Category Archives: Owners

04.25.11
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Nuggets from the Boxer and Reed interviews

I recorded the two interviews using TuneIn Radio (really worth getting on your smartphone platform of choice), so I had a chance to listen to them again. I picked up on a few things that I thought would be interesting to discuss. First, the Boxer portion.

  • Boxer mentioned that the suite requirement for Victory Court was 32-33 boxes, not 40 (which is what Wolff is aiming for). Perhaps this would explain why the capacity is greater (39,000), to make up for the reduced suite requirement. Maybe this is a realization of how difficult it is to sell suites in the East Bay with the corporate environment.
  • Since Boxer left Oakland’s Planning Commission in February, he hasn’t been as plugged in regarding the EIR process. That’s a shame when you consider that there’s such a vacuum when it comes to real information right now.
  • Townsend was bit miffed when he tried to get Oakland Mayor Jean Quan on for the segment. Her office referred him to Boxer instead. That’s not to say that Boxer wasn’t good – he was, especially because he talked for an hour – but it shows there’s a disconnect. They want to say that they’re operating within a gag order, but that gag order should be extended to San Jose Mayor Chuck Reed, so why was he available while Quan wasn’t?
  • People jumped on Boxer for misstating attendance and Townsend for naming the wrong company for the ballpark, to which I say, “STOP.” None of that matters. You’re getting distracted by the most insignificant details.
  • The Coliseum has been effectively deepsixed as any kind of ballpark site by MLB.
  • Boxer admitted that if redevelopment goes away, getting the plan going would be very challenging. He notes that some development powers should be enshrined in a successor agency, though it’s unclear how far-reaching those powers would be. What’s going for Oakland is that CEDA/ORA has bonding capacity for further land acquisitions and infrastructure improvements.
  • Boxer also mentioned that the EIR process takes the better part of a year to complete. While he was probably referring to the entire process (it usually takes longer), a draft shouldn’t take anywhere near that long.
  • Boxer alleges that Schott/Hofmann didn’t pursue the Uptown site because if they committed to it, they feared that the franchise’s value would drop. Curious. Update: The franchise value would have dropped because the team would have been less attractive if it were locked into a new stadium.
  • Boxer mentions in passing that Wolff may have violated the contract with the Coliseum Authority by talking to San Jose in the past. That again? If that’s a problem, then just sue already, stop talking about it and do it. Before John Russo escapes to Alameda.

Now for the Reed segment, which was much shorter.

  • Reed hasn’t had any direct contact with Bud Selig. He and his team have been working solely through Selig’s committee. Reed thinks the work is finished, though it’s hard to tell at this point.
  • As in recent print interviews, Reed is palpably frustrated.
  • Reed’s not giving up on the ballpark as long as Wolff is optimistic.
  • No word on whether Reed would try for this November’s election. I’m guess no unless word comes down from on high.
  • Reed referred to the new joint powers authority (San Jose Diridon Development Authority) as carrying on the ballpark development work as SJRA shrinks or disappears.

What did we learn today? Not much. There will be some pro-Oakland folks who are happy that Boxer was on for an hour, which was good. However, the fact that no new information came out was highly disappointing. Hope can’t live on words alone.

P.S. Really great work by Chris Townsend today. There’s been more stadium talk in the last week than in the last five years on all of the sports and talk radio stations combined.

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.

04.21.11
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A’s and Dodgers could be tangled up after all

The McCourt-Dodgers meltdown could have an unusual and for-now unmeasurable impact on the A’s depending on one decision: Who will be brought in to oversee the team now that MLB has seized it? According to ESPNLA’s Tony Jackson, the shortlist has three candidates:

  • Stan Kasten, former Nats president
  • John McHale, Jr., executive VP within MLB
  • Corey Busch, frequent MLB committee member and former team exec

Yes, that’s the same Corey Busch who’s on the A’s stadium panel with Irwin Raij and Bob Starkey. Busch has been all over the West Coast with his baseball involvement, including a key role in the ownership transition between Fox and the McCourts. Supposedly Busch was to stay on after the transition to become the Dodgers’ team president, but the job was offered to then-Red Sox front office man Mike Dee. Dee declined the position, got a raise, and eventually moved on to the Miami Dolphins in 2009. In 2005, Jamie McCourt became team president and executive VP. I wouldn’t be surprised if that was around the time the downward debt spiral began in earnest.

The commissioner’s appointee will have the tough task of sorting out the huge mess the McCourts made. Unlike Oakland, there will be no stadium study. Instead, it’ll be an effort to determine what abuses were made and what the team’s real fiscal health is. That’s important, because MLB will want to get as high a price as possible for the team once it finalizes its seizure. It wouldn’t be surprising to see Raij (law) and Starkey (accounting) brought in soon.

