How long before Commissioner Selig's term expires?
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Thursday, April 22, 2004

Marlins Extend Deadline for Stadium Deal

Marlins President David Samson is willing to give taxpayers one last chance to contribute more money towards a new ballpark. He has extended his own artificial deadline for passage of stadium-financing legislation from May 1 to May 6.

The latest discussions between the Marlins and the City of Miami involve a proposed retractable-roofed park to be built in the southwest corner of the Orange Bowl lot. State legislative leaders continue to say they won't consider a stadium bill this year -- and even if the proposed $60 million tax rebate sought by the Marlins were to pass, the club would still be $55 million short of the money it needs for the proposed park. A new poll conducted by Florida International University won't help, either:

"The study, commissioned and paid for by FIU, found that 80 percent of the 600 respondents considered themselves Marlins fans and that 73 percent believed the Orange Bowl to be the best site available.

"Still, nearly 55 percent of those polled either opposed or strongly opposed using public money to build a baseball stadium."

Vegas Not Getting Expos, Says MLB Insider

An unidentified "well-informed major league source" has told the Las Vegas Review-Journal that "there's little to no chance" the Montreal Expos will be moving to Las Vegas, because the region lacks the population to support the club. Another unnamed insider stated the obvious: MLB is "using Las Vegas to get a better deal somewhere else."

The first unnamed source also said: ""There are a lot of offers on the table. There are other offers that are better than Las Vegas." I suspect the MLB, Relocation Committee won't be happy with that comment, which will make the Commissioner's inevitable delays, hesitancy and waffling about the future of the Expos sound even lamer than usual.

In addition, Robert Walker, sports book director of the MGM Mirage, said he would be opposed to giving up casinos' ability to handle wagers on baseball games as part of the price for landing a team. According to the Nevada Gaming Control Board, baseball accounts for about 20%, or $378.5 million, of the annual sports wagering at casinos.
Providers Cool to Pawlenty's Twins TV Mediation Proposal

Now it appears that the cable companies are blocking the best proposal for bringing the Twins' Victory Sports to local viewers. The Twins have consented to Minnesota Gov. Tim Pawlenty's proposal, under which Victory Sports would immediately be supplied for free to any cable company willing to commit to mediation over the ultimate fee to be charged.

Time Warner Cable responded by telling the Twins to go back to Fox Sports Net. "The true parties to this dispute are Fox Sports Net North and the Twins, and any mediation effort should involve them. ... Any agreement between the Twins and Fox Sports Net North would mean these games would immediately be available to our customers at no retail price increase."

Kevin Cattoor of Victory Sports responded, "Our discussions with (Fox) are over, and it's not possible to go back." That's clearly an overstatement -- but the cable operators' refusal to participate even in a non-binding mediation does not bode well for an early resolution of this dispute.

Padres, Giants Pitching for 2006 All-Star Game

So are the Cardinals, who'd like it for the first year of their new ballpark, according to the AP's Alan Robinson. Robinson notes that the All-Star Game is often awarded to a club that could use some help selling tickets -- a description that clearly applies to the Pirates, and just as clearly doesn't apply to the Giants. On the other hand, Pittsburgh hosted the All-Star Game all of 12 years ago.

The article lists Cincinnati, San Diego and Philadelphia as the other NL cities whose new parks haven't been scheduled for an All-Star Game. Recent expansion franchises in Florida and Arizona haven't hosted the ASG, either...yet somehow Milwaukee got a game the year after its new park opened. I'm sure that decision was made entirely on the merits...


Wednesday, April 21, 2004

Fixing the Fan Cost Index

In this article for Baseball Prospectus (on the free side of the site), I examine the components of Team Marketing Report's "Fan Cost Index" and propose a few simple modifications to make it more realistic. I also recompute the FCI for other types of fans beyond TMR's mythical family of four, including a family that brings its own food from home and a group that gets together at the park after work.

Future articles in this series will ascertain, division by division, how realistic TMR's "average ticket price" is for fans trying to buy seats at each ballpark. I'll also identify major promotional discounts available to fans who plan ahead.
Attendance Trends in Multi-Club Markets

Reader Travis Nelson points me to his site, where he's graphed trends in attendance in multi-club markets. He finds little evidence to support Peter Angelos's concern that a team in Washington would significantly reduce the Orioles' attendance.

