left field bleacher seats by $1. The first
thing I do is write down the current price and the total attendance
to-date for the left field bleacher section. Then I simulate the
next home game and I check how attendance normally would react if I
did not change the price at all. By doing that, I can discover that
attendance increased by 2,165 in a section with a capacity of 3,500.
Now, I load my game so that I am back at my starting point. Before I
simulate the next game, I raise the price of those seats by $1. Now
I simulate the next game and I discover that attendance increased by
2,134. Now I load my game again. By doing that test, I concluded
that there was no significant drop-off in attendance when I raised
the price. In fact, that small drop-off could just be attributed to
the unpredictable nature of day to day attendance. Therefore, it is
clear that I can raise the price by $1, and since there is no
significant drop-off in attendance, the total revenue gained from
that section will go up and attendance stays level. I will not stop
there however. From there, I will do another test to see if raising
the price by one additional dollar will have any effect. If not,
then I know that I can safely raise the price of those tickets by a
total of $2 now. I will keep doing this until I notice that raising
the price one additional dollar beyond my last test shows a
significant fall in attendance. If the fall in attendance is
significant enough, then it will be made clear that the fall is
almost entirely due to rising prices.
Ultimately, this is how the STL method works, by providing you a
safe method to play around with different variables to see how they
affect your bottom line and your business goals.
There are five distinct times where you will use the STL method to
run some tests, and they are these:
Ticket prices – Your goal is to see how high you can raise the price
of certain tickets without having any significant effect on
attendance.
Concession prices – Your goal is to find a price that maximizes
revenue for each individual concession.
Adding vendors – Your goal is to find out whether adding a new
vendor produces a positive net present value.
Parking prices – Your goal is to maximize revenue. (This is the
toughest one)
Adding seats – Your goal is to see how many additional seats can be
immediately filled by the addition of new seats.
Some of these terms like “net present value” might seem a bit
strange, but each one of these sections is described in more detail
later, so don’t worry about it for now. Also, these tests should be
done precisely in the order listed above. I will get more into that
later, but there is a reason why I listed these tests in this
particular order.
Also, just to clear up any confusion, testing for concession prices
and ticket prices should be done in bulk. In other words, test the
prices by increasing all prices at the same time and checking the
effect on each individual section or concession. If you did a test
for one concession at a time, it would take you forever.
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PRESEASON MANAGEMENT
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Before you even play your first game of the regular season, you will
need to create a solid foundation for your franchise to grow and
prosper. You can treat this section as a checklist of things to do
before you begin.
FRANCHISE GOALS
The very first thing that you have to do when you start a new
franchise is to sign on to a list of goals that you must accomplish
within a span of 4-6 seasons. Same with last year’s game, the
difficulty of these goals is directly linked to how well your team
did (in real life) during the 2005 season. This means that if you
are a Mariners fan like me, then your franchise goals will not be
too difficult to fulfill. Cardinal and White Sox fans, on the other
hand, will have to deal with a tougher list of goals that need to be
accomplished. Most of these goals will be will be related to on-
field performance such as winning a post season award, leading the
league in a certain statistical category or making the playoffs.
Other goals deal with non-performance requirements like maintaining
a certain level of fan loyalty, earning profits, and such. The only
requirement that I don’t like having is the requirement that your
stadium host an All-Star game. I don’t know how cities are awarded
this honor, and I don’t like it since I don’t have much control over
that. You also don’t need to worry about the possible goal “Draft
and All-Star potential player”. This one is actually pretty
reasonable, and you can read more about this in the AMATUER DRAFT
section of this FAQ.
You may ask “OK, so what happens when I finally complete all of my
goals after 4-6 seasons?” As far as I know, you don’t get anything
other than the honor of being able to keep playing. I’ll try to test
this in the future as well as to see what happens if you don’t
fulfill all of your goals in the stated time frame.
***UPDATE***
For quite a while, I thought that it was not possible to switch teams
during franchise mode. Apparently, you can and it is directly linked
to your franchise goals. Here is what ashawn1234 wrote to me:
"you can change teams in franchise mode you just have to wait to your
contract is up and weather or not they want to resign you just click on
view other offers and depending on how you did other teams will want
you to run there franchise for example i started with the rangers and
won 4 world series in a row no cheating and at the end of my contract
they wanted to resign i clicked view other offers and the rangers,
Yankees, red sox, and giants wanted me to run their operation."
EDITING PLAYERS
Each organization will have about 6-12 real life minor league prospects.
Chances are, that hot prospect for your favorite team will end up on
the team's AAA roster, or possibly a few on the AA roster. The rest of
the players are all fictional. So it might be a bit of a bummer for
many fans to find that the one prospect that they had hoped would be
in the game is not there. If that is the case, then you can always edit
a fictional player into that missing prospect. You can either edit
rosters from the game's main option screen or, while you are in
franchise mode, go to veiw rosters. From there, highlight the player
that you want to edit and press the X button.
First of all, when it comes to editing real life players, your options
are limited. You cannot edit that player's name, age, height, weight,
or throw and bat hand. Everything else is fair game. When it comes to
editing fictional players, you can edit anything you want. Therefore,
it is very possible to establish an entire AAA or AA roster of real
players. The announcer will still not use that player's name in PA
announcements, however, even if it is a common name. For example, if
I edited the name of the Tacoma Rainiers' center fielder to Adam Jones
(which is the actual name of the prospect), the annoucers will still
refer to that player as "Number 10".
Finally, this method of editing is far superior to usinf the create-
a-player option because inorder to make room on your roster, you will
have to release current players under contract(see section below), and
if your prospect his high playing attributes, it can be inordinately
expensive to sign him from the free agent screen, which is where created
players end up.
RELEASING PLAYERS
If you recall from MLB 2006, you are not really releasing a player,
you are in fact buying out his contract for the year. For example if
you have a player with 1 $15 million, 10 year contract that pays
$1.5 million per year, then you will have to pay out only $1.5
million, not $15 million.(I am not sure if you have to pay that player's
$1.5 million/year salary in following years because the salary
composition of my team changes every year.)This means that you cannot
cut costs by simply cutting players from your roster. The remainder
of that player’s salary is spread out over about 180 days, Besides
you will need full MLB, AAA and AA rosters to have valid line ups. The
only reason to release a player would be if you have too many players
at a single position (see the section below) and you need to add some
free agents to create valid minor league rosters and line ups. In order
to release players, go to the free agent signing screen, highlight the
player on your roster that you want to release, and then release him.
Look at the bottom of the screen to determine which button to use.
SETTING ROSTERS
Before you play a game, each level of your franchise must have a set
of valid lineups; otherwise you will not be allowed to proceed. This
is not too difficult to deal with. Your MLB, AAA and AA teams will
each need 25 players, and here is how I recommend setting your
rosters:
Position For each club Total
C 2 6
1B 2 6
2B 2 6
3B 2 6
SS 2 6
OF 4 12
SP 5 15
RP 5 15
CL 1 3
TOTAL 25 75
There is some room to move with the infield positions, especially at
first base. For example, you can hire a general infielder to cover
more than one infield position and use that extra slot to have an
extra pitcher or outfielder. This may be especially valuable if your
team is an American League team and you want some extra pop in your
line up for that DH position. Either way, following this general
tactic will ensure that you will have enough players at every
position to set valid lineups for each of your clubs. To set your
line ups, select LINEUPS in your main franchise menu and toggle
between each of your clubs, setting lineups as you go. One other
reason why you will want a sufficient number of bench players is to
give your regular starters a break once in a while, which I will
discuss in the PLAYER FATIGUE section. Finally, it is good to have a
nice, deep bench of specialty players, i.e. players who have top-
notch speed or glove work so that you can also make defensive
substitutions or put in a pinch runner when needed.
If you are playing this game for the first time, then I suggest using
the above table to set your rosters. After you have played a full
season in franchise mode, then you should have a good idea of your
own playing capabilities and your own roster needs. Therefore, if you
feel that you can do with out an extra relief pitcher and you would
rather have an extra out fielder, then you can make that decision
before you start the next season.
FREE AGENTS
The free agent screen can be accessed through your main franchise
menu. This is where you get to release players (buy out their
contracts for the year), and pick up new free agents. This section
is pretty self explanatory, but the one interesting feature here is
that when you create a player, this is where he ends up. So, for
example, if I wanted to make myself into a player, I could do that
on the create-a-player screen and, once I am finished, that player
can be found in the free agent screen of my franchise. Of course,
the better the created player is, the more it will cost to sign him.
Be careful with this though, and the reason for this is because your
team has a salary budget(you can turn this off in the options screen
before you set up your franchise which makes this part moot, but
budgets make the game more realistic). When you attempt to sign
players, the amount of money that you have available for salaries
begins to decrease. You can see this in the signing screen. The
difference between your salary budget and your payroll is the amount
of money you have left for signing players. You should also keep an
eye on your salary budget because it may hinder you from making
trades. If for example, you have a available salary budget of
$5,000,000, you will be unable to trade for a player that has a
salary of $6,000,000 because his salary will exceed your available
salary budget.
HIRING A STAFF
There are two types of personnel (other than players) that you can
hire as part of your franchise, and these are coaches and scouts.
First and foremost, the team’s manager is important to your
franchise to the degree that his strategy affects the way your team
performs when you simulate games. Your manager does not matter all
that much if you plan on playing all or most of season yourself. He
has four categories by which he is measured: Aggressiveness,
leadership, offense and defense. I am not quite sure what the
leadership and aggressiveness stats affect, but offense and defense
are pretty self explanatory. The higher the offense stat, the more
your coach will focus his players on scoring runs. The higher the
defense stat, the more he will focus his players on keeping opposing
runs off the board.
The pitching, batting and development coaches are by far the most
important personnel that you can hire. They are even more important
if you plan on spending a lot of money on training because these
coaches will give you the biggest bang for your training dollar.
Each of these coaches has four distinct ways in which they benefit
the growth of your players.
*Pitching Coach*
- Control – Makes sure that the pitch ends up where you want it.
- Velocity – Allows your pitcher to throw a lot harder.
- Mechanics – I’m not quite sure what mechanics does, but I believe
- that it has something to do with preventing injuries
- Pick-off – Makes it easier to pick off opposing base runners.
***UPDATE***(Lee Sharp pointed out to me that developing a pitcher's
mechanics also helps in improving a pitcher's control as well as
velocity.)
*Batting Coach*
- Power - Increases home run hitting power.
- Contact - Cuts down on strike outs and increases the chance of a
base hit.
