10.20.11
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Crane names his price and it’s a discount

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Perhaps MLB should put the Astros out on Priceline. Wait, wrong Crane?

The New York Post is reporting that Jim Crane’s price for moving the Astros to the American League is not, as I speculated, a future franchise sale price guarantee. Instead, Crane wants the value upfront, asking for a $50 million discount off the $680 million sale price. Assuming that MLB and Crane meet somewhere in the middle, we’ll see how desperate Drayton McLane is to finally unload the franchise. Based on previous reports, McLane is quite desperate. (Additional coverage available from The Biz of Baseball.)

Crane may be trying to deflate the valuation bubble a little. **Astros sale is not final.

Crane’s argument is that moving to the AL West will cause more games to be broadcast at 9 PM Central time because of frequent trips to the West Coast. Let’s do some math on this. Setting aside the interleague rotation, the ‘Stros currently play 4 NL West opponents roughly 6 times apiece. Cut that in half and it translates to 12 road games against the West Coast, then take away a third of those games as daytime games for a total of 8 games at the 9 PM start time. If they play in a 5-team AL West, they’ll play 3 West Coast opponents 18 times (assuming the format stays unbalanced). Half of those games will be at home, translating to 27 total games on the West Coast, or 15 more than before. Roughly a third of these games will be either weekend daytime or weekday getaway day games, reducing actual number affected by the two-hour shift to 18, or 10 more 9 PM starts than before. Is a 10-game delta worth a $50 million discount?

Crane is actually coming into a very good situation with the Astros. $12 million was spent last year to upgrade the big scoreboard. Renovations to club areas have also been completed. The Astros will be moving to CSN Houston, of which they’ll own 40%, in 2013. They’ll be partnering with the NBA Rockets, who will move starting with the 2012-13 season. With the ‘Stros in full rebuild mode, it would make sense for Crane to keep payroll low until the team sniffs contention again.

Moreover, Crane’s request seems to fall in line with the thinking that, when it comes to dealings between teams and owners on the business side, money generally does not change hands. If Lew Wolff gets territorial rights and the Giants are awarded compensation, it’ll be interesting to see what form that compensation takes. Based on this news and the historical pattern of how franchises work out deals (other than player trades), cash payments are not the likely form of compensation.

10.17.11
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Houston, we have a problem

After a lengthy delay and a lot of questions, Jim Crane may be on his way to becoming the next owner of the Houston Astros. Word out of Houston tonight is that Crane met with his board after another meeting with MLB. It’s hard to think that any information about Crane’s bid isn’t already out there for Selig and the higher-ups to review, so this looks like a matter of prepping the transition (which McLane desperately wants). The change would have to be approved at the upcoming owners meetings, along with the CBA and perhaps the A’s territorial rights matter.

Houston realignment to the American League

A key item in that blog link is that Crane is willing to accept compensation in exchange for moving the team to the American League, where it would be part of the West division. My wild guess at this point is that the compensation would be a franchise sale price guarantee as long as Crane’s group owned the team for a significant enough tenure – say five years or so. That would provide some protection for the heavily leveraged Crane group as they “endured” the transition. I’m sure the hardship of trading the Cubs and Cards (25k per game x 15 games) for the Red Sox and Yankees (35k per game x 12 games) will make the other owners highly sympathetic.

The preliminary 2012 schedule was released a couple weeks ago (more on that later this week), and it appears that MLB wants to bake it in ASAP, which would render a 2012 realignment impractical. In theory, it should be easier to make changes to the schedule since starting next year, there will be only one team who has to share a multipurpose facility with another franchise (I’ll give you one guess as to who that is). Another thing to consider is the schedule format, which could continue in the unbalanced method MLB now employs (15-19 games in division, 6-9 outside), or move more towards a balanced format. Some examples are listed in the table below.

