Behind the Business of Baseball with Phillies’ Owner John Middleton

The Wharton School welcomes all kinds of visitors from around the world to its Philadelphia campus — captains of industry, celebrities, and serial entrepreneurs. Sometimes, however, big names need only travel a few blocks to Locust Walk to impart their best business wisdom.

Such was the case recently when John Middleton, CEO and managing partner of the Philadelphia Phillies major league baseball team (and a super fan since the age of five), drove a few miles from Citizens Bank Park to sit down with Wharton’s Asuka Nakahara for a conversation during the Wharton Sports Business Summit.

Here are 6 strategic plays from Wharton’s inside baseball chat with Middleton:

1️⃣ World Series goals. “You either win the big trophy or you don’t,” said Middleton of the success metrics he cares most about as an owner. “There’s one winner and 29 losers. Nothing else matters. You just win.”

2️⃣ Outside rules don’t apply. “Every industry has technical knowledge, and you have to learn it and master it to be an effective CEO,” noted Middleton. “In baseball you have to know how to evaluate baseball players, how to develop baseball players, and how to manage baseball players. There’s nothing you do in the outside world to develop those skill sets. You can get buffaloed. You make a lot of mistakes. We just hire great general managers and are smart enough to let them do their jobs. But it’s hard to find that great GM… The product is a baseball team, and the raw ingredient are athletes who play baseball exceptionally well. If you really want to be in the business of baseball long-term, you have to get into that side of the field and learn something about it. You can’t be ignorant.”

3️⃣ A value proposition. When it comes to different revenue streams (like merchandise and ticket sales), “The more money you are bringing in, the more money you can spend, assuming you do it intelligently. You’re buying better players,” said Middleton. “What’s different about baseball than the other major sports is the degree to which our revenues are local revenues as opposed to national revenues… The disparity between the large-market and the small-market teams is significant. Putting aside the individual best interest of the team, for the future of baseball we need to move more money into the central baseball fund and have it distributed equally among the 30 teams. That’s the only way the small-market teams will be able to stay competitive long-term.”

4️⃣ The Niagara Falls of data. “As much information as you can get on baseball players is good,” said Middleton, noting that the Phillies were late to the party, not investing in data and analytics in any way until 2014. “You’re looking for congruency; agreement between the scouts and their eyes and the analytical people and their formulas, algorithms and conclusions. When you see that agreement, it’s good and when you see a disparity you need to explore the why.” 

5️⃣  $750 million decisions. The Phillies recently sold stake in the organization to billionaires for future financial health. “In Covid, we lost a little over $200 million in two years. It started there,” said Middleton. “My desire to get my trophy back has caused me to spend a lot of money in payroll. We’re still losing money after Covid. We have a lot of work we want to do. [We have] laid out a vision for our Clearwater (Florida) training facilities and it’s a $350 million project. We have a lot of money to spend on Citizens Bank Park, like infrastructure upgrades and improvements. Fans enjoy games differently than they did 25 years ago. Frankly, our tab was three-quarters of a billion dollars. We needed to go to the outside and broaden our financial base and add some depth so we could do some of these things comfortably.”

6️⃣ A high-tech pitch. “The fastest growing expense category in Major League Baseball in the last five-plus years isn’t player payroll, it’s ancillary services, like the analytics department, equipment and cameras,” noted Middleton. “There’s a $1 million machine called a [Trajekt that uses data to mimic the way balls break from any big-league pitcher]. You can call up any single pitcher in baseball. A hole moves around this giant screen. Let’s say you want to hit against Zack Wheeler’s fast ball. A life-sized Zack Wheeler appears on the screen and the hole moves to a specific spot. He winds up and throws the ball and it hits that hole precisely and the ball comes out of the machine at exactly the spin rate and MPH of Zack Wheeler. We are on the cutting edge of all that stuff, finally. It took us years to get caught up. I don’t know how you could long-term be successful if you’re not riding the wave at that place.”

Conversation Starters

What are three key decisions that John Middleton has made to boost the business of the Philadelphia Phillies?

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