Problem is that the whole rigamarole would take at least a year, probably two. The McCourts’ divorce proceedings are in recess and aren’t scheduled to begin again until next year. Meanwhile, Frank McCourt is considering a lawsuit or injunction against MLB. That would be interesting since as we all know that teams (and owners) are prevented from suing each other or MLB thanks to the covenant known as the ML Constitution. If McCourt sues and a judge decides to allow his lawsuit to move forward instead of dismissing it early, the action would effectively challenge both the commissioner and baseball’s antitrust exemption together in one fell swoop. Which would be, well, is it 2012 yet?

The best thing for Frank McCourt would be to see the writing on the wall, take his lumps, and give up the Dodgers. That would speed everything else up.

Short term, what does this mean for the A’s? It could be interpreted as two possibilities. Either the panel is done with its work, or Selig has seen fit to put the A’s on the backburner while the Dodgers mess is cleaned up. Or both. The crazy thing about this is that the whole strategy about keeping the A’s and Rays in limbo for the upcoming CBA talks has been pretty much blown out of the water thanks to the much scarier impact of the Mets’ and Dodgers’ woes. Neither of those will get fixed before the next CBA is ratified. So, Bud, how about getting the “easy” stuff out of the way first?

More good reading: Dodger Divorce, Biz of Baseball, Forbes

04.21.11
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Isaac and Suke talk Dodgers-A’s-Wolff

Cue the conspiracy theories. Unsubstantiated reports have Bud Selig giving Lew Wolff right of first refusal on bidding for the Dodgers when it comes up for sale. Strange. Apparently this is all because Wolff lives there. Guess what? Brewers owner Mark Attanasio lives in LA, why not him? Discuss.

Update 2:30 PM – Right on cue, here’s a response from Wolff via Joe “Quicktweet” Stiglich (thanks Different James):

Lew Wolff, on being mentioned as potential buyer if Dodgers go for sale: “I’m only interested in the A’s — and getting above .500.”

More from Bill Shaikin:

Although Bud Selig’s takeover of the Dodgers on Wednesday could lead to a sale, Oakland Athletics owner Lew Wolff said Thursday he would not be a buyer.

“I’m not interested in the Dodgers,” Wolff said.

…

“My focus is deep into getting us a new venue for the A’s,” Wolff said. “That’s where my long term is.”

04.20.11
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Dodgers now under MLB control

Brief, terse press release from Commissioner Selig today regarding the Dodgers.

“Pursuant to my authority as Commissioner, I informed Los Angeles Dodgers owner Frank McCourt today that I will appoint a representative to oversee all aspects of the business and the day-to-day operations of the Club. I have taken this action because of my deep concerns regarding the finances and operations of the Dodgers and to protect the best interests of the Club, its great fans and all of Major League Baseball. My office will continue its thorough investigation into the operations and finances of the Dodgers and related entities during the period of Mr. McCourt’s ownership. I will announce the name of my representative in the next several days.

“The Dodgers have been one of the most prestigious franchises in all of sports, and we owe it to their legion of loyal fans to ensure that this club is being operated properly now and will be guided appropriately in the future.”

The big clue that this was happening was that Selig rejected a $200 million loan and a new TV deal between Fox and the Dodgers. Fox sent McCourt a smaller $30 million loan last week just to cover payroll, which may have been the last straw. The last thing Selig and the other owners want to see is for the Dodgers to hit such a debt level that it negatively affects bidding on the team. This didn’t hurt the Rangers when Tom Hicks put the team in a similar position, but still, at some point enough is enough. Apart from the messy process of legally extricating the Dodgers from the McCourts, the team is still one of the most valuable in baseball and should attract numerous bidders, none of whom are likely to be Lew Wolff.

04.20.11
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A’s, City of Phoenix agree to extend Spring Training lease, improvements

The Arizona Republic is reporting that the City of Phoenix City Council is set to improvement a lease extension for the A’s at Phoenix Municipal Stadium and Papago Park. The lease will run $425,000 per year to the A’s through 2025. They’ll also pay $50,000 per year into a capital improvements account. Most of the improvements would be at the Papago Park training facility, not Muni.

(A’s director of minor league operations Ted) Polakowski said the improvements are needed not so much at the stadium, which will require ongoing maintenance, but at the training facility. The team is outgrowing the current indoor space, he said, and the parking lot is getting tight. The A’s would like additional clubhouse space for its minor-league operations.

