April 30, 2003
Prospectus Today
Owning Up to the Problem
by Joe Sheehan
One of the baseball stories I managed to catch while on my vacation was Bud
Selig's
announcement that he would not pursue a new contract after his current
one
expires. This means that his tenure as commissioner--one that began with
him
taking the job on an interim basis a decade ago--would end in December
2006.
It's no secret that I've disagreed with how Selig has run the game, in
particular his anti-marketing strategies in pursuit of a favorable
labor
agreement. The short-term gain of a Collective Bargaining Agreement
that
benefited management wasn't worth the years of damage Selig and his
cohort
did with their relentless bashing of what was a healthy industry.
Declines in
attendance, TV ratings and revenue, as well as fiascoes like contraction
and
the Expos situation, can largely be traced to Selig's efforts to
convince
people that baseball wasn't viable, wasn't competitive, and wasn't
worth their
time.
With a new CBA in place, though, and Selig setting his own exit date,
it's
time to look forward and see what can be done between now and the end
of 2006.
What positive steps can and should be taken to ensure that Selig leaves
the
game in better shape than it's in right now? Every now and then this
year, I'm
going to pick an aspect of the game and lay out what I think should be
done to
improve it. While I'll isolate one level of the game in each column,
the ideas
I'm presenting need to be viewed as a whole, as one big plan to get
baseball
where it needs to be.
I'll start with the game's ownership, because I think everything grows
from
that. Over the past decade, baseball has brought in a number of owners,
both
individual and corporate, that have had a net negative effect on the
game.
From grandstanding over taxpayer-funded ballparks and inflated claims
of
losses, to taking short-term approaches in a long-term industry, the
most
recent set of "lords of the realm" have been a disaster.
The bad owners can be loosely separated into two categories: corporate
and
Seligian. Disney, Fox/News Corp, Rogers Communications and Time Warner
came
into the game not because they really wanted to run baseball teams, but
because those baseball teams served a larger media goal. (In Time Warner's case,
it was
more like the team was part of the package. But I digress.) With those
goals
reached, all three are on their way out of the game, although it may
take some
time to sever the Braves from AOL Time Warner.
The other category of owners are ones such as David Glass, John Henry
and
Jeffrey Loria--ones who came into their teams because of their fealty
to Bud
Selig and his strategies. Selig showed no remorse in scotching the
efforts of
a Miles Prentice or a Charles Dolan to make sure he got his loyalist in
place.
Remember Donald Watkins, who had the temerity to suggest that he'd
privately
finance a new ballpark for the Twins if he bought them? He hasn't been
heard
from since. The owners in place were wonderful for the anti-marketing
campaign
and the labor battle, but they've done little to build loyalty to
baseball in
their markets.
If baseball is going to grow, it has to do more than wait for America
to
realize that the NFL is the professional sports equivalent of rolling a
32-sided die. It has to bring in people who want to be baseball owners,
who
want to do the one thing that brings people to the ballpark over and
over
again: win. It has to stop recruiting owners who will run their teams
as just
another division of a company, and who will scream bloody murder about
a $5
million book loss in one year. Owning a baseball team is a privilege,
and it's
one that comes with any number of benefits that accrue not to the team,
but to
the owner himself. It's not like owning the corner grocery, and
baseball needs
owners who understand that and embrace that (not to mention a media
willing to
point that out once in a while).
To that end, I propose the following steps to increase the quality of
baseball
ownership. If you start with 30 men who want to own baseball teams for
more
than the tax advantages, you can do wondrous things.
- End corporate ownership. Three of the game's corporate
owners will
probably be out of baseball by the end of next season. It's clear that
Fox and
Disney used baseball, and that Time Warner never wanted any part of it.
While
baseball envisioned marketing synergies, all they really got was the
ability
to hide revenue. That was valuable, but in the larger scheme of things,
not
enough to justify the presence of three apathetic ownership groups.
The experience should teach baseball that a team can't function as a
division
of a large organization. It's a unique industry, and it doesn't do well if
it has
to answer to shareholders or corporate boards, because the primary goal
of a
baseball team is winning, not profit. Baseball should reject all future
efforts by corporations to purchase teams, and hasten the exit of the
current
four corporate owners.
- Recruit owners who want to win. The problem with baseball
isn't
George Steinbrenner. It's that there's only one George Steinbrenner.
While the
focus tends to be on his willingness to spend money, what is just as
important
is that he holds his people accountable for their work product, and
expects
them to be as devoted to the goal of winning as he is.
That makes him the game's best owner, and means that the Yankees start
every
season with a competitive advantage that goes well beyond their
revenue.
The current MLB mindset is that a culture that embraces owners who put
winning
first would simply lead to escalating salaries, which is anathema to
the
current administration. Putting restraints on how intensely owners can
compete
with one another to win is one of those NFL ideas that MLB has embraced
to its
detriment, because it has focused only on the potential for bidding
wars over
talent.
Competition, real competition, would bring so much more. An owner who
wants to
win is going to look for edges in management, in development, in
marketing, in
every area of his operation. That will mean pushing his people to
embrace new
ideas; it will extend what we're already seeing in some places, the
application of real-world business principles to the administration of
baseball teams. That's going to have as much, maybe more, effect on the
salary
structure as an increase in the number of owners who want to pay market
price
for Vladimir Guerrero.
MLB needs to actively recruit the next generation of Mark Cubans,
because a
league with 30 owners that enthusiastic about the game, and that
dedicated to
winning, would be the most competitive in the world.
- Embrace private funding of stadia. In sketching out this
column, I
believed that this would be an important point going forward. While
baseball
likes to downplay its attendance issues by talking about the war and
the
economy, it does so while at the same time accepting billions of
dollars in
public subsidies for new ballparks, and asking for more.
However, looking around, I see that come Opening Day 2004, just 12
teams will
be playing in ballparks built before 1989, so perhaps this is an issue
that's
behind us.
Still, I don't think the game can have it both ways. Given what we're
seeing
in the economy at the local and state level, taking a stand that the
national
game will no longer be a part of community extortion would be a huge
public-relations step at a time when the game could use the help.
Public
funding for infrastructure would be one thing, but new ballparks should
largely be built using private funds. MLB should take the lead in
ending 50
years of holding cities and citizens hostage to better the lives of
rich men
and the corporations they lead.
- Extract 10-year commitments.
The churning of baseball owners has been a huge problem, and it's
motivated in
part by the tax laws that allow a new owner five years of paper
deductions. A
real solution would involve closing the loophole that calls player
contracts
an "asset," but with that unlikely, the next-best solution is
to
require new owners to hold their teams for 10 years. This would end
the
practice of holding a team through the depreciation period, then
looking for a
new buyer.
Beyond that, forcing a 10-year commitment would encourage new owners
to think
about the long term in their practices. We've seen owners come in,
spend a lot
of money, fail, and immediately overreact and slash salaries, starting
a cycle
of failure, all within the five-year window covered by the depreciation
rules.
An owner who knows he has to stick around to deal with his mistakes
will be
more likely to consider his decisions.
Mostly what this would do is shake out the dilettantes. Baseball has 30
franchises, and I have no doubt in my mind that there are easily 10
times
that number of people who have the resources and the willingness to own
a
team, and to do it for the right reasons. These people will gladly sign
on for
10 years--hoping it becomes a lifetime--and once you have owners with
two feet
in the room, you can build something.
Baseball is the greatest game ever invented. It can once again be the
most
prominent sport in the United States, and that starts with getting
people and
policies in place that can make it happen.
Joe Sheehan is an author of Baseball Prospectus.
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