- Base Running – Allows base runners to steal bases more easily,
round bases faster and generally become smarter base runners
- Discipline – This really only comes into play when simulating
games and it affects your team’s ability to lay off bad pitches and
wait for a pitch to drive.
*Development Coach*
- Fielding – Increases player’s defensive abilities.
- Pitching – Increases pitcher’s general pitching ability
- Batting – Increases hitter’s general hitting ability
- Base running – Same as above.
The rule here is simple: Get the best coaches that you possibly can.
Allow me to finish this section by saying a few words about scouts.
They are worthless. My strategy here is to replace all of my current
scouts with the cheapest and lamest scouts that I can find. I know
that this is quite a departure from my recommendations for MLB 2006,
but I have found that the information that scouts gather to be
useless in the end. What scouts do is go around the world and give
you information about amateur players that you may want to draft in
the amateur draft at the end of the year. In MLB 2006, whenever I
got to the amateur draft, the players that I had scouted had just as
much information about them as players that I did not scout. Also,
many of the players that seemed talented when I scouted them, turned
out to be lousy when I was able to see their abilities in the draft.
In some cases, it seemed that they turned out worse than other
players that I scouted who I thought were untalented. Therefore,
just forget about scouts. Pick the cheapest scouts possible to save
money, and just use them to scout potential draft picks.
TRAINING AND REHABILITATION BUDGETS
In my opinion, training is one of the most important aspects of
keeping your team and your players on the winning edge. Without
training, your players will, of course, start to get grumpy with
you, but more importantly, their skills will begin to deteriorate
over time. With a good amount of training, your player’s skills will
increase. This is especially valuable when you have a team of young
players or some young talent that you want to develop over several
years. Training is also very expensive if you decide to maximize
your training budget. There are a total of 16 categories in which
you can increase your player’s skills.
*Pitching*
- Stamina – Pitcher can pitch deeper into the game.
- Movement – Breaking pitches will break harder and fastballs will
have more movement
- Pitch Development – Increases the overall quality of each one of a
player’s pitches.
- Control – Increases the chances that a pitch will end up right
where you want it.
*Defense*
- Speed – Allows you to get to the ball quicker. Crucial for
outfielders.
- Glove – Decreases the chance that a line drive will bounce off of
your player’s glove and increases the chance of snagging the ball.
- Accuracy – Increases your throwing accuracy. This is crucial for
your youngest AA players who tend to be horrible at simply making a
throw to first base.
- Arm strength – Makes sure that your throw gets to the target
quicker.
*Offense*
All of the categories here (power, contact, base running and plate
discipline) are identical to the categories of the hitting coach.
*Conditioning*
- Strength – Improves general abilities like hitting power, the MPH
on your pitches, arm strength, etc.
- Stamina – Your players will tire less quickly.
- Agility – Increases your “first step speed” that allows you to
track down fly balls, get a good jump on a stolen base or get to
that ground ball into the hole of the infield.
- Flexibility – Increases your player’s ability to do things like
hit inside pitches squarely or jump against the wall to take a home
run away from an opposing hitter.
Those are all of the categories, and my conclusion is that you
should maximize the budget each of these categories, with the
possible exception of plate discipline. Now, this is going to be
very expensive. There are a grand total of 16 categories, and you
can spend up to $5,000,000 on each category for a grand total of
$80,000,000 in total training costs. This means that you may be
spending up to, approximately, $444,444 per day on training.
Personally, I think that it is worth it. It may take a few years to
for the results of your training efforts to come to fruition, but
you will notice that your young players are turning into great ball
players. In my personal example, the Seattle Mariners have a good
mix of youth and veterans. I would like to hold on to young players
like Felix Hernandez, Jeremy Reed, and Yuniesky Betancourt, so
having a high training budget is key to making sure that they
develop into great players. Having a high training budget will also
keep some of my veterans like Richie Sexon, Adrian Beltre and Joel
Pinero playing like All-Stars.
Rehabilitation should be treated a little bit differently. This
comes into effect when a player is injured and it is your rehab
budget that will, in part, determine how quickly that player can
return to the field. If you are planning on simulating every game,
then having a maximized rehabilitation budget is crucial because you
will run into injuries. If you are planning on playing most of the
games yourself, then rehab is not such a big deal because it is very
rare to suffer injuries in a game that you are actually playing.
Therefore, if you are planning on simulating every game, then you
should maximize your training budget. If you are going to be playing
most of the games yourself, then I would set the rehabilitation
budget at just a bit more than one third of the maximized rehab
budget. There are four categories of rehabilitation that you can
fund, and you can spend up to $2,000,000 on each category for a
grand total of $8,000,000 worth of rehabilitation. I would set each
category at about $338,000 for a grand total of about $1,350,000. If
you remember from the EXPLANATION OF COST STRUCTURES section, we can
spread this cost out over the period approximately 180 days which
means that you will end up spending just $7,500 per day on rehab.
What this does is keep the players happy and if a player gets a
minor injury, he will be back in no time.
TV CONTRACTS AND PRIMARY ADVERTISER
Here you will have the opportunity to sign a television contract as
well as rent space in your stadium to advertisers in order to earn
some money. The catch is that you will not be earning the bulk of
your contract until the end of the season. When you sign a contract,
it will be for a period of 2-8 years for a fixed cash flow. When
choosing a contract, the golden rule is that you should choose that
shortest contract, not the biggest in terms of dollar value. There
is a good reason for this which is that as you become a winning
franchise, bigger and better deals will come along in the future.
You don’t want to be locked into a deal for 6 years at $2,000,000
per year when you have a 3 year deal worth $5,000,000 per year waiting
for you. A short deal will insure that when a better deal comes along,
you have a better chance of nabbing it when your deal expires.
The shortest deal that you can sign is for two years, and that
is optimal.
When it comes to primary advertisers, you will have several options
as to which advertiser to choose. When you begin your new franchise,
your choice of TV contracts, however, is limited. When I say limited,
I mean that your only choice will be your home town local channel with
a meager yearly cash flow of, usually, less than $1,000,000. This is
when it is most critical to choose a short contract. If the contract
demanded is longer than 3 years, then it is probably worth it to not
sign a contract at all! This may sound crazy, but if you sign a four
year contract at $750,000 per year, and then you are presented with
an opportunity for a 2 year contract for $4,000,000 per year in the
following year, then you will have sacrificed several million dollars
by hanging on to your old contract. In that case, you would have been
better off not signing a contract in the first year and then picking
up the better contract in the second year.
Also, just be aware that when you sign a contract with a TV station
or a primary advertiser, there are stipulations that go along with
that contract that you must fulfill in order to receive full
payment. This means that your contract may require you to have a
team batting average above a certain level, an ERA below a certain
level, make the playoffs or have a certain level of attendance. You
will be able to see what this requirement is before you sign the
contract, but make sure that you keep it in mind before you sign.
BILLBOARD ADVERTISERS
This one is pretty obvious. When you sell billboard advertising, a
certain company will pay you to advertise in your stadium. What the
game allows you to do is sign short term advertising deals in your
stadium for a fixed amount of time for a fixed number of dollars.
Again, short deals are better because better deals may come along in
the future. In general, the rate at which advertisers will pay you is
directly a function of attendance. This means that it is a good idea to
sign deals that expire in midseason. As attendance keeps rising,
advertisers are willing to pay you more. Therefore, I think that the
optimal length for a new franchise is to choose a deal that expires in
the middle of 2006 or 2007. By that point (if you have been winning),
your stadium should be 90-97% sold out each game and advertisers will
be paying out a lot to advertise in your stadium. Once rates are high,
then you can start locking in long term deals.
LOANS AND BANKING
This is one of the most crucial aspects of starting off your franchise
on the right foot. There are several purchases that you can make at the
start of the season. When choosing a loan, you want to do two things.
First, choose a loan amount that fully covers the cost of all of the
investments that you want to make. Secondly, now that you have figured
out the appropriate amount for your loan, you need to choose a bank.
The optimal choice is the bank that will loan you your desired amount
and provides for the lowest monthly payment that you can get. There are
two reasons for this. First, payments are made on the first day of each
month. Since you are trying to keep your balance sheet high in the
black as well as maximize your funds, keeping this payment as low as
possible is crucial. The second reason is that you will be paying off
this loan during the off season. This means that in addition to being
charged for transportation and the revenue sharing tax, you will also
be charged for loan payments made over the months of the off season.
The shared revenue tax is a pretty crazy expense, so you don't want to
make the situation worse by having huge loan payments accumulate over
the off season. With this particular loan, you don't have to
perpetually hold on to paying it off. In fact, it is good to pay off
the balance of the loan a season or two from now, but I will get to
that later.
VENDORS AND FACILITIES
Now that you know the rules about taking out a loan, you have to use
that loan to purchase some assets. You can purchase whatever you like,
but here are my suggestions for what to get.
batting cage 2,000,000
face painting 100,000
playground 2,000,000
hot tub 5,000,000
ice cream guy x20 200,000
soda man x20 200,000
peanut guy x20 200,000
aerobic room 10,000,000
auto pitcher 5,000,000
spa room 6,000,000
massage room 4,000,000
---------------------------------
TOTAL 35,000,000
This should give you one unit of each asset, except for ice cream guy,
soda man and peanut guy for which you should have a grand total of 30
units each.
When you receive your loan, you will want to do two things. First you
will want to buy those vendors that will create cash flow, like the hot
tub and the playground, and such. Second, focus on those facilities
that will help your players such as the auto pitcher and the aerobic
room. Ultimately, if you take my full advice based on the above table,
then the optimal loan amount is a $35,000,000, 15 year loan from Roll
Bank at 7.9%. This should require a payment of just about $340,000 per
month. That is the lowest per-month cost that you can get, and it is
the least obnoxious when it comes to keeping your cash flow high. I
should also mention that not all of you will begin your new franchise
with a home game. About half of you will play your first home game a
week or more after opening day. If this is the case, then wait until
you begin your first home game to make this kind of a financial decision.
There is no reason, whatsoever, to take out a loan to gain a certain
amount of funds, and then see those funds dwindle by using them to pay
for player salaries, staff salaries, training, rehab, etc. For those of
you who will start your franchise on the road, wait until you are about
to play your first home game to take this loan. This is important because
when you buy a new vendor (like the hot tub, for example) you want that
vendor to start producing cash flow right away, so you might as well
wait until you can get some cash flow before you buy those vendors.