Maybe they’ll build Rich Harden a shed where he can stay during his eternal rehab, amirite?

Total cost of the improvements is slated to be in the $8-10 million range. That’s a far cry from the $30 million that Lew Wolff was looking for, and much, much less than the $100 million spent for the Salt River Fields project. From the sound of things, both Wolff and Phoenix were driven by new fiscal realities. Phoenix was willing to help, but it wasn’t going to make major sacrifices to do it. Wolff probably saw how Salt River’s opening sucked the life out of the competing complexes in the Cactus League, and figured that any really expensive improvements to Muni short of a brand new complex would’ve been futile. At least they don’t have to share.

The piece ends on this note:

Robert Johnson, a political consultant who helped in the campaign for the Cubs facility, said Phoenix should jump on the A’s offer.

“It makes a lot of sense,” he said.

The interim agreement contains language allowing either party to pull out of the agreement with two years’ notice, but Harman does not anticipate that becoming an issue.

“The A’s have been a great partner for us,” he said, “and they are committed to staying in Phoenix.”

In Oakland, someone’s ears are burning. BTW, it would cost $10 million just to fix all of the plumbing problems at the Coliseum.

The great news is that just like before, you’ll be able to fly into PHX in the morning, take the free shuttle and then light rail ($3.50 round trip) to Priest Drive and walk right in. It’s so convenient, one reader and frequent commenter here was able to do this and catch a game during a layover a month ago. How’s that for convenient?

04.14.11
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Ron Burkle: Oasis or Mirage?

I’ve never met Ron Burkle, and I don’t know him personally. From what I’ve heard and read about him, I can tell you this much: He’s no Wally Haas or Mark Cuban. He’s a lot more like John Fisher. Like Fisher, Burkle is a middle-aged billionaire. Burkle tends to run in the Hollywood and pro sports circles more than Fisher, but his ownership “style” is similarly hands off as he is not a managing partner and he tends to defer decisions to the front office, based on his decade-plus tenure owning the Pittsburgh Penguins.

There’s also little chance that Burkle gets involved in the Kings-or-other-Sacramento-team business unless some new arena deal is part of it from the get-go. Burkle gritted his teeth along with Mario Lemieux as the Penguins plugged away season after season in the decrepit Civic Arena. They came close to selling the Pens to RIM co-CEO Jim Balsillie, who most assuredly would’ve moved the team north to Hamilton, Ontario. That deal didn’t happen only because Balsillie backed away when he felt that NHL commissioner Gary Bettman interfered with the process. A deal to publicly finance what would eventually become CONSOL Energy Center happened thanks in part to visits by Burkle-Lemieux to Kansas City and Las Vegas, which scared Pittsburgh and Pennsylvania officials into acting. Burkle definitely wasn’t afraid to play hardball in the venue game. If Burkle is going to get involved in Sacramento, he probably doesn’t want to repeat that constant headache. If he does, well, he must be a masochist, especially considering Sacramento’s pledge of zero dollars towards a new arena.

The Pens aren’t Burkle’s only dalliance with major pro sports. When the NFL was looking to add its 32nd team, Burkle and Ed Roski (of City of Industry stadium fame) pledged a $300 million expansion fee for what everyone in the media assumed would be a new LA NFL franchise. Another consortium featuring Eli Broad and Michael Ovitz pledged $400 million. Then both groups were blown out of the water by Bob McNair’s $700 million bid, and the expansion team went to Houston. Burkle doesn’t appear to be attached to either of the competing LA bids this time around, so naturally he could devote some attention to keeping or resurrecting NBA hoops in Cowtown.

In 1988, four arenas opened around the NBA: ARCO Arena, The Palace of Auburn Hills, Charlotte Coliseum, and Miami Arena. At $70 million, the Palace was the most expensive to construct and has retained its value and ever since. ARCO’s flaws have been readily apparent to anyone and everyone. Charlotte Coliseum was too big and lacked forward-thinking amenities, whereas Miami was far too small. Miami replaced its arena barely a decade later. Charlotte lost its team and was only granted one when a new arena deal was struck. The Palace and ARCO are the only ones left standing, with ARCO the one that should be replaced. If NBA basketball is going to stay or come back to Sacramento, the biggest issue will always be the arena situation. It doesn’t matter if the hero is Ron Burkle or Ron Burgundy.

P.S. Former Kings SacBee writer Mark Kreidler notes (on ESPN.com) that combined TV/radio revenue for the Kings is around $11 million annually. That’s terrible for a major pro sports franchise and shows how dire the arena problem is for the Kings and the Maloofs.

