Category Archives: Feature

06.17.11
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Sometimes a tree has to be chopped down

Nearly thirty years ago I went on a field trip with my brother and dad to a nursery in the Santa Cruz mountains. The nursery mostly grew coast redwoods. The afternoon was chilly as the marine layer wafted in over the mountains, giving the trees the moist, dense air that makes them thrive. As we left, my brother and I were both given redwood saplings in half-gallon milk cartons. We decided to plant them in the planter strip near the curb in front of the house. I forgot which brother was responsible for which tree.

Ten years later both trees had grown, though not taller than the other trees on the block. The western tree was taller than the eastern tree and had a thicker trunk. They required no maintenance. My dad laid down iceplant (just like at the old Coliseum!) around the trees and everything coexisted peacefully.

Another ten years passed, and from all appearances the western tree was growing like crazy, whereas the eastern tree was stalling out. The western tree also had much more substantial root growth, which could be identified by the uprooted sidewalk next to the tree. Its brother to the east posed no threat to strollers and skateboarders. Eventually the city noticed the problem with the sidewalk and told us that we had no business planting those trees next to the curb. We were told to put a tree in the yard next time, where it could have more space to grow. One day the city chopped down the western tree, which had grown to 20 feet tall. Later they pulled out the stump and fixed the sidewalk. The eastern tree still stands, growing little by little (I think). My dad calls it the Christmas tree and runs the holiday lights out to the former sapling every December. It remains the only redwood on the block.

San Jose’s redevelopment agency is much like the western tree. It grew as a mighty redwood was supposed to, big and tall and fast. Over time it became too big for its own good, and to keep it from destroying the street it had to be chopped down. SJRA’s mission was informed by a quest to become a big city, which meant putting tons of resources into it. Some of it was well directed (library, convention center, arena, museums) and some of it wasn’t (numerous retail failures). SJRA has a ton of fundamental problems that make it difficult to easily chop down. Yet that’s exactly what it’s done. In preparation for the upcoming fiscal year 109 jobs were slashed, or 91% of staff. Even as they expressed outrage at the passage of the twin “kill” bills, they clearly saw what was coming down the road and prepared for it.

Over the next year it’s expected that many RDA’s will be chopped down like the western tree. Most of those will be agencies that have grown too big or have become unmanageable. The loose definitions of blight and even the term “redevelopment” have allowed the agencies to grow unchecked. Controller John Chiang’s audit covered numerous instances of waste and abuse. Agencies who have mismanaged themselves are likely to get cut down, while the properly managed ones – and they do exist – have a chance to stay alive, like the eastern tree. What we don’t know is the criteria for separating the good ones from the bad ones.

With the first real salvo fired in the redevelopment war on Wednesday, every agency throughout the state is scrambling to protect or save themselves from the coming onslaught.

If you’ve read this far, you now get a treat of ballpark news! The Merc’s Tracy Seipel checked in with both Lew Wolff and San Jose Mayor Chuck Reed to catch their responses to the redevelopment shuffle. Wolff appears undeterred, still saying he can buy land if necessary, though he hasn’t actually done it. Maybe he’s waiting to find out what he might have to buy once the dust settles. Reed provided three scenarios under which the Diridon land can be made whole:

  • Wolff could buy the two parcels, and the city could sell him the rest of the ballpark site.
  • The city could sell agency assets to buy the last two parcels, then sell the entire site to Wolff.
  • The city could buy the last two parcels and lease the site to Wolff, with the city using the lease as security for financing to pay for the land.

These are all scenarios we’ve discussed here on the blog. None of what San Jose has done has been sexy or attention-grabbing. I’ve noted in the past that I could often count all of the people present at a ballpark-related session on two hands. The point is that they get things done. Every time an obstacle has come up, they’ve figured out a way to deal with it. Consider the following:

  • PG&E substation move? Not needed, ballpark configured to fit within purchased land.
  • Fire training station move? Garage requirement eliminated, no longer necessary.
  • Sharks objections? Lifted once entitlements were made for garage/commercial development on north side of HP Pavilion.
  • AT&T land stalemate? Possibly resolved when city provided entitlements to AT&T for land near Santana Row.
  • Worries about parking related EIR impacts? Not if “enough” parking is found on the other side of Guadalupe Parkway. (*shakes head*)

We’re in for an interesting rest of the year. In the morning I’ll check on what ORA and City Hall did with the $100 million.

One more thing: Billy Beane obliterates Lowell Cohn in this interview.

05.22.11
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The Neukom Doctrine

In the mid-90’s, Microsoft was at the top of the world. With unmitigated dominance over the computer operating system market, smaller competitors were crying foul as Microsoft used its stature to enter new markets and take them over. Often MSFT did this by bundling features into Windows for free, such as its Internet Explorer browser. This strategy was called “embrace and extend” though it really meant “embrace, extend and extinguish” to competitors, as Microsoft frequently added features that would lock out competitors.

Giants managing partner Bill Neukom is no stranger to this strategy, as he defended Microsoft’s practice of it during his tenure as general counsel until he left the company in 2002. Initially he and Microsoft lost the landmark antitrust case against the Department of Justice in 1999, only to have the decision overturned by an appellate court. The company and the government eventually settled out of court, which allowed the company to stay intact (DoJ was seeking to break it up). Historically, the decision for Microsoft is viewed as a somewhat pyrrhic victory, as it has struggled to innovate in the face of Google, Apple, and smaller upstarts over the past decade, resulting in flat stock performance during that period.