TRANSPORTATION
Read my lips! Do not EVER upgrade your transportation. This is the
biggest waste of money in the game. You may be tempted to upgrade when
you see your players whining and complaining that they have to ride on
a cheap bus, but don't worry about it. Sure, riding on a bus is a
negative for player morale, but you can more than make up for that by
being a winning team. The rule here is that there is no substitute for
victory. Your players will put up with having to ride on a bus just as
long as your team is having a great year. There is another temptation
that you should avoid. As the season progresses, you will notice that
the cost of an upgrade keeps falling day by day. Don't be fooled. The
reason why the cost of a transportation upgrade keeps falling is
because transportation costs are automatically paid in full at the
start of each year, and that billing pays for the entire year.
Therefore, when you upgrade your transportation near the end of the
season, you think that you are getting a great deal, but the cost is
low because you are only leasing that mode of transportation for a few
weeks, not a full season. The cut off date for transportation upgrades
is about three weeks before the end of the regular season. By that
point, you will be tempted by the very low cost of the upgrade.
However, if you do it, then you will not be able to reverse it until
the start of next season. When the off season ends and the regular
season begins anew, you will be charged for that one year lease right
off the bat. If you upgraded to a team jet just before the season ends,
you will be hit with a bill of $200,000,000! You can get a refund by
downgrading, but why bother? If your franchise has been wildly
profitable, then you will certainly be hit with a massive shared
revenue tax and you WILL start next season with a large negative
balance sheet. I will get more into this later, but the tax has to be
paid from your funds. The same rule applies to transportation costs.
The amount of the transportation lease will be paid out of your funds.
If your funds are not sufficient to cover your higher mode of
transportation, then you will automatically be downgraded to a bus.
Ultimately, the only real benefit of upgrading your transportation is
that your players energy will not decline as fast and you will be able
to play your starters more during the year with less days off for rest.
The problem with is that you have to pay a pretty high cost for keeping
your players refreshed with more luxurious transportation. Therefore,
the only time where you might be justified in upgrading your transportation
is when you literally don't have anything else to spend your money on.
If you cannot profitably add more seats and vendors after several seasons,
then go ahead and begin upgrading transportation.
--------------------------------------------------------
In-Season Business Management
--------------------------------------------------------
This section is the most vitally important part of maximizing your
revenues throughout the season. Selling soda, beer, popcorn, caps,
tickets, parking and such are going to be your main focus of making
money. Here, I will discuss aspects of the day to day nature of running
a franchise and give you the tools to maximize revenues.
PLAYER FATIGUE
As you move along through your franchise season, you may notice that
your players suddenly don’t have as much pop in their bat, they are
slower, and may even commit more errors. One explanation for this is
that your players might simply be fatigued. When you play a game, you
begin by picking your starting pitcher, and then adjusting your lineup.
When adjusting your lineup, look just off to the side of the player’s
names, and you will notice green bars of different lengths. Those green
bars represent your player’s energy. When certain players play day
after day, they get tired. Giving them a day off once in a while will
keep their energy levels high as well as their performance. This is why
it is so important to make sure that you have skilled bench players who
can sub for you starters every once in a while. Generally, it is a good
idea to let any given player to play for five days straight, and then
rest him.
PLAYER MORALE
Player morale is a general level of the happiness of your players. If
you have seen video trailers and some reviews of this game, then you
know that a big deal is made, sometimes, about player morale. The truth
is that player morale and the maintenance of morale is not a very big
deal at all. If you have a player that is unhappy, but signed to a long
term contract, then he has no choice but to play the game at your
command. There are several variables that affect player morale, but the
one factor that overrides all others is winning. If you are a winning
franchise, then players will forgive just about anything, including
having to travel across America in a bus. Winning a lot will eventually
maximize your player’s happiness, and you can forget about most other
aspects of morale building. There is only one reason why I would be
concerned about the morale of certain players. If a star player is
unhappy, then his team preference level will be low(you can view these
stats by finding your player on the roster menu, pressing the circle
button to bring up the player’s card, and then toggling through the
player’s info). If his team preference level is low, he might demand
extra compensation when you try and resign him. Other then that, you
can always keep player morale high by winning, having reasonable
training budgets, quality training and rehab facilities, and giving
bench players sufficient playing time.
PLAYER ADVERTISING
One way to get more fans to come to your stadium is to advertise your
players to your fans in order to tickle their baseball bone. The
benefit of advertising is that it slowly, but steadily increases the
support and loyalty of your fans. This in turn has a positive effect on
attendance. Of course, when it comes to increasing attendance, there is
no substitute for victory. Winning is the best way to increase
attendance, but advertising will give your franchise a little extra
push. When it comes to advertising players, you cannot directly choose
whom you will advertise. Instead, you will choose a marketing strategy
based on marketing your team's All-Stars, sluggers, rotation, fielders
or rookies. From there, the game will assign a player who fits that
description. You should start by setting the budget for advertising.
This is a yearly budget, so I like to set the total budget to its
maximum level, which comes to a grand total of $13,200,000 per year. I
think that it is worth it. Keep in mind as well that once you begin the
season, you can always change this amount, as well as the marketing
strategy. If you have committed to a maximized advertising budget, then
you should probably stick with it, but you should never stick with the
same marketing strategy. This can be changed independently of the
budget, so you should be mixing this up as the season moves along with
different strategies and different players.
TEAM ADVERTISING
Team advertising is identical to that of player advertising except for
one aspect that keeps team advertising more dynamic. With team
advertising, you can adjust the message of your advertisements to be
more in sync with your team’s situation. For example, you can begin the
season with the “Start of the Season” message, and then change it a
week or so into the season. If you have a winning streak going, then
you can switch your advertising message to “Keep the Streak.” Some
types of advertising have more of an impact than others which means
that TV advertising is both the most expensive and the most effective.
Keep this open for adjustment based on your team’s situation. Newspaper
and magazine advertising are good for generic messages, but use TV and
radio to adjust your message to your situation.
PROMOTIONS
The first thing that I want to say about promotions is this: don’t go
nuts with numerous, big, expensive promotions as a means of raising
attendance. That’s simply not the way to do it. It is more useful to
think of promotions as an extension of team advertising. What I mean by
that is that promotions can be used most cost effectively as a means of
slowly building fan support over a long period as opposed to increasing
support in small, but temporary bursts. With team advertising, you can
adjust you message to send word to the public about your promotions
with the “Upcoming Events” choice. This provides a bit of synergy to
the effectiveness of your promotions. Although player morale and
support is something that you should not worry about too much, fan
support is crucial. One way of keeping fans happy is to constantly have
them looking forward to your next promotion. There is also one more
reason why doing a lot of big, expensive promotions is a bad idea. When
it comes to total fan support, there are so many variables that
determine fan support that the weight that promotions have in
determining this support does not justify large costs. Some of these
variables are things like wins, concession prices, ticket prices, your
position in the standings, the time gap between promotions, and
advertising spending among other things. With all of these taken into
account, promotions alone cannot justify a ton of spending on
promotions. Instead, you want to slowly, but steadily, raise fan
support over the long run with a bunch of small, cheap promotions. The
way to do this is to drop a small promotion in the middle of every home
stand, and I must stress that it should be done IN THE MIDDLE OF THE
HOME STAND. If you do it on the first day of the home stand, then you
will mess up your tests for things like optimal ticket and concession
prices when doing the STL method.
The two cheapest promotions that you can do are the “Program Night” at
$2 per unit and “Ball Night” at $3 per unit. I like to do a promotion
of about 3,000 units for each home stand. The cost is small and your
fans will always be looking forward to the next promotion.
I have to make one very important note about free ticket promotions.
The game lists the cost of this promotion as zero. Do not be fooled!
The cost of this promotion is very real and, as ticket prices begin to
rise, this could end up being one of the most expensive promotions that
you can do. Although the game says that the cost is zero, you are in
fact paying a cost for this promotion since you are forfeiting the
revenue that you otherwise might have gained. Let me illustrate with a
simple example. Suppose that you have a lemonade stand. Each cup that
you sell costs you $0.25 worth of lemons, sugar, and ice, not to
mention the paper cup. You are also charging $1.00 per cup of lemonade.
Therefore, your expected profit per cup is $0.75. Your best friend
stops by and you offer him/her a free cup. Did your give away cost you
nothing? No, since you obviously had to pay for the ingredients that
went into making that cup of lemonade. Then you might say "So the cost
of my give away was $0.25." Wrong again. The true cost of giving away
that cup was in fact $0.75. Since each cup earns you a profit of $0.75,
you just forfeited $0.75 worth of profits! That is what you truly lost
by giving away a cup of lemonade. The same principal applies to a free
ticket give away. The cost of giving away tickets is the money that you
COULD have earned by selling them. The more tickets that you decide to
give away, the more expensive this promotion will be. When tickets are
given away, I am not sure which tickets are being given away. They
could be cheap seats or very expensive ones. Even if the game
distributes the free tickets strictly according to price (cheapest
seats given away first), then the remaining tickets will then be given
away for the second cheapest, and then third cheapest and so on. This
would mean that the cost of the give away will rise in an exponential
trend. Here is a hypothetical, totally made up chart to illustrate what
I mean:
SEAT # OF SEATS PRICE COST RUNNING TOTAL
Bleacher 1,000 5 5,000 5,000
LF View 1,500 6 9,000 14,000
RF View 1,500 7 10,500 24,500
LF General 10,000 8 80,000 104,500
RF General 10,000 8 80,000 184,500
IF Box 4,000 10 40,000 224,500
Home Plate 3,000 12 36,000 260,500
In this hypothetical example, you can see how the true cost of this
promotion can build up. By giving away 4,000 tickets, you incurred a
cost of $24,500 by giving away the tickets rather than selling them.
The cost is then borne by you in the form of reduced profits when you
forfeit the revenue from those tickets. This whole example is a great
illustration of the economics concept of "opportunity cost". By the way,
tickets are NOT given away in a "cheapest first" manner. The tickets
given away are spread out over all of your seating section which means
that this is indeed an expensive promotion.
There is also another temptation that you should avoid which is the idea
that free ticket give aways will increas attendance and therefore increase
the number of hot dogs, beer, soda and such which might off-set the cost.
This idea was originally sent to me by Chris C. and it was a challenging
idea. I ended up giving him a long winded answer as to why that is not
the case, but there is a much more simple, non-theoretical test which
proves it with better results. Here is what I did.
I simply started a new franchise with the Mariners, and I simulated the
first game. The relevant numbers that I got were as follows:
Net Income: -$217,817
Average Attendance: 23,422
Ticket Revenue: $619,786
These results are about normal, and doing multiple tests would reveal
similar figures. Also, keep in mind that this was just for one game, so
average attendance is equal to total attendance. Then, I decided to do
a free ticket promotion of 20,000 total tickets. The following figures
that I got surprised me in magnitude, but not in result.
