Jul
19

The post-George still-Steinbrenner Era begins

By

Hal Steinbrenner watches over his New York Yankees during yesterday's win over Tampa. Credit: AP Photo/Bill Kostroun

George Steinbrenner always had impeccable timing. He knew when to hire and fire managers in such a way that would generate the most publicity for the Yankees. He knew which free agents his team should have; he knew when his incendiary statements would garner the most outrageous coverage on New York’s back pages. And whether he realized it or not, he knew when to die.

As callous as that sounds, George Steinbrenner’s death could not have come during a better year for the Yankees than in 2010 for this is the year the estate tax has lapsed. Prior to 2010, those with estates of over $3.5 million were taxed at a rate of 45 percent. After 2010, those with estates over $1 million will be taxed at a rate of 55 percent. This year, though, Congress allowed the estate tax to go uncollected, and although some Senators wish to restore the tax retroactively to January 1, for now the Yankees are off the hook.

For the post-George Era, it’s hard to understate the impact this good luck has on the Yankees. Estimates from Forbes Magazine pegged Steinbrenner’s worth at over $1 billion, and the Yankee heirs would have had to liquidate some of his holdings to raise the money for a $450-$500 million government bill. Despite the value of the Yankees, the family apparently doesn’t have that much cash on hand, and the Steinbrenners may have had to sell a large chunk of the team to do so.

The point though is moot. As Forbes’ William Barrett wrote, the family has spent a lot of lately working to avoid that reality. The team is controlled by a variety of holding companies of which the various Steinbrenner children are the controlling shareholders. Major League Baseball officially recognized Hank and Hal Steinbrenner as the team’s day-to-day operations heads in 2008, a move made to protect the family’s control over the club. The family, says the Associated Press, wants to avoid falling into the same trap that plagued the Wrigley’s when then-Cubs owner P.K. Wrigley died in 1977.

But questions surrounding club ownership remain. Do the Steinbrenners want to cash in on their billion-dollar gem? Do the sons want to be as involved as the father was? So far, the family has given every indication that they will not be selling the Yankees, as Joel Sherman wrote on Friday. The Post scribe, well-connected in the upper echelons of the Yankee Front Office, offers up this revealing take about life after George initially stepped down:

Hank Steinbrenner — think a combination of hot-headed Sonny and underwhelming Fredo — briefly oversaw baseball operations after the 2007 season. He quickly burned out, not fully understanding the time and scrutiny that came with the job, especially if you were going to try to be Boss Jr. with loud proclamations.

Hal stepped into the breach, though it felt more out of responsibility to the family business than love for the job. So there was an assumption that whenever George died, so to would the Steinbrenner obligation to owning the franchise. It was not hard to imagine a frenzy of the super-rich bidding to buy the Yankees after George’s death.

Reserved and protective of his privacy, Hal projected the wrong fit for the job. Except Hal did a funny thing: He changed the way the Yankees Boss operates. Over the past few years, he learned he actually could run the Yankees under the radar. He has managed leadership without bluster or much inspection of his private life. He rarely speaks in public, offering almost none of the state of the Yankees messages that his father could deliver multiple times a day, especially in bad times. Does Hal burn to run the Yankees like his father? No. However, he has learned to like this job, and — as it turns out — the Yankees are in the Steinbrenner family blood now; George’s four children all having grown up in pinstripes.

Randy Levine, current team president, succinctly summed up the family’s thinking. “They have no plans to sell. There are no succession issues,” he said to Sherman.

Hal is, as Sherman puts it, the “cautious” version of George Steinbrenner. Whereas George’s brashness made baseball popular and rich off the field, Hal plans to own the game on the field. He’s a quiet and collected individual who knows when to delegate and knows when to step in. He’s willing to support a high-payroll team and understands that victories equals dollars in the world where Yankees and the YES Network dominate New York.

In one of the better business columns written about the Yankees post-George, Joe Nocera of The Times explains how George got lucky. The Yankees became so valuable because of their preeminent place in the country’s number one media market and because they started winning at the right time in the nation’s economic path. George happened to be the guy holding the reins, and although he made a lot of good decisions, he made some bad ones too. He didn’t sell when the chance arrived, and good fortune smiled down upon him. In a smaller market — had he bought the Indians as he so desired — George Steinbrenner might just be another irascible owner lost to the pages of baseball business history.

With a history of sports ownership in tow, the next generation of Steinbrenners will look to build on their wealth through wise investments. Luck always plays a part of the capitalist market, but so too does diversifying and smart management. According to one British tabloid, the family may bid £450 million on the Totteham Hotspurs with Hank taking his turn atop that Premier League team. Baseball owners have a mixed track record within the EPL, but it’s a start. The club reportedly has no interest in buying into the NFL, NBA or NHL.

