Archive for Business of Baseball
The Yankees unveiled their 2011 ticket prices this afternoon, and while most prices will not go up, the team announced increases for six price points including the bleachers. While most tickets that are witnessing an increase will go up by $5, the $12 bleacher seats will now cost $15 for both season-ticket packages and single-game sales. The $5 obstructed-view seats will remain as such, and the Yankees are not cutting any ticket prices this year.
Yankees’ COO Lonn Trost spoke this afternoon with Mike Francesa about the rationale behind the ticket increases, and he explained how the team used the secondary market to gauge demand. Since the Yanks routinely saw bleacher seats sold at 175 percent mark-ups, the team determined they could raise the prices and opted for a 25-percent mark-up. The 2011 ticket prices are listed at the Yankees’ website, and I’ll try to summarize the key increases.
While 54 percent of Yankee Stadium seats will still be priced at $50 or less, a good portion of the seats in the lower levels will see increases. In the Main Level, Sections 205-209 and 231-234, prices are increasing by $5 from $45 to $50 for a full season and $50 to $55 for partial ticket holders. Seats in sections 210-212 and 228-230 will rise from $60-$65 for full packages, but partials will stay at $70. Main level seats in sections 213-214b and 226-227b will increase from $75 to $80.
At the field level, rows 12-30 in sections 116-124 will increase to $260 full plan holders. Game-day ticket prices for these seats will increase from $300 to $325. Season tickets for the field level, rows 15-30 in sections 112-113 and 127b-128 and rows 1-14 in sections 108-11 and 129-131 will now cost $110 for a full plan holders and $115 for partial plan holders. Rows 15-30 in sections 108-111 and 129-131 will now cost $80 for full plans.
In addition to the prices that are going up, Trost mentioned that the team will soon be selling ticket packages for multiple seasons that are locked in at the purchase price. For example, fans who buy tickets for three years at the 2011 price point won’t have to pay for price increases in the years that covered by the initial purchase contract.
Of course, no one wants to see ticket prices increase, but Trost’s claims bear out the increase. He says that the Yanks are constantly playing to 95 percent capacity, and even when the seats appear empty on TV, the tickets have been sold. Either fans are no-shows — which happens a small percentage of the time — or they are wandering the stadium. The Yankee Museum, Trost said, has been a very popular in-game destination, and the various bars and restaurants have drawn fans away from their seats as well.
Essentially, the increases are a prime example of ticket economics at work. The Yankees might be increasing their payroll and know that the secondary market supports higher prices. The team wants to and can capture that revenue. Thus, many people will be paying more for their tickets come 2011.
Yanks “expecting a sell-out” for Saturday’s Army/Notre Dame game
During his interview with Francesa, Trost spoke about the debut of college football at Yankee Stadium. Because the new stadium cost so much to build, the Yankees need it to become a year-round venue, and Trost has spent a lot of time working to ensure a smooth game on Saturday. If ticket sales are any indication, he will succeed.
The team has sold 51,000 tickets for the game, and while a few seats remain, the club is “expecting a sell-out.” Astute readers will note that Yankee Stadium’s baseball capacity is under that 51,000 mark, and Trost says they’ve added seats by installing temporary bleachers in the bullpens and on the field. For those heading to the game, Metro-North is running extra trains as well.
We reported last week on the impending sale of the Scranton/Wilkes-Barre AAA franchise to the Yankees and Mandalay Bay. At the time, the details included a $40-million stadium renovation plan and a $14.8-million price tag on the franchise. But since then, more information has come to light that sheds a less-than-flattering light on the stadium shenanigans.
Currently, two parallel disputes have the potential to plague the project. The first is a lawsuit brought by Luzerne County officials. They claim that because they ponied up $1 million in 1986 — or half of the purchase price for the franchise — they are now owed half of the money from the impending sale. Lackawanna County, the physical home of the franchise and selling party, filed a countersuit requesting $20 million or half of what it has spent on baseball. The impending lawsuits will derail immediate plans to use the proceeds from the stadium sale.
Meanwhile, the sale and sweetheart terms of the agreement — more on that in a second — seem to be the product of intense lobbying by Pennsylvania Governor Ed Rendell. As The Times-Tribune reported yesterday, Rendell was a driving factor behind the sale and pledged $20 million in state money to fund the ballpark renovations as well. He didn’t do anything wrong or illegal, but his actions have led to the tensions in Northeast Pennsylvania.