Net Income: -$292,705
Average Attendance: 29,018
Ticket Revenue: $460,129
As you can see, ticket revenue dropped sharply. Opportunity cost is
obviously a factor here. However, the most interesting thing here
is that Average attendance increased by only 5,600 instead of 20,000.
This means that of the 20,000 tickets, 72% of them went to fans who
were going to go to the game anyways, but they got in for free as
opposed to paying for them. This means that the promotion attracted only
an extra 5,600 fans who otherwise might not have gone. Did they buy
more concessions than a smaller crowd would have. Yes, they did, but
that does not come close to off-setting the cost. As you can see, ticket
revenue fell by about $160,000, but net income fell by about $75,000.
This means that those extra 5,600 fans translated into total profits of
$85,000 worth of concession sales. However, when you subract from that
the loss of ticket revenue, you get -$75,000 woth of net income. Even if
you were to sponsor a smaller ticket give away, the results will be
similar, but with less magnitude.
One reader, Billy Zobel, made a very interesting observation about all
of the other promotions in that opportunity cost does not apply to other
give-aways like baseballs, programs and gloves. Suppose that I schedule
a promotion of 2,000 baseballs with a cost of $3 per unit for a total
cost of $6,000. On the day of that promotion, you will notice that your
total sales of baseballs has not fallen at all. (To figure out the total
number sold, take the average sold per game and multiply that by the total
number of home games that you have played.) You would think that if people
can get baseballs for free, then they would not buy them, but they do.
Therefore, there is no opportunity cost to giving away goods like
baseballs or programs which makes the cost of such a promotion of just a
pure cash cost. The only reason to add an opportunity cost into your
decision here would be if the quantity sold differed significantly
from the average amount sold per game. If the average amount of sales
per game is 500 units, but a promotion causes sales to drop by 200 units
below the average for that day, then you can take that into account
because it will increase your total cost. If, for some other reason, the
amount sold for that day increases by 200 units above the average, then
you will be collecting extra revenue, and you can deduct that from the
cost of the promotion. Either way, opportunity cost will only come into
play when the total amount sold for that day differs significantly from
the long run average sold per game.
On a side note, the only time where I personally was compelled to
attend a Mariners game due to a promotion was during "Buhner Buzz
Night" when the Mariners still played in the Kingdome and Jay Buhner
was our star right fielder. Every fan who was willing to get his or her
(and there were several women, oddly enough) head shaved in the parking
lot got free tickets to the game. It was actually pretty fun, and it was
quite funny to see the right field seats as a sea of bald people. George
Costanza would have felt right at home. The upside is that I have not
had to visit a barber in over 10 years.
TICKET PRICES
This should be done in two stages. First, use the STL method to test
for the revenue maximizing price when you begin a brand new franchise.
Second, after a few weeks and every test afterward, you will want to
see how high you can raise the price before you see a significant drop
in attendance. If you want to do an effective test, make sure that you
followed my advice in the previous sections with regard to promotions,
advertising, and such. Also, this should be DONE ON THE FIRST DAY OF A
NEW HOME STAND. The reason is because if you are raising prices, you
will also be increasing revenue. To maximize the total profits that you
can take in, doing the test on the first day of a new home stand will
make sure that extra revenue is collected for each game of your home
stand. So, let’s give this a shot.
When you begin a brand new franchise, the first stage of the test is to
test for the ticket price that will yield the highest revenue to begin
your franchise with. Now, simulate your first home game and check out
how much each section yielded in terms of revenue. (you can find this
information by choosing Business Management > Facilities > Stadium
Updates > and toggle to the Seating screen with R1.) Now, load the game
and try again, except this time, raise each ticket price by $1.
Simulate the game and see if there is any significant change in the
income generated. Load the game and keep repeating until you find the
revenue maximizing price for each section. This will get you off on the
right foot by maximizing your early cash flow which is low at this
point, but it will rise from here on out.
After a few weeks, your advertising, winning and promotions should be
having some effect on the happiness of your fans, and more of them will
start to come to the ball park which will make daily attendance levels
rise. At this point, and from now on, we want to see how high we can
raise the price of each ticket without affecting attendance. Don’t
worry about finding the revenue maximizing price anymore since more
fans in the stadium will mean that they will buy more soda, peanuts,
jerseys and beer. Anyways, at some point during the season, you will
want to STL for ticket price effects on attendance. To do this, take
note of season section attendance which can be found on the seating
screen mentioned above. Now simulate the next game and check out the
change in attendance. Keep this new level in mind, because that is the
result of our control test. Now load the game and raise each ticket
price by $1. Simulate the next game and check your attendance figures
again. If there was no drop in attendance for a specific section beyond
normal variance (which might be + or – 50 people), then you know that
you can raise that section price by $1 with out consequence. Keep doing
this until you find out how high you can raise each section price
without dropping attendance too much. If attendance drops significantly
more than previous tests by raising price by one more dollar, then the
price is too high and you should revert back to the last price that you
tested for.
It is VERY IMPORTANT that you test ticket prices before you test
concession prices. The reason why is because when doing these STL
tests, we want to test the result of changing one variable, and ONLY
one variable. Since revenue gained from concession sales is both a
function of price and attendance, we want to hold one of those variable
constant, i.e. attendance. We can hold attendance relatively constant
by testing ticket prices first by testing for only one variable(ticket
price). Once attendance is held relatively constant, we can now test
for concession prices while having only one variable to test.
Finally, I should mention that in previous games, I was unable to
maximize both ticket price and attendance. If I set the ticket price
for any particular section to it's maximum level, then I found it
almost impossible to sell out that section. Therefore, I think that
it is OK to create a price ceiling of $1 or $2 below the maximum
allowable price. You should not be sacrificing too much, and you can
be assured that happy fans will gladly sell out the stadium at 100%
capacity after your first full year. From there, you can easily check
your attendance figures and be confident in being able to sell out
any additional seats that you add.
CONCESSION PRICES
If you successfully tested for the revenue maximizing ticket price,
then you should be getting the hang of how STL is working for you. Now,
we want to adjust concession prices to see what price for each
concession will yield the highest revenue for that concession. (you can
find the data screen that you need by choosing Business Management >
Facilities > Vendors and then using R1 to toggle to the Prices screen.)
First, just make sure that you do a control test to see what happens
under normal circumstances. Now load the game and increase the price of
each concession by $1-2 and see what happens to your season income
figure (season income is the figure that you want to look at. Ignore
the Avg Profit figure). I must note that when it comes to expensive
items like jerseys, gloves, signed bats and others, these goods are
heavily inelastic (see Appendix 1) which means that you can raise the
price much more than normal goods. For these types of goods, try
raising prices by $5-10 at a time. Here is where you get introduced to
those funny little arrows that indicate customer’s feelings about that
price. A blue arrow pointing down means that customers think the price
is a real bargain. A green arrow that points right means that the good
is in a reasonable price range for the customer. A red arrow pointing
up means that customers think that the good is very expensive. My
advice is to ignore these arrows. Who cares if customers think that the
price of a jersey is too high when you have chosen the price that earns
you the most amount of money. Yes, this will cause fans to get a bit
angry, but that’s OK. They will forgive you if you keep winning. Also,
the fans will get used to the prices, and their attitudes will change
for the better. A good that previously had a red arrow for its price
may turn into a green arrow price in a month or two.
Normally, I would let you all figure out the optimal prices for the
start of the season for yourselves, but I though that it would be
interesting if I gave you my list so that you can make comparisons.
I should note that since I am playing with the Seattle Mariners who
play their first game of the season at home, these prices may not be
optimal for you if your team began its season with a one or two week
road trip. Your performance will affect demand for goods, but you can
use this list as a starting point and then test to see how much higher
you can raise the price. Also, these prices are what I found to be
optimal, but they may not be optimal for your club. I would test out
the prices that I have listed and then see if tweaking the prices up or
down a bit can yield better results.
CONCESSION PRICE OVERHEAD/UNIT(in$)
Soda 5 0.20
Hot dog 4 1.00
Hamburger 5 1.00
Fries 5 0.50
Ice cream 6 1.00
Peanuts 4 0.50
Pretzels 5 0.50
Nachos 6 1.00
Cotton candy 5 0.50
Bratwurst 7 1.00
Sports Drink 5 0.50
Beer 8 0.75
Caramel Corn 5 0.50
Jersey 75 20.00
Hat 24 10.00
Jacket 105 35.00
T-Shirt 24 7.00
Glove 87 35.00
Foam Finger 10 1.00
Pennant 9 1.00
Bobble Head 19 10.00
Bat 40 20.00
Signed Ball 73 30.00
Signed Bat 118 75.00
Ball 8 2.00
Cards 9 1.00
Poster 8 1.00
Program 6 1.00
Calendar 11 1.00
Mega Jump 7 0
Hot Tub 220 0
Play Ground 7 0
Throw MPH 7 0
Face Paint 7 0
Batting Cage 6 0
You should be able to test all of these prices again when you begin
your next home stand. I must make a very important note here which is
that most of your profits will be gained by doing these price increases
for tickets, concessions as well as adding vendors. It is very critical
to your financial health that you be diligent in testing to see whether
prices are set at the revenue maximizing level.
OVERHEAD
So what is this thing that you seen in the pricing screen called overhead?
Basically, overhead is how much money you have to pay in order to sell
a single unit of a particular item. This means that when you sell a hot
dog for $4, you have to pay an overhead charge of $1. This means that, in
net terms, you will recieve $3 worth of profit. I generally use the term
"maximizing revenue" as opposed to "maximizing profit" because the overhead
rate in the previous section is fixed and it does not change with the
number of vendors. Therefore, as you maximize revenue, you are
automatically maximizing profit, so the two phrases can be used
interchageably. By using the data from the pricing screen, you can compute
all sorts of things.
(Price - Overhead Rate) x (# Sold per Game) = Average Profit(less exact)
(Total Profits) / (Total Sold) = Average Profit (more exact)
(Season Overhead) / (Overhead per Game) = # of home games played
(# of Home Games Played) x (# Sold Per Game) = Total Sold
(Season Income) - (Season Overhead) = Total Profits
(Overhead Per Game) / (# Sold Per Game) = Overhead Rate
So, when you pay $1 to sell a $4 hot dog, where does that $1 get counted
on the balance sheet? I gets counted under FACILITIES in the EXPENSE
portion of the balance sheet. That is ultimately how overhead leads into
the NET INCOME figure. The $4 gets counted under facilities in the income
portion, and the $1 gets counted under facilities in the expense portion
which increases net income by $3.
