Moneyball: Major League Baseball CFO Discusses Career and the Economics of Baseball

On January 28, Jonathan Mariner (HBS ’78), Executive Vice President and CFO of Major League Baseball, spoke to HBS students about his career and the economics of professional baseball.

On January 28, the Business of Sports Club hosted one of professional sports’ most influential executives when Jonathan Mariner, Executive Vice President and Chief Financial Office of Major League Baseball (MLB), entertained a classroom of HBS students with a discussion on the economics of baseball and his career within MLB.

Mr. Mariner’s talk focused on the economics of professional sports and how league executives are persistently challenged by the careful balance between profitability and labor relations. Over the past 20 years, each of the four major sports leagues has experienced work stoppages, including the MLB Players Association strike in 1994 that led to the cancellation of 938 games and the World Series.

Mr. Mariner discussed the difficult financial position MLB faced leading up to labor contract re-negotiations in 2002. At the time, only three of the 30 MLB teams had positive EBITDA, and the league collectively lost nearly $500 million. No form of salary cap existed, and debt was cheap and widely available. To remain competitive, many teams took on heavy debt-loads to attract players with exorbitant salaries. After months of negotiations, Mr. Mariner and MLB agreed to a new collective bargaining agreement (CBA) with the players’ union in late 2002 to provide greater financial stability for league owners.

Mr. Mariner highlighted three key provisions of the CBA that were critical to MLB’s efforts to become a profitable enterprise. First, the league’s revenue sharing arrangement, whereby each team contributes a portion of their local revenues to a league-wide pool that is divided evenly across the 30 teams at year’s end, was increased from 20% to 30% of local revenues. This arrangement was designed for smaller market clubs to become more competitive with large market teams such as Boston and New York. Second, the new CBA installed a luxury tax tag heuer replica for sale , which was intended to slow rapid growth in player salaries. Under the luxury tax, teams that spend more than a pre-established threshold amount on player salaries are assessed a 15% to 40% tax. Third, MLB implemented a debt service rule that required teams to maintain a debt load of less than ten times their average EBITDA over the prior three years. Since many teams were generating negative EBITDA, the three-year look back significantly limited league-wide indebtedness.

The aggressive controls and regimented reporting measures implemented by Mr. Mariner and his team had a powerful impact on the ability of league executives to manage the game as a professional business. In 2007, 28 of the 30 MLB teams generated positive EBITDA, and the league collectively garnered $540 million. This roughly $1 billion cash flow swing over the life of the 2002 CBA, notably achieved without a work stoppage, is Mr. Mariner’s proudest accomplishment as an MLB executive.

In addition to his discussion of baseball economics, Mr. Mariner entertained the classroom with an amusing recollection of his rather unlikely entry into the world of sports. After graduating from HBS, Mr. Mariner worked for the HBS admissions board and MCI before moving to south Florida to join the truck leasing and rental company Ryder. After four years in a corporate finance role, Mr. Mariner left Ryder to become VP of Finance & Administration of the Greater Miami Convention & Visitors Bureau. Though aware that the Bureau was in financial turmoil, he relished the challenge of “cutting my teeth in a direct-line responsibility role.” In 1992, MLB granted a new baseball franchise-the Florida Marlins-to Wayne Huizenga, the successful entrepreneur behind Waste Management and Blockbuster. Well aware that the Marlins would have a huge impact on local business, Mr. Mariner followed the franchise’s development closely and became intrigued when he saw a newspaper advertisement seeking an executive to fill the start-up club’s CFO position. Although Mr. Mariner knew Miami intimately well and was a sports fan in general, he was admittedly somewhat clueless with regard to baseball breitling superocean replica. “I probably couldn’t name five baseball players at the time,” he recalled humorously. “I was just happy to show my friends the business card.” However, Mr. Mariner’s turnaround experience with the Visitors Bureaus impressed the Marlins, and he was offered the job.

As the Marlins’ CFO, Mr. Mariner was responsible for financial reporting, budgeting, payroll, and cash management, as well as the human resources, information technology, and risk management functions. Mr. Mariner also held the position of CFO for the National Hockey League’s Florida Panthers franchise, also owned by Mr. Huizenga, during their start-up and inaugural season.

Mr. Mariner served as Marlins’ CFO for five years and sports a glowing ring from their 1997 World Series Championship. In 2000, after the team was sold by then owner John Henry (current owner of the Boston Red Sox), Mr. Mariner left baseball to become COO and CFO of Charter Schools USA (CSUSA), a charter school development and management company funded by Michael Milken’s Knowledge Universe corporation. Mr. Mariner thought his career in baseball was over, but after CSUSA was sold in 2002, he received a call from MLB Commissioner Bud Selig about rejoining MLB as the league’s CFO. “It was the easiest job interview process I’ve ever had-no resume required,” he recalled.

In addition to his daily responsibilities for overseeing central office budgeting, financial reporting, and risk management activities, Mr. Mariner’s responsibilities as CFO include administering the $1.5 billion league-wide credit facility, which supports struggling franchises; providing updates at owners’ meetings on the industry’s financial health; overseeing all team-level financial reporting through team CFOs; and providing financial reviews on potential ownership applications.

Mr. Mariner concluded his presentation by engaging students in a lengthy question and answer session in which he addressed the current state of labor relations, the MLB amateur draft, the upcoming launch of MLB’s proprietary cable network, and global expansion, with an emphasis on the growing fan base in Japan and China.

The Business of Sports Club coordinated Mr. Mariner’s visit as part of an ongoing effort to bring individuals who have built successful careers in sports to Harvard Business School.

February 11, 2008
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