04.06.11
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Bloomberg profile on Wolff

Update 12:50 PM – Several items have been added to the end of the post.

Last, Bloomberg’s Nadja Brandt put up a profile of Lew Wolff in which he indicates that his LA-based real estate firm, Maritz Wolff, is looking to sell up to $1.8 Billion in various luxury hotel properties by 2015. There’s one interesting takeway.

  • Wolff helped keep the St. Louis Blues in town when they threatened to move in the late 80’s. He and partner Philip Maritz were part of a large business consortium that built a new arena, now known as Scottrade Center, which kept the Blues in St. Louis.

That doesn’t mean the comparisons to Wally Haas should start. But it does show that Wolff has had crucial experience in this realm that stretches way back. Coincidentally, that consortium, Clark Enterprises, ran the Blues and arena at a significant loss for several years before eventually selling the team to Bill Laurie.

Both San Jose and Oakland partisans will be fixated on a couple other takeaways. Chief among them is this easily misinterpreted quote:

“I have no emotional ties to any property,” Wolff said. “They are inanimate objects. That’s the only way we can be fair to our long-term investors who trust us to do what’s best.”

In the ongoing effort to demonize Wolff, his detractors will seize upon that as a sign that Wolff is a cold, emotionless moneygrubber. The Blues experience would seem to belie that. Wolff is neither saint nor devil. He’s laying out his vision for what he thinks is the best path forward for the A’s. Unless someone steps in to buy the team from Wolff and Fisher with a mindblowing offer, that vision is going to be seen through. Which leads me to this:

“Where it may make sense to sell is if you’re in a gateway city with a trophy hotel that doesn’t need significant capital expenditures,” he said. “Bidding for those has been crazy.”

Extend Wolff’s contrarian real estate investment philosophy to owning a team, and it would appear that Wolff intends to hold on until his vision, a new ballpark, is achieved. There’s no bigger capital investment for a sports franchise than building your own stadium. After that, who knows?

Also, it’s a bit much to think that these hotel sales will suddenly mean hundreds of millions will get plowed into a ballpark. That’s not how it works. A ballpark will be financed just like every other ballpark because no one invests cash in a stadium these days and it’s crazy not to take advantage of low interest rates.

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In other news, Evan Weiner has a good overview of the history of territorial rights and franchise moves.

The SNY (Mets) and YES (Yankees) networks are under pressure to renew carriage deals with satellite providers Dish and DirecTV.

A vigil will be held tonight in LA for Bryan Stow, the Giants fan who was beaten outside Dodger Stadium after last Thursday’s Opening Day game. The Giants will dedicate their Friday opener to Stow. The reward for his assailants’ arrest has been upped to $100,000. Stow is a 42-year old Santa Cruz paramedic and father of two.

If you haven’t read it yet, read Josh Koehn’s feature for Metro from last week. It’s about San Jose’s efforts thus far, and when coupled with Robert Gammon’s 2006 Fremont-oriented piece for the East Bay Express, should bring anyone with a passing interest up-to-date.

Oakland City Attorney John Russo appears to be on his way to becoming the next Alameda City Manager.

Cuts to Caltrain service will not be as bad as once feared, though the Giants and some secondary stations are getting the brunt of it.

  • Weekday service will be slashed from 88 daily trains to 76.
  • Special service, such as Giants pre and postgame trains, will be cut.
  • Four lightly used stations will be closed on the weekdays, several more will be closed on the weekends.
  • Fares will rise 25 cents.

It could have been much worse.

03.25.11
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MLB may change debt rule

At the end of last season I wrote about how MLB’s lightly-enforced debt rule might impact the A’s in the future. Now that the Mets have been practically sunk by the Madoff scandal and the Dodgers handcuffed by the McCourts’ divorce proceedings, Bud Selig may be looking to actually monitor the situation more closely and even act on violations.

The NY Post kicked off today’s news by indicating that a change to the existing debt rule may be in order. The article cites the now obsolete 60:40 rule, which was mothballed in favor of a multiplier-based system in which debt couldn’t be more than 10x operating income, or 15x if a new stadium were in operation. The kicker is that MLB is looking to include holding company debt in the calculation, which has potentially enormous implications. For ownership groups that were heavily leveraged to buy TV networks and radio stations, enforcement could have crippling effects on how much they can spend in the future, whether it’s on players or anything else. MLBPA may be pushing in favor of such a plan since it would provide a more honest assessment of each club’s financial stability and risk.

A source who represents players said, “I think it [a rule change] is positive,” even if it could have a negative impact on salaries.

