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May 5, 2004

The Return of Swamp Thing

Could Bringing a Team to New Jersey Work for MLB?

by Neil deMause

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It's the pipe dream that won't die. Last month, New Jersey Sports and Exposition Authority chief George Zoffinger reiterated what Andrew Baharlias first reported in this space back in February: He was looking into luring a major league baseball franchise to the swamplands of New Jersey.

"It's gone from something I didn't think was possible to something that actually could happen," Zoffinger told the Newark Star-Ledger. "Jerry Reinsdorf told me that baseball is interested in the Meadowlands because we are building a family entertainment center and bringing mass transit to the site."

Leaving aside whether anyone should take seriously statements made by the guy who said he was moving the White Sox to Tampa, on the face of it the idea is a no-brainer. In terms of market size, the New York metro area is mind-bogglingly huge, dwarfing every other market in American baseball. Even splitting the market in half (OK, more like 65/35) the Yankees and Mets each have enough TV-rights firepower to blow away the rest of the league at free-agent time. You could put a team in Jersey and three more in Brooklyn, and each of the six area franchises would still have a larger populace to draw on than the likes of Milwaukee or Cincinnati.

The problem is...well, one problem is that George Steinbrenner and Fred Wilpon would form a lynch mob of lawyers to chase any interlopers off into the sunset. But we'll come back to that. The more immediate problem is that our hypothetical swarm of New York-area franchises would have to form a stickball league. Because while the tri-state area, as it's known to meteorologists, may be rich in population, it still has just the two baseball stadiums, Yankee and Shea.

New York City currently has its hands full with requests for sports facilities. At last count, the Jets, Nets, Knicks, Rangers, Yankees and Mets were all lined up, with the total taxpayer bill due to run well over $2 billion if everyone's dream home gets built, and New Jersey sports czar Zoffinger has said in no uncertain terms that his state won't be forthcoming with public cash. So let's ask a different question: Are the riches to be had in the New York area so great that it would make sense for a small-market team with a lousy lease--not to name any names, but say the Florida Marlins--to build their own damn stadium in order to stake a claim on the Big Apple's bounty?

For starters, we need to know how much a new New Jersey stadium--let's call it Joe Piscopo Park--would cost. According to Zoffinger, Janet Marie Smith, the woman behind Camden Yards and Fenway's Green Monster seats, said she could build him a new stadium for $300 million, but that seems laughably low. The new parks in Philly and San Diego each cleared $400 million; the Cardinals are spending $387.5 million (about a third of it belonging to St. Louis taxpayers) on their new stadium; the Twins are talking half a billion and up, though much of that is for a retractable roof. In New York City, where you can't even buy bottled water without taking out a home equity loan, the estimate on the new Mets and Yankees monoliths that have been on the drawing board since the late Mattingly epoch is $800 million apiece. For New Jersey, in New York's sphere of labor influence but with cheaper land costs, let's split the difference and assume a low-end price tag in the neighborhood of $500 million.

Now, no one pays for a stadium in cash. The preferred method, whether you're a city mayor or team owner, is to sell 30-year bonds and pay them off over time. Without getting into the vagaries of triple tax-exempt bonding and the prime interest rate, since we're doing back-of-the-envelope math here to begin with, let's estimate that to pay off our $500 million playpen we'll need $35 million a year. That means whatever our footloose franchise is making right now, they'd need to boost revenue by $35 million a year, and keep it that way for three decades, just to break even.

Stadium revenue prognostication is a tricky art--remember when the Tigers were predicting nightly sellouts once Comerica Park opened?--but we can certainly guesstimate from other teams' experience. Let's look at the ticket revenue figures for MLB teams for 2001, which is the last year for which Doug Pappas' incomparable Web site has good data:

Yankees        $98,000,000
Boston          89,743,000
Seattle         76,570,000 (new park opened 1999)
Mets            73,971,000
Cleveland       69,470,000 (new park opened 1994)
San Francisco   67,173,000 (new park opened 2000)
St. Louis       67,084,000
Atlanta         62,141,000 (new park opened 1997)
Colorado        54,015,000 (new park opened 1995)
Baltimore       53,216,000 (new park opened 1992)
Cubs            51,189,000
Los Angeles     50,764,000
Texas           50,664,000 (new park opened 1994)
Houston         49,161,000 (new park opened 2000)
Pittsburgh      48,610,000 (new park opened 2001)
Arizona         46,509,000 (new park opened 1998)
Milwaukee       46,021,000 (new park opened 2001)
Detroit         42,299,000 (new park opened 2000)
San Diego       34,381,000
Cincinnati      32,102,000
White Sox       30,898,000
Philadelphia    30,435,000
Anaheim         30,208,000
Toronto         25,363,000
Oakland         24,992,000
Kansas City     19,520,000
Tampa Bay       18,193,000
Minnesota       17,605,000
Florida         16,756,000
Montreal         6,405,000