By building AT&T Park, Peter Magowan initiated his own form of “embrace and extend” with the fanbase by choosing a more attractable, accessible location for the Giants than the windy, transit-poor Candlestick Park. Suddenly it became much easier to bring in fans from throughout the city proper, plus well-heeled fans in Marin County (via ferry) and the Peninsula (via train). The Giants got the added bonus of tons of fans coming from the East Bay via ferry and BART. Many of those fans were ex-SF residents who moved out to warmer, cheaper suburbs like Concord and Pleasanton. In doing so, they struck at a huge part of the A’s East Bay fanbase, and while many of the hardcore A’s fans would stay allied with Oakland, the A’s lost one very important demographic: Giants fans who could frequently go to A’s games as a more accessible substitute.

Since then-A’s-owner Steve Schott couldn’t object based on the fact that the Giants were building within city limits, all he could do was to deal with it and look to improve the A’s stadium situation, which he tried with Lew Wolff at the HomeBase site and in Santa Clara. The former was declined by Coliseum officials, the latter by Santa Clara officials when rumors of Schott wanting to sell arose. Schott also infamously didn’t show for a presentation on Oakland’s Uptown site, which is the very least he should’ve done – even though Jerry Brown was never going to let an Uptown ballpark happen on his watch.

Neukom further extended Magowan’s strategy by acquiring the San Jose Giants. He also had the World Series trophy paraded all over the East Bay – though not Oakland, obviously. Now, he’s preparing to make an interesting choice regarding the Giants’ future.

Since the beginning of his tenure as managing partner, Neukom has been steadfast about the Giants’ territorial rights to Santa Clara County. The argument goes that the value of those rights was baked into the financing of AT&T Park, which means they’re also baked into the franchise’s value. As such, they’re sacrosanct and not up for negotiation. Naturally, being steadfast is not the only option that he has since Bud Selig may choose to nudge him in one direction or another. With that in mind, it appears that Neukom and the rest of his ownership group have three distinct options moving forward.

  • Don’t budge, let the A’s leave the Bay Area. The Giants have said publicly that they “hope” that the A’s are able to work out a ballpark deal in the East Bay, since it would respect the existing six-counties-to-two distribution of territories in the Bay Area. Secretly, they have to be hoping the A’s fail completely in the Bay Area and are forced to look elsewhere. The only really advanced threat of building in either Alameda or Contra Costa Counties was when Pacific Commons was in the planning stages. It concerned Magowan and Giants President Larry Baer enough that they scouted the location to see how close it was to Santa Clara County. With Fremont a bust and many outside Oakland skeptical that a privately financed ballpark deal can be done in Oakland, the Giants have to be licking their chops at the thought of a Bay Area completely to themselves. While there don’t appear to be any good relocation markets for the A’s at the moment, there’s no certainty that will remain so five or ten years down the road. Should the A’s leave the Bay Area, they would be compensated by the Giants for ceding the East Bay. The interesting thing about such a transaction is that like the Giants ceding Santa Clara County, it would place a price tag on a territory. If the argument among the big market teams is that they don’t want to see such a precedent, then they don’t want either outcome to happen. Strange, huh? It would get even more complex if the A’s were to move to Sacramento as Baer has suggested, because the A’s could lobby MLB hard to split up Northern California to gain exclusivity over much of the region up to the Oregon border and Northern Nevada, the same way Warriors and Kings TV territories are split. The split would be damaging to the the value of the Giants’ TV rights since they’d give up millions of households every game. The result is ultimate dominance over the Bay Area for the Giants, but a huge loss throughout their broader territory. From a bottom line revenues standpoint, it’s hard to say how much this helps the Giants. If the A’s move out of state, the Giants pay nine figures upfront. If the A’s move to Sacramento, the Giants lose money on an annual basis. There have been rumors about the the Giants being willing to pay off the A’s to leave, so it’s not like both teams haven’t thought about it.
  • Don’t budge, keep status quo. This option assumes many events occurring in sequence. First, Lew Wolff (or whoever the owner is if Wolff sells) would have to stay in the Coliseum several more years past the existing end of the lease while working out the details of a ballpark in Oakland. It also assumes that MLB absolutely believes that a privately financed ballpark deal can be and is being done in Oakland. The Giants would be fine with this as it maintains regional hegemony. It might not work quite as well for MLB. If the A’s have trouble filling the ballpark due to poor performance, high priced tickets, or both, the A’s will have an extremely bad debt position for MLB to deal with. As long as the A’s struggle (whether in old or new digs), the Giants will continue to essentially pay part of their revenue sharing payment directly across the Bay to the A’s, which could be $20 million or more in coming years. Remember that the Bay Area is the only market where one team effectively subsidizes the other. That’s another situation that has to give MLB and Giants ownership pause.
  • Allow the A’s to move to San Jose. Again, Neukom has been steadfast about not allowing this. How bad would the Giants be damaged? Once you remove TV money and other Bay Area local revenue, I figure that Santa Clara County alone is worth at least $25 million per year in revenue to the Giants (back of napkin guess). That’s a lot. That pays off AT&T Park all by itself and then some. Neukom’s argument is that they’d lose that revenue. Wolff and South Bay proponents counter that hardcore Giants fans will remain that way and the Giants’ losses won’t be so deep. In particular, Wolff has argued that the league should look at compensation for T-rights on an annual basis, where a threshold is set and the A’s pay for the gap that doesn’t meet that threshold. Whatever the compensation model, I don’t think the Giants would lose $25 million annually. They’d probably lose 50% of that number since many of the fans are casual and both fans and sponsors can be replaced by East Bay fans. Years ago Magowan floated a number like $100 million for Santa Clara County, while Roger Noll estimates that the actual value is around to $20-30 million. If you’re Neukom and his partners, how do you attack this? A one-time payoff, even $100 million, dissipates within 7-10 years and doesn’t do much for franchise value (currently $563 million). Noll’s number is a mere pittance to them. Even if the A’s come off revenue sharing, it doesn’t mean the Giants won’t stop paying in – they most assuredly will continue to pay, though a few million less every year. The best thing for them may be to simply shut up. But that sets up the possibility that Selig will name the price for them.