Furthermore, now that details of the lease agreement have leaked, this deal is looking more and more like a losing proposition for the taxpayers of Pennsylvania. The $14.7 million the county will receive from the purchase of the franchise is to be reinvested in stadium upgrades, and the state will add in another $20 million. Neither the SWB Yankees nor the purchasing entity — the New York Yankees and Mandalay Bay — would have to chip in any additional money for the stadium upgrades. If the renovations come in under budget, the remaining dollars will be held in a sinking fund for future improvements and repairs.
And so what we have is yet another municipal stadium mess. Lackawanna County contends that baseball will depart from Northeast Pennsylvania without this investment while Luzerne County claims the sale price of the franchise is too low. More than $7 million from the purchase of the team will be held by the court, and the battle — and state’s and city’s willingness to fork over $40 million in taxpayer dollars with dubious fiscal returns — will loom over the 2011 AAA season.
After the jump, I’ve posted the Memorandum of Understanding between the Multi-Purpose Stadium Authority of Lackawanna County and the Scranton/Wilkes-Barre Yankees. It highlights how much of a good deal the franchise is getting in this sale. Read More→
According to the New York City Comptroller’s Office and the Economic Development Corporation, the Staten Island Yankees, New York-Penn League affiliates of the Bronx club and owned by the Yanks, owe the city $300,000 in back-rent, unreported attendance totals and improper deductions. The team does not agree, and the SI Yanks plan to bring the issue to an arbitration hearing.
The finer points of the dispute are rather arcane, but Comptroller John Liu lays them out in a press release which accompanies his office’s audit report (PDF). In essence, the terms of the lease deal between the SI Yankees and the EDC make rent payment levels contingent upon game attendance figures, and the team must pay a fee for each now-show complimentary ticket it issues over the course of the season. The team, says Liu’s office, underreported attendance totals for the 2009 season and now owes the city $118,366 in rent and $39,140 in no-show and complimentary ticket fees. Separately, the team took unallowable deductions in calculating money owed to the city through its net-signage revenue provisions and now must pony up $151,058. The EDC, leaseholders of the stadium in Richmond County, say the team owes back-rent and ticket fee payments only but not the net-signage revenue.
To rectify these deficiencies, the Comptroller’s Office has urged the team over the $308,564 it ostensibly owes while instituting better controls for its complimentary ticket policy. Since the various parties disagree, to arbitration this will go. As Frank Donnelly at SILive.com reported, the two sides “want to put the issue behind them,” but the EDC is prepared to go to court to collect its money. And once again, a professional sports franchise with a sweetheart stadium deal from its host seems to be withholding money that should go to fill the city’s coffers.
Lackawanna County, owners of the AAA Scranton/Wilkes-Barre franchise, have agreed to sell the team to the Yankees and Mandalay Baseball Properties for $14.6 million. The new owners will sign a 30-year lease with Scranton and have pledged $40 million for stadium renovations, David Singleton of The Times Tribune reported last night.
The Yankees had originally expressed interest in purchasing the team back in September, but political wrangling held up the sale for a few months. Even still, Luzerne County, passive part-owners of the Scranton franchise, is making noises about holding up the deal. That’s Pennsylvania county politics for you.
As Donnie Collins outlines, the sale will come with new terms attached. In addition to the stadium renovation funds, the team’s rent will increase from $150,000 to $750,000, and the least continues an option that could keep the franchise in place for 50 years. The Scranton stadium authority could repurchase the ballpark if the franchise relocates or ends its Yankee affiliation. New York, however, has been inclined to keep the team in Scranton due to the proximity factor. It is only a two-hour drive from the Majors to the AAA.
Overall, the Yankees are committing $37 million to the region, and while local politicians are wary about chipping in a few million in taxpayer dollars as part of the matching funds for the stadium renovation, they recognize its better than losing the team.
As for the renovations, they are extensive. Stadium capacity will drop from 10,500 to between 8000-8500, and the entire park will be overhauled. David Singleton offers up this take:
Under the proposal, only four elements of the existing stadium would be retained: the lower seating bowl, the playing field, the home locker room and the parking lots, Mr. Schmitt said. Everything else, including the upper-level deck, would be demolished.
The rebuilt stadium would have an elevated single- or double-tier of suites, club seats and media facilities behind home plate, but the rest of the seating would be on or below a concourse that would wrap around the entire playing field like a promenade, he said.