However, this study doesn't examine Angelos's bigger concern, the likely effect of a team in Washington, DC/northern Virginia on the Orioles' TV and cable contracts. A team located 40 miles south of Baltimore would immediately claim the loyalty of at least half the fans who currently have the Orioles as their default "home team."
Legislation Takes Swing at Fickle Pro Sports Teams

California Assemblywoman Christine Kehoe has introduced a bill to regulate sports team movements within the state. AB 3003 would require any California city which lures a team from another area to reimburse the community losing the club for lost revenues. "This reimbursement shall include consideration of fiscal effects to the local government from reduced revenue experienced as a result of economic loss experienced by the community caused by loss of the team."

The Oakland Raiders and Oakland Athletics say they're not concerned about the bill, which suggests how likely it is to become law. A good thing, since a law like this would have the perverse effect of encouraging California sports teams dissatisfied with their current lease to leave the state entirely. Moreover, most sports economists question the existence of the "economic loss" which this bill is designed to compensate.

The only effective way to prevent local governments from subsidizing pro sports monopolists would be a federal law forbidding the use of tax-exempt bonds for anything to do with stadium construction or other incentives used to lure franchises from one market to another. I doubt that a President who owes most of his own personal wealth to the generous taxpayers of Arlington, Texas will be in any hurry to support such a bill.
Blackout Could Hurt Twins Bill

The Minnesota Twins' attempt to strongarm legislators and cable companies at the same time seems to be backfiring. Aron Kahn of the St. Paul Pioneer Press reports that with 105 Twins telecasts unavailable to the vast majority of the state, thanks to the Pohlad family's demand that cable companies pay $2.20/subscriber each month for its new Victory Sports Network, the Minnesota legislature's not inclined to take up the stadium bill demanded by the club until the cable dispute is resolved.

One legislator has already tried to force Victory Sports into binding arbitration with local cable systems. Senate majority leader Dean Johnson says his constituents know which issue they want to see resolved first:

"It's been said to me more than once: 'Keep your powder dry on the stadium until they resolve the issue of putting them back on TV.' "

Last year Fox Sports charged $1.70/month for the Twins plus the local NBA and NHL teams. Last month a panel of arbitrators ruled that the Yankees' YES Network was worth $1.93/month. The Pohlads can hold their breath until they turn blue, but their product is clearly overpriced at $2.20/month and no major cable operator is going to meet their terms.

The cable stalemate is also antagonizing legislators whose vote will be needed to pass any bill containing the nine-figure stadium subsidy demanded by the Pohlads. Their overreaching could leave them as friendless as they were the day after they offered the club for contraction.
Winning Over Profit

Don't say bad things about George Steinbrenner around Allen Barra of the Wall Street Journal. Barra praises him for being willing to reinvest his revenue in players, noting, "One of the absurdities of the current system is that it rewards some of the wealthiest men in the country for not investing in their own baseball business rather than sitting back and locking in a profit by refusing to compete actively for players." He sums up:

"Baseball's critics are right: There is a ridiculous imbalance in baseball spending. But it hasn't been caused by Mr. Steinbrenner. It's been caused by a system created by men who, in the words of the former players' union head Marvin Miller, 'pay lip service to competition and free enterprise, and shudder when they see it in action.'

"All George Steinbrenner wants to do is win."


Tuesday, April 20, 2004

House Speaker: No Money for Marlins This Year

The $60 million state subsidy sought by the Florida Marlins for their new stadium appears dead for 2004, as the Speaker of the Florida House has said it won't be included in this year's budget. In the words of Speaker Johnnie Byrd:

"We support economic development on good projects. I've had a chance to learn a little bit more about the Marlins issue, and I don't believe that's an appropriate way to invest taxpayer dollars."

The Marlins didn't return a phone call from the AP requesting comment. We should be hearing from David Samson soon enough...
Phyllis Kahn: Let's Get Behind Community Ownership of the Twins

In this Minneapolis Star Tribune op-ed piece, by Minneapolis Rep. Phyllis Kahn discusses her proposal for community ownership of the Twins.

Kahn's bill, which has 34 co-sponsors in the Minnesota House of Representatives, would forbid the use of any state funds to support the Twins unless the club was transferred to community ownership. Under her plan, the Twins would issue two classes of stock. Class A stock would have full voting rights; Class B stock would be able to vote only on proposals to relocate the franchise. Any proposal to move the Twins out of Minnesota would require the approval of 80% of both the Class A and Class B shares.