No matter what Neukom decides, it looks like he’ll have to pay. He either keeps paying to keep the A’s in their stadium rut, he pays them to leave, or he gets less revenue if he cedes the South Bay. With the aura of the World Series and record revenues pouring in, such a possibility seems extremely remote. When the time comes to figure out how all of this should work out, that glow will be the furthest thing from his mind. By no means am I sympathetic to either Neukom or Selig for dragging this out for more than two years, but this is a thumbnail sketch of the dilemma and it took 1,600 words. What price hegemony? It’s definitely not cheap. Or easy.

05.18.11
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Blame it on the rain

Lately baseball writers have been looking far and wide to figure out what is keeping fans away from ballparks this year. Poor weather is the most often blamed culprit, thanks to 30-and-counting rainouts this season, 9 more than the entire total in 2010. Frank McCourt is also shouldering much of the blame, since the malaise hovering over the Dodgers is driving fans away from Chavez Ravine. Worse, the optics of ballparks with much worse (unannounced) turnstile counts than ticket sales makes the problem that much more apparent.

MLB isn’t alone in this regard. The NFL posted two straight annual attendance declines before bouncing back last year. NBA attendance has been flagging while the NHL has surged post-lockout. With the economy still spotty in many places, on-site pro sports consumption is considered something of a luxury for many consumers, making long-term commitments a tough sell in tough times.

We’re just past the quarter pole of the season, so I figured it was a good time to take a look at this. I’ve sampled off attendance statistics throughout the league, cutting off the last two seasons at May 20, 2010 and yesterday, respectively. The high number of rainouts this year and the generally irregular nature of the schedule makes it difficult to get a completely even comparison, so this was as close as I could get. While the Dodgers are the obvious trending team, when you look at the table below you might see something different.

Gains for last year’s two World Series participants, Texas and San Francisco, have more than made up for the Dodgers’ decline. In fact, the top five gainers have surpassed the losses incurred by the top five losers. Yet league attendance has gone down nearly 1% per game. The Dodgers are part of the economic foundation of the league, and once McCourt is rightfully ousted and a another owner enters the picture, the team’s attendance will be well on its way to recovery. So what’s the real problem?

If anything, the problem is the number of no-shows. Only the league and the teams know the actual number of people entering each stadium. If the announced crowd is double that of the actual number of people who show up, that could add up hundreds of thousands lost each game in terms of concessions and merchandise revenue. Take the A’s, for instance. The last two crowds were announced to be over 10,000, even though it was abundantly clear that far less than 10,000 were present. 5,000 no-shows x $10 per fan spent = $50,000. The A’s are used to this, so they staff accordingly for it and make it up on the back end thanks to revenue sharing. On the other hand, the Dodgers might have as many as 20,000 no-shows for a home date. 20,000 no-shows x $10 per fan spent = $200,000, and that might be conservative. Get 50 home dates like that, and suddenly the Dodgers have lost $10 million over the course of the season. If there’s anything that should provide impetus for Bud Selig to act on getting the Dodgers settled ASAP, that’s it.

As for the weather, that’s going to remain a tricky issue as the season progresses. The May 11 A’s-Rangers rainout had only one realistic makeup date thanks to complexities within the schedule. That date was July 7, which was confirmed earlier this week. Since teams can’t play more than 20 dates in a row and off days are scheduled to prevent that, putting a makeup date in one of those late season off days creates a risk of playing that kind of really long streak. The unbalanced schedule doesn’t help either because there’s no guarantee that one team will play an interdivisional opponent late in the season in a way that a makeup game can be accommodated. Worse, rainouts that are made up the following day as part of a doubleheader aren’t counted as part of attendance, which makes them a net loss on their own. Teams in the Midwest and East Coast are going so far as to preemptively postpone games, with upset fans reporting that the actual conditions at the cancelled game time weren’t as bad as feared.

We could run into a situation in which this season, which is to end on a Wednesday (September 28), may be strung out one or two days later to properly account for all teams in contention fulfilling a 162-game schedule. That would incredibly ironic because this season started on March 31/April 1 to ensure that the regular season part ended early and the postseason wouldn’t stretch too far into November. Looks like Selig and the competition committee might run into a solution for the rainouts that doesn’t solve their postseason problem. Maybe Selig is looking forward to a prolonged NFL lockout, which would cause MLB to be the only major pro sport on broadcast TV come November (NBA/NHL are relegated to cable then, and the NBA may also be in a lockout).