The promenade concept, now popular at many major and minor league stadiums, allows fans to view the game from multiple vantage points, he said. “The idea of a promenade lends itself, we think, to the very leisurely and social aspect of attending a ballgame,” [architect Craig] Schmitt said.
It’s a safe bet to assume that the Yanks will extend their PDC with Scranton well beyond the current 2014 expiration date. For minor league fans in Central Pennsylvania, baseball is seemingly there to stay.
Three billion dollars is no small amount to pay for the rights to baseball games. For any media entity, an investment of that magnitude requires a commitment to the cause, and when two competing media companies throw that much money into one pot as FOX and TBS did in 2006 for MLB rights, the product aired must be of a superb quality.
Last year, as the Yankees marched to their 27th World Series title, TBS’ coverages wasn’t all that. Chip Caray was pilloried in the press, and TBS brass eventually removed him from the broadcast booth. For a game long accustomed to the subpar stylings of Tim McCarver and Joe Buck, the TBS fiasco was just business as usual, and it seemed that baseball would be relegated to an afterthought on the national stage.
But TBS this year is taking its commitment to the game seriously. As I detailed yesterday on Second Ave. Sagas, TBS and MLB have engaged in a groundbreaking advertisement campaign in the New York City subways to promote TBS’ postseason coverage. One of the 42nd St. shuttle trains will be fully branded with baseball superstars, and in-car video screens will show highlights from playoff games and promotions for upcoming contests. While the dollar totals for the deal haven’t been announced, the shuttle branding combined with the display ads represent an aggressive push by TBS to get casual fans interested in their baseball coverage.
“Postseason in New York is always a big moment for sports fans, and this is an opportunity to excite the local fan base and launch a campaign that highlights iconic players in local markets,” Christina Miller, a Turner Sports senior vice president for strategy, marketing and promotion, said.
Over at AOL’s Fanhouse, Andrew Johnson picks up on this theme as he explores how TBS is improving its October coverage. In its fourth season of playoff coverage and with Ernie Johnson’s replacing Chip Caray, TBS is striving to bring a better understanding and presentation of the game to the fans. “It’s really important that we know our roles,” Ron Darling said to AOL. “We’re really custodians of these great athletes and great teams that are gonna be chronicled forever and be on DVD forever, so we do feel a responsibility, with Turner doing these games, that we’re part of it. We’re part of history every year.”
Darling and John Smoltz will join Johnson in the booth. The color analysts in the studio will include David Wells, Cal Ripken and Dennis Eckersley. Their analysis might not stray into sabermetrics and advanced statistical viewpoints, but these are players who are both entertainers and baseball supporters. Eric Byrnes and Kevin Millar they are not.
This push by TBS to do better stands in stark contrast to FOX’s coverage which often seems begrudging at best and downright resentful at worst. FOX too has spent the billions, but they don’t listen to the loud groundswell of disgust for the quality of their broadcasts. They continue to turn to Buck and McCarver as the voices of baseball. They plug football nearly as often as they discuss baseball during the broadcasts, and they haven’t engaged in much advertising to promote their cause.
Baseball writing on the Internet has at times grown on the wings of Fire Joe Morgan, a site dedicated to, well, seeing the dismissal of ESPN’s lead baseball color commentary realized. We can’t bash on the bad coverage without giving a nod to the good, and while TBS still makes its mistakes, it’s doing more to promote the game than other outlets who pay the big bucks. As the Yanks will soon be appearing on TBS, we should sit back and appreciate.
The Yankees’ holding company is currently carrying nearly $2 billion in non-stadium-related debt and $1.2 billion in stadium bond debt, according to a report in the Sports Business Journal. Despite these seemingly staggering numbers, though, Yankees Global Enterprises enjoys a cash flow high enough to make the debt, in the words of one baseball source, “very manageable.”
Daniel Kaplan has more:
The enterprise value of the companies composing YGE is roughly $5 billion, and cash flow at YES alone is expected to hit $208 million this year, sources said. YGE has been using the bulk of YES’s cash flow to reduce the regional sports channel’s debt, which is $1.448 billion, the sources said…
Neil Begley, a media and entertainment analyst at Moody’s Investors Service, which rates the stadium bonds, said ratio of debt to value for YGE was in line with other companies of its kind. “It is a significant amount of debt for a sports enterprise, probably among the biggest there is,” he said. “But if they cleared 2009, I would be hard pressed to think they would have economic pressure more significant than that.”
