How IT Bolsters the Baseball Experience and Revenues

By Bill Schlough  |  Posted 10-01-2004

How IT Bolsters the Baseball Experience and Revenues

In August 1996, 16 months before the first brick was laid at SBC Park, fans of the San Francisco Giants baseball team could go online and check out the view of home plate from their prospective season seats—and purchase the rights to those seats for a lifetime.

Back then, real estate agents had just begun offering crude virtual walk-throughs on Web sites, but the sweeping pano-views of the inside of the future SBC Park—designed by HOK Sport + Venue + Event, the architects behind Baltimore's Oriole Park at Camden Yards—were an order of magnitude finer than just about anything a baseball fan (or prospective home buyer) had yet glimpsed.

Nor was this a soon-forgotten "Cool Site of the Day" gimmick.

Sales from those first 15,000 charter-seat licenses helped the consortium that had purchased the money-losing Giants in 1993 to book advance revenues against the $200 million in debt they racked up while completing the $357 million waterfront facility.

SBC Park was the first privately funded baseball stadium to open since Dodger Stadium, in 1962.

More important, the online marketing initiative laid the groundwork for the enviable position the Giants find themselves in today: Fully 28,000 of the park's 42,000 seats have been presold to season-ticket holders—that's 66 percent, the highest percentage in major league baseball.

Since moving to SBC Park from windswept Candlestick Park, the Giants have tripled annual revenues, too, from $65 million to a break-even $170 million.

"Of course, making it to the 2002 World Series, and getting to see Barry Bonds hit haven't hurt our chances," says Giants Vice President and COO Larry Baer, with an expansive grin.

He doesn't grandstand for long, though, before switching to crisp executive mode.

"We lost a fair amount of money at Candlestick Park. Actually, we lost a lot of money at Candlestick. And it was clear that if we couldn't get a new stadium built, we'd have to move the team."

Bill Schlough
Career Highlights
2002: Technology Team Leader, San Francisco 2012 Olympic Bid

2000: Technical Supervisor, Olympic Games (Salt Lake City)

1999: Named CIO of San Francisco Giants

1998: Associate, IT Group, Booz Allen Hamilton

1996: Event Services Coordinator, Olympic Games (Atlanta)

1994: Consultant, World Cup Soccer (Stanford, Calif.)

For the Giants, Baer underscores, doing what they want has been partly tech-driven.

"Our goal is to be one of the most technologically advanced sports facilities in the world," he says.

"I'm not a techie myself, but technology has been a huge strategic factor for us, in lots of ways, and Bill has done a great job making sure our technology projects give us direct benefits and really enhance the fan experience."

"Bill" is CIO Bill Schlough, 34, a tall, clean-cut engineering graduate from Duke University with an M.B.A. from the Wharton School of Business, who could pass for a lean first baseman.

Hired in 1999, Schlough has not only kept the Giants' front office Web-savvy, he's demonstrated new potential for IT in professional sports, including a successful six-figure effort to establish SBC Park as the first major-league ballpark to offer 802.11b Wi-Fi at every seat in the house.

Schlough fields an IT division of eight who serve 150 full-time employees in three main areas within the Giants organization:

  • Operations (SBC Park itself, which also plays host to soccer, concerts and Monster Truck rallies during the off-season).
  • Baseball (the players, coaches and scouts, who rely, for example, on digital video to improve their hitting and pitching, or to assess promising talent).
  • Ticketing (ticket sales, as well as other aspects of customer service, including self-service kiosks that allow fans to print out their tickets before going through the park's old-fashioned turnstiles).

    Ticket sales comprise the biggest revenue source—about 50 percent of the team's annual income.

    SBC Park's Wi-Fi "hot spot" status garnered the lion's share of the club's tech press this year, but it's in the ticketing and customer-service game that Schlough has really scored.

    Among his innovations: the "Double Play" ticket reselling auction, in which ticket holders can resell tickets when they can't make a particular game.

    Next Page: Interviews with CIO Insight.

    Interviews

    As he revealed to former Executive Editor Brad Wieners in a series of interviews this summer, he's working step-by-step toward a sophisticated ticketless, cashless, wireless future that could well revolutionize not only sports venues, but live entertainment, shopping malls and even individual retail stores.