04.27.11
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Strength in numbers

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.

04.24.11
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Cities Simpatico

Holy Week finds Oakland and Sacramento in similarly uncomfortable places. The new sports radio station (95.7 FM) has been talking about the A’s stadium fate all week, and that will only continue on Monday when Chris Townsend interviews both Doug Boxer and Chuck Reed during the first hour. A death watch has hovered over Sacramento since the Kings’ last regular season game of the season ten days ago. Both cities have had highly active grassroots groups rally the resources to get their respective higher powers (MLB/NBA) to give their homes another shot, perhaps their last. So it may be fitting that during a religious week, the Kings appear to be resurrected – if for a year.

As the process for both the Kings and A’s drags out, comparisons will be made between the teams, cities, owners, and fanbases. The easy (and somewhat lazy) thing for the media to do would be to lump them in together. To get a better read on where either team might end up down the road, it’s important to highlight the similarities and differences between each team’s current predicament.

What’s similar

Admittedly, this is the easy part. Both the A’s and Kings play in outdated venues, the histories of which have been well documented here and elsewhere. Both cities have somewhat unfair reputations as not being particularly corporate-rich and both are government towns. Oakland is the county seat and it has the Port, UC, MTC, and BART. Sacramento has the Capitol and numerous agencies associated with it. Both cities have been hit by crushing unemployment. There’s a sense that either team’s ownership group hasn’t exactly given 100% effort towards a new venue in their respective home cities. Lew Wolff’s last try in Oakland was in 2006 (Coliseum North), and the Maloof brothers infamously dropped support for a railyards arena in the middle of the campaign – also in 2006. Both venues’ financing plans involved the selling of land entitlements. Those plans crumbled in the wake of the real estate market collapse. While neither party has verbalized it, it’s that collapse that has caused Wolff and the Maloofs to have doubts about any financing plan in Oakland or Sacramento. Now nearly five years later, Wolff is looking 40 miles south whereas the Maloofs are looking 400 miles south.

What’s different

This stuff is harder to explain, but it gets at the heart of the problem. Most of this it is inside baseball, making it hard to pin down or easily explain away. Unfortunately the differences are more likely to be responsible for what eventually happens than anything else.

  • Markets. The Kings would be moving out of the Sacramento market (2.1 million population) which it has to itself in order to inhabit Orange County, part of the Greater LA market (18 million). LA already has six major league teams. The A’s would move within the Bay Area market, which would preserve TV and radio presence but cause upheaval among available fans for attendance and sponsorships.
  • Venues. While both the Oakland Coliseum and ARCO Arena are antiquated, that’s where the similarities end. The Coliseum is owned by the City of Oakland and Alameda County. ARCO Arena is owned by the Maloofs. That’s an important distinction because of who to “blame” regarding the state of those venues. The Coliseum has received few upgrades and limited maintenance since the Raiders came back, thanks in part to very limited public funds. Kings fans have targeted the Maloofs due to their seeming neglect of their asset.
  • Team ownership styles. The Maloofs saw fit put a well-paid team on the court as long as they were competitive, going over the NBA’s salary cap on a regular basis during the glory years (1998-2004). Ticket prices were in the upper half of the league to help pay the bills. The brothers’ business fortunes have taken a tumble, which has caused them to field low payroll teams filled largely with young players. Wolff has been practicing that philosophy for years with Billy Beane at the helm, though payroll for the A’s more a function of team revenue than anything else. Thanks to frequent discounting, A’s tickets are among the cheapest in MLB.
  • Television complications. It is believed that the Maloofs are going to Anaheim lured in part by much greater television revenues. In Sacramento, they’ve been getting $11 million from CSN California, one of the lowest annual deals in the NBA. Earlier this week officials from CSNCA have suggested that they would bump up that number if the Kings were to stay, though they didn’t say how much. As part of the move, the Kings would be on Henry Samueli-owned KDOC for a year until the Lakers’ deal with Fox Sports ends, then that slot would be available. The KDOC deal is worth $20 million for the year. However, LA’s pre-existing NBA teams, the Lakers and Clippers, object to the move on the grounds that they’ll be negatively impacted. In the Lakers’ case, they could lose up to 10% of their newly inked deal with Time Warner. That deal could provide as much as $5 billion over 25 years, and would take a hit if a third team such as the Kings/Royals played in the market. Considering the opportunity cost for the league, there’s now a legitimate question of whether new TV revenue in SoCal for the Kings/Royals makes up for that lost revenue for the Lakers.
  • Antitrust exemption. MLB’s longstanding exemption allows the commissioner to control all franchise moves, which has made baseball the major sport with the fewest moves in the modern era. The NBA has no such protection, which has allowed nine franchises to move since 1972. During the same period MLB has only moved one franchise, the Expos to DC, and that was orchestrated by Bud Selig. Whatever the NBA decides, Stern doesn’t have to worry about actions that may set a precedent since Stern’s already been through it. The possibility of setting a precedent with the owners seems to paralyze Selig, who was once an owner and wants to remain buddy-buddy with the owners. Stern may be the opposite in that he’s often received criticism that he’s more supportive of the players – specifically the stars – than the owners.
  • Timeline. Selig’s panel has been deliberating for two years with no end in sight. In the last few days, David Stern and his committee have essentially set a real end date to the process, March 2012 – if the Kings are stay in Sacramento as has been reported. If the move is approved, the moving trucks will be at ARCO faster than you can say “Mayflower.” The Maloofs have pushed out a deadline to apply for the move, but that application and the decision making process are not expected to drag out for very long.
  • Sales pitch. Let’s Go Oakland may have gotten some attention with its $500k in pledges last summer, but that’s nothing compared to what Sacramento mayor Kevin Johnson has put together. Working with Denver consultancy ICON Group and Sacramento-area civic and business leaders, Johnson has gotten $10 million in commitments to keep the Kings in town. Johnson also may have dazzled the NBA’s brass in a way only a young upstart who isn’t a career politician and had a lengthy career as an All Star point guard can do. San Jose’s sales pitch has been glacial, minimal, and could be boiled down to a MS Project chart with milestones. Anaheim’s pitch has been rushed to the point of incoherence.