She envisions that the Class B shares would be bought by locals for their novelty value, while the more serious investors would opt for Class A stock. The Twins would first be transferred to a nonprofit corporation, which would hold title for up to a year while stock in the club was sold to the public.

There would be three types of Class A shareholders. A private managing partner would be allowed to purchase up to 25% of the Class A shares, and would have full responsibility for operating the club. Other large investors would be allowed to buy up to 5% each, subject to the requirement that at least 50% of the Class A shares be held by owners of 1% or less.

In the unlikely event that this bill were to become law and the more unlikely event that the Pohlads agreed to sell the Twins to such a group, the restrictions on Class A ownership could still doom the deal. The plan requires a minimum of 56 Class A investors -- 50 1% shareholders, 5 5% shareholders and the 25% shareholder/managing partner -- with even the 1% shareholders required to invest over $1 million apiece.
ChiSox Deals Put Fans on the Field

Street & Smith's SportsBusiness Journal reports that the Chicago White Sox are set to announce new promotions that will actually allow well-heeled fans onto the field during games.

Two fans per game will be allowed to pay $1,500 for the privilege of dragging the infield. Two more will be allowed to pay $1,000 each for the honor of changing first and third bases during the fifth inning. For $1,500, one fan will be allowed to deliver the lineup card to the umpire.

Think of the opportunities! How much would you pay to be allowed to mop the dugout floor after the game, make the traditional pregame "don't throw things or run onto the field" announcement over the public address system, or deliver new baseballs to the plate umpire?

The Sox are also renting a 20-seat "All-Star Suite" for $10,000/game, which includes a ballpark tour and a chance to meet club management and former players. For $5,000, ten adults and ten children can take batting practice on off days.

MLB Clubs' Debt Concern Eases

Jonathan Mariner, MLB's chief financial officer, tells Street & Smith's SportsBusiness Journal that only five clubs are at risk of not satisfying MLB's new debt rules, which will take effect after the 2005 season. The new rules will limit clubs to carrying debt of no more than 10 times their earnings before interest, taxes, depreciation and amortization (EBITDA), or 15 times EBITDA if the club moved into a new stadium within the past 10 years. Mariner wouldn't identify the teams at risk.

Since clubs will have to maintain a positive cash flow in order to comply with the rule -- if the club has zero or negative earnings, the required ratio can't be satisfied -- this means that MLB expects at least 25 of the 30 clubs to operate in the black by 2005, one year before the current CBA expires. Does this mean the owners won't still be crying poverty at the bargaining table? Don't bet on it...
It's Geek to Him

With a headline like this, of course the article's about one of what the Los Angeles Times calls "a new generation of baseball executive, one who probably never played the game for a living and in any case trusts in computers as a valuable tool in player evaluation and roster composition."

Author Bill Shaikin quotes some of new Dodger GM Paul DePodesta's remarks last September to an audience at Credit Suisse First Boston:

"Previously there had been no accountability at all in player evaluation. As you can imagine, the scouting community prized that tradition. How were they to feel free otherwise about giving their opinions and keep getting raises at the end of the year, despite how often they were right or wrong?

"… My industry is comprised of human capital — the players are our assets. So subjectivity plays some role. But the enormity of the subjectivity was staggering. Our scouts even started making up vocabulary like 'pitchability' to describe players…. Opinions as conversation starters are fine. Opinions as conclusions are very bad.

"Ninety percent of the player population in major league baseball is replaceable by someone who makes less."

MLB President Bob DuPuy, who got his own job through old-fashioned cronyism, responds by calling sabermetrics "the flavor of the month. Everybody's got their own method for trying to build a winning franchise. That's what makes it interesting." His hometown Brewers, who haven't had a winning season since 1992 and haven't qualified for the postseason since 1982, might want to rethink some of their methods...

