Mar
03

Appreciating a dedicated owner

By

While Yankee blogs were all atwitter this weekend discussing the Steinbrenner brothers article in this quarter’s edition of The Times’ Play magazine, a different story with New York parallels caught my eye.

Joe Nocera, one of the paper’s top business columnists, explores the idea of the Bad Owner. Using two basketball owners — our Knicks’ own James Dolan and the Los Angeles Clippers owners Donald Sterling — as examples, Nocera explores how sports franchise owners get rich without really trying. Outside of real estate, he says, it really is the easiest way to free money.

“To own a franchise in any of the three major sports — football, baseball or basketball — is to enter a club in which it is nearly impossible to come away a financial loser,” he writes.

Nocera’s premise is a sound one: Each sports league has a limited number of franchises and significant barriers to entry. Namely, an interested buyer or group of investors has to come up with a lot of money and find a franchise owner who wants to cash out. Meanwhile, league officials — whether David Stern is behind the helm or Bud Selig is steering the ship — are always trying to improve the league’s image, and teams will rise to the top.

More important to a team’s bottom line than even success is geography and media market. “Certainly a good owner can do things that add value to a franchise. But far more important is whether the team is in a big media market and plays in a stadium with modern, high-priced luxury boxes,” Nocera writes.

Sterling bought the Clippers for $13.5 million in 1984. The team has been terrible since then, and now Nocera figures Sterling could command in excess of $400 million. In New York, the value of the Knicks continues to increase, and as the team struggles and more potential investors make noises about buying the team, the value of the franchise will climb even further. They don’t win on the court, but they win where it counts for the Dolans.

Baseball, of course, has its fair share of bad owners. Some — Peter Angelos comes to mind — seemingly want to win but are too meddlesome; others — Nocera cites Carl Pohlad of the Twins — don’t care to spend an iota of their own copious amounts of money to churn a better product on the field. Yet, when Carl Pohlad or his heirs decide to sell the Twins, they will more than recoup their initial $36 million investment in the team. Why bother working to win if simply owning the team is an obscene money-maker?

Enter the Steinbrenners. As Jonathan Mahler’s article notes, the Yankees have indeed been an obscene money-making venture just like any sports franchise. King George bought the team in 1973 for a pittance: approximately $10 million. Now, the team is valued at around $1 billion with a $300 million cable franchise a part of its global entertainment network. With a new stadium with those high-priced luxury suites in the world’s biggest media market, the Yankees are a money-printing machine.

As tough as it is to embrace the Steinbrenners, then, as tough as it is to overlook George’s shortcomings and his blatantly illegal activities, it’s tough to ignore the impact the family has had on the team. The Steinbrenners have a burning desire to win; mostly, as Mahler intimates, it stems from some tough love issues the men in the family seem to have with their respective fathers.

No matter though; the fans benefit from the owners’ desire to win. The Yanks would still be a very profitable franchise if the team was merely okay. The team would still be worth nearly $1 billion if they won every few years instead of every year.

In a way though, the Yankees are in a unique position in the game. Because they are so successful both on the field and on paper, because they have owners who are willing to invest and spend to win, they have emerged as the leader in baseball. For better or worse, the Yankees, through their revenue sharing contributions, are funding their opponents. They set the bar for player salaries; they set the bar for coaching salaries; they, much to the dismay of everyone else in the game, can set the agenda.

But as I look south from Yankee Stadium to Madison Square Garden and watch the 18-42 Knicks slump away another season, I wouldn’t want it any other way in the Bronx.

Categories : Front Office

14 Comments»

  1. John D says:

    Being old enough to remember how tough it was to be either a Giants or Yankees fan in the late 60′s early 70′s can’t help but love, with all the faults, the Boss Family’s ownership.

  2. Rob says:

    That’s a fantastic summary.

    We’ve come to appreciate the Boss, but I really think his sons will be even better caretakers. This off-season they’ve already shown a reasoned discipline he never had even as they invested heavily in the draft. Long live the Steinbrenners!

  3. LiveFromNewYork says:

    The worst I think are the owners like Pohlad, who refuses to spend the revenue sharing on the team. To me, that should be illegal.

    The Dolans are just horrible owners who should be run out of this great city. The Steinbrenners, for all their faults, are about winning. And that’s good enough for me.

  4. Alvaro says:

    Hank talks too much and much of what comes out his mouth is embarrassing. Thus far it’s only been words and has had no impact on personnel but at some point he’ll want to make a major decision that would be better left to baseball people. We’ll see what happens then. It’s hard for me to see Cashman signing on for another stint given Hank’s insistance on letting everyone know who’s in charge.

    The problem with Hank is that he doesn’t just wnt to win – he wants to get the credit for it.

    • chris fowler says:

      feel free for blasting him for what he’s done but lets not blast him for what you speculate he might do.

  5. Mike P says:

    Steinbrenner’s pretty good for the Yankees, though he has had his fair share of terrible meddling.

    That doesn’t detract from the fact he and his sons are assholes.

  6. Rob says:

    Sorry, big Stein was a big asshole to many, many people. But I like the kids. They treat their employees well and they’re funny as shit.