Since some items have overhead rates of less than $1, like soda, you might
wonder how the game accounts for fractions of a dollar when the balance
sheet presents everything in terms of whole numbers. The game simply rounds
off cents to(I believe), the nearest dollar. Also, the number that you sell
of most concessions is pretty high, so that large number will traslate into
whole-dollar costs.
Finally, you can see why I stress being diligent with testing your
concession prices. The higher the price, the larger the gap you create
between overhead and price. Since overhead stays constant, you will be
directly increasing net income when you increase prices.
ADDING VENDORS
Vendors are the ones who ultimately put all of the concessions that you
sell into the hands of your fans. As you begin to win more and make
your fans happier and happier, they will begin to fill more and more
seats. And what to fans do when they come to your stadium? They walk
around and buy stuff. However, you do not have enough vendors to sell
your concessions, your fans will have to wait in line longer and longer
which means that the demand for your goods is higher than the quantity
that you are currently supplying. If you want to have nice income
growth, then you will need to cater to the demand of your customers by
increasing your supply capabilities. The less time your fans will spend
waiting in line, the more time they will spend buying stuff.
The first thing that I should mention about adding one of these new
vendors is that each vendor has a built-in normal rate of return of 1%
per home game. So what do I mean by this? If you go to the vendors
screen, you will notice that the first vendor on the screen is the
Super Food Stand at a cost of $5,000,000 per additional vendor. A 1%
home game rate of return means that for each home game that you play,
the addition of this vendor will provide you with an extra $50,000
($5,000,000 x 0.01 = $50,000) worth of income per home game.
Ultimately, the addition of a new vendor is the same as buying a
perpetuity. A perpetuity is a type of financial asset (mostly sold in
Great Britain) where if you lend a certain amount of money, the
borrower will pay you a certain amount of interest every year forever.
The value of a perpetuity can be calculated as PV = C / r where PV is
the present value of the investment, C is the level of annual cash flow
and r is the interest rate. So if we treat the addition of a new vendor
as the purchase of a perpetuity, then the value of an additional Super
Food Stand will be $5,000,000 = $50,000 / 0.01. Now that you know about
how new vendors increase your cash flow.
Before doing this of course, you should have already tested for ticket
prices and concession prices. So, you should have a saved game right
before the first game of a new home stand and you should be ready to
test. Do a control test first, of course, to see what happens under
normal circumstances. What you are looking for is that particular
vendor’s SEASON INCOME which is listed on the vendors screen. Now that
you know how much income that vendor will have generated after that
game, load your game and add an additional vendor that you want to
test. Simulate the game and see how much income has now been generated.
If the generated income is the same as before you added the vendor,
then supply is already meeting demand (the market has been almost
perfectly cleared), and the addition of an extra vendor means that you
are not increasing sales any more. Therefore, don’t buy it and move on
to a different vendor. Do the same thing with another vendor and see
what happens. Let’s use a Super Food Stand as an example. If you test
for a new Super Food Stand, and you notice that the increase in income
is $25,000, then DO NOT buy an extra vendor. The reason is because you
will be overpaying for that additional cash flow. Since the game’s
internal rate of return is 1% per home game, then you need to find a
vendor that will provide you with at least that. In this case, that
would be like spending $5,000,000 for an investment that is only worth
$2,500,000 = $50,000 x 0.005. Therefore, it is not worth it to add an
extra vendor at that point. Demand will increase in the future,
however, and you should try again the next time you are ready. Suppose,
however, that instead of yielding an extra $25,000, adding that extra
Super Food Stand yielded an extra $50,000. If that had happened
instead, then your return would be equal to the value of the
investment. In that case, you should consider making that investment in
a new vendor. However, there is one buy rule that trumps all others and
should signal an automatic buying response. If that investment in a new
Super Food Stand yields an amount greater than $50,000, such as
$60,000, then you should absolutely buy it. The reason is, of course,
that you would be spending $5,000,000 on an investment that is worth
$6,000,000 = $60,000 / 0.01. In this case, an extra Super Food Stand
would have a net present value of $1,000,000 (Net Present Value =
[Present Value of the Investment] – [Purchase Price]). It is a real
bargain in this case and you should buy. Of course, that $60,000 per
home game will probably return to the normal level of $50,000 in a
month or two, but in the mean time you get to take in the benefits of
that extra revenue.
Investing in new vendors should not stop at adding just one extra. If
you can afford it, and if you are willing to do so, then buy two or
three. Just make sure that if you want to make that investment, that
the increase in income is equal to or greater than the 1% rate of
return. For example, if I notice that adding one extra Super Food Stand
adds $60,000 to the season income of Super Food, then I will buy it. If
adding one more on top of that adds another $50,000 to my total
($60,000 + $50,000 = $110,000), then I will that one as well. However,
if the third vendor that I add yields only $40,000, then I will not buy
that one because that marginal investment has a lower rate of return
than the standard 1% return.
Now, here comes the interesting part which is choosing a basket of
vendors based on the returns that you can get. As stated earlier, you
should be taking note of how much extra revenue each additional vendor
can potentially give you. Once you have made a crude spread sheet for
yourself, you can determine extra revenue and the total cost of getting
that revenue. Allow me to use this example from a test that I recently
did.
-total $ figures
-all $ figures in thousands
-A = year to date revenue before test
-B = year to date revenue after control test
-1,2,3... = revenue collected after adding additional vendors
-x = no extra revenue
VENDOR A B 1 2 3 4
Super Food 8939 9251 9315 9363 x x
Food Flat 4194 4335 4367 4388 4410 4422
Snack Food 6241 6463 6495 6506 x x
Drink Stand 4817 4997 5004 x x x
Jersey 26262 27014 27133 x x x
Based on the above return figures, I can break down the nubers into just
increases in revenue due to an additional vendor.
VENDOR A B 1 2 3 4 COST OF VENDOR
Super Food - - 64 48 - - 5,000
Food Flat - - 32 21 22 12 2,000
Snack Food - - 32 11 - - 1,500
Drink Stand - - 7 - - - 1,000
Jersey - - 119 - - - 10,000
As you can see, I can get a positive net present value from 1 super food,
3 Food Flat, 1 Snack Food, and 1 Jerseys 'n Junk. Of course, it would be
absurdly expensive to buy all of these at once, so you have to pick and
choose which ones to get. At this point, I really did not want to spend
more than $10,000,000 on additional vendors, so I compared my options and
came up with three baskets of vendors to choose from.
OPTION 1: Jersey 'n Junk (1)
$10,000,000 investment for a return of $119,000 per day.
119,000 / 10,000,000 = 1.19%
OPTION 2: Super Food(1), Food Flat(1), Snack Food(1)
$8,500,000 investment for a return of $128,000 per day
128,000 / 8,500,000 = 1.51%
OPTION 3: Food Flat(3), Snack Food(1)
$7,500,000 investment for a return of $107,000 per day
107,000 / 7,500,000 = 1.43%
As you can see, OPTION 2 gives me the best return when I take into
account all of the investments that have a net present value.
I would like to add just a few more things about adding new vendors now
that you know the rules about adding them. First, if you see fans
complaining that the lines are too long, then don’t simply take this as
an indication that a new vendor has to be added. If your testing
reveals that you are not getting a good rate of return on your
investment, don’t buy the vendor. Your goal is to maximize profits, and
that is what you should be concerned with. Second, as I mentioned
before, the rate of return per home game is 1% of the vendors total
cost. This means that the yearly rate of return is actually 82%! Since
you will be playing a minimum of 82 games at home, you collect that
cash flow for each game. So be careful when adding big and expensive
vendors like a Jerseys & Junk which costs $10,000,000. If you add this
vendor at the very end of the season, then you will not be able to
realize much cash flow for the season. The best time to add the most
expensive vendors is at the very start of the season so that you can
capitalize on as much of that cash flow as possible. In the case of
Jerseys & Junk, adding a vendor at that very start of the season should
yield about $8,200,000 for the entire season ($10,000,000 =
$100,000 / 0.01....$100,000 x 82 = $8,200,000.)
Finally, you may notice that even though your tests reveal that you
have added income to the SEASON INCOME figure in the vendors screen,
that money may not show up right away on your balance sheet in terms of
changes in NET INCOME. I don’t know why this is, but in my experience,
that extra revenue will show up really soon, so don’t worry about that.
PARKING PRICES
This is a tough thing to price. The reason it is so tough is because I
have found that testing for a profit maximizing price yields revenue
figures that can fluctuate wildly. This makes it very hard to pin down
an optimal price, so my suggestion is to use the highest “green price”.
This means that you should increase the price of parking to point just
before that green arrow turns into a red arrow. I wish that I could be
more detailed about this, but there is too much variability to nail
down the right price.
ADDING SEATS
After about two seasons, you will notice from your ticket price tests
that attendance is getting up there and certain sections of your
stadium are, or are close to, being sold out every single game. When
that happens, it is time to let some more fans into your stadium by
adding extra seats. To add new seats, go to the seating screen where
you checked your ticket price tests. Press the X button and you will be
able add additional seats. You will notice two things right off the
bat. First, you can add seats in intervals of 10. Second, you will
notice that each section of seating has different costs associated with
it. Some are, of course, more expensive than others to add.
Before you add seats, doing a simple control test is not enough. You
should do about three or four control tests to make sure that when you
play a game, the cumulative attendance for that section increases by
the exact amount of the seating capacity. In other words, make sure
that if a particular section has a total capacity of 2,500 seats, then
you have to make sure that each and every seat is sold out. Check this
a few times to be sure that this is the case. Once you have confirmed
that a section is consistently selling out, then you can add some new
seats.
What you will be testing for is how many people will actually sit in
your new seats. Therefore try adding 50 seats at a time when you test
for increases in attendance. If those 50 seats are also sold out, try
adding another 50. You should have the idea down by now.
Of course with day to day attendance figures, there will be some
variability that makes it hard to predict an exact number of seats that
you should add. If for instance, adding 100 seats brings an additional
76 fans to that section, then sticking with an addition of 100 seats is
a good idea since the rest of the seats will fill out in time. That is
why I think that increases of 50 seats at a time is a good,
conservative benchmark for this particular test and it allows for some
variability.
As a supplement to this section, I would highly recommend that you read
the appendix section below on the subject of elasticity. The reason is
because there is the possibility that you may be in the highly elastic
range when you are adding seats. This basically means that if you drop
the price by a small percentage, attendance could increase by a much
larger percentage. If this is the case, then it would be worth it to
start LOWERING the price of tickets to pack more fans in. Here is an
example based on the model from the appendix.