What also stands out about the debt is how little of it, $97 million, actually resides at the team. MLB’s debt regulations are applicable to the league’s clubs, but not to the clubs’ affiliates. It also underscores how the Yankees have shifted revenue to affiliates like YES and Legends, limiting the already steep revenue-sharing and luxury-fee payments, about $100 million, the club pays to MLB. The team also deducts about one-third of its $64 million annual stadium interest payment from its revenue-sharing commitment.
What makes this story so interesting isn’t necessarily the high debt total but rather the overall picture we get of the Yankees. This is a company that is financially healthy enough to be carrying $2 billion worth of debt, and the on-field product — the New York Yankees themselves — are responsible for just $100 million. By shifting debt to the other YEG holdings, as Kaplan notes, the Yankees are not subject to MLB’s debt regulations.
Going forward, it seems clear that money isn’t much of an obstacle to the Yankees. The team will have a budget, higher than anyone else’s, for the on-field roster because it will make them operate more efficiently, but as, say, Derek Jeter‘s contract comes due, the difference between $15 million and $18 million a year is negligible to the Yankees.
It’s worth also keeping an eye on how the team comes under attack when the collective bargaining negotiations begin next year. The original luxury tax/revenue sharing schemes were instituted to reign in the Yanks’ spending, but the team has kept on spending while making use of smart accounting and corporate practices that allow them to shift the revenue and debt to other affiliates. If the owners again go after the Yankees’ millions, I expect the Steinbrenner family to fight hard against it.
Over the past few weeks, those who follow the Yankees — from the beat writers to the bloggers and everyone in between — has grown concerned with the team’s dollars. From the perspective of a well-run organization, the Yankees are bleeding cash. They’re spending millions on A-Rod for far too many years; they are doling out checks to A.J. Burnett that his pitching can’t cash. They’re going to re-up with Derek Jeter for many millions more than he would get on the open market, and they seemingly want Cliff Lee as this winter’s shiny new toy.
It doesn’t take an economist to understand that the dollars behind these deals are tremendous, but we can see in all of its Spreadsheet-y goodness just how many bucks the Yankees have committed already. Via Cots, we learn that prior to this winter’s anticipated spending spree, the Yankees already have $107 million on the books for 2012, $94 million in 2013 and $73 million in 2014, the season after the free agencies of Joba Chamberlain and Phil Hughes. The Yankees may have a budget, but don’t expect that number to shrink below its current $213 million level any time soon.
But the real question is the one with which I opened this post: Should we be concerned? If we were looking for the next Moneyball, the next financially-constrained team to exploit an inefficient market, we might be worried that the Yankees aren’t fulfilling that criteria. We aren’t, however, engaged in that chase. Instead, we root for the Yankees and accept them for what they are: a financial behemoth that has the spending power and market ability to tower over the baseball landscape. What good is playing in New York City if you can’t take advantage of the fact that you’re playing in New York City?
Apparently, though, a few folks are worried. In the wake of the release of the MLB financial documents, some Yankee writers decided that, in light of Derek Jeter’s and Mariano Rivera‘s contract extension and Andy Pettitte‘s willingness to go year-to-year, Cliff Lee would not be a good investment. The Yankees might have — GASP — a $240 million payroll in order to compensate for the fact that their long-term aging players aren’t living up to their peak numbers.
Yet, the idea that the Yankees would raise their payroll by 10 percent over the next few years is hardly a revolutionary one. In fact, the Bombers’ payroll has risen by over 10 percent since 2007 and by nearly 100 percent since 2000. If I didn’t know any better, I’d almost believe the Yankees are printing money at will behind the marble of their new stadium in the Bronx.
In fact, that’s what Phil Birnbaum at Sabermetric Research says the Yankees are doing. Even though the Yankees claim they’re running a barely profitable business, Birnbaum delves into the figures publicly available and posits that, by delving up the business and selling off certain aspects of Yankee Baseball — including the TV rights — the Steinbrenner family is running a highly profitable venture, and the millions that reap can either be reinvested into the team or taken as a dividend outside of the revenue sharing scheme baseball has in place. If the Steinbrenners want to put a team getting paid $240 million onto the field, the only thing stopping them would probably be pressure from Major League Baseball.
So maybe all of this hand-wringing over Derek Jeter’s worth, value and contract prospects are for naught. Maybe the Steinbrenners don’t really care that they’re saying they’ll “take care” of Jeter because it’s small beans compared to the overall revenue picture. They can still provide for Jeter, sign Cliff Lee and perhaps even put together a decently-stocked benched next year. It is, after all, only money.