Monday, April 19, 2004

Las Vegas Expos? It's Rollin' the Dice

Don Ruiz of the Tacoma News Tribune looks at Las Vegas' bid for the Expos from the perspective of a Triple-A city that would be affected by any reconfiguration of the Pacific Coast League resulting from the incorporation of Las Vegas (or Portland) into the majors. He notes that Don Logan, GM of the PCL's Las Vegas 51s, is among those who believe that Las Vegas is not yet a major league city:

"I'm not convinced - nor (is Mandalay Baseball Properties, which owns the 51s) - that Vegas is ready yet," he said. "It's still the 52nd media market. We don't have any suburbs."
Runs, Hits and Taxes

Toronto Blue Jays president Paul Godfrey wants the province of Ontario to follow the example of 20 U.S. states, several cities, Alberta and Puerto Rico by adopting a "jock tax" on the income earned by visiting athletes while working in the province. And he proposes a twist: the money raised by the tax should be used to subsidize the Blue Jays.

As Rick Westhead writes in the Toronto Star, California currently takes in $70 million/year from the "jock tax," and the Expos' "home games" in Puerto Rico are generating $7 million/year from the 12% income tax levied by the commonwealth on the players from both clubs. These taxes are an administrative nightmare for players and their accountants, especially since different jurisdictions use different methods to compute the tax. Most states allow residents a credit on their state income taxes for "jock taxes" payable elsewhere, but Florida, Illinois, and Nevada don't.

Godfrey notes that Alberta currently imposes an income tax surcharge on players on the Calgary Flames and Edmonton Oilers, with the proceeds returned to the clubs. He wants Ontario to do the same, but to tax players on the home and visiting teams for the benefit of the local owners. Godfrey describes his proposal as "a common-sense approach to a complex problem" and "a way of aiding sports teams without being a burden on taxpayers." I suspect many players will use different terms to describe it...

Sox Owner's Success Driven by Numbers

A profile of Red Sox owner John Henry, written by Robert Gavin of the Boston Globe, which bears more than a passing thematic resemblance to the current Business Week cover story. Even more than the other article, this one emphasizes how sharply Henry's emphasis on the decisionmaking process differs from the short-term emphasis on isolated results taken by 99% of the sporting press, 99.9% of sports radio hosts and callers, and his chief rival's principal owner. Henry

"says one of the most important lessons he learned was to recognize how little he really knows.

"His numbers-driven trading model, in fact, is designed to strip ego and emotion from investment decisions and is grounded in another modest, and, for the financial industry, somewhat heretical, assumption: no one can predict the future. And unlike Steinbrenner, who meddles in both front office and field decisions, Henry's management style is to put 'competent, committed, and passionate' people in place, and let them do their jobs."

Breaking the Curse

A Business Week cover story looks at the Boston Red Sox, where chairman Tom Werner confidently declares, "We want to win multiple World Series" and principal owner John Henry explains the philosophy he uses both with the Red Sox and as one of the world's most successful futures traders:

""It's not for me to ask why the price is going up or down but rather to pay attention to what is actually happening. And over time, that gives us a big advantage."

The key is "over time." "Everyone in baseball is well aware that anything can happen in a short series. That's why we need to take a long-term perspective and make the playoffs every year"

Sox owners are also pushing for more ways to generate money outside the constraints of MLB's revenue sharing:

"Now the partners are launching a new company -- New England Sports Enterprises -- to further exploit the Sox brand. NESE will pursue deals from sports marketing to team consulting services; the company may even buy another sports franchise. And unlike the baseball team -- which must share 34% of adjusted revenues with other clubs -- 'we don't have to share NESE's revenues with anyone,' says Red Sox COO Michael Dee, who heads the unit."
Thank You, Grady Little?

My article from the April 2004 Boston Baseball, which explains why another few years of Lovable Loserdom could prove more lucrative for the Red Sox than a World Series title ever could.

Sunday, April 18, 2004

New Ballparks No Magic Financial Pill

Andrew Baggarly of the Oakland Tribune doesn't buy the Selig/Schott line that the Athletics need a new ballpark to compete.

"You're the owner of a small-market team? There's your answer. Hire a smart and savvy marketing staff if the whim strikes you. Invest in scouting and player development if it makes you feel good. Print playoff tickets if you must.

"But, if you listen to Selig's rhetoric, none of those things can save a franchise. For that, you need to pour concrete, and get a bigger outpouring of public money to pay for it all."

Baggarly also points to the bottom half of the NL Central as examples of what a new ballpark can't do. The Reds have slashed their payroll by $16 million in their second year at The Great American Ballpark; the Pirates' attendance has fallen by a third in three years; and the Brewers have cut their payroll almost in half, to a major league low $27.5 million.

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