Suppose that you have a section that has a seating capacity of 3,000
seats, and that section is selling out every game at a price of $70.
You add 500 seats, and those extra seats are filled with an additional
150 fans. Now suppose that I dropped the price by $2 and I notice that
the lower price attracts an extra 250 fans to the game. The percentage
change in quantity ( [3,400 – 3,150] / 3,150 = 7.9% )is divided by the
percentage change in price ( [68 – 70] / 70 = -2.9% ), which yields an
elasticity of -2.72 = (7.9% / -2.9%). Since the relationship between
attendance and price is elastic, lowering the price of tickets will
increase both attendance and revenue from that section.
LOOSE ENDS
Before you head into the off season, there will be a few things that
you might want to take care of. First, if you have plenty of funds in
the bank, you may want to consider paying off the balance of your loan
before you finish your season. The reason for this is because you will
have to make loan payments over the months of the off season. By the
end of your second season, you should have plenty of available funds,
and you should pay off that loan. Also, by the end of the season, the
condition of your field, training and rehabilitation facilities will
have deteriorated a little bit. You can fix this at the end of the
season in the Stadium Updated screen, and the cost is rather minor. In
fact, I like to do this twice. I like to do this at both the end of the
season and at the beginning of the season. You may want to do this at
the start of the season because these facilities will deteriorate
during the off season.
-----------------------------------------------------
OFF SEASON MANAGEMENT
-----------------------------------------------------
I hope that you all had a very profitable and winning season, and now
you should get ready to manage your team in the off season. Some of the
aspects of the off season have remained the same, but a few
improvements have been made to make the off season a bit more dynamic
than the last game.
SHARED REVENUE TAX
Ah, the good old shared revenue tax. This certainly adds more realism
to the business side to the game, but it can freak out a lot of players
when they end the off season because they will start their next season
and notice that their balance sheet shows a net income of $-60,000,000!
When I saw that number after playing MLB 2005, I almost had a nervous
breakdown! This can freak out players, but I am here to assure you that
seeing such a large negative number on your balance sheet is really not
a big deal. In fact, Appendix 2 is all about giving you a proof as to
why it is no big deal, and I highly encourage you to check it out.
First, let’s break down what the shared revenue tax is all about.
When your season officially comes to an end, you will completely cease
all of your business operations. From your balance sheet, you will see
that you have earned a large amount of revenue. In order to “level the
playing field”, the game (just like in real life) will levy a tax on
the revenue that you have earned for your season. In fact, the game
will do this to every team in the game. All of the tax revenue from
each team goes into a giant pool. From there, the total taxes collected
are divided equally among every team in the form of an equal rebate
check. This means that the tax minus your rebate is the net tax that
you have paid. Some teams that have earned very low revenue (I have a
sneaky suspicion that this can be more accurately described as a SHARED
PROFITS TAX) will actually come out ahead because their rebate checks
will be higher than their tax expense. You on the other hand will
probably be paying a very large net tax because you managed your
business so well.
Ultimately, the reason why your balance sheet will look so scary is
because of a matter of timing. Suppose that you just finished the 2006
season, and you are about to jump over to the year 2007. Once the new
year begins, you will be hit with the tax on January 1. So you just
incurred an expense, but have you earned any revenue? Only a little
because this is when your primary advertiser and television contract
will keep their promise and pay you. You also are charged with two more
expense during the off season. First, you will have to make loan
payments over the off season, and those payments will be taken out of
your funds every month. Also, you will have to pay for the full cost of
your transportation lease. With all of those combined expenses and just
a little bit of revenue, your balance sheet will show a large negative
number. There are two main reasons to not worry about this. First, the
funds that you begin your next season with would be the same regardless
of when the shared revenue tax is paid (see Appendix 2). Second, your
profits per game will be high enough (you should be earning between
$2,500,000 and $3,000,000 per home game by that point) that you will be
able to climb out of the red and into the black by around the All Star
break.
RESIGNING PLAYERS
This is not only a great opportunity to lower your daily expenses, but
you can also free up some additional payroll room in the RESIGN PLAYERS
section. Instead of releasing players into the free agent pool and then
attempting to sign the, you can simply renegotiate the contract of any
player on your roster that is or is not under contract. Also, you will
have already noticed that when your season ended you were granted an
increase of x% in your maximum salary budget. This increase is directly
linked to the success of the season that you have just finished.
Winning the World Series will certainly grant you the biggest increase,
but if you fail to make the playoffs, then you can expect a salary
budget increase of about 1%. I do not know if winning off season awards
like the MVP award or the Cy Young affects your budget increase, but it
can’t hurt.
Right now, your first priority should be to free up some salary budget
room. To do this, take note of all of your players who you would like
to keep for several seasons and are in the middle of their contract.
Now, try to resign them to a contract that is heavily reconstructed in
your favor. To do this, you should start by setting your offer at one
year and the lowest salary possible. Now, adjust the length of your
offered contract to whatever number of years the player finds
acceptable. You can safely try out several contract lengths because no
one in his right (except a pitiful AA player) mind will accept such a
contract. Once you have found the optimal contract length, now you can
raise the salary offered to find the absolute minimum salary that the
player will accept. If you do this with the right players, you will
notice that the amount of money that you have available for player
salaries is increasing. The reason for this is because when you
restructure a players contract, that player will accept a lower salary
now in exchange for a higher salary later. Since the immediate effect
is to lower the salary that you will be paying that player next year,
the amount of money that you are allowed to spend on players will
increase. This should illustrate the reason why you should do this
first, and it is because you want to have as much money available for
resigning your best players who have expired contracts as well as money
available for signing free agents.
Your second priority should be your best players who have expired
contracts. These are the guys who you definitely do not want to risk to
free agency. Now, you should do exactly what you did when resigning
players in the middle of a contract. Set the contract length and salary
to a minimum, find the optimal length and then the minimum salary that
is acceptable to the player.
At this point, you should have freed up some salary budget room as well
as resigned your best players to long term contracts that have been
reworked in your favor.
Finally, I would like to make an IMPORTANT POINT HERE. Several readers
have e-mailed me and wondered how to release players in the off season.
As it turns out, you can't. The reason why they wanted to release
players is because when they went on to signing free agents, they
realized that they had no more room left on their rosters, and
therefore were not able to sign any free agents. To avoid having this
happen to you, just let go of those pitiful minor league players that
are waiting for a contract. You can always end the off season and
sign more pitiful players to fill out your roster later. Just MAKE
SURE THAT YOU HAVE ENOUGH ROSTER SPACE before you move onto signing
free agents. and drafted players.
TRADING PLAYERS
You will be surprised by just how easy it truly is to trade your minor
league and bench players for All Stars. This is true all year round. In
fact, I found it very easy to trade a minor league pitcher for
Dontrelle Willis, Matt Lawton and Carl Everett for Adam Dunn, and
another minor leaguer for Austin Kearns. There are a lot of trade
opportunities out there that can be made this easily. This is one of
the flaws in this game since the trade system is not very realistic.
Then again, why not take advantage of it? Trading for players has a
distinct advantage signing free agents in the sense that once you trade
for a player, you can immediately restructure that player’s contract in
your favor as you just did with players that are already under
contract. Therefore, you should look around each team’s roster and try
to find players that you like which you can trade for. However, you can
only trade for a player that is currently under contract with another
team. You cannot trade for a player that has no contract. Also, try
out several combinations of players that you offer until you find
a combination of players that the CPU will accept.
AMATUER DRAFT
This is really the only part in the game where your previous attempts
at scouting will come into play. When the draft begins, all teams will
select amateur players in an order based on their performance during
the season. The worst teams will, of course, pick first and the best
teams will pick last. When it is time for you to pick, you truly can
pick any player that you want, but almost all of the players will have
their ratings kept a secret from you since you did not scout them. If
you want to check a player’s ratings, then you must have scouted that
player previously. Those players that you have scouted will be
indicated by an icon next to that player’s name. Ultimately, the entire
draft goes for 5 rounds, and your position in each round is the same,
and it is based on your performance during the season.
When you began your franchise, you may have been given the goal that
you need to draft an All Star potential player. This is actually not a
very unreasonable goal. You can either leave it to chance and pick the
player with the highest overall rating(the bar meter) which is not a
very good idea, or you can check that player’s potential rating. To
check his potential rating, highlight that player and press the O
button and then the X button. From there, use R1 to toggle to the
player’s rating screen. On the rating screen, you will see six
different ratings along with a letter rating from A to F with A being
the best. Both pitchers and hitters have OVERALL, FIELDING, and
POTENTIAL ratings in common. In order to fulfill your goal, you want to
find the player with the highest POTENTIAL rating. An A will almost
certainly guarantee that the player will have All Star potential.
Drafting a player that has a rating of B will give you a solid chance
that he will be a potential All Star. A player with a rating of C has a
slim to none chance of having All Star potential. You don’t necessarily
need to have an early draft pick to nab such a player. In fact, you
could possibly have the last pick in the first round and still draft an
All-Star potential player.
General attribute levels like power, fielding, and the quality of a
pitchers individual pitches can be seen without scouting that player.
Therefore, if you do not have to pick an All-Star potential player as
a franchise goal, then picking on the basis of the player's actual
attributes is perfectly acceptable.
One reader, Clint P. sent me an e-mail where he mentions that for him,
the draft ended in the fourth round and he was unable to draft more
than 3 players total. This has never happened to me personally, but I
do want to mention it if anyone else has had the same problem. I have
two possible explanations for this. First, this could simply be a glitch.
Second, it could be that the number of available players simply ran out.
You may notice that when you are scouting players, there will be a lot
of 16 and 17 year old players that can be scouted. These are high school
players and they cannot be picked unitil they are 18(you may have noticed
that when you try to create a player, the youngest age that you can set
is 18). Players who are 19 years old are college players, but thay can be
from either 2-year colleges or 4-year colleges. This means that these
players will be available when they are 20 and 22 years old respectively.
I suppose that if a large number of players are in the middle of high
school or college, then they will not be draftable until they graduate.
If that is the case, it may explain why a draft might not last a full
five rounds.
SIGNING FREE AGENTS
This is one area of the game that has been almost totally revamped.
Hopefully, you have freed up some of your salary budget and left some
roster spaces open in preparation for signing a top free agent. After
the amateur draft is over and you have signed your five draft picks,
you will be ready to sign free agents. When you examine the players
who have filed for free agency, you may notice the one thing that truly
makes this phase of the game different from previous games. Now, you will
be put on a timer. At the lower right corner of the screen, you will
notice that there is a blue bar that is indicating how much time you
have left for that day. Each day takes between 1 and 2 minutes to
complete, and there are a grand total of 60 days in which you can sign
free agents. This means that if there is a free agent player that you
really want, then you had better act fast or else other teams may step
in sign him in the first few days of the free agent signing period.