At this point, it’s all up for grabs for both teams, all of the cities, all of the owners. MLB and the NBA have upcoming collective bargaining sessions, though MLB’s should be less contentious. It’s hard enough to know how all of this will turn out if there weren’t a ton of external factors. Many think that the simplest path is to have money rule the day, and that cities like Oakland and Sacramento haven’t a chance. Hardcore fans hold out hope for a white knight like Ron Burkle or Larry Ellison to save the day. There’a a well-earned feeling of solidarity between Oaklanders and Sacramentans, with some being fans of both the Kings and A’s. Whatever happens, we’ll give it a thorough look. Just sit back and buckle your seat belt. It’s gonna be a bumpy ride.

03.31.11
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A’s sign 4-year radio deal with KBWF-FM 95.7 “The Wolf”

The A’s press release is available now.

For some part of the next four years, A’s games will be broadcast on 95.7, KBWF-FM, a.k.a. “The Wolf.” It’s a country station, broadcasting with a Class B license atop San Bruno Mountain at 6,900 watts. The coverage map from radio-locator looks like this:

While 6,900 watts is not the most powerful of signals, KBWF is augmented by a 186 W (that’s right) repeater near Mt. Diablo, which is meant to help the station’s coverage in Contra Costa County. The FCC’s service contour map can be found here, though it should be pointed out that the single line in that map reflects the same coverage as the red line in the map above.

Perhaps the biggest and most unknown takeaway of all of this is the fact that the deal was with Entercom, the radio giant that owns Sharks broadcaster KUFX. Entercom isn’t looking to sell individual stations, so the chance that it might unload one of its properties to a non-radio entity like the A’s is slim. It’s unclear what this means for KTRB. The A’s press release makes no mention of Comerica Bank-owned station. If this was yet another hardball tactic in ongoing negotiations, it may push the bank to take a less hard line stance. As for KTRB, the A’s pursuit of the station is over according to Susan Slusser. Via SuSlu’s Twitter feed:

The #Athletics pursuit of 860 AM is at an end. They offered more than double what it was worth and had signed letter of intent to buy.

#Athletics VP Ken Pries on the receiver’s motives for terminating team broadcasts: “You can speculate. Leverage? Up the offer? Hardball?”

If the receiver for 860 AM was trying to play hardball, she lost big-time. Only the #Athletics had incentive to overpay for troubled station

Pries says the team will now try to find affiliate in Monterey area with demise of 860 AM. #athletics

That last tweet is for Bleacher Dave. If the A’s simply thought the price was too high, it’s possible that KTRB’s existence as the other sports radio station in the Bay Area will be short-lived, as whomever buys the station will surely go with a different format.

We can’t end this without a joke, this one from Ken Arneson:

So I’m assuming that the A’s new radio station “95.7 The Wolf” will soon change its name to “The Wolff”?

It’s a sad day for the many of us who wanted an alternative to the KNBR hegemony. At least the A’s have a broadcast deal going forward. How long this one lasts… well, we wouldn’t be A’s fans if we knew.

P.S. – Wherever you are in the Bay Area, please turn on KBWF and let us know how the coverage sounds. The signal is constant day and night, so it should not be affected by the transmission power rules that plagued previous stations.

P.P.S. – Pre and postgame coverage will remain as is with Chris Townsend doing the honors (he is employed by the A’s). Over the last couple of months, KBWF has garnered a 1.1 rating, good for 26th in the San Francisco market (#4 nationwide) and just above rival country station KRTY, which pulled in a 1.0. In the San Jose market (#34), KRTY gets a 3.1 while KBWF (13th) pulls in 0.7 (30th).

03.29.11
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Baseball Season means it’s time for Homeroom

Updated 7:00 PM – The Merc’s Tracy Seipel has a Q&A on the A’s-to-San Jose effort.

I went to the A’s ticket office to pick up some extra seats for this weekend, and while I was there, I figured I’d check out a little eatery I’d heard about, Homeroom. Located at 400 40th Street in the Temescal neighborhood, Homeroom is only a few blocks east of the MacArthur BART station and a few more blocks from Fenton’s Creamery.