Comparison of existing scheduling format vs. three potential realignment formats

Option A mostly retains the spirit of the existing schedule. Option B sacrifices interleague series for more interdivision games. Option C nearly achieves a balanced format, whereas Option D again reduces interleague matchups. Key to this is the question of how many interleague games are truly necessary, especially now that the games will be played throughout the entire season. Another thing to consider is that by starting the season with an interleague series, it gives MLB an excuse to always have an opening series in Japan, Korea, etc.

Astros fans aren’t taking this threat lying down, though one has to wonder how strong the opposition truly is. As of tonight, a petition at SaveOurStros.org has 633 signees. The Keep the Astros in the National League Facebook group has only 50 members. Not that MLB cares about what a few fans think. I’d feel bad for them, but they’re going to have a very strong rivalry with the Rangers in short order, which should be great for both franchises. As for the effect on the A’s, there isn’t much of one. They’d just be trading two opponents in the AL Central/East for one in the Central time zone. No big deal.

There’s also talk of adding another wildcard team for a one-game playoff prior to the divisional series. I didn’t have strong feelings one way or another on the subject until the final day of the 2011 season, in which the action was so riveting that it would be highly anticlimactic to eliminate it by creating game 163.

What are your thoughts on this? Personally, I’m glad MLB is creating an equal amount of interleague games for every team, which IMHO is far more important from a competition standpoint than confining interleague play to May and June. It’s something that has been impossible to address because of the 16-team National League. Now it can be fixed, and baseball will be better off for it.

10.16.11
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Shea asks if the A’s could stay at the Coliseum if the Raiders leave

Sometimes I wonder if, given the lack of juicy topics, some of the local media default to writing about the A’s stadium situation. It’s not sexy, and it’s easy to write about without getting into any real depth. That’s exactly what Chronicle baseball writer John Shea did when opining about a new Coliseum ballpark.

Shea thinks that the possibility of a joint 49ers-Raiders stadium in Santa Clara should provide an opening for the A’s to stay there. The land is already there and paid for, as is BART and a ton of parking. Sounds simple enough, right?

Should the Raiders decide that they want to stay in Santa Clara long term, then yes, this could work out just fine and dandy. Except for a few minor details. Allow me to enumerate.

  1. The Raiders may only view Santa Clara as a temporary thing (10 years), with an eye towards building somewhere else in the future. The prime location would be the Coliseum, which as reported previously, has plans on the drawing board for a new football stadium and land purchased to support it.
  2. MLB wants this thing wrapped up by 2015. They’ve said so to both Oakland and San Jose officials. By waiting out the Raiders’ decision making process, they’re guaranteeing that a new ballpark for the A’s couldn’t open until 2017 or 2018 at the earliest.
  3. Why should MLB be subordinate to what the NFL is doing? The A’s have already suffered from that exact problem for the last 16 years.
  4. Who’s paying for the remaining debt at the Coliseum now? Certainly not MLB or the A’s.
  5. What happened to Victory Court? That’s the Oakland site that was chosen by both the City and MLB to move forward because of its location downtown. MLB has already dismissed the Coliseum and Oakland has gone along with it. Nothing has fundamentally changed to make the site more attractive. By going back and forth on sites like this, those involved look as if they’re not making a concerted effort. Instead, it looks like they’re grasping at straws.
  6. Wolff responds in the article to Shea’s idea by saying that he couldn’t privately finance it at the Coliseum site. And he’s right. A “rebuilt” Coliseum is out of the question since MLB would never go for it. And investing $450 million at the Coliseum is impossible for some time to come, given the state of stadium lending and the fact that it’s a “depressed area“.

The only thing that could drive this is if MLB outright rejected the A’s efforts to gain territorial rights in Santa Clara County. Even then, it really comes down to simple sentiment: Al Davis said before his passing that there could be a future for the Raiders at the Coliseum, whereas Lew Wolff doesn’t believe in such a future for the A’s. They’ve both spent a lot of time on this. After all this time, are they both wrong? Or is a quaint notion thrown out there on a whim more realistic? Somehow I find that hard to believe. Facts are inconvenient, I know.