  7. Rich says:

    The problem with Little Dolan is that MSG is a relatively small part of Cablevision’s corporate empire which seems to have diminished any urgency to win. In addition, unlike Steinbrenner, he is an offensively stupid person, who may not have been qualified to sell pencils on the subway if his father hadn’t been born before him. I have to acknowledge, however, that he has been willing to spend big bucks, but he has lacked what is perhaps the most important quality for any business manager, the ability to hire smart people.

    George, OTOH, despite all his public psychodramas, has been a visionary through large portions of his tenure, particularly, in the ’70s, when he smartly exploited free agent system in the aftermath of the Messersmith decision. Obviously, the ’80s were a down period in terms of championships, but at least the Yankees won in the regular season. While it’s true that his suspension in the early ’90s may have yielded the unintended consequence of saving both the franchise and his legacy, George still deserves credit for hiring the people who recommended forming the YES network, which has transformed the franchise into a global conglomerate that will provide the financial resources to keep the Yankees on top going forward, if Hank and Hal are shrewd enough to rely on smart baseball people to prudently spend it.

    • Casper says:

      James Dolan does not run Cablevision’s corporate empire. He runs the Garden. Pretty sure I read somewhere – someone please correct me if I’m wrong – that Charles Dolan put James in charge of the Garden (and it’s teams) to keep him away from the day-to-day operation of Cablevision, as in Charles’ opinion James is not up to the task.

      So, really, owning the Knicks and the Rangers is James’ job. (Well, that and his music career.) Makes his stewardship of the Garden look even worse. Failure at the Garden hasn’t been about a diminished urgency to win due to Cablevision’s other business interests.

      • Rich says:

        I didn’t address the issue of Dolan’s role at Cablevision, but according to this 2005 article, it’s not insignificant:

        Late last year, James Dolan, the CEO of Cablevision and corporate overlord of the Knicks, Rangers, and Madison Square Garden, had his hands full battling Mayor Bloomberg’s plan for a football stadium when he was confronted with an even tougher task. It was probably the hardest thing he’d ever faced in his professional life. He had to personally tell his 78-year-old father, the estimable Charles Dolan, the company founder and chairman and a pioneer of the cable-television business, that as CEO, he could no longer support his beloved satellite offshoot and that it would have to be sold or terminated.

        [...]

        Throughout Jim’s tenure as CEO, there has been rampant speculation about who was really running the show. Especially early on, few believed that Jim, who had a history of substance abuse, a hair-trigger temper, and a taste for leisure-class pursuits like competitive yachting, was anything more than his father’s compliant proxy. In early January, when I asked Wall Street analysts who was really in day-to-day control of the company, the father or the son, few could answer with any certainty. “The problem is, we don’t really know,” said Richard Greenfield of Fulcrum Global Partners.

        • Casper says:

          I clearly don’t know who runs Cablevision – I’m not really arguing with your premise here, but with the evidence you’re relying on. That excerpt does not say that James Dolan runs Cablevision. It says that nobody believed he did prior to 2005 because of his “history of substance abuse, a hair-trigger temper, and a taste for leisure-class pursuits like competitive yachting,” and that he was believed to be nothing more than “his father’s compliant proxy.” Apparently in 2005 or possibly beyond, there was/has been some question about who runs Cablevision. It does not say his role at Cablevision is “not insignificant.” In my opinion it says that prior to 2005 he was believed to not have a substantial role at Cablevision (aside from running the Garden, one of Cablevision’s holdings), and that in 2005 there was some question as to his role within the organization.

  8. Whitey14 says:

    Excellent piece Ben, I couldn’t agree with it more.

    Other owners throughout baseball in particular have had the option to spend more money if they wished and have declined to do so. I’m not aware of any other industry that forces it’s business owners to support their competition and I don’t support the practice in baseball. Revenue Sharing is disgusting when owners like those in Florida and Minnesota constantly put the RS money into their wallets, not into their teams. I believe a Salary Floor would help baseball moreso than a Salary Cap.

  9. Casper says:

    Feel like I’m always the negative voice when the Steinbrenners are the topic of conversation, but here goes… I agree with what I read to be the consensus here – that the Steinbrenners are certainly preferable over owners who do not invest (or reinvest) into their teams (and who are seemingly motivated to make money, exclusive of whether their team wins on the field). I’d argue, however, that being motivated to win and spending money isn’t enough. Just because a lot of owners are seemingly not motivated to win doesn’t mean that being motivated to win makes someone a good owner, in my eyes. That should be a foregone conclusion. In my opinion, the way the owners who are not motivated to win operate is so far-removed from the way those owners SHOULD be acting, that to compare owner A (who spends money and wants to win) to owner B (who does neither) and declare that owner A, on the strength of that comparison, is an ideal owner, is foolish. I think you think about what a good owner should be, without considering the faults or merits of actual owners, and then you see if that’s what you have in reality.

    Before someone jumps all over me here… I’m not saying the Steinbrenners are Satan or that I’d rather have Carl Pohlad running this team. I’m psyched that we have ownership that is driven to win and will invest whatever it has to in its team to make success possible. I just don’t think they’re necessarily the ideal owners based on those criteria alone.

  10. [...] spend way too much time with baseball box scores – Dave & Aziz Nekoukar – Pride of the Yankees Appreciating a dedicated owner – Ben K. – River Ave. [...]

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