When you spot a free agent that you want to sign, highlight that
player and make him an offer. That player will not accept or reject at
this point. Instead, he will consider your offer and will take a few
days to mull it over. You can make offers to other players as well at
the same time. There are a few indications as to how likely it is that
your target free agent will sign with you. The first way you can tell
is by checking the player’s interest meter. This can be seen when you
select the high lighted player. The second way is to check to see if
you are truly making the best offer. You can see this on the main free
agent screen by looking at the icon in the best offer column. If your
team is offering that player the best offer, then your team logo will
appear in that column. If another team is making a better offer, then
that team’s logo will appear there. Either way, the terms of that deal
will appear in the right hand column. If another team is making the
best offer, then looking at the terms of the deal will give you an idea
of what you need to do in order to top that deal. Once you have picked
your free agent targets, just sit back and see if your best offer is
taken within a few days.
HOW DID I DO IN SEASON 1?
It's only fair that I put my net income where my mouth is, and let you
all see some of the financial figures that I endedup with at the end
of my very first season. I loaded my back up franchise file and wrote
down the relevant information on what I did.
Net Income: $94,330,941
Ending Funds : $121,330,941
Ticket Income: $118,353,634
Parking Income: $14,928,571
Vendor Income: $163,215,778
Shared Revenue Tax: $83,551,728
Shared Revenue Rebate: $25,836,771
Starting Funds for 2007: $61,417,718
Not too shabby. I'm sure there are a lot of you out there who did
better since many teams have larger stadiums than Safeco Field.
Anyways, Starting year two with about $40 million more in funds
than I did in year one will give(and has given)me a lot of room
to add seats and vendors.
LAST WORDS
That pretty much does it for the major aspects of how to run a
franchise in MLB ’06: The Show. As I mentioned before, being very
profitable in this game mostly has to do with diligently testing your
prices to see whether they are at the profit maximizing level and
making sure that you add vendors at strategic times. What this will do
is keep your revenues rising in a slow and steady manner for several
seasons. Most of your expenses like player and staff salaries, training
budgets, advertising budgets and such will be held relatively constant
over the same time period. This means that by being diligent, you can
have some very good profits for several years to come. After several
years, things like the bite from the shared revenue tax will be
lessened (because other teams will become more profitable as well,
granting you a larger rebate), revenue from TV and primary advertisers
will increase because you will be able to lock in better deals, and
your fan base will be loyal. You should now be very familiar with all
of the options that this game has to offer in franchise mode, as well
as strategies for being able to fully utilize those options.
I hope that you all have enjoyed this game and that you found my guide
to be helpful to you.
-----------------------------------------------------
Appendix 1: Elasticity
-----------------------------------------------------
This first appendix section is not necessary for you to know if you
want to be successful at this game. It will, however give you a
deeper understanding as to how I came up with the STL method and why
this is the most effective tool for understanding how the price of
concessions will affect total revenue.
First, let’s start out with the basic economic model of a demand
curve. From my crude (but brilliant) graph below, you have a visual
illustration of how demand works. It’s pretty simple actually. On
the vertical axis, P represents the price of a good. On the
horizontal axis, Q represents the quantity of goods demanded. It is
an economic law, but also common sense that says that the lower the
price of a good, the higher the quantity demanded. Therefore, if you
were to graph this relationship, you would get a graph similar to
the one below.
P
| *
| *
| *
| *
| *
| *
| *
| *
| *
|_____________________________Q
However, maximized price does not mean maximized revenue. Because of
the dynamic relationship between price and quantity demanded, total
revenue changes in a dynamic fashion as well. This is where the
concept of ELASTICITY comes in. The price elasticity of demand can
be defined as the change in quantity demanded due to a 1% change in
price. In other words, we know that when the price goes up, the
quantity demanded will go down, but the question is “by how much?”
Technically, elasticity is calculated by taking the percentage
change in the quantity demanded and dividing that by the percentage
change in the price. In the hypothetical demand schedule below, when
the price falls from $11 to $10, that is equal to a price drop of
approximately 9%. By dropping the price, the quantity demanded
increases from 1 unit to 2 units, a 100% increase. 100% / -9% =
-11.1. In other words, if the price increases by 1%, the quantity
demanded will fall by 11.1% and visa versa.
P Q TR %changeP %changeQ E
11 1 11 x x x
10 2 20 -9 100 -11.1
9 3 27 -10 50 -5
8 4 32 -11 33 -3
7 5 35 -12.5 25 -2
6 6 36 -14 20 -1.42
5 7 35 -16.6 16.6 -1
4 8 32 -20 14 -0.7
3 9 27 -25 12.5 -0.5
2 10 20 -33 11 -0.3
1 11 11 -50 10 -0.2
(note: some numbers may be a bit off due to rounding)
Now, note where total revenue (TR) is maximized. It is maximized
around the point where E = -1. What this means is that if price goes
up by 1%, then quantity demanded falls by 1%. Those forces then
perfectly offset each other because increasing or decreasing the
price any further will force TR to fall.
TR
|______________
TR* | *
| * | *
| * | *
| * | *
| * | *
| * | *
| * | *
| * | *
| * | *
| * | *
|*____________|____________*___Q
Q*
elastic inelastic
range |E| > 1 range |E| < 1
The above graph further illustrates this. In the inelastic range, a
1% increase in price causes a less than 1% decrease in quantity.
Price is increasing faster than the drop in quantity, therefore
revenue increases.
In the context of the game, you will notice that when you are doing
the STL method to do price tests for concessions, you are ultimately
trying to find the point where the elasticity of each concession is
as close to -1 as you can get. You should be able to maximize
virtually all of your concession prices within your first franchise
season. From there, the only way to increase concession revenue is
to increase attendance or vendors, since price increases will no
longer be a factor in increasing revenue.
When it comes to tickets, your goal is to maximize attendance, not
revenue, so you can alter the equation a little bit. Instead of
saying “price elasticity of demand”, we can rename this type of
elasticity as the “price elasticity of attendance”. The principal is
exactly the same. If the price of tickets goes up, by how much will
attendance fall? That is, in part, why I recommended that the STL
method should be used in two stages. For the very first home game of
your very first season, it is appropriate to choose the revenue
maximizing price. After that, you should be increasing the ticket
price to the point where there is no significant drop off in
attendance.
-----------------------------------------------------
Appendix 2: Accounting for the Shared Revenue Tax
-----------------------------------------------------
As I mentioned before, you will be shocked by seeing your balance
sheet so deep in the red due to having to pay the expense of the
shared revenue tax. I also mentioned that this really is not as big
a deal as it seems. It is more an issue of WHEN the tax is paid that
makes the tax so shocking. In this appendix section, I would like to
do a little accounting experiment to illustrate exactly what I am
talking about.
The first thing that I did was pick up my old copy of MLB 2006, and
I simulated an entire season with the Boston Red Sox. I took out a
loan, bought some missing vendors and raised prices a bit. I did
three general price increases to roughly simulate what I might have
done had I been a little more diligent. Anyways, my simulation ended
with the Red Sox being eliminated in game 7 of the ALCS (by the
Royals, if you can believe it). Here is was my financial status at
the very end of the season:
Beginning funds: 22,600,000
BALANCE SHEET
INCOME 308,669,156
Facilities 263,589,156
Licensing/Ad Sales 9,180,000
Shared revenue 0
Loans 36,000,000
EXPENSES 269,799,423
Staff Salaries 7,426,581
Training/Rehab 24,056,095
Facilities 102,962,257
Marketing 7,836,742
Banking 37,063,410
Shared Revenue 0
Player Salaries 90,454,338
NET INCOME 38,869,733
Ending Funds 61,469,732
From there, I just simulated the entire off-season and let the CPU
handle everything. When I officially started season two of my
franchise, my balance sheet looked like this:
Funds: 13,442,273
INCOME 28,420,288
Facilities 0
Licensing/Ad Sales 2,586,250
Shared Revenue 25,834,038
Loans 0
EXPENSES 75,847,748
Staff Salaries 0
Training/Rehab 0
Facilities 10,000,000
Marketing 0
Banking 0
Shared Revenue 65,847,748
Player Salaries 0
NET INCOME -47,427,460
This is a rather typical situation. Net income is a large negative
number, and in addition to the shared revenue tax, the cost of the
transportation lease was paid in full (the CPU upgraded, not me).
Also, some income was earned in the form of TV revenue and
advertisement revenue, as well as the shared revenue rebate. Also,
notice that the CPU paid off the balance of my loan, so I did not
have to make any loan payments over the off season. (*As a side
note, note that I said a few times before that what net income
represents is the amount of money that has been added to your funds
to date. Ending the previous season with $61,469,732 in funds
combined with $-47,427,460 should have yielded a starting balance of
$14,042,272 for the 2006 season, which leaves almost exactly
$600,000 in expenses unaccounted for.) Anyways, as you can see,
since the game is using cash based accounting, the expense of the
shared revenue tax will be recognized on January 1 of the new year.
Since you have incurred a very large expense and have gained very
little income, then of course your balance sheet (Geez, I hate
referring to the above table as a balance sheet) will show a
negative net income.
Now, let’s try that little experiment. Here, we will see what
happens if the shared revenue tax is recognized and paid when the
World Series is officially over and all teams have ceased their
business activity in 2005 as opposed to 2006:
Beginning funds: 22,600,000
BALANCE SHEET
INCOME 334,503,194
Facilities 263,589,156
Licensing/Ad Sales 9,180,000
Shared revenue 25,843,038
Loans 36,000,000
EXPENSES 335,647,171
Staff Salaries 7,426,581
Training/Rehab 24,056,095
Facilities 102,962,257
Marketing 7,836,742
Banking 37,063,410
Shared Revenue 65,847,748
Player Salaries 90,454,338
NET INCOME -1,143,977
Ending Funds 21,456,023
As you can see here, I added the expense of the shared revenue tax
to the EXPENSES part of the balance sheet, and I added the rebate
from the shared revenue tax to the INCOME portion. Everything else
has remained constant. What this ultimately did was cause a small,
negative net income of $-1,143,977. Since net income tells you how
much money was added to your beginning funds, this negative net
income lowers funds to $21,456,023.
Now, let’s skip ahead to the start of the 2006 season based on these
revised numbers.