10.14.11
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Wolff, SJ ready to roll on remaining Diridon land purchases

We’re almost exactly one month from what could be a very pivotal owners meetings in Milwaukee. And while Commissioner Bud Selig may not end up feting his colleagues over a Brewers’ World Series, it may be that Selig’s frat bro Lew Wolff will be the one celebrating. Merc scribe Tracy Seipel reports that the recently formed San Jose Diridon Development Authority (a.k.a. SJ City Council) will meet in closed session to arrange an option from which Wolff could buy the remaining ballpark site parcels.

As discussed previously, Wolff would in all likelihood have to pay for both land and moving costs for the affected landowners/business, since SJDDA/SJRA is tapped out now and for some time to come. One thing that may help is that Maritz Wolff, Wolff’s real estate investment firm, sold a series of hotels in August for $570 million. Some portion of that could easily offset the estimated $24+ million of the remaining land buys. Now that I think about it, I wonder if the timing is set up for a 1031 exchange, which would limit tax exposure for Wolff (in-depth knowledge on this subject is above my pay grade).

Seipel also reports that the purchase may be part of a final push to convince Selig and the other owners:

Mayor Chuck Reed explained it another way:

“It’s so that Lew can go to the commissioner of baseball and say, ‘I control the dirt.’ ”

Reed characterized the plan as taking away “one more little reason the commissioner can’t make up his mind.”

Because of the black cloud over redevelopment and the lawsuit against the state, it’s possible that much of the money may have to be reclaimed by SJRA for its extortion payment to the state, the big bond payment that’s due next month (which could cause a default), or other issues that the agency has to address. It’s not just a matter of SJRA being broke. They also can’t enter into any new agreements, which is probably what caused City to in a moment of prescience create SJDDA. It’ll be interesting to see how the option agreement is structured. The Airport West agreement went through some major changes before arriving in its current form.

Seipel ends the piece with a note from City Attorney John Doyle, who said that a referendum will be required for the ballpark/land transaction.

There are a number of follow-up questions that can only be answered by the actions of SJDDA and affected parties in the coming weeks:

  • What will be the final price for the transaction(s)?
  • Does this lead to Wolff buying all of the land, or giving the purchased part back to the City/SJDDA?
  • Unlike Airport West, the purchase of Diridon has a much earlier deadline. What is that deadline?
  • Is Wolff in effect bailing out SJRA by doing this?
  • While Reed openly cheers on the influence that this move may have, Doyle (as you would expect) tamps down expectations on MLB’s decision-making. What’s the story here?

The road ahead promises to be scenic, and a little bumpy.

10.13.11
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News for 10/14/11

It’s been a somewhat contentious week in the comments. Let’s cool it down a bit.

  • The City of Industry NFL stadium’s financing plan is a little too 90’s optimistic for this era. (ESPNLA/Arash Markazi) Choice quote:

    “You would probably be more likely to see Eric Dickerson suit back up for L.A. than see a stadium pay for itself solely with PSLs, naming rights and the NFL $150 million payment,” (sports economist Victor) Matheson said.