    CIO Insight: How did you get this job?

    Schlough: I was recruited by McKinsey & Co. They'd put together a study of how to grow the Giants from a $65 million company to $160 million over five years, and it included a CIO. They suggested the Giants create the position, and it was exactly what I was looking for.

    You aren't the only relatively young executive in the Giants' front office. Is that in the nature of sports today?

    I don't think it's sports so much as entertainment. Actually, if you go around the league you'll find that people in my role at other clubs have been there awhile because turnover is low. Because it's baseball, people are really passionate about their jobs. And with our offices right here [in SBC Park], they can walk right out and see the benefits of their work.

    Let's talk about that work. The Giants were the first to offer a secondary market for tickets online. Why not leave that to eBay Inc.?

    It's funny. We caught some flack for Double Play when we first offered it in 2000. Because a few people asked exorbitant amounts for their tickets, some columnists in the local papers said we were enabling scalpers and rip-off artists. But most of the tickets sell at face value or one-and-a-half times. The advantage over buying on the street or on Craig's List is that we take responsibility for the transaction. Fans don't have to meet a stranger or carry cash or mail a personal check or give out a credit card number. The tickets can be reassigned as e-tickets and printed out at the stadium kiosks when you arrive. So it's safe and secure. You never have to deal directly with the seller.

    Do the Giants take a cut?

    We take a small transaction fee, but honestly we aren't making money on that. It's a service. When we first proposed it, other teams all but told us we were nuts. It's hard enough selling tickets once, they said; why put yourself in the position of selling them twice? But most of the tickets being resold are from our season-ticket holders, so we see it more that we're putting money back in the pockets of our best customers. I'm really proud of the decision to do this. There was a lot of risk involved in the concept of putting money in your customers' pockets as opposed to your own. But it works.

    How many people have used the service?

    Well over 400,000 tickets have been resold on Double Play since 2000. And in just under two seasons, more than 60,000 tickets have also been transferred by Ticket Relay, a similar service that allows ticket holders to transfer their unused tickets to family and friends online.

    Those numbers don't seem terribly large.

    This is still new, and again, the key thing is that it's a way to keep our best customers coming back. We've refunded more than $20 million to our best customers. Also, one of the top reasons season-ticket holders say they don't renew is "tickets-in-the-drawer" syndrome. At the end of the season, they have all these unused tickets. And they feel guilty about it, even if their company is paying. But if we can make it easy for them to let others use those tickets, they don't feel that guilt. We also have a service where you can donate them to charities or kids and get credit for them.

    What's your renewal rate on season seats?

    More than 90 percent.

    Have you found that season-ticket holders use the service to underwrite their seats?

    We have heard some things like that. I think someone figured out that if you buy the package for 81 games, and you sell 50, you can go to 30 games for free. But I don't think that's common. There's another point which gets missed here: San Francisco receives 15 million tourists each year, and if games are sold out, this makes it possible for visitors to get in to see a game. Any time a seat is filled, it's better for us, for concession sales, for atmosphere. It's always more fun when there's a full house.

    Next Page: Three areas of business, three different needs.

    Supporting Business Areas

    You support three areas of the business, each with different needs. How does that work?

    Baseball is very different from the other two. It's kind of like there's baseball, and there's the rest of the business. So ticketing, sponsorship, accounting, our Giants enterprises group—whenever we go forward with an IT initiative, it's got to be led by one of those. And that's really key to our success.

    A great example of an initiative that had trouble is our intranet.

    It took years to get it off the ground, but we finally got it going in 2001. Well, someone in my department led it exclusively, and we tried to, you know, collect the requirements of a whole bunch of different business units in our intranet 1.0.

    It was out there, and it had some killer apps, but it really didn't serve the needs of the whole populace, and so it went underused.

    With release 2.0 we said, "Hey, even though this covers so many different business units, somebody outside of IT is going to drive this."

    Now we've got 2.0 out. We're getting feedback from all across the office on this. A lot of people are excited about it, a lot of people have ideas. Now we can choose from the whole company who we think would be the right person outside of our department to lead this. We want somebody who's got influence, who spans multiple departments.