Earlier this week, a leak rocked the baseball world. Now, this wasn’t your run-of-the-mill steroid leak. This wasn’t news of a player traded, suspended or otherwise disgraced. This was a meaty, juicy leak of MLB’s hard-to-find financial information, laid bare for all to see.
The documents, originally posted on Deadspin included the Pirates, Rays, Marlins and Angels in one leak, the Mariners in another and the Rangers in a third. The numbers are in line with what most industry-watchers perceived them to be. Small market teams have been, thanks to revenue sharing, turning small profits while putting teams of varying quality on the field. It’s not so much an outrage as it is a giant question mark for the future of the game and baseball’s next collective bargaining sessions in 2011.
Over at the Biz of Baseball, Maury Brown contextualizes the numbers in the documents. Since two of the clubs — the Angels and the Mariners — dole out revenue sharing money while three others — the Marlins, Pirates and Rays — receive it, we can see the disparity between the haves and the have-nots.
Florida, for instance, had a combined net income of $32 million over the past two seasons while receiving over $90 million in revenue sharing. The Rays had a net income of $15 million while taking it $74 million in other team’s money. If Yankee fans want to a bit jilted, they have every reason to. In a sense, our team is paying to compete against Tampa Bay this year.
This glimpse at the numbers leaves us wanting more. We don’t know how the Yankees’ finances look; we can’t see the Red Sox’s books. We can only guess from the Angels’ ledger — and their $30 million revenue sharing charge — the top-tier teams must contribute to Major League Baseball’s pot. Without a full sense of how each of the 30 clubs are doing, it’s tough to issue many conclusions about the state of revenue sharing and the luxury tax in baseball, but we can try.
Maury Brown, writing this time for Fangraphs, already has. In a piece earlier this week, he made the case for increased revenue sharing. Even though teams are seemingly overly subsidized, Brown wants to see what he terms “salary compression.” Because, as he puts it, “subsidizing clubs at the current levels that continue to lose repeatedly may not be incentivizing them to move up the standings,” the top teams’ spending must be reined in while revenue sharing continues in an effort to level the playing field.
Over at Sports Illustrated, Joe Sheehan has a different proposal. He would prefer to see Major League Baseball establish a market size-based model of revenue sharing. Instead of a welfare system where mediocrity — or downright losing — is constantly rewarded, Sheehan too pushes for something that can create economic parity by adjusted for the market. “If a team does a particularly good job of leveraging its market to make money,” he writes, “they shouldn’t be penalized for that. Similarly, if a large-market team becomes a sad joke, they shouldn’t get bailed out by dipping into the fund. Revenue-sharing shouldn’t be punishment for failure or reward for success; it should be a tool to create a fair and level field of competition.”
Should we, as Yankee fans, be satisfied with either of these answers? After all, although revenue sharing is billed as a way to penalize all of the teams, its primary purpose is to limit the Yankees’ natural economic advantages, and thus, any revenue sharing/luxury tax proposal will inevitably hit the Yankees the hardest. Some might say that if the Yankees are unhappy, the revenue sharing is doing the job, but as long as the Bombers are outspending everyone by significant margins, MLB’s shot at parity isn’t working.
It’s easier to say first what shouldn’t happen. MLB can’t simply increase revenue sharing money that goes to the teams without money. An extra $5 million in the pockets of the Pirates won’t help them become competitive. Perhaps it will allow them to spend more at draft time, but the two-win player $5 million can buy on the free agent market will be the difference between a 90-loss season and a 92-loss season. Fans won’t come out in droves for that quality of play.
Major League Baseball also cannot put itself in a position of penalizing owners for making a profit. It’s easy to fault the Pirates and the Marlins for taking millions out of their baseball clubs while the Yankees invest millions in the on-field product, but that’s a calculated business decision. Owners get into the game to make money, and the $10 million will do just as much on the field as it will in the pockets of an ownership group. The Yanks shouldn’t be paying out more dollars just so that the Pirates owners can enjoy higher profits from a team that’s consistently losing.
So we’re left trying to find some economic incentive to invest. Maybe baseball should allow revenue sharing for small market clubs on the verge of competitiveness. On a case-by-case basis, MLB can assess how much money a team would need to field a competitive club. Of course, this would lead to a situation where non-competitive clubs see their margins shrink. In essence, this could create contraction by market forces as the clubs that don’t compete can’t and are no longer viable MLB teams. The union would demand an expansion of the active rosters, but baseball would see the gap shrink between the haves and the have-nots simply by economic attrition.
