Obviously, the MLB non-waiver trade deadline is in the rear view mirror. The Indians, as has been well documented, went to the swap meet with Cliff Lee, Victor Martinez, Rafael Betancourt, and Ryan Garko and came away with a gang of giant young pitchers and a few other prospects.
In the process, the Indians’ fan base reacted loudly and bitterly. From what I was reading and hearing, it felt like we were one trade away from people massing in Public Square with torches and pitchforks to storm the Dolan family compound like the castle of Dr. Frankenstein.
The centerpiece of the anti-Dolan movement has been that they are unwilling to spend money to make the Tribe a contender. Hence, the jettisoning of Betancourt (due $5M next year), Lee (due $9M next year), and Victor (due $7M next year) in exchange for a battalion of players with almost no actual major league experience and thus, comparatively tiny contracts.
In other words, the fans believed that the motivation for these moves was just plain cheapness.
People screamed. They cursed. They flooded talk radio. How could ownership do this to them? How could they throw in the towel for the sake of saving a few million bucks? What heartless, unworthy owners are they, that they wouldn’t spend to the hilt for the sake of having the best possible chance of winning?
Here’s the reality that no one seems to want to acknowledge: successful businessmen buy sports franchises not because they want to win for the good people of the host city, but because owning a pro franchise is IMMENSELY profitable.
Why is this the case? Suffice it to say that the individual owners in each sports league for all intents and purposes form a cartel - by definition, a group of competitors who decide to band together for their mutual benefit. In other words, the Owners Association in each sport exists so a bunch of rich guys can figure out how to use their sport to get as rich as they possibly can.
Owners cash in through a variety of different methods. TV contracts, ticket sales, merchandising, tax breaks, public subsidies, creative accounting - all of these contribute directly to the bank accounts of franchise owners.
Just to paint the picture a little more clearly, let’s look at some specifics. In 1997, four national TV networks - Fox, CBS, NBC, and ESPN - struck deals with the NFL for the rights to broadcast weekly NFL games through the 2005 season. The combined amount of these deals totaled $17.6 billion, or about $75M per team per season.
True to form, the current NFL licensing deals increased when they were renewed at the start of the 2006 season. The total haul for NFL teams is now $20.4 billion through 2011, or a toal of $96M per team per season.
Admittedly, the NFL has by far the priciest TV deals of any of the major sports. But the point is that every owner in every sport is getting paid handsomely just off of broadcast rights alone.
Meanwhile, the stadiums each team plays in are generally subsidized almost entirely by public funds. As we all know, owners are quick to talk about the necessity of a new, state of the art stadium for their team. They feel so passionately about this issue that they’re willing to hold cities and states hostage over public funding for the architecture, with the threat that if taxpayers don’t help them meet the astronomical costs of building a new gym or field, they’ll be forced to move the team elsewhere for financial reasons.
Here’s the reality: this is highway robbery any time it happens. I’ll avoid the obvious example for us Clevelanders and go to one that, economically speaking, is even more heinous. Paul Allen - owner of Microsoft and one of the richest men on the planet - owns both the Portland Trail Blazers and the Seattle Seahawks. In 1997, he demanded that the state of Washington cover 75% of the cost of a new stadium for the Seahawks, or else he would move the franchise to another state that would help him lift the heavy burden of owning the team. The total estimated cost to build the stadium was $425 million.
At the time, Paul Allen was worth $40 billion.
What happened? Rather than lose the team, the citizens of Washington collectively forked over $319 million to subsidize a guy who was worth more than the GDP of entire countries. This left about $106 million to be paid by Allen himself - or about $30M more than what he made from the NFL’s national TV deals that year.
The real kick in the balls is that once any new stadium is built with taxpayer money, the revenue from concessions, ticket sales, merchandise, parking, sponsorships, and non-sports events held there all go directly back to the owner, not the public. So the taxpayers invest hugely in something for the unique and strictly emotional / psychological prize of having a pro team to follow.
Meanwhile, all the monetary rewards for their investment go toward making the rich even richer. D. Stanley Eisen refers to this as “reverse welfare.” (His article ”Public Teams, Private Profits” in the March/April 2000 issue of Dollars & Sense is the origin of some of the specifics I’m using in this post.)
Even better, a new stadium immediately boosts the value of the franchise for when the current owners decide to sell the team. In 1993 (the year before the opening of Jacobs Field), the Indians’ net worth was estