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View Full Version : The REAL Issue for owners


PaleHoseGeorge
01-22-2002, 09:21 AM
Maybe this point is so obvious to everyone, nobody thinks to bring it up. Action speaks louder than words, so hear me out about what the owners do, rather than say, that betray the true motives behind what MLB is doing these days.

The issue for Bud and his fellow owners has nothing to do with competitive balance (they've ignored it since the 1920's when the Yankee dynasty first began). The issue isn't skyrocketing salaries (they are the ones freely offering the guaranteed contracts to the players). The issue isn't equitable sharing of revenue (they've never done it in the history of the game). Finally, the issue isn't the need to contract weak franchises in poor markets (the furor they've stirred in Minnesota and on Capitol Hill proves that point).

The REAL issue for owners is keeping them, the current set of owners, in business. For at least thirty years now (perhaps sixty if you believe Bill Veeck), the primary way for owners to make money is buying and selling their team. There are huge tax benefits for rich people (or people savvy enough to know how to get rich) that owning and selling a team provides. Veeck explained all of this in his book, Veeck as in Wreck , back in the early-60's. If you don't understand what I'm talking about, get a copy of the book at the library and read it.

After years of operating this way, the owners now want more. This is the meaning behind Reinsdorf's infamous quote before the last big strike in 1994-95, "The economics of baseball are screwed up."

Screwed up for who? It's not like any owner has lost money on the sale of their franchise since the time of "the golden era" of baseball in the 1950's. (If it was such a golden era, why were franchise values falling, and the Yankees still winning all the championships?)

So it's really simple: the owners who own the team right now want to retain ownership of their teams indefinitely. They don't ever want to sell in order to cash in big-time. They want to retain ownership of the team indefinitely, effectively blocking the market forces that otherwise force small family operators (like Veeck or Clark Griffith) to sell to larger, more-capitalized buyers (like Reinsdorf or Pohlad).

Thus, the REAL threat to owners comes from the increased value of their franchises--and the big-buck conglomerates (like Rupert Murdoch and Fox, or Ted Turner and AOL/Time Warner) that have the financial interest--AND RESOURCES--to wipe out all of the older, smaller operators if they so desired. The price of playing this game of poker has gone up.

Owning a baseball team is no longer a mom & pop operation. However, the sport of baseball is doing just fine. The sport will survive just fine whether Jerry Reinsdorf owns the Sox for another 50 years or not. The same can be said for most any other franchise (and the one exception, Montreal, can be attributed more to mismanagement than fan indifference. Read ex-commissioner Bowie Kuhn's book, Hardball , for his opinion about Montreal as a fine major league city).

Don't fault the owners for wanting more. Who can blame them? If you made several different investments and soon discovered one of them (baseball) outperforming most of the others for capital appreciation, you wouldn't want to sell it either. Reinsdorf bought the Sox (in 1981) for a measly $20 million. Steinbrenner got the Yankees (in 1973) for an incredible $10 million, LOL!

Next time you hear someone suggest baseball is a dying sport, ask yourself whether it's dying for the fans or dying for the current owners? More often than not, you'll surprise yourself with the answer.

czalgosz
01-22-2002, 10:45 AM
But isn't the whole point of holding on to something for capital appreciation to sell it some day?

There's some great points here, George, but I think the main point is the same ol' demon that caused the owners to institute the reseve clause 100 years ago - escalating salaries.

Sure, noone is holding a gun to their head and forcing them to offer huge contracts, but if even one owner out of 30 is doing it, that one automatically has a big advantage in getting talent and therefore in winning and therefore in making money.

Whether or not the owners are losing money, having to pay the players a lot still eats into their profits. They want some mechanism to tie down the Steinbrenners and Colangelos of the world and force them to play the same game as everyone else. Do the owners care that the Yankees win all the time? No. Do they care that the Yankees' piece of the pie is three times as big as everyone else's? Damn right. That's what they're trying to address.

PaleHoseGeorge
01-22-2002, 11:13 AM
Re-read what I wrote. I'm not begrudging the owners wanting more. In fact, I suggest any of us would want to hold a $10 million investment that is now worth $1 billion. This is precisely the situation George Steinbrenner is faced with. If he has made $990 million on that investment so far, he figures to make even more if he holds it even longer. That's perfectly rational behavior any of us would be stupid to not to follow.

Furthermore, nearly every other owner (except Montreal's) has a similar opportunity in front of them. And what does Loria intend to do once he's freed himself of his financial albatross, the Expos? Buy the Marlins, of course. Oh yeah, Cz, he's losing his shirt. Sure.

And you wonder why Selig is facing possible perjury charges for lying on Capitol Hill? He's not selling used cars in Milwaukee anymore.

If Murdoch, Turner, Nintendo, the Tribune, and other corporate giants want to own baseball teams, let them. The sport will survive. If Reinsdorf, Pohlad, and the other little guys (who bought when the franchises were cheap) can't afford to compete, let them sell. They'll get rich in the process. If not for the incredible growth in the value of their franchises, none of the big corporate giants would have ever wanted to buy them in the first place.

In nutshell, that's my point.

czalgosz
01-22-2002, 12:36 PM
Well, okay, I see your point. I don't believe that the owners are losing money (well, except for Montreal) any more than you do. I think it was stupid of them to try to convince people that they're losing money in the first place. It doesn't do anything to help their cause.

But while I can see a queue forming to buy, say, the Red Sox or the Yankees or the Cubs, I don't see one for the Twins or the Expos. The only reason that there's a potential buyer for the Twins at all is that Pohlad threatened to fold up the franchise. People were more than willing to let him sit on that franchise when it was obvious that he didn't want it and it appeared that he had no choice but to run it.

And, George, watch out if corporations start taking over ballclubs. Right now there are two clubs owned by corporations - the Cubs (Trib. Corp.) and the Braves (AOLTimeWarner). Despite having access to literally billions of dollars and turning huge profits over to their parent corporation year after year, the Trib. won't spend money on the team, and why should they? As for the Braves, AOLTimeWarner has already slashed their player development budget, and has made moves to cut payroll. I predict that they'll try to compete one last time and then start cutting payroll seriously. They're coasting right now on the organization that Turner paid to built up, but that won't last for long. Big corporations running ballclubs will be even stingier than individual owners were, mark my words. And then you'll have the Yankees even more dominant.

Daver
01-22-2002, 12:40 PM
You forgot to mention the Dodgers(Fox) And the Angels(Disney).

czalgosz
01-22-2002, 01:01 PM
Originally posted by daver
You forgot to mention the Dodgers(Fox) And the Angels(Disney).

Sorry 'bout that. Well, there's four well-run organizations for you...

PaleHoseGeorge
01-22-2002, 01:23 PM
If corporate owners don't pay to field a better team, I hardly see the threat their ownership constitutes to competitive balance. It simply allows the smaller operators (like a Reinsdorf or Pohlad) to remain competitive longer. Certainly Turner has willingly spent more on his Braves than the Tribune has on the Cubs--in spite of both of them having the same economic advantages (a TV superstation) to foot the bills.

But your point is well-taken. Big companies can screw up as easily as small ones. Enron (K-Mart, too?) is a good example.