    Is there one of the three areas where you have more allies?

    I try not to work that way. Baseball is really the fun stuff for me, the glamorous job, but it's hard work because a lot of the coaches and players and scouts are not technology savvy. If I need feedback from a coach, I can't send an appointment in Outlook.

    So the baseball side's been more of a crusade—getting laptops to all our scouts, for instance. Only recently have we got these folks into the mindset of how technology can improve their efficiency and decision making.

    From the standpoint of publicity, the Wi-Fi rollout was a home run. Is it paying off?

    We haven't figured the ROI, if that's what you're asking. Anecdotally, I've heard about people looking up trivia about pitcher-batter match-ups and becoming the expert in their row, settling a bet in the bleachers. Of course, you'll get your hecklers wondering why you have a PDA out at a baseball game, too. But on balance, the feedback has been phenomenal. And SBC Communications Inc., our title sponsor, is in telecommunications, and the Freedomlink service [the Wi-Fi connection provided by SBC] has reinforced their brand in a big way.

    But from a business standpoint, I'd say the Wi-Fi has been a success already because of the relationships we have as a result with Intel Corp., Nortel Networks and Hewlett-Packard Co.

    A lot of the technology you use comes from those relationships, from sponsors who want to have their names on the scoreboard. Does that make your job easier?

    Lots of companies are happy to give us stuff for free, but the danger is really that you've got to take a close look and ask, "Does this make sense for our organization. And is this company going to last?" Because we've been through a lot of failures.

    Early on, we might have thought, "You want to do it for free? Great!" But not anymore. Now we have three investment criteria for any new project. One, is this going to enhance the fan experience in some way? Two, is this at least revenue-neutral? If it dramatically enhances the fan experience, it doesn't have to be revenue-neutral—but at least revenue-neutral over a time horizon. And that used to be it.

    Now we add a third thing: Is this partner viable, and do they have a sound business model?

    The development of Double Play is really a good story because the company that we brought in to develop Double Play was a joint venture between Intel and SAP America Inc. called Pandesic LLC, and they were one of the first dot-com busts.

    The deal changed our whole philosophy about whom you partner with. Intel and SAP are pretty strong companies. We figured a joint venture between those two is probably going to stick around. So we committed to Pandesic for our entire fan-loyalty program.

    From scratch, they built us this networked system, integrated with our ticketing system, Tickets.com Inc., and they were also our CRM system. That was huge: Now we could gather information about all of the transactions our fans were doing, and manage our marketing campaigns, all in one system.

    Then Pandesic went bust in September of our first year. Fortunately, they kept us going through the end of the season, and when October came, we had to decide what to do.

    Was your butt on the line?

    The beauty is, I don't make the final decisions for the organization. We make decisions together, as a team. We may not always reach true consensus, but we reach a majority. We fail, we fail together. We succeed, we succeed together. So there wasn't any real finger-pointing with Pandesic. But that doesn't mean we were okay with it. We want to take steps forward, not back, and we vowed to at least be back to where we were by the start of the next season.

    So what did you do?

    Everybody came at us. SAP said, "We'll do all of it for you!" But we didn't want to go there. We didn't have two years to build this thing. So basically we went two different routes. We broke it up. We persuaded Tickets.com to recreate our resale system. On the CRM side, we decided to take what we learned and bring it in-house with another CRM system called the Profiler, based on Microsoft/SQL database technology.

    What's your ideal? What are you building toward?

    I really liked what I saw recently near Dusseldorf, Germany. It's a horseshoe coliseum called Arena AufSchalke with a retractable roof. It's a completely ticketless and cashless facility. Even the turnstiles are electronic.

    Everything works with RFID cards and smart chips. The coolest thing about it was that once you walked in, the turnstiles kicked you in the butt to keep you moving. It's amazing how big a difference that made in keeping the lines moving. And they didn't need to staff the turnstiles.

    Was that trip to Germany a one-time deal, or do you do recon regularly?

    I try to make two to four of these trips a year. Or someone from my team will go. We're competitive on the field, but if we can learn from each other, it will only improve baseball as a business and entertainment over all.