A rarity, a post from above ground. We're visiting my mother at her home in Trenton ON for a few days. I think it's really cool that my 66 year old mother - raised without indoor plumbing, blue collar her entire life, never learned to type - got wired a year or two ago. In fact she explained to me today how she rid herself of spam - although she calls it junk mail. Good on my mom. On to baseball.
I think owning an MLB franchise isn't about the baseball business anymore and probably hasn't been for a while. Maybe that's an exaggeration but nonetheless it is increasingly the case.
We all know there was a time - not that long ago it seems - when guys owned sports teams because they liked it and it was also how they earned a living. Tickets, hot dogs, beer, that was pretty much the extent of it. Worked fine in MLB if for no other reason than the players were slaves thanks to the reserve clause. How could you not make a go of it? Things changed, the players were, to a large degree freed, salaries rose and owners adapted in order to survive and prosper. The last of the old school, the Griffiths & Veecks were succeeded by much wealthier hobbyists and big media companies and corporations. They cashed in big on TV. Ted Turner was the visionary, recognizing the value in the cheap programming that his baseball team provided to his new superstation. WGN followed and currently several teams have stakes in their own RSNs. They also were masters in blackmailing local governments to build new stadiums, in better locations, with better sightlines, better concessions, better signage and lots of luxury suites for the local corporate community. Although the business changed, in one way or another the revenues seemed directly related to the baseball team, even if their beancounters wouldn't admit it. Today the lines are a lot blurrier.
The present and the future appears to be real estate development. Is the cost of owning and operating a franchise part of the price you pay to develop real estate around it? Are MLB and the other ball and stick leagues part of "Shoppertainment"?
From a recent SBJ feature on AEG. "Building entertainment villages is part of what Leiweke ( my note - Tim Leiweke is the CEO of AEG ) believes is the dominant sports business theme of the 21st century. In the 1970's and early 80's, he said, sports was driven by ticket sales. Later in the 80's, television money became vital, and in the 90's, amid a building boom, premium seats and suites became a huge part of the business. "Now, when you look at what sustains growth, it's about development around the arenas," he said. "Entertainment districts are huge."
From this excellent piece in The Sun Chronicle, "Team owners see their teams or facilities they can control as a way to catalyze other types of development," Bragitikos said. Chuck Bragitikos is the President of Vibrant Development Group which "specializes in developing compelling retail, dining and entertainment destinations." and has worked with the NFL amongst others.
From a recent banker roundtable in SBJ, managing director of Societe Generale, Randy Campbell explains what owning a big league team can do for you. "...these were sort of "mom and pop" clubs to a degree, in terms of maybe how they were run or operated or viewed. Now, you clearly have a lot more sophisticated investors not only looking at sports teams but looking at media rights, looking at stadiums, looking at development around stadiums. I think that people are recognizing that these sports clubs have great brands; they have great, almost a magnetic, power to sort of draw people to them. Kind of trying to think through how you further monetize that brand value, I think, is going to be the next key thing to do."
From the same aforementioned Sun Chronicle piece:
"In Arlington, Texas, the 135-acre "Glorypark" will encompass more than 2 million square feet of office and retail space, three major hotels and 2,000 residential units sandwiched between a new ballpark for the Texas Rangers and the new Dallas Cowboys domed stadium. The complex will open in 2009."
"In Fremont, Calif., the Oakland Athletics major league baseball team is proposing a "ballpark village," complete with a new stadium, a retail-office complex, 3,100 residential units, and even a new elementary school."
The Cards are also constructing a ballpark village centred around the new Busch Stadium. And the D Rays proposal for a new stadium is based on the destruction of their current stadium and subsequent redevelopment of the site - although they don't own it but I digress.
Examples abound across all leagues and in fact on other continents. L.A. Live, The O2, Patriot Place, Xanadu, on and on....
The pro sports real estate "play" ( why do they call it a play? ) also seems to be a response to skyrocketing construction costs and the fact that John Q taxpayer seems to have cottoned on to the scam of publicly funded stadia for the benefit of super wealthy individuals and corporations.
From the same SBJ banker roundtable, Mitchell Ziets on stadium financing. "You're seeing less appetite from taxpayers and political officials to put public money in....folks are getting a lot more creative about how they're packaging and dressing up public money...you're getting a lot of deals where taxes are generated by the project or by a development project around the stadium or around the arena (and) are getting funneled back into the project. You're seeing that in Oakland with a development deal...You look more at development plans to sustain the financing plans."
See the December 06 posting by Phil Miller at The Sport Economist. "...sports stadiums are not the boon of economic development that they are often portrayed to be and, thankfully, public money has not been as easy to come by in many instances. That's why some recent public financing packages include plans to have ballpark villages developed as a part of an agreement for public financing....So politicians are seemingly more resistant, thankfully, to giving subsidies just for stadiums by themselves. But package in some secondary development (which, if it draws any extra economic activity to the site, will probably draw it from elsewhere in the region) with the subsidy request and see if you can get the necessary votes."
Maybe most importantly, will "shoppertainment" revenue be counted as part of team / league revenues? Gene Upshaw and Bob Kraft are already being asked this question in light of the upcoming Patriot Place. Stay tuned...
Scouts N The Hood
In April I blogged about the much discussed subject of the declining number of African Americans in MLB. Some blamed MLB and colleges - in part - for not scouting "urban" communities as enthusiastially as they should. John Helyar , "Caucasian scouts were disinclined to bird-dog the declining number of inner-city ball fields when college baseball programs had so much talent." I've read little about this subject in the baseball media since the controversy died out in the spring - culminating on Jackie Robinson Day April 16 - until a few days ago when this piece on MLB's Urban Youth Academy in Compton popped up. Coincidentally I read this piece in Baseball America about a Winter Meetings get together of college baseball coaches and MLB scouting directors about the same time. What's notable about the BA piece are the critical comments by Washington Nationals scouting director Dana Brown.
"As for the issue of getting more black players in college baseball, coaches indicated helplessness because the pool of black players at the youth levels is so small. Coaches also said their lack of scholarships was causing them to lose quality athletes of all ethnicities to football and basketball. But Nationals scouting director Dana Brown, one of just two black scouting directors in baseball, expressed frustration with the level of discourse on that issue. "I thought, personally, it was kind of window dressing," Brown said. "I thought it was something that was brought up. I'm scouting a lot of (prep) players across the country; certainly not all of these African-American players are going to be drafted. There's a lot of guys I see that are good students that could go to some of these elite schools that just don't get recruited. I don't buy that there's not enough African-American players that we can get in school that we can recruit."...Brown cited former Florida prep standout turned Southern star Rickie Weeks, the No. 2 overall pick in the 2003 draft, as a black player who should have been more highly recruited. "What happened with Rickie Weeks?" Brown asked. "How does Rickie Weeks get out of Florida?...I just think that coaches have to make a conscious effort to go out and recruit players. They always talk about, 'Well, there's a drop-off in African-American players in the game.' Colleges have to scout them, recruit them, sign them and develop them also."