Since Let’s Go Oakland and the City of Oakland made their pitch to Bud Selig’s panel last year, there has been a curious talking point emerging from that camp, “We have enough corporate support.” The argument is that Oakland’s geographic placement between San Francisco and the growing East Bay (if not Oakland) makes it well suited to capture corporate clients for premium seating and sponsorships. To that end they’ve listed about two dozen companies, many of whom are not headquartered in the East Bay, who could sign on with a new Victory Court ballpark. It sounds reasonable on the surface. Scratch that surface a little and it looks a little weak.
For Oakland there is a “checkbox” problem. Oakland partisans frequently cite Clorox, Kaiser Permanente, Dreyer’s, and Cost Plus, plus Chevron if they extend the reach a bit. If Oakland has Cost Plus and maybe Ross Stores, San Jose has Orchard Supply Hardware and Fry’s Electronics – and those latter two companies have proven track records sponsoring sports in the South Bay. These are the low hanging fruit of the corporate game. Every team has official sponsors and partners for which there are exclusive deals. For instance, Kaiser Permanente would be a fantastic official health provider/insurance of the A’s and the new ballpark. It is huge, national, and is a major presence throughout the Bay Area. However, there are multiple available substitutes who would love to have regional market exposure, yet the exclusivity part restricts them to radio or something else. Right now the A’s have Washington Hospital Healthcare System, a Fremont-based partner whose deal goes back to the Pacific Commons concept days. Maybe the price of such a sponsorship will be too high to renew with a new ballpark, maybe the location (if it isn’t Fremont) won’t prove attractive given Washington Hospital being Fremont only. If Kaiser doesn’t sponsor Cisco Field it leaves a competitive opportunity for one of the other large HMO’s (PacifiCare, Aetna, Anthem Blue Cross, etc.) to swoop right in, along with another hospital network.
Along the same lines, there are numerous other official sponsors who should be there regardless of where the ballpark is. Chevron signed on with the A’s a couple years ago after several years with Valero instead. There will be an official fuel sponsor regardless. There will also be an official soft drink provider (Pepsi), beer (Budweiser), broadband provider (Comcast), mobile phone carrier (Verizon), and newspaper (BANG). These are the easy gets because in many cases there are other related deals in place, such as CSN’s broadcast rights or Pepsi’s pouring rights. Chevron could choose not to go with a San Jose ballpark, but that risks losing exposure in the company’s backyard.
It’s when you get past the checkbox deals that it starts to become difficult. It’s not going to be hard for the A’s to get those deals above. Nine-figure naming rights deals are hard. Suite deals can be challenging, especially if they don’t involve one of the vaunted sponsorship slots. That is where the comparison between what Oakland and the rest of the East Bay can muster up vs. what San Jose and Silicon Valley can provide ends.
The second problem is one of competition. The team will need to do more than just sign Company X to some deal. They need to extract maximum dollars upfront to pay down the large debt service that will come with new digs. That means that getting 32 or 33 companies, as Doug Boxer suggested, isn’t enough. There needs to be a real market situation that can propel those revenues. Without that demand and those commitments in place it’ll be harder to put together the financing piece. If you look at SVLG’s letter from last September, you see a lot of competitors in the same industries signing on. Wells Fargo and Bank of America. Cisco and Brocade. HP and IBM. Three different venture capital firms. Numerous competing chip manufacturers. It’s creating a situation where there have to be winners and losers, and that’s good because it should create mini bidding wars. That’s what you want – no, need – if you’re MLB and the A’s and you have $25-30 million in debt service every year.
The Mercury News has an index of local publicly traded companies called the Silicon Valley 150. The combined market cap for those 150 companies is $1.55 trillion, and well over $1 trillion just for the top 50. The list below (all figures FY 2010) omits companies outside of Santa Clara County and nearly every company beyond #60, yet it remains impressive.
There are some companies who I wouldn’t expect to be involved in a major way with Cisco Field, such as Google and Apple. Neither company has done much in the past in terms of sports sponsorships, and their focus tends to be global instead of local. Maybe they’ll get a suite or club seats to use as employee perks, maybe not. Whatever they do, it’s reassuring to know that so many other companies stand ready to fill in the gap. Interestingly, many of the companies will have a motivation that only applies to the Valley and has since the dot-com boom. Top tier software engineers are in extremely short supply, and competition is so fierce among various tech companies that they are throwing crazy money at the so-called rock stars of the industry – not just to sign, but to stay. The market has effectively exploded after a DoJ investigation that uncovered a “no poaching” gentleman’s agreement among the biggest, most well funded tech companies. Now that there are no restrictions, self imposed or otherwise, the market for engineers and C-level talent is unfettered and extremely competitive. The billboards along Highway 101 aren’t selling for millions as they did in the 90’s, but they still serve an important purpose for tech companies looking to catch the attention of talent. Signage at HP Pavilion and commercials on Sharks broadcasts serve the same purpose. Even now, Rambus has an aggressive ad campaign running during Sharks games on CSN California. Rambus doesn’t sell anything to consumers. It barely sells things to companies. Much of Rambus’ revenue comes from patent licensing and awards from lawsuits against patent violators. What the company wants is new engineers to create the next big advance in memory technology that could create the next patent licensing gravy train. Those engineers are predominantly in the Valley.
Multiply Rambus’ efforts by 100 and you have the potential for Cisco Field. The A’s are well positioned to take advantage, as they could lock a high bidder into a 10-year deal if the market is competitive enough. Those long-term agreements are what made China Basin possible. It’s what Oakland will need to get a ballpark built, since they and we know that the A’s would have to pay for it in the end. For Oakland it’s a much bigger challenge because its accessibility from the Valley and the Peninsula is not great and will be worse if they move to Downtown Oakland. Oakland simply cannot replicate those market and network effects. There are burgeoning industries, such as green tech, where several Oakland companies are out in front. Unfortunately, few of those companies are as yet profitable and many require massive government subsidies to keep them going, which is not a bad thing for the nation moving forward towards energy independence but puts those companies in a position where bidding wars for suites and signage doesn’t make much sense. Another indicator is media coverage. The East Bay Business Times, which contacted me almost six years ago shortly after this blog was started, folded in 2008 and was merged with the SF Business Times. Sister publication San Jose/Silicon Valley Business Journal remains in print and relevant, and is one of the companies in the SVLG letter.
Let’s be clear. Oakland and surrounding East Bay cities have corporate strength. Some of it is homegrown, some of it is from subsidiaries of larger companies. To compete with the South Bay it will need every bit of that strength. Since we don’t know what LGO’s list of commitments consists of, we can’t say whether it makes Victory Court more or less feasible. As long as the there is such a vast disparity between the East Bay and the South Bay, questions about that feasibility will linger, fair or not. The campaign needs to be much more than “We’ve got enough.” Because what you consider enough may not actually be enough for those who make the loans and the others who have to pay them off. Sacramento put together $10 million in commitments in the span of a few weeks. Sacramento is coming strong. That’s what needs to be done to convince MLB that Oakland can work in the long run. That’s not hate. That’s reality.