  • A little further towards downtown, Frank McCourt is up to his eyes in debt – $550-600 million, not including the Dodgers’ recently approved $150 emergency bridge loan. After the Dodgers are sold and McCourt’s divorce is final, he could be left with very little. (LA Times/Bill Shaikin)
  • Mark Davis, son of the late Al Davis, reportedly met with AEG about Farmers Field six months ago, but balked at selling a large percentage of the team in exchange for first dibs on the downtown LA stadium. (Yahoo! Sports/Mike Silver)
  • On the other hand, given the Davis family’s cash position and the potential for estate taxes, the least expensive and most feasible option may be to go to Santa Clara. (Yahoo! Sports/Jason Cole)
  • NBA commissioner David Stern is really putting the screws to the players, saying that if there isn’t a deal by Tuesday, games through this Christmas will be cancelled. I don’t understand the proportionality of these threats. That’s what makes him the Godfather. (NY Times/Ken Belson)
  • Apparently it’s not just California cities that are under the gun regarding redevelopment. Reno’s agency faces a default if it can’t make a $2.7 million bond payment next summer. Property tax receipts are in the gutter, so the agency is looking to Washoe County for help. (Reno Gazette Journal/Brian Duggan)
  • Peter Gammons tweeted on Wednesday that the Astros sale to Jim Crane will go through no later than the owners meetings, which are scheduled for November 15-16. Included in the ownership change would be the ‘Stros switch to the American League, which, given the release of the preliminary schedule, probably wouldn’t occur until the 2013 season (concurrent with a playoff format change if approved). Those owners meetings are shaping up to be a doozy, aren’t they?
  • Come on Cal, you can’t be 0-for-AT&T Park (Presbyterian doesn’t count, does it?).

I’m working on a post or two for the weekend, so watch this space.

10.13.11
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18 hurt in accident at JLS Amtrak Station

KTVU is reporting tonight about a train accident at the Jack London Square Amtrak Station. That makes sense since KTVU is literally down the street. The accident occurred before 10 PM between a train stopped at the station and another that was slowly entering. I’m confused as to why this occurred since there are three platforms and two tracks for Amtrak at the JLS station; nevertheless, it happened. Yes, Virginia, train safety is nothing to prematurely dismiss. The video below was taken a few years ago. Understand what we’re dealing with here:

From what I can piece together in the timetables, the two trains that collided were the northbound San Joaquin #717 coming from Bakersfield (9:55 arrival) and the northbound Coast Starlight #14 (PDF, 9:42 departure) coming from LA. The fact that they’re both listed as northbound is misleading since the San Joaquin actually loops around western Contra Costa County before stopping at Emeryville and terminating in Oakland. That would explain why the two engines hit each other. Fortunately, the 18 reported injuries were all minor in nature.

Can you imagine the scene if tonight’s accident occurred outside an A’s game at Victory Court right after the final out? This is why real infrastructure changes are needed at Victory Court to accommodate 30,000 coming 82 times a year. Fans are worth the cost.

10.12.11
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Population talk

At The Biz of Baseball, Maury Brown and Thomas Kelsey did a study of population per MLB market (existing and prospective) based on commute times to the home ballpark or site. Read the post and take a look at the table. While it’s a subject we’ve covered here at the local level, this comparison also includes potential relocation candidate markets. The census data used is from 2000, so it isn’t exactly up-to-date, yet it provides a reasonably good picture of what the markets look like.

Population in millions. Data from 2000 Census, compiled by Thomas Kelsey for The Biz of Baseball

Presented in this fashion, it’s interesting that Oakland appears most populous due to its central location relative to the rest of the Bay Area. As one might expect, there’s less population within an hour when the A’s are moved from the Coliseum to Victory Court. Based on population alone, San Jose falls into a mid-market range filled out by the Rockies, Indians, Twins, and Mariners. It’s also far superior to any potential relocation market except for perhaps a mythical northern New Jersey opening. It goes to show why, for various reasons, the A’s are not fully exploiting the Bay Area as they should. Oakland partisans will argue that the central location is best, whereas San Jose partisans will argue that the South Bay is the part of the market not getting exploited. All other factors (economic, demographic) aside, the A’s should be able to thrive in the Bay Area once they get a proper ballpark in which they can compete with the Giants.

10.12.11
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Madlibs Oakland style

In the new season of the FX show Sons of Anarchy, the police department of the fictional town of Charming, California (somewhere in the Central Valley) has been disbanded and replaced by San Joaquin County Sheriffs. We may be about to see something similar soon, only in a much larger place that is all too real: Oakland. The first shoe to drop was the resignation retirement of popular-albeit-embattled Oakland police chief Anthony Batts. Batts has encountered friction since Jean Quan became mayor, and there was a sense that he would be gone at some point, either by taking another Chief’s job (San Jose interviewed him) or something else – in this case, academia (Harvard).