Despite this glimpse into baseball’s tortured economics, we’re left where we started: with few real answers and no good solution to a problem that will dominate headlines for the coming year. Baseball certainly has a competitive imbalance as the Yankees and the Red Sox can pump more money into their teams in one season than some clubs can in three. Even as we learn more and more about baseball teams’ ledgers, to solve this problem while encouraging competitiveness remains an ever elusive goal.
To say that Derek Jeter is popular is akin to proclaiming New York in slight fiscal troubles. Both are understatements of the highest degree. In fact, no other Major Leaguers are, according to a recent Sports Business Journal survey, as popular and as marketable as Derek Jeter, and how the Yankees realize this marketability could impact Jeter’s off-season contract negotiations and his Bronx future.
Based upon the results of a survey sent to 49 sports business executives and media personalities, Derek Jeter is tops among baseball in terms of marketability. He appeared on 47 of the 49 ballots and garnered 39 first-place votes en route to 223 total points. Albert Pujols finished behind Jeter with 111 voting points. (The full results are available here.)
Those in media were universal in their praise of Jeter. “You’ve got the star power. He’s playing in the biggest market. He’s obviously an All-Star caliber player. And I think more important than anything else, he’s one of the few guys that has really just stayed out of all kinds of trouble and controversy,” Mark Feinsand, Daily News beat writer, said to SportsBusiness Daily. “He’s got a clean-cut image and he’s always lived up to it. Any company that would get into business with him wouldn’t be worried about waking up and seeing his face flashed across the front page for the wrong reasons.”
Jeter, says the business executives, is primed for a very successful post-baseball career as a brand as well. He has become synonymous with Yankee success and class, and marketers love the image he puts forward. “He’s just so consistent, and I think people feel that reliability,” Brandon Steiner, chair of Steiner Sports, said. “It’s just really unusual for a player and a personality like him to be that consistent for that long, all going in the right direction.”
While this news is all well and good for Derek Jeter’s accountant, for the Yankees, it is just another aspect of Jeter’s package to consider when he comes up for free agency in a few months, and it adds to the forces pulling the Jeter issue in various directions. As some coverage focuses on Jeter’s image, in today’s Times, Joe LaPointe looks at Derek’s slump. Through 89 games, Jeter is hitting .271/.335/.384. He has a 97 OPS+, but with an sOPS+ of 110, he’s still better than the average AL short stop by a significant amount.
The team though has reason for concern. He’s seeing a career low 3.53 pitches per plate appearance, hasn’t homered since June 12 and is hitting just .248/.324/.338 over his last 310 plate appearances. He also turned 36 last month and is due to take home $21 million this year. Brian Cashman recognizes that a prolonged slump at this stage in a player’s career could be more than just a slump. “We’ll find out at some point,” Cashman said last month of Jeter’s play and his ability to stick at short. “The clock runs out on everybody. Sometime in the future, it will be a real issue to deal with.”
As Jeter’s struggles continue and the Yanks continue to win despite his lackluster play, the jury is decidedly out on how his season will end. Buster Olney, writing today, thinks Jeter will recover because “his history tells you he’ll bounce back.” Baseball history, though, says that middle infielders playing in their late 30s aren’t too dissimilar from this year’s version of Jeter. But Olney also says that if Jeter didn’t carry that marketable image around with him, he probably wouldn’t get more than $5 million a year after a season such as this one. Fangraphs’ WAR valuation pegs Jeter to a three-win season which would be worth closer to $12 million annually. The truth is somewhere in the middle.
NoMaas, in a piece that analyzes Jeter’s new-found tendency to swing at too many pitches, ponders the same problem. “In a strange and perverse way,” SJK writes, “this could be a blessing in disguise for the front office, since a down year could give them a stronger position in contract negotiations additionally influenced by public relations and legacy.”
So with three months left in the baseball season, the Yankees find themselves stuck in the middle with DJ. Chances are good that, because of Jeter’s image and marketability, the proper contract length for the right amount of dollars will generate enough revenue to pay for a significant part of the salary. But the Yankees also need a short stop who can man the position and a hitter who isn’t a drain on the lineup. How much should Jeter earn? For how many years? As I’ve said this season, I’m glad I’m not the one making that decision.
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.