Homeroom’s thing is Mac ‘n Cheese. As American as baseball or apple pie, mac ‘n cheese is perhaps the ultimate comfort food, and is clearly my favorite American food. When I heard that a restaurant dedicated to serving up the dish was opening in Oakland, I squealed like a little girl. Today just happened to be a day I could partake in cheesy goodness, so off I went.

The decor is reminiscent of an elementary school classroom, with a wall-sized chalkboard in the back. Tables are made out of refinished remnants of old gymnasium bleachers, a huge plus in my book.

Seeing that this was my first visit, I chose the Classic, which is the simple Cheddar-based version with no toppings. Breadcrumbs are great from a textural standpoint but don’t impart much flavor, and bacon, frankly, is a cheat. Just about anything can be improved with bacon, so I wanted to see what the dish was like without embellishment. Mac n’ Cheese is generally a vegetarian dish, but they also had a vegan option and just about everything can be ordered gluten free.

The menu has both wine and beer pairing suggestions. The proprietors are apparently big beer coinnoisseurs, since they do occasional beer-food events and had spent some time puttin together the solid, but not exceptionally long list of beers. I asked for a Racer 5 from Bear Republic, but it was out and they had Acme IPA from North Coast instead. I went for the suggested beer for the Classic, Lost Coast’s Downtown Brown, which inevitably was a very good idea.

Texture is everyting when it comes to mac ‘n cheese. I wasn’t disappointed. Sharp, molten cheddar had the perfect balance of heft and creaminess. Portion size at $7.50 was just right. The brown ale took the edge off the sharpness. Lather, rinse, repeat. Dessert was a homemade oreo cookie, sweet but not cloying. Total bill was a shade north of $18, not including tip. I went mid-afternoon, hoping to avoid the reportedly long lines.

It’s too bad the Broadway Auto Row concept never gained traction, either 4 years ago when I sketched it out or last year when Let’s Go Oakland was looking at sites. Homeroom and Fenton’s would be great for families attending a day weekend game to simply walk over to these establishments. With some luck, Homeroom will continue its early success and attain the kind of longevity experienced at Fenton’s. Even though it’s a ways from the Coliseum and not within walking distance of Victory Court, Homeroom is worth a visit. Perhaps not everyday as you were mandated in grade school, but once in a while, maybe every other homestand. How else are you going to try the various great mac ‘n cheese variations they have on hand?

03.25.11
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KTRB broadcast deal in jeopardy

Apparently, playing hardball extends to the board room when you’re the A’s. They started the offseason haggling with Hisashi Iwakuma, now they end it haggling over a radio station. BANG’s Joe Stiglich reports tonight that the A’s and Comerica Bank are still duking it out over the final price to buy KTRB. The bank, which owns the station as part of bankruptcy and receivership proceedings, may be pulling A’s broadcasts off the air as a negotiating tactic.

According to the source, the receiver is looking for a higher bid than the A’s are willing to offer, and might be threatening to pull games off the air as leverage.

But it’s also possible that one of the sides budges and a compromise is struck to continue airing games before next Friday’s opener.

I was afraid that this would hold up the sale. Lew Wolff and Ken Pries have a week to prevent this from being a disaster. Do the right thing. Git er done.

03.01.11
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When encroachment is not encroachment

Update 3/1 2:00 PM – Lew Wolff is keeping the campaign going. In a Bloomberg article, Wolff states that he is “aghast” at how the Giants could be so stubborn in guarding T-rights when the A’s are moving further away.

Thanks to jk-usa for getting hold of KCBS In Depth’s (Doug Sovern / Ed Cavagnaro) interview with Giants president Larry Baer. Nearly four minutes of the interview is spent talking about the A’s and territorial rights. Below is a transcription of the relevant section (starting at 17:30 of the interview).

KCBS: The other team in our market – the A’s – their owner still very much has his eye on San Jose. What is the Giants’ on this, has it changed at all as far as, is there something you would accept to give the A’s entry into San Jose?

Baer: No change. When we go back to 1992 and the team was acquired by this group, there was a territorial right that went with that purchase… the exclusive right to exhibit baseball in San Francisco, San Mateo, and Santa Clara counties… We understand the A’s situation. We believe that they need a new ballpark. There’s no doubt about that… but they need a new ballpark, not a new territory. Certainly in their exclusive areas, Alameda or Contra Costa County or anywhere else in this region whether it’s Sacramento or wherever, we wish the A’s luck and hope that they’re able – for the good of the sport – to get a stadium that’s to their liking.

KCBS: We know you have the right and that you’re opposed, but do you think that there’s any chance that the owners would allow the A’s to move to San Jose, and the odds that the San Jose people would be able to build a baseball stadium?

Baer: Well, there’s no precedent for stripping a team of its territory. People point to Baltimore-Washington. That’s a totally different situation because the Orioles did not have a territorial right to Washington. In fact, when Montreal moved to Washington there were reparations paid to the Orioles even though it wasn’t necessary. So in a way it argues our point that even when another team doesn’t own a territory, that it’s allowed to move close, there’s a chance for real destabilization of the existing team. So this has been kicked around forever. The commissioner has never indicated to us that he believes that the territorial right that we have is in doubt.

KCBS: How do you feel having the A’s in San Jose would harm the Giants?