Zennie Abraham (hold on, give it a minute) put up a blog post with his opinion on the subject, and like many, he feels the whole thing is a mess. It wasn’t his words that caught my attention, it was the quotes and musings from others close to the situation. From City Councilperson Jane Brunner:

“…in my opinion, he needs to want to be here. And if there are things that are preventing him from wanting to stay, he needs to be in the room to have that discussion…If he’s going to stay, he needs to work with us as a team.”

Does that kind of rhetoric sound familiar? It should:

“We all got this feeling, everybody who met with him, we all walked away thinking he was just not interested,” said Councilmember Jane Brunner. “When you negotiate with someone, you need a nibble. … There was just no nibble.”

That was Brunner’s comment about Lew Wolff five years ago. The difference between Batts and Wolff? Batts has more control over his future. Next in Zennie’s post is a quote by recently elected city councilperson Libby Schaaf:

I’m extremely disheartened by Chief Batts’ resignation. I can’t blame him for feeling frustrated by this City’s inability to unite around a shared vision and commitment to public safety for Oakland. I hope this experience inspires us all to work harder at finding consensus and providing support to our next Chief. Oakland’s future depends on it.

Now if I change this a little to this (changes italicized):

I’m extremely disheartened by Commissioner Selig’s decision. I can’t blame him for feeling frustrated by this City’s inability to unite around a shared vision and commitment to a ballpark for Oakland. I hope this experience inspires us all to work harder at finding consensus and providing support to our next team. Oakland’s future depends on it.

I say, that looks quite apropos right about now, given the lack of consensus over a site and the complete unknown that is the EIR. That’s not a direct quote from anyone above, but it is a reminder of what rhetoric looks like, even if it comes from a well-intentioned place.

According to Matier and Ross, a federal judge is threatening to put OPD into receivership, which could by default make Oakland the jurisdiction of the Alameda County Sheriff. I hope, for the sake of Oakland citizens, that City Hall can provide the leadership necessary to get OPD through this. In the past I’ve stayed away from the “Oakland has bigger priorities than the A’s” stance, but after seeing all of this develop, frankly, Oakland has bigger priorities than the A’s.

10.10.11
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$230,000,000

After the defeats of both the Yankees and Phillies in the divisional round, the most oft-tweeted fact was that all of the payrolls of the remaining four teams (Detroit, Texas, Milwaukee, St. Louis) were less than $107 million. All four teams can be considered midrange in terms of revenue and payroll, which makes it incredibly refreshing that those are the four left standing, not the mega-money teams of the biggest markets. We can only hope that this continues, if only to start a trend of “right-sizing” payrolls all over baseball in order to optimize efficiency. (Yeah right.)

That culling of the playoff herd was preceded by Lew Wolff’s observation (during the Tuesday interview with Carl Guardino) that should the A’s make the move to the South Bay, the team’s annual revenue could jump to $230-240 million. At first that seemed improbable and to me, perhaps a bit of a lark. Over the weekend I started to dig into the numbers to try to understand if it was possible. Not only is it possible, by the time the A’s finish their first year at Cisco Field, $230 million may be mandatory.

To get a better sense of this, it’s best to look at how MLB’s revenue has grown over the last decade, especially since the first revenue sharing CBA year in 2003. Back then, baseball’s total revenue was a shade under $3.9 billion. Last year was a cool $7 billion. During the last decade, the average annual revenue growth has been 6-7% year over year. That growth slowed with the recession, but it’s realistic to see growth rebounding to at least 4%, which would at least outpace inflation. To that end, I’ve run some projections over the next few years with a 5% growth rate (conservative, I expect Commissioner Selig and the owners to be satisfied with no less than 6% if the corporate customer base is considered healthy enough).