As you can see, moving one of the bottom-rung teams--either of the Florida franchises, say--into the middle of the new-stadium pack would be worth $30 million or so a year in new venue revenue. This is in line with what most sports economists say: "Baseball and Billions" author Andy Zimbalist estimates a $25-30 million per year boost, and those University of Dayton guys who made headlines recently for saying teams could afford to build their own stadiums--though the study itself said even a relatively cheap $268 million park would generate $68 million in red ink--use $33 million as an average baseline.

There are, however, a couple of caveats. First off, in 2001 most of the new stadiums listed above were still in their "honeymoon period," an ill-defined time span when the lure of the new is still enough of a draw to overcome the countering effects of having to watch yet another year of B.J. Surhoff impersonating an outfielder. Evidence from the first crop of the latest round of new stadiums--SkyDome, new Comiskey Park, Camden Yards, and Jacobs Field--shows that the bloom is typically off the rose after eight years at most, whereupon ticket sales (though not necessarily ticket prices) begin reverting to background levels.

(The more recent crop of parks in places like Phoenix, Houston, Pittsburgh, etc. have shown a much shorter honeymoon period, an effect I've chalked up to "stadium fatigue," as the glut of new stadiums has worn out fans' enthusiasm more quickly. But let's give the benefit of the doubt here and assume a more generous Camden-sized honeymoon.)

Secondly, the above is before revenue sharing. Under the current CBA, 34% of revenue gets sent to the league for redistribution to low-revenue (not poorer, as billionaire Carl Pohlad can attest) teams. It wasn't mentioned much at the time, but this should create a serious drag not just on player salaries, but stadium-building as well: Why put serious money into skyboxes if one-third of the proceeds is going to go to line the pockets of your competitors?

So, hand-waving madly, let's say an average of $20 million a year after accounting for honeymoon, further reduced to $13 million after cutting revenue-sharing checks to Pohlad and Co. Clearly, we're not going to make our $35 million a year bond-payment nut on new stadium revenue alone. (This should give you a good sense of why we're not seeing more stadiums built with private money.)

Ah, but selling tickets isn't the only way our Jersey Jalopies would rake in the dough. The big money for a New York metro franchise is in broadcast rights. Let's go back to those 2001 figures, this time looking at local media revenue:

New York Yankees       $56,750,000
New York Mets           46,251,000
Seattle Mariners        37,860,000
Boston Red Sox          33,353,000
Chicago White Sox       30,092,000
Los Angeles Dodgers     27,342,000
Texas Rangers           25,284,000
Chicago Cubs            23,559,000
Cleveland Indians       21,076,000
Baltimore Orioles       20,994,000
Atlanta Braves          19,988,000
Detroit Tigers          19,073,000
Philadelphia Phillies   18,940,000
Colorado Rockies        18,200,000
San Francisco Giants    17,197,000
Tampa Bay Devil Rays    15,511,000
Florida Marlins         15,353,000
Toronto Blue Jays       14,460,000
Arizona Diamondbacks    14,174,000
Houston Astros          13,722,000
San Diego Padres        12,436,000
St. Louis Cardinals     11,905,000
Anaheim Angels          10,927,000
Oakland Athletics       9,458,000
Pittsburgh Pirates      9,097,000
Cincinnati Reds         7,861,000
Minnesota Twins         7,273,000
Kansas City Royals      6,505,000
Milwaukee Brewers       5,918,000
Montreal Expos            536,000

The numbers we're most concerned with here are at the top of the chart, and one of them is badly in need of updating. While the Mets still trundle along through the final years of their long-term deal with MSG Network, the Yankees, as everyone should know, went off and formed their own cable network, YES, in 2002. Officially, George Steinbrenner is still paid only $58 million a year by YES for Yankee telecasts; unofficially, as 30% owner of YES, he and his Yankee partners are set to rake in additional profits that could be worth as much as $100 million. (Bud Selig, incidentally, said back in February that he'd be investigating this affront to revenue-sharing. How's that audit coming, Bud?) Once their MSG deal expires next year, it'll be shocking if the Mets don't follow suit by either forming their own network or asking for YES-type money from one of the existing ones.