Funds: 13,442,273
INCOME 2,586,250
Facilities 0
Licensing/Ad Sales 2,586,250
Shared Revenue 0
Loans 0
EXPENSES 10,600,000
Staff Salaries 0
Training/Rehab 0
Facilities 10,000,000
Marketing 0
Banking 0
Shared Revenue 0
Player Salaries 0
*unaccounted expenses 600,000
NET INCOME -8,013,750
WOW! Isn’t that just amazing! I would have just as much funds in the
bank no matter when the shared revenue tax is paid. (*Note that in
the normal situation, $600,000 of expenses were unaccounted for, so
I just added that expense in order to reconcile the two balance
sheets.) As you can see, we ended the 2005 season with $21,456,023
worth of funds in the bank. Since net income tells you how much
money has been added to your funds to-date, last season’s balance
less the negative net income is:
13,442,273 = 21,456,023 – 8,013,750
In this game, would you rather climb out of a $47,000,000 hole or an
$8,000,000 hole? Based on this example, I don’t see why anyone
should care.
That, ladies and gentlemen, is why you should not worry about seeing
a large negative net income on your balance sheet when you begin
your next franchise season.
-----------------------------------------------------
Wish List for Future MLB games
-----------------------------------------------------
If anyone from 989 Studios or SCEA happens to check out my FAQ, I
would like to congratulate you all on a fine game, and I would like
to add some suggestions for how to expand franchise mode a bit to
make it more dynamic and complex.
1.) It would be cool if you could buy negotiating rights to free
agents from other countries, much in the same way that the Seattle
Mariners paid several million dollars to buy negotiating rights with
Ichiro Suzuki.
2.) I would like it if you could also sign radio deals much in the
same way that you sign TV deals.
3.) You should be able to sell team gear (or at least the licensing
rights) to vendors across the country which would make the game more
realistic in being able to generate income. The better you team, the
more people around the country will want to buy your team gear.
4.) Change up the types of vendors, stadium advertisers a bit to
make new games feel a bit fresher.
5.) Owners also have to deal with other things when it comes to
maintaining a stadium such as adding bathrooms, security, clean up
crews, etc. This would make you have to consider the comfort of fans
more when making decisions.
6.) Make the shared revenue tax recognized and paid for in the year
that the revenue is earned as opposed to the start of the next year.
7.) If your team has more than a certain number of players from a
specific country like Japan, South Korea or the Dominican Republic,
then you should be able to sell television rights to that country so
that fans in those countries can see their countrymen play in the
majors.
8.) It would be cool if some real life musical artists were able to
sing The Star Spangled Banner for the game. It would be unique for a
sports game to do this, and the player would have a chance to watch
and listen to the national anthem sung by a real talent like Alicia
Keyes. The better your team plays, the bigger the star you can hire.
9.) Having former players come back to their old team to throw out
the ceremonial first pitch would be a nice touch for each stadium.
For Mariners fans, how cool would it be to see Edgar Martinez in a
baseball game once again?
10.) You should be able to make deals with different companies to
supply your concessions. For example, you could have several soda
companies (real or fictional) make bids to be the sole supplier of
soda to your stadium. You could also have different breweries and
food markets doing the same, giving you the chance to choose between
local and national distributors. Each company could have different
contract lengths, overhead rates, prices, etc, and that can be
treated like minor stadium advertisers. Hey! Maybe they could be the
ones advertising in your stadium.
11.) You should be able to put your funds in short or long term
investments to gain some extra money. It would be cool if you could
invest $10,000,000 of extra funds into a short term bond that you
could earn interest on instead of waiting for the right time to add
a vendor.
12.) Each stadium should have some really unique types of
concessions that are synonymous with that city. For example, you
should be able to sell Philly cheese steaks in Citizens Bank Park in
Philadelphia and sell grilled salmon burgers at Safeco Field in
Seattle. Each stadium should also have a few more common concessions
such as pizza, bottled water, coffee mugs, key chains, etc.
13.) Some good music.
14.) It would be nice to build your own stadium from scratch. Give
the player $800 million to construct every thing, add vendors,
add seats, billboard space, etc. Hey, the PS3 ought to be powerful
enough to handle that.
-----------------------------------------------------
READER QUESTIONS
-----------------------------------------------------
Whenever I receive an e-mail about MLB 200x games, some questions
get asked more than others. Here, I want to save both of us some
time and preemptively answer some of the most commonly asked
questions. Also, if I get a good question from one of you here that
I have not addressed in this FAQ, I’ll post is here.
Q: Why isn’t (insert player name here) in the game?
A: That player is probably in the game. Because of union and
licensing issues, baseball games are not allowed to use the names of
some players. Instead of deleting the players outright, MLB 2006:
The Show gives fake names to players in order to get around the ban.
For example, Barry Bonds falls under this rule. His name, photograph
and stats are not allowed to be used in a video game. However, Bonds
is in the game, but he just has a different name(Reggie Stocker).
His attributes should still be there however, which means that if a
player for the San Francisco Giants has massive hitting skills, but
you don’t recognize the name, then that is Barry Bonds. Some players
have been totally removed because of (probably) licensing issues and
were not put into the game. Also, for those of you wondering where
Roger Clemens is, he was removed because he was not on any MLB roster
at the time the game was released, and his retirement was highly
probable.
Q: My game keeps freezing up on me and I can’t continue my
franchise. How do I fix this?
A: Honestly, I don’t know what to do about freezing. This was a big
problem in MLB 2005 and MLB 2006, and I have never heard of a good
solution to this problem. Sorry.
Q: Could you please write a FAQ for MLB 2005? I’ve tried your profit
building methods and they worked for me in MLB 2006, but they don‘t
work now.
A: Actually, they do work. Most of my guide is based on what I
learned from MLB 2005. Like I said in the intro, a lot of sections
to this FAQ are simply copy/pasted to this guide from my MLB 2006
FAQ. The reason for this is because, for most aspects of the game,
there is no difference between MLB 2006:TS and the 2006, 2005
versions. I assure you that I would not have done this if I was not
sure that the same rules applied. They do apply because what I
described is a METHOD. The method(STL) is based on the concept of
trial and error. If you apply this to previous games, then it will
work.
Q: I have been able to earn a lot of money in The Show, but I am
also a big fan of the Madden football games. Could you write a FAQ
about maximizing profits for Madden football games?
A: Madden football games do have a great franchise mode which is
similar to that of the MLB games. However, the financial data from
the Madden games is not detailed enough for me to make any
significant conclusions about profit maximizing. Therefore, just try
and use the STL method as best you can for those games.(As a side
note, I wish that EA Sports would add some kind of financial aspect
to the NCAA football games that it produces.)
Q: Are you going to write a FAQ about career mode?
A: As of early May, I decided to start taking notes and putting
together the skeleton of a Career FAQ. This could take a long
time since there is a lot of little details that I am trying to
figure out, and I am not sure if I will get it done in a reasonable
amount of time this year. I certainly want to write one for next
year.
Q: (from Keith G.)My question is, if I put the management on CPU
control and just focus on the on the field stuff, will the CPU run
my franchise into the ground or can it be trusted to make good
decision regarding facilities, management, advertising, etc.?
A: The CPU is OK at running a franchise, but not great. When it comes
to adding vendors, raising prices and such, the CPU will act very
conservatively, which means that you will probably end up with a sold
profit by the end of the season, but not nearly as much as you could
earn by doing everything manually.
-----------------------------------------------------
CONTACT INFORMATION
-----------------------------------------------------
If you have a new strategy for profit building, or if you find
glitches, errors, suggestions, or anything else, just e-mail me at:
kim@rodieck.com
Let me just add a few notes here.
1.) First, the MLB series is notorious for freezing. Sometimes the
game will simply freeze up at certain points which will not allow
you to continue your franchise. Every indication says that the
company fixed this problem, and I pray that it is true. If not, then
there is really nothing that I can do since I never figured out how
to deal with this problem before.
2.) I really do enjoy getting e-mail from people who read my FAQ. I
do check my mail regularly, so if you do not receive a reply, it’s
probably because there was an error in sending my reply, or your
mail was never received, or it was accidentally identified as junk
mail, or my server is down, or some weird reason. I do reply to all
e-mails as long as you are not rude. If you are, then I just send
your e-mail to circular file. So, if you don’t get a reply in two or
three days, just try again.
-----------------------------------------------------
MUSIC LIST
-----------------------------------------------------
Originally, I did not want to do this, but the sound track to this
game is so horrible, in my opinion, that I cannot burden the thought
of so many players doing the STL method while being subjected to the
music from this game. If I am spending time doing the STL method,
then I put on some good music and I do not subject myslef to the
cacophony of, so called, music that comes from this game. Therefore,
I just hit the mute button and I put any one of these albums on:
John Mayall: The Turning Point
Dick Dale: The Best of Dick Dale and His Del-Tones
Paul Simon: Graceland
Ottmar Liebert: Nouveau Flamenco
Ginger Baker: Unseen Rain
The Ventures: Walk-Don't Run-The Best of the Ventures
Mason Williams: The Phonograph Record
The Lively Ones: Hang Five!!!
Any comedy album by Bill Cosby :D
For all you kids and parents out there, none of these albums have any
dirty lyrics or cuss words, or anything like that. It's just great
music that anyone can get into.
I'm sure some of you will be tempted to write to me saying, "That
album sucks" or "You should listen to such-and-such". These are just
the albums that I like, so I put them out there. Please don't write
to me with you music suggestions because I am not very adventurous
when it comes to music. If you liked these albums, then that is great!
-----------------------------------------------------
CREDITS AND THANKS
-----------------------------------------------------
Thanks to SCEA and 989 studios for yet another great game as well as
fixing so many of the bugs that plagued previous games.
Thanks to gamefaqs.com for originally hosting this FAQ as well as
all other sites who post this FAQ such as 1up.com , cheatplanet.com
and gamesradar.com
Thanks to Lee Sharp for sending me info about pitching mechanics.
Thanks to ashawn1234 for telling me about being able to switch teams
during franchise mode.
Thanks to Billy Zobel for his observations about promotions.
Thanks to Bryan Taylor for correcting me on the fact that the Phillies
do not play in The Vet anymore but rather in Citizens Bank Park.
Thanks to Clint Peinhardt for alerting me to a possible problem
in the amatuer draft.
-----------------------------------------------------
LEGAL STUFF
-----------------------------------------------------
This may be not be reproduced under any circumstances except for
personal, private use. It may not be placed on any web site or
otherwise distributed publicly without advance written permission.
Use of this guide on any other web site or as a part of any public
display is strictly prohibited, and a violation of copyright.
Copyright 2006 MR. Kim Dalton Rodieck.