That kind of agreement is nowhere to be found among the NFL, NBA and their unions. Craig Calcaterra has a short take on the rule change as well.

Where I’m not clear on the impact is whether or not additional teams and their debt in other sports is applicable. After all, Tom Hicks overreached to buy Liverpool F.C. and lost both the soccer team and the Texas Rangers because of it. While that’s clearly an outlier case, crazier things have happened. Ask Fred Wilpon, John Moores, or Frank McCourt.

The upshot of this is that while the A’s appear to be clean at the moment, things will get a more stringent in the next CBA and with the building of a new ballpark. MLB will look at any stadium deal and the A’s ability to make it work very, very closely. And while Selig may be supporting his friends Wilpon and McCourt right now, it wouldn’t surprise me for Selig to make an example out of one of them in the future, and to use the A’s or Rays as an example of how to properly run a lower-revenue franchise.

To further explain this, let’s take a look at operating income for the A’s as reported by Forbes for the last three seasons:

  • 2009 – $26 million
  • 2010 – $22 million
  • 2011 – $23 million

The average of those is $23.7 million. With a 10x multiplier, the A’s debt ceiling is $236.7 million. They’re nowhere near that point right now. Once they add a ballpark, that number will shoot up considerably. The ceiling will be $355 million, though that’s not enough to fully cover construction costs (and outstanding debt). The stadium cost number may go down by MLB’s definition if more corporates are locked in early and long term, I suppose that’s at the league’s discretion. Just as important, the debt number will be as high or perhaps even higher than the franchise value. Whether the debt rule stays the same, just with greater enforcement, or evolves to include holding companies, it’ll be interesting to see how individual teams respond in terms of fiscal restraint. That a debt rule change is on the table would also reinforce the idea that the A’s stadium resolution may not come until after CBA talks are complete. Will that happen before or after the season ends? We’ll find out soon enough.

03.23.11
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2011 Forbes valuations out, A’s up 4%

It’s late March, and you know what that means: the new Forbes MLB franchise valuations are out. With a few notable exceptions due to debt problems (Mets, Dodgers), things in baseball are going quite swimmingly. The A’s are back above the $300 million mark with a $307 million valuation, up 4% from 2010. The team remains second-to-last among all MLB franchises, eclipsing only the Pirates. Forbes also listed at $23.2 million, which is probably due entirely to revenue sharing.

To understand where the A’s may be headed, I took five teams and looked a little deeper at how their valuations were constituted. The teams are the A’s, Giants (natch), Red Sox (Giants’ aspirations), Rockies and Padres (aspirational western mid-markets for the A’s). The numbers are quite interesting.

First off, it’s important to note Forbes’ explanations for some of the components of each valuation. “Sport” is described as attributable to revenue shared among all teams. You’ll see there’s an inverse relationship between the bigger revenue teams and this number. If a team is highly dependent on revenue sharing, this number will be higher. “Market” seems self-explanatory, though for the two Bay Area teams it’s interesting that according to Forbes they share the same market, which based on its size (4,274,000) is probably defined as the SF-Oakland-Fremont MSA. That leaves out both the South Bay and all of the North Bay save for Marin County. Not clear on what impact this has, so I’ve reached out to Forbes editor Kurt Badenhausen for a clarification. Here’s his response:

We publish the population and revenue per fan numbers based on the San Francisco-Oakland-Fremont MSA. We use the official MSA designations for all those numbers. Market size plays a role in the value of teams in terms of how they drive revenues, but a bad stadium situation in a big market is still not going to help a team out.

“Stadium” is fairly straightforward, though it should be pointed out that just because you build a $500 million dollar stadium you’re not going to see a similar appreciation in your franchise valuation. That makes “Stadium” more a function of gate revenue and attendance, areas where the A’s and Padres fall behind while the Giants and Red Sox excel. “Brand Management” must be related to marketing efforts – or in the case of the A’s, a lack thereof.

Debt/value is a tricky beast, both in how it’s defined and how MLB’s debt rules get enforced. It always includes stadium debt, and should the A’s get their new ballpark in the next few years that number will jump up significantly from its 29% position, which has hovered there for several years. Since it’s possible that some of that debt may come in the form of a loan from MLB, it will be extremely important for Wolff/Fisher to ensure that revenue streams are locked in to service that debt (and then some) for the foreseeable future.

Surely, this annual release by Forbes will be followed up by a denial of the veracity of the figures by Commissioner Bud Selig. Despite this, it’s telling that franchise sales tend to use the Forbes figures as a baseline at the very least, leading me to believe that they’re far more accurate than Selig, who is loathe to provide any real financial data from MLB, is willing to let on.