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April 30, 2003

Prospectus Today

Owning Up to the Problem

by Joe Sheehan

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One of the baseball stories I managed to catch while on my vacation was Bud Selig's announcement that he would not pursue a new contract after his current one expires. This means that his tenure as commissioner--one that began with him taking the job on an interim basis a decade ago--would end in December 2006.

It's no secret that I've disagreed with how Selig has run the game, in particular his anti-marketing strategies in pursuit of a favorable labor agreement. The short-term gain of a Collective Bargaining Agreement that benefited management wasn't worth the years of damage Selig and his cohort did with their relentless bashing of what was a healthy industry. Declines in attendance, TV ratings and revenue, as well as fiascoes like contraction and the Expos situation, can largely be traced to Selig's efforts to convince people that baseball wasn't viable, wasn't competitive, and wasn't worth their time.

With a new CBA in place, though, and Selig setting his own exit date, it's time to look forward and see what can be done between now and the end of 2006. What positive steps can and should be taken to ensure that Selig leaves the game in better shape than it's in right now? Every now and then this year, I'm going to pick an aspect of the game and lay out what I think should be done to improve it. While I'll isolate one level of the game in each column, the ideas I'm presenting need to be viewed as a whole, as one big plan to get baseball where it needs to be.

I'll start with the game's ownership, because I think everything grows from that. Over the past decade, baseball has brought in a number of owners, both individual and corporate, that have had a net negative effect on the game. From grandstanding over taxpayer-funded ballparks and inflated claims of losses, to taking short-term approaches in a long-term industry, the most recent set of "lords of the realm" have been a disaster.

The bad owners can be loosely separated into two categories: corporate and Seligian. Disney, Fox/News Corp, Rogers Communications and Time Warner came into the game not because they really wanted to run baseball teams, but because those baseball teams served a larger media goal. (In Time Warner's case, it was more like the team was part of the package. But I digress.) With those goals reached, all three are on their way out of the game, although it may take some time to sever the Braves from AOL Time Warner.

The other category of owners are ones such as David Glass, John Henry and Jeffrey Loria--ones who came into their teams because of their fealty to Bud Selig and his strategies. Selig showed no remorse in scotching the efforts of a Miles Prentice or a Charles Dolan to make sure he got his loyalist in place. Remember Donald Watkins, who had the temerity to suggest that he'd privately finance a new ballpark for the Twins if he bought them? He hasn't been heard from since. The owners in place were wonderful for the anti-marketing campaign and the labor battle, but they've done little to build loyalty to baseball in their markets.

If baseball is going to grow, it has to do more than wait for America to realize that the NFL is the professional sports equivalent of rolling a 32-sided die. It has to bring in people who want to be baseball owners, who want to do the one thing that brings people to the ballpark over and over again: win. It has to stop recruiting owners who will run their teams as just another division of a company, and who will scream bloody murder about a $5 million book loss in one year. Owning a baseball team is a privilege, and it's one that comes with any number of benefits that accrue not to the team, but to the owner himself. It's not like owning the corner grocery, and baseball needs owners who understand that and embrace that (not to mention a media willing to point that out once in a while).

To that end, I propose the following steps to increase the quality of baseball ownership. If you start with 30 men who want to own baseball teams for more than the tax advantages, you can do wondrous things.

  • End corporate ownership. Three of the game's corporate owners will probably be out of baseball by the end of next season. It's clear that Fox and Disney used baseball, and that Time Warner never wanted any part of it. While baseball envisioned marketing synergies, all they really got was the ability to hide revenue. That was valuable, but in the larger scheme of things, not enough to justify the presence of three apathetic ownership groups.

    The experience should teach baseball that a team can't function as a division of a large organization. It's a unique industry, and it doesn't do well if it has to answer to shareholders or corporate boards, because the primary goal of a baseball team is winning, not profit. Baseball should reject all future efforts by corporations to purchase teams, and hasten the exit of the current four corporate owners.

  • Recruit owners who want to win. The problem with baseball isn't George Steinbrenner. It's that there's only one George Steinbrenner. While the focus tends to be on his willingness to spend money, what is just as important is that he holds his people accountable for their work product, and expects them to be as devoted to the goal of winning as he is.

    That makes him the game's best owner, and means that the Yankees start every season with a competitive advantage that goes well beyond their revenue.

    The current MLB mindset is that a culture that embraces owners who put winning first would simply lead to escalating salaries, which is anathema to the current administration. Putting restraints on how intensely owners can compete with one another to win is one of those NFL ideas that MLB has embraced to its detriment, because it has focused only on the potential for bidding wars over talent.

    Competition, real competition, would bring so much more. An owner who wants to win is going to look for edges in management, in development, in marketing, in every area of his operation. That will mean pushing his people to embrace new ideas; it will extend what we're already seeing in some places, the application of real-world business principles to the administration of baseball teams. That's going to have as much, maybe more, effect on the salary structure as an increase in the number of owners who want to pay market price for Vladimir Guerrero.

    MLB needs to actively recruit the next generation of Mark Cubans, because a league with 30 owners that enthusiastic about the game, and that dedicated to winning, would be the most competitive in the world.

  • Embrace private funding of stadia. In sketching out this column, I believed that this would be an important point going forward. While baseball likes to downplay its attendance issues by talking about the war and the economy, it does so while at the same time accepting billions of dollars in public subsidies for new ballparks, and asking for more.

    However, looking around, I see that come Opening Day 2004, just 12 teams will be playing in ballparks built before 1989, so perhaps this is an issue that's behind us.

    Still, I don't think the game can have it both ways. Given what we're seeing in the economy at the local and state level, taking a stand that the national game will no longer be a part of community extortion would be a huge public-relations step at a time when the game could use the help. Public funding for infrastructure would be one thing, but new ballparks should largely be built using private funds. MLB should take the lead in ending 50 years of holding cities and citizens hostage to better the lives of rich men and the corporations they lead.

  • Extract 10-year commitments. The churning of baseball owners has been a huge problem, and it's motivated in part by the tax laws that allow a new owner five years of paper deductions. A real solution would involve closing the loophole that calls player contracts an "asset," but with that unlikely, the next-best solution is to require new owners to hold their teams for 10 years. This would end the practice of holding a team through the depreciation period, then looking for a new buyer.

    Beyond that, forcing a 10-year commitment would encourage new owners to think about the long term in their practices. We've seen owners come in, spend a lot of money, fail, and immediately overreact and slash salaries, starting a cycle of failure, all within the five-year window covered by the depreciation rules. An owner who knows he has to stick around to deal with his mistakes will be more likely to consider his decisions.

    Mostly what this would do is shake out the dilettantes. Baseball has 30 franchises, and I have no doubt in my mind that there are easily 10 times that number of people who have the resources and the willingness to own a team, and to do it for the right reasons. These people will gladly sign on for 10 years--hoping it becomes a lifetime--and once you have owners with two feet in the room, you can build something.

Baseball is the greatest game ever invented. It can once again be the most prominent sport in the United States, and that starts with getting people and policies in place that can make it happen.

Joe Sheehan is an author of Baseball Prospectus. 
Click here to see Joe's other articles. You can contact Joe by clicking here

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