Mean and median revenue figures differ because of the distribution of big market teams with very high payrolls.

It gets even more interesting when the numbers are broken down per team.

Growth will be largely dictated by new media/broadcast deals, as well as additional gate revenue from new venues in Florida and California.

By 2015, the average revenue should be $250-260 million, an amount that would support a payroll of $125 million, almost twice what the A’s payroll was this past season. In effect, projecting to $230 million is merely trying to keep up with the Joneses. It’s what will be required for the A’s to truly minimize their revenue sharing “welfare” status. If the A’s can’t hit the median or mean revenue mark on a somewhat regular basis, it’s probably worth asking if it makes sense for the Bay Area to host two teams.

Rough revenue projections. Figures are for illustration purposes only and are not meant to be exact. Model assumes a continuation of the current 34% straight pool revenue sharing plan.

To get to $230 million in 2015, the A’s ownership group will have to sell the hell out of Cisco Field, including a 50% jump from 2014 to 2015 across the board in terms of local revenue sources. Given the meager results they’re getting while at the Coliseum, this is not an impossible task. (The Twins experienced a similar jump when Target Field opened.) Season sellouts for the first year or two would go a long way towards hitting the target. In 2015, the difference between 24,000 per game and 32,000 per game is over $26 million, let alone whatever additional money they get if the ballpark is larger than 32,000 seats.

When Lew Wolff and Billy Beane talk about planning for the next three years, the reasons for doing so start to crystallize when the numbers are laid out like this. Already, the Earthquakes’ $60 million stadium appears to be moving forward without significant upfront sponsorship commitments, indicating that Wolff is willing to make the cash calls necessary to get the ball rolling there. I’ve heard rumblings of private equity firms perhaps being involved, though it’s hard to see any heavy investment there when the return may not be as great as what such firms may be looking for. After all, it was only two months ago when Wolff said:

(Baseball’s) not an internal rate of return 20% or something like that. You shouldn’t be in this business if you want that.

Getting commitments for Cisco Field should not as difficult as for the Earthquakes stadium; in fact it should be a highly competitive situation. Still, ownership has to be looking at trying to reduce debt service as much as humanly possible, so they must have an internal target of upfront money they’ll need to push forward. Maybe it’s $200 million, maybe more (roughly 40% of the total cost). This is incredibly important because the private stadium loan market could be a complete wildcard over the next couple of years. Keeping debt service manageable doesn’t just help the bottom line, it will surely raise the franchise’s valuation due to its favorable debt position. Keep in mind that Cisco’s $120 million naming rights deal has a present value of $60 million, so the A’s will need much more than that to truly get going.

If Wolff gets a “no” decision from MLB, that leaves Beane with the regular revenue streams to fund the next several seasons’ payroll. It’s easy to see the A’s consistently hovering in that 74-86 win range depending on the team’s health. The team may be good enough to go for the division crown with some luck, and without luck the team would not be bad enough to score a top five first round draft pick. On the other hand, if San Jose is a go the controversial full rebuild could occur, with a key focus being another top ten pick to go along with Michael Choice (2010 #10). Jeffrey’s post from Friday explains the need for any money-challenged team to have a stable of developed top ten picks to serve as franchise cornerstones. This also highlights the importance of reining in debt, as it may be expected that the team run lean should a more aggressively enforced debt rule come into play.

In light of the lessons of Moneyball, it’s crazy to think that the A’s payroll in future seasons could frequently eclipse $100 million. Thanks to a little inflation and a lot of revenue sharing, the A’s are coming along for the ride. That will only take them so far, however. If the A’s are unable to significantly grow their own locally-sourced revenue on a regular basis, they be left behind competitively. With the future threat of multiple teams having $200+ million payrolls, the A’s have no choice. As Brad Pitt’s Beane flippantly says to a defiant Grady Fuson in the film, “Adapt or die.”