A New Jersey franchise would likely play third fiddle to the two existing clubs--it's unlikely Long Island and Connecticut cable systems would carry them, for example--but something in the neighborhood of $40 million a year doesn't seem unreasonable. That's another $25 million increase over the Florida teams' current contracts--though our team would only see $16.5 million of it after revenue sharing, unless it could work out a YES-esque deal to hide money in some other corporate pocket.

And we're not done yet: We still haven't sold naming rights to the place. Off goes Piscopo's name, on goes that of a local corporate behemoth (the Johnson & Johnson Band-Aid Dome?) for another $2.5 million per annum.

The total--$32 million--is pretty close to break-even on our mythical $35 million in annual bond payments. There's been enough guesswork involved here that a few tweaked assumptions (a cheaper stadium here, a less lucrative TV deal there) could easily tip the balance into the red or the black. It's not necessarily a risk I'd take if it were half a billion dollars of my own money, but one thing is clear: If there's one place in America that a privately financed baseball stadium has any shot at making economic sense for a ballclub, it's on the Mets' and Yanks' doorstep.

Except for the pesky indemnification issue. Forbes estimates the two New York teams to be worth more than $1.2 billion. Even recognizing that a new club will grow the market and won't take a full third of the existing revenue pool, it's hard to see a fair indemnification price for invading the New York/New Jersey market coming in at less than $300 million.

Would MLB help soften that blow? For baseball as a whole, merely taking money out of the hides of two existing teams and shifting it to our new Jersey franchise is no net gain; except that we're talking about two of the richest hides in baseball, including one that, as you may have heard, has come under some criticism for using its filthy lucre to unfair advantage. Adding more teams to the New York market is the one sure way to level the revenue playing field and spread some of Bud Selig's much-touted "hope and faith" around the league, or at least around the A.L. East. This is why economists like Zimbalist and Rod Fort have long pushed New York-area expansion as a free-market solution to competitive balance--and, not coincidentally, why George Steinbrenner would be expected to reach for the "team of rabid attorneys" button on his speed-dial.

If nothing else, it would set up some extremely interesting court battles. The Mets and Yanks currently control territorial rights to the entire New York metro market, including four counties in northern New Jersey. Those rights could be bought off, but that would increase the cost to our already-tenuous Jersey franchise, likely sinking the whole deal. Or, if MLB wanted, it could assemble 22 team owners to vote to change its bylaws and rescind those territorial rights...and face an almost certain lawsuit.

But Steinbrenner and Fred Wilpon aren't the only ones with the law on their sides. In 1992, Florida attorney general Bob Butterworth began an anti-trust investigation against MLB after the league blocked Bob Lurie's attempted move of the Giants to Tampa Bay, dropping his inquiries only after the league coughed up the D-Rays expansion franchise as a consolation prize. New Jersey could easily enough file a similar suit; and while Fort believes it's unlikely the state could win, he does note that "it's funny how baseball tends to put teams where there's political heat."

Meanwhile, so long as we're pipe dreaming, there's an even cheaper way to inject a third team into the New York market, without spending a dime of anyone's money, whether taxpayer or baseball baron. Yankee and Shea Stadiums are empty half the summer, and owned by the New York City Parks Department. With the Yankees' lease set to expire in 2008, there's nothing stopping the city from going to Steinbrenner and saying: "Gosh, George, we'd love to have you back. But, you know, times are tight and we have an affordable housing crisis and...well, how would you feel about a roommate?" And while he might bluster and threaten, does anyone really believe that Steinbrenner would abandon the Bronx to the Marlins, while taking off for the hinterlands himself?

Of course, that would require the mayor of New York to stand up to George and tell him who's Boss. At those odds, my money's on the swamp.

Neil deMause is co-author of the book "Field of Schemes," and runs the fieldofschemes.com Web site. He lives in Brooklyn with his partner Mindy, their son Jordan, and a circa-1986 Yankee Stadium bleacher seat. Neil can be reached at neil@demause.net.

Neil deMause is an author of Baseball Prospectus. 
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