News Briefs: Fall 2001

MLB threatens to contract by two teams. See separate article.

Commissioner Selig announces $500 million losses in 2001. Details to be presented at a December 6 Congressional hearing. This should be fun; check my Web site for further commentary.

Selig receives three-year contract extension. When Bud Selig became acting Commissioner in 1992, MLB's own numbers show that the sport was modestly profitable. The owners now claim to be losing $500 million/year despite greater revenue sharing and a doubling of gross revenues, yet they're so happy with Bud's leadership that they extended his contract two years before it was due to expire.

Labor talks on hold pending contraction grievance. Although the CBA expired November 7, MLB has not imposed a signing free and has promised not to lock out the players "for now." Murray Chass of the New York Times reported that early this season, secret talks were going so well that the negotiators thought they might strike a deal by the All-Star break. However, the owners broke off talks in late June, reportedly because Selig and his allies favored a harder line than their negotiators were taking.

MLBPA accounts down to "only" $114 million. This fund, collected mostly from licensing fees, compares to $200 million before the 1994 strike. MLBPA membership remains one of the world's best investments: each member's $9,150 annual dues returns roughly three times this sum from MLBPA-administered licensing agreements.

Most TV ratings rise. Regular-season ratings for national network and cable telecasts held steady, while ratings at the various local Fox Sports Nets rose by an average of 10% in 2001. The Seattle Mariners led the way with an average 14.9 rating; the Minnesota Twins posted the largest increase, a whopping 161%. The World Series averaged a 15.6 rating and 25 share, up 26% from 2000's all-New York series; Game 7's 23.5/34 made it the most-watched baseball game since Game 7 of the 1991 Twins-Braves series.

Video Webcasting of games in 2002? After attracting a reported 120,000 paying subscribers for its $9.95 package of live game audiocasts, may also offer live videocasts for 2002. The Webcasts would feature the team's local video feed, and would probably be blacked out in markets where the game telecasts are available through cable or free TV. The details must still be negotiated with local rights holders.

Around the Majors

Diamondbacks win Series, look for more money. The team's backers have invested $198 million to date; managing general partner Jerry Colangelo wants another $160 million over 10 years for working capital. Earlier this year the team persuaded its high-priced veterans to defer large chunks of their salaries, freeing up cash for now but creating huge deferred liabilities.

Braves claim "mammoth" operating losses. Without disclosing the numbers, Atlanta president Stan Kasten insisted that despite the team's uniquely lucrative national cable deal with its affiliate WTBS, the Braves have sustained "very, very serious" operating losses in 2000 and 2001.

Red Sox bids received. The Yawkey estate's 53 percent share of the Red Sox – an asset that includes 80% of the NESN regional sports cable network, as well as Fenway Park and its land – is expected to sell for $350 million or more. Former Padres owner Tom Werner heads a bidding syndicate that includes former Senator/Blue Ribbon Economic Panelist George Mitchell, baseball executive Larry Lucchino and The New York Times Company; other bidders include Charles Dolan of Cablevision, brother of Indians' owner Larry Dolan, and several local developers and concessionaires.

Reds ordered to pay $6.5 million back rent. Marge Schott had withheld the money in a dispute over alleged preferential treatment given the NFL Bengals. County officials offered to forgive the rent in return for the Reds' signing a lease for a new park, but local resident Steven Ritter sued to invalidate the concession. A local judge held that since the Reds were still playing in the same park under the terms of the same lease, the county couldn't waive its right to the money.

Marlins could soon be sold. Rumors suggest that Expos owner Jeffrey Loria could soon buy the Marlins from John Henry for $150 million. Henry would then buy the Anaheim Angels from Disney, while the Expos would be contracted, sold to the highest bidder or operated by MLB itself.

Expos outdrawn by 13 minor league teams. Montreal's average crowd of 7,648 fans per home game was less than, among others, the Class A Kane County Cougars. As of late September, the Expos were responsible for the majors' 32 smallest home crowds. The Expos have signed a lease for 2002, but it contains an escape clause in the event of contraction.

Yankees announce new cable network. YankeeNets, which owns the Yankees, Nets and New Jersey Devils, owns 52% of the new YES Network, with 40% held by investment bankers and the remainder by individuals. YES, which will begin airing the Yankees in March, the Nets in November 2002, and the Devils in 2007, is still negotiating with local cable companies over the cost of its programming.

Pirates revenues jump in new park. Owner Kevin McClatchy noted that PNC Bank paid $30 million over 20 years for naming rights, and that the Pirates sold all 65 luxury suites, for an average of $80,000, in just 1-1/2 months. Even though the price of an average ticket rose from $11.80 in 2000 to $21.48 in 2001, attendance jumped from 1.7 million to a franchise-record 2.4 million.

Padres receive $48 million stadium guarantee from MLB. The Padres are responsible for $146 million of the $450 million cost of a planned ballpark-and-redevelopment project in San Diego. The same week that Commissioner Selig explained that MLB would rather kill off low-revenue teams than loan them money for new parks, MLB agreed to guarantee $48 million of the Padres' contribution. Construction on the park was suspended in October 2000 in the wake of lawsuits challenging the city's share of the funding, but it's now expected to be ready for Opening Day 2004.

Rangers' stadium mortgage paid off 10 years early. The $135 million bond issue approved in early 1991 was financed by a half-cent sales tax increase, as well as $3.5 million year from the Rangers. The deal benefitted from a recession in the construction industry while the park was being built, followed by faster-than-expected economic growth that produced higher sales tax revenues.

Blue Jays claim huge losses, blame exchange rate. In early October Blue Jays officials said the club would lose $50 million (Canadian) in 2001, with roughly $40 million of this sum attributable to the exchange rate. The club claims losses of $10 million in 2000, $8.7 million in 1999, $42.8 million in 1998 and $36.3 million in 1997 (all figures in Canadian dollars).

Northern Virginians propose $325 million stadium. The Virginia Baseball Stadium Authority is already authorized to issue up to $200 million in state-backed bonds, and has identified four potential sites for a park, including two in Arlington County and two in Fairfax County. Even before MLB declared it would rather contract teams than move them, both of Virginia's Senators and three of its Congressmen were hinting they could challenge MLB's antitrust exemption if metropolitan Washington, D.C. didn't get a team soon.

Copyright © 2001 Doug Pappas. All rights reserved.
Originally published in the Fall 2001 issue of Outside the Lines, the SABR Business of Baseball Committee newsletter.

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