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Top 25 Baseball Stories of the Decade — No. 3: Baseball teams become cash cows

LOS ANGELES, CA, WEDNESDAY, MAY 2, 2012 ,aa¨,aa¨ Mark Walter of the Guggenheim Baseball Management g

LOS ANGELES, CA, WEDNESDAY, MAY 2, 2012 ,aa¨,aa¨ Mark Walter of the Guggenheim Baseball Management group, applauds a speech by partner Earvin “Magic” Johnson at a press conference introducing them as new Dodgers owners in center field at Dodger Stadium. (Photo by Robert Gauthier/Los Angeles Times via Getty Images)

Los Angeles Times via Getty Imag

We’re a few short days away from the dawn of the 2020s. So, instead of counting down the Top 25 stories of the year, we’re taking a look at the top 25 baseball stories of the past decade.

Some of them took place on the field, some of them off the field and some of them were more akin to tabloid drama. No matter where the story broke, however, these were the stories baseball fans were talking about most over the past ten years.

Next up: number 3: Baseball Teams Become Cash Cows

It’s been a fantastic decade in which to own a baseball team.

It was recently reported that Major League Baseball set a new revenue record in 2019, raking in $10.7 Billion. That’s up from $10.3 billion the year before and up from a mere $6.6 billion a decade ago. Indeed, 2019 marked the 17th year in a row that MLB has broken its own revenue record.

Meanwhile, every single team in baseball is estimated to be worth at least a billion dollars, with the Yankees topping the list at something north of $4 billion. In 2009 only the Yankees were estimated to be worth a billion dollars, with teams near the bottom of those rankings valued at less than $300 million. By Forbes’ estimates, teams have appreciated by about 377%.

Given that those 17 years of revenue escalation include The Great Recession, and given that those ever-increasing franchise values include teams run by brilliant business minds and tacticians like, um, Frank McCourt and Jeff Loria, it’s probably safe to say that, from a business perspective, baseball has become basically idiot-proof and that owning a baseball team is a license to print money.

But the idiots are, increasingly, getting out of the business in favor of a very different breed of team owner which may, in turn, change the very nature of baseball going forward.

To be clear, this is not a lament about “Baseball Men” -- however one wants to define that slippery term -- no longer owning baseball teams. That ship left the harbor a long time ago. Indeed, a guy who made his bones building actual ships -- a fellow by the name of Steinbrenner -- bought the Yankees 46 years ago. The last baseball owner who actually made his true living by owning a baseball team was probably the Twins’ Calvin Griffith, who got out of the business in 1984. As such, the notion of rich men from other walks of life -- be it used cars, shipbuilding, cable TV, real estate, or what have you -- buying baseball teams as their ego-stoking playthings is a many decades-old phenomenon and not one I’m worried about at the moment.

But there was a distinct change in the 2010s. The rich men who have bought into the ownership club in this past decade have, increasingly, come from financial backgrounds or investment groups. And, rather than playthings, they’ve purchased their teams, it would seem, as primarily financial plays as opposed to ego trips. Indeed, no fewer than ten current ownership groups -- and I may be missing one or two -- either made their fortunes in the financial services industry or inherited money from someone who did.

The newest on the list: hedge fund billionaire Steven Cohen, a longtime minority owner, who just entered into an agreement to buy out the current Mets owners over the next couple of years. Also new this past decade are Bruce Sherman of the Miami Marlins, Mark Walter of the Dodgers, and Ray Davis of the Rangers. This past year the Giants, who have long been owned by a multi-headed investment group, named Gregory Johnson their control person. He’s the son of the team’s largest single equity holder, Charles Johnson, who made his billions in finance, and Gregory has followed in those footsteps. They join longer-standing owners with financial services backgrounds like John Henry of the Red Sox, Mark Attanasio of the Brewers, Bill DeWitt of the Cardinals, and Stuart Sternberg of the Rays.

These owners are a savvy lot. They’ve been watching those revenues and team valuations rise. They’re aware that baseball, unlike any other business, is exempt from antitrust laws. They’re well aware that, while they might have to pay to build a factory or a distribution center if they invest in a different kind of business, they can usually be assured that taxpayers and local governments will subsidize their capital and facility investments in baseball. It’s really appealing. If you have some money to park it’s hard to find a better parking place than in a major league baseball team.

And there may be many more looking for parking in the near future.

A recent change to Major League Baseball’s ownership rules will allow investment funds -- private equity -- to acquire minority stakes in ball clubs. The rule change is, primarily, a vehicle to allow current owners to get substantial cash infusions and to allow minority owners looking to cash out their holdings to capitalize on soaring MLB team valuations. For the investment funds it’s just a financial move. A way to get in on the cash cows that are major league franchises.