Baer: Well if you look at the patterns, Ed, and you look at over the years what’s transpired… when the team was first acquired in ’92 or ’93 the team was in trouble. We were playing in Candlestick but the fans weren’t coming. We were thinking that it was franchise that maybe could not survive. We redoubled the marketing effort – San Francisco, San Mateo, and Santa Clara counties. That is our core. If you look at – even though Oakland may be closer to SF than San Jose – there’s a little thing that people forget called the San Francisco Bay. The path of travel in this region is really north-south. If you look at KCBS traffic reporters and where people are moving it’s a north-south grid. People are well versed and in the habit of coming up the train to San Francisco – we have to preserve Caltrain by the way – coming up the train to Giants games. They take buses, they take BART into parts of the South Bay. That is our fanbase. It’s a big part of who we are, it’s where our sponsors come from, and we’d be destabilized if the Giants had another team that was right there.

That part of the interview was sandwiched by talk about an arena in SF and CBA matters.

First off, I have to admit I admire the way Baer said that he hopes it works out for the A’s in Alameda/Contra Costa Counties and sneaks in a reference to Sacramento or other parts of “the region” in the same breath. The Giants certainly won’t be shedding any tears if the A’s moved to Sacramento. They’d probably pay for the Mayflower trucks. Of course, Sacramento is such a hamstrung market right now that any suggestion like this is clearly a straw man. Still – well played, Baer.

Next up – the path of travel is really north-south? That must explain the full Embarcadero BART platform before and after each Giants game. Or the record BART ridership the day of the championship parade. Or the fact that fans coming via Caltrain are 5% of a typical Giants gameday attendance. Or the 444,000 vehicles that take the three east-west bridges every day. Come on, let’s get real. We all know something that neither Larry Baer nor Bill Neukom are willing to say – that the Giants and AT&T Park have taken much of the East Bay fanbase, especially the casual fan. They have that and they want continued protection of their “core.” As much as fans may come from the South Bay, it still isn’t the most convenient kind of fandom. If a weeknight Giants game ends at 10 PM, fans aren’t leaving on the train until 10:30 and won’t arrive at their respective stations in Santa Clara County until at least 11-11:15. Add a drive home and it’s 11:30. That may be perfectly acceptable for diehard Giants fans (it is for me when going to A’s games) but it’s a tall task to get a truly significant number of fans from the South Bay. And the “BART into parts of the South Bay” business? That is truly rich.

Circles indicate a 20-mile radius from China Basin, Coliseum, Diridon sites

Circles indicate a 20-mile radius from China Basin, Coliseum, Diridon sites

The Giants frequently like to point out that 50% of their ticket sales come from south of the San Francisco City-County line. Roughly half of those come from Santa Clara County, and many of those are long-time Giants fans. Many are corporate interests who can’t or won’t buy into the A’s where they’re currently situated. Sometimes it’s both. If they’re that worried, why not measure it? Let’s set a baseline for how much revenue comes from the South Bay, and if the Giants see an attributable drop to the A’s move to San Jose, MLB can set compensation on a seasonal basis until the loans on AT&T Park are paid off. I’ve suggested in the past the the A’s simply shift part of their existing revenue sharing check – which basically is paid by the Giants anyway given the clubs’ relationship to the revenue sharing pool – and be done with it. Once the A’s move in, then use the baseline. The fact is that San Jose is too far from either San Francisco or Oakland to be even remotely optimized as a market. If MLB wants to maximize sales to the entire Bay Area, it needs to maximize the sales territory. Ever wonder why Oakland doesn’t have great retail shopping districts or a mall? It’s partly because long ago, retailers and developers decided they could get sales from Oakland without having to locate in Oakland by locating in Emeryville, San Leandro, and even SF for some major stores. At some point MLB will have to decide if it wants as much from the Bay Area as possible or not. The status quo will surely not provide that.

Finally, there’s this matter of the Giants getting the South Bay baked into the $100 million purchase price paid by Peter Magowan and company in 1993. That price was a hometown discount, well shy of the $115 million offered by Vincent Piazza when he tried to move the team to St. Petersburg. We’re familiar with the hometown discount since it allowed Steve Schott and Ken Hofmann to get the A’s from Wally Haas for a cut rate. However, that brings up the question of how much the T-rights for the South Bay were worth back then and now. Below is a table showing the purchase prices for eight teams that changed hands in the early 90’s.

franchisesales-early90s

So Magowan paid about the same for a bigger market, greater legacy team as Drayton McLane and Nintendo did? Barely more than the two National League expansion franchises, both of whom were in inferior markets compared to the Giants? Incidentally, Magowan initially offered $95 million but may have brought in additional outside money to bolster the bid (at the time Magowan was worth a “measly” $60 million, hardly billionaire status).

If $95 million could be considered the Value of a Replacement Franchise, that doesn’t say much for having additional value baked into the 1993 price paid for the Giants, whether that value comes from T-rights to the South Bay or not. In all of the resale cases, franchise values may have been artificially depressed to maintain that team in-market. That’s fine, better that than a free-for-all. Let’s not kid ourselves about how much Santa Clara County was worth back then. In fact, in 1993 the A’s franchise valuation was $114 million, well north of the Giants, close to Piazza’s bid, and more reflective of an open market valuation. Shortly after Magowan assumed control, he inked Barry Bonds and the franchise value took off. It’s hard to argue that the South Bay had so much value in that transition when Magowan such a huge discount in the process. There’s more meat to the story if the value is baked into the financing of the stadium. But that’s done in 2017, and the Giants want the South Bay in perpetuity.