For now, fans should see nothing new. The Steinbrenner family will invest and try to win those championships. The looming axe won’t be there to fall, but the pressures of a high payroll will remain. It is, after all, always beneficial to be in the business of winning. That’s what George was, and that is what his children should be.

Categories : Front Office

52 Comments»

  1. Tampa Yankee says:

    Randy Levine, current team president, succinctly summed up the family’s thinking. “They have no plans to sell. There are no succession issues,” he said to Sherman.

    I heard rumors they were going to sell the team to the Dolans though.

  2. Ross in Jersey says:

    It’s scary (in a good way) to think how the Yankees might be if Hal projects to be a more reserved, intelligent version of George. Big free agents, along with a strong farm system? Making trades, but being smart about not overpaying?

    Everyone knows the Yankees are the richest. But if Hal turns them into one of the smartest? The “Yankees are bad for baseball” murmurs will get a lot louder.

  3. losjanks says:

    I realize I’m picking nits here, but the EPL team is usually referred to as “Tottenham Hotspur” not “The Tottenham Hotspurs”. Please don’t ask me to explain.

  4. A.D. says:

    The club reportedly has no interest in buying into the NFL, NBA or NHL.

    Shame, would be nice to see someone sane own the Knicks.

  5. Brien Jackson says:

    Even if the estate tax gets applied retroactively, it shouldn’t make that big of a difference for ownership, as there’s a fairly long window to pay the tax as long as it remains in the family. Somewhere around 15 years, I believe.

    • CS Yankee says:

      $400-500 M$ is still big coin…

      but I believe that all the ultra-wealthy use the living will trusts that go into affect (fully funded) once they pass away whereas the family are paid “managers” for the trust. Heck Bill Gates estate won’t pay nothing but some lawyer fees when he passes.

      However, i thought George was still married and estate taxes wouldn’t kick in until after the spouse is deceased.

      • Sweet Dick Willie says:

        George was married when he died. However, the unlimited marital deduction to which you refer applies only to assets left to the surviving spouse.

        Assets left to children receive no such favorable tax treatment. So any assets left to Hal, Hank, Jessica & Jennifer would be subject to the estate tax, if there was one, which there isn’t, but there might (soon) be (retroactively).

        • CS Yankee says:

          I would bet a dollar to a donut that a trust is in place to avoid any estate taxes.

          The spouse would have control of all assets unless she previously signed off on his will affecting the children (getting some transfered to the heirs).

          Courts protect the spouse interests over the kids (see Torri Spelling).

  6. steve s says:

    One interesting aspect of how Hal and family will handle things going forward is to monitor how much influence Reggie Jackson will continue to have with the family. Reggie still was one of the few members of whatever was left of George’s inner circle up to the end. Reggie has also previously put together well-financed consortiums to purchase other major league teams (most notably the A’s). It wouldn’t surprise me that if the kids decide to sell within the next 5 years Reggie will be prominently involved with the acquisition group.

    • It wouldn’t surprise me that if the kids decide to sell within the next 5 years Reggie will be prominently involved with the acquisition group.

      I hope Reggie’s not waiting for the kids to sell, because they’re not going to. There’s a far greater chance that the kids tell Reggie to go ahead and pursue ownership opportunities elsewhere and wish him godspeed.

    • Andy In Sunny Daytona says:

      I think the 1998 Yankees, as a group, should buy the team. Everyone would be so happy.

      • vin says:

        I’d love to see Homer Bush have a bigger place in the day to day operation of the New York Yankees. He was such an instrumental player for the team – stolen bases, runs scored, extremely high batting average. The man was a legend, and needs to be at the forefront of the organization.

        /Kay’d

  7. Rafael says:

    so, how long until someone start to say that George is not dead and he’s just faking it to avoid this tax?

  8. Reggie C. says:

    Are there any Russian oligarchs sitting in 1 billion euros who might make a run at buying out the Steinbrenners?

    Imagine Vodka shooters instead of Budweiser being given out in the stands!

  9. Poopy Pants says:

    Hopefully, they are students of history and know to butt out of baseball operations.

  10. phughesisgod says:

    Thankfully, the team will stay in Steinbrenner hands. They are the only owners in sports that seem to have the win at all costs mentality. All owners of sports teams really would be wise to adhere to George’s quote about winning. “Winning is the most important thing in my life, after breathing. Breathing first, winning second.”

  11. Plank says:

    The city of New York just gave the Yankees hundreds of millions of dollars to build a new stadium. The Steinbrenners are using the money they saved to buy a soccer team.

    Democracy in action.

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