When this rule was changed, some people worried that it might create problems down the road in which private equity could begin to exert the sort of power over baseball that it has in other industries, making demands for returns on their investment which require ownership to drift away from its core business and do things which serve the investors first and foremost. That baseball teams will, increasingly, not be thinking primarily of baseball when they go about their business. Things like jacking up ticket prices and slashing payroll even more than they’ve already done. Things like building fees into even more transactions and experiences than they already have. Making baseball games and the experience of being a baseball fan even more about extracting money from fans and giving it to billionaires than it already is.

Others say that’s needless worrying:

“Leagues want consistency and owners who are in it for the love of sports, offering benefits to the community and supporting goals of the league,” Phil de Picciotto, president of sports marketing agency Octagon, recently told Institutional Investor. “None of these are private equity qualities.”

Based on what else has happened over the past decade, however, that seems like a pretty naive take to me.

Those record revenues we talked about above have come as attendance has declined. They have come as player salaries are falling. They have come as a startling number of teams seem to have very little interest in improving themselves or winning baseball games in the near or even the mid term. They have come on the back of sources of income that have little or no connection to clubs putting entertaining and competitive baseball teams on the field and, in some cases, have no connection to the playing of actual baseball games at all. They have come amidst -- indeed, as a result -- of an increasing disconnect between that which makes money and that which provides competitive excitement and fan interest. That “love of sports” and those “benefits to the community and supporting goals of the league” that guy mentioned above -- the things we came to expect when ego-driven guys like George Steinbrenner and Ted Turner owned teams and happily threw money after championships -- are, in fact, less important to baseball, financially, than they have ever been.

So, if you own a team and you are getting billions from your long-term TV deals, your real estate investments, and your corporate sponsorships over the next couple of decades -- and billions more in random windfalls from gambling, internet side businesses, and periodic cash infusions from private equity -- why put any money into your team? Why pay for the best ballplayers? Why try to compete? To do so is to take money out of your own pocket for very little financial reward, relatively speaking. And, if you have an aggressive private equity firm or hedge fund with a stake in your business, you may be risking a fight with a well-heeled and well-lawyered minority investor who couldn’t care less about anything that is not a return on their investment. In short: given the changing face of baseball ownership, a trend which has already taken hold in the 2010s stands a pretty decent chance of intensifying in the coming years.

To be sure, those old owners, both the old school Baseball Men and the Steinbrenner/Turner types who followed them, were not a great lot. Dozens of books have been written about their greed, their cheapness, their racism, their cruelty and, in some cases, their criminality. I don’t miss them. I’d guess that most of today’s current lot of owners are better people, on the whole, than those Lords of the Realm were.

But those Lords of the Realm did, for the most part, consider themselves to be in the baseball business and, for the most part, desired to win baseball games. There were always exceptions -- cheap owners who were happy to finish in the second division if they were profitable -- but there were financial risks to losing that don’t exist today, providing for at least some amount of correction. And, of course, there were a pretty decent number of owners who simply wanted to win because what in the hell is the point of owning a team if you don’t win once in a while?

Baseball teams have become cash cows on a level no one could’ve imagined even a decade ago. The men who own teams now are less interested in baseball than they are in using baseball as but one part of a well-diversified portfolio. As result, that whole deal seems to be breaking down in a number of ways.

As such, it’s not hard to look into the future and imagine situations in which it begins to imperil the cow itself.


No. 4: Bud Selig Retires, Rob Manfred takes over
No. 5: The Tanking Epidemic
No. 6: The Deaths of Young Players
No. 7: Miguel Cabrera Wins the Triple Crown
No. 8: The Biogenesis Scandal
No. 9: Bullpen Mania Takes Over the Game
No. 10: The Rise of the Young Player
No. 11: Baseball Goes From Deadball To Juiced Ball
No. 12: Baseball Begins Rewriting the Rulebook
No. 13: Baseball Adds a Second Wild Card
No. 14: Albert Pujols Signs With the Angels
No. 15: Baseball Continues a Remarkable Run of Labor Peace
No. 16: Baseball implements a domestic violence policy
No. 17: Cardinals Employee Hacks Astros’ Database
No. 18: Frank and Jamie McCourt Bankrupt the Dodgers
No. 19: Baseball Embraces Gambling
No. 20: The Hall of Fame Logjam
No. 21: The Bat-flippers Win the Battle Over the Unwritten Rules
No. 22: Astros switch leagues
No. 23: The Strasburg Shutdown
No. 24: Chicken and Beer
No. 25: All-Star Game no longer counts
Honorable mention: Astros Sign Stealing Scandal

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