The funny thing is that I’ve spent over 1,000 words on what is essentially no change in position on the part of the Giants from 2009, when Neukom took the helm. While the A’s and South Bay interests have shifted to an appeal to decency, the Giants haven’t budged one bit. It’s clear that one team is better at playing this particular game, and it’s not the one who has more World Series trophies.

02.24.11
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Revenue sharing rollback?

Fox Sports’ Ken Rosenthal is at it again. This time he’s talking about that horrible, disgusting word that I loathe, the one that makes my skin crawl, the C-word.

That’s right. Contraction.

Rosenthal notes that some of the big market owners are grousing about having to send money to low revenue franchises such as the Rays and A’s, who conveniently don’t have new ballparks to help their revenue cases. Both teams should be the likeliest candidates because of this. However, all is not as it appears to be! Rosenthal walks back the threat in the context of upcoming CBA negotiations. To wit:

Such a threat would, however, change the tenor of the upcoming labor negotiations, raising the tension considerably. Yes, the owners always could pull back to extract other concessions, but if the A’s can be saved, why risk a work stoppage to eliminate one troubled franchise?

Naturally, he pivots to an A’s move to San Jose, which could (and should) resolve the A’s poor revenue position. In the grand scheme of things, improving the A’s financial stance may bump up total MLB revenue 1% on annual basis. That’s not enough to make Joe Fan notice, but if the game is as also about getting more owners to sign off on the financial model for the next 5-10 years, it’s an important battle to not have to fight.

Right now, MLB and MLBPA are set to go into CBA negotiations with several draft related items such as bonus slotting, a potential international draft, and the possibility of trading draft picks (yes please). Competition matters include increased replay and that extra playoff round. These items are only peripherally related to how the revenue pie is split, so the tension regarding those matters is projected to be minimal at best. That makes the biggest struggle not between players and owners, but rather between owner haves and have-nots. It has building to this ever since revenue sharing was introduced, and the financial document leaks of last summer only added fuel to the fire.

For a while I’ve been talking about how revenue sharing isn’t going to be expanded. It faces a rollback, strange as it seems, and the big market teams are pushing it. Bud Selig is listening, as his response to Hank Steinbrenner’s comments from earlier in the week shows:

“We have more competitive balance than ever before,” Selig said. “We have more competitive balance than any other sport.

“Now, look, is the system perfect? No. I didn’t say it was perfect, but I said that I think what exists today is pretty darn good. In the next labor negotiation, we have to tweak it in some areas, and it’s significant tweaks.”

What kinds of tweaks are we talking about here? There might be a tweak to the luxury tax, but that would only really satisfy the Yankees. Revenue sharing is defined as 31% of revenue minus expenses. Which means that teams keep more than 69% of their gate, local TV and radio money thanks to the ability to deduct stadium costs. Forbes had the Yankees 2009 revenue at $440 million after expenses and revenue sharing. By reducing the required share from 31% to 25%, the Yankees could see their net revenue approach $500 million, half of that excess likely going to yet another free agent pickup.

On the other end of the spectrum, a have-not team like the A’s could see its revenue go south by only a few million. It also means that other have-nots would take similar hits. In practical roster terms, this means not signing some like Grant Balfour. For a team that tends to hoard revenue sharing like the Pirates, it simply means they have less to hoard since they are forever playing the waiting game until their competitive window opens.

(You can stop your laughing now.)

Thankfully, the have-nots and middle class teams outnumber the big markets. They’re not going to take this lying down and they can lobby Selig just as effectively as the Steinbrenner brothers or John Henry (who once owned a have-not team in the Marlins). What to do then? As Rosenthal suggests, getting one team off the dole – namely the A’s – could be a big difference maker. The Twins are already there. The Marlins will be healthier starting next year. The Royals have a greatly renovated ballpark and a fantastic farm system which could literally pay dividends over the next several years. The A’s will be once they have a ballpark built (and they have the revenue streams to pay for it). That leaves the Rays as the only team that can’t lift itself up by its proverbial bootstraps. Knowing that the Rays probably won’t have anything done at least through this next CBA means they are the only team to worry about instead of four or five should the A’s situation be resolved. The sooner the owners make this happen, the sooner they can end this major internal distraction and rally in solidarity against their real enemy: the players union.

.

P.S. One other thing that Rosenthal touches on is debt or legal issues facing certain owners like Fred Wilpon, Frank McCourt, and Tom Hicks. It would seem that owning a team is a license to do some seriously crazy things, like investing with Bernie Madoff or buying a bunch of other franchises that one can’t afford. While Selig may look to enforce debt rules better, his reach doesn’t go as far as telling owners how to run their own personal finances. Is this recent history of individual owner financial troubles simply a remnant of the economic downturn or something else? I don’t know that any additional “screening” of potential owners would help. It’s not like choosing owners is going to become an open, democratic process overnight. They don’t call it The Lodge for nothing.

P.P.S. Ray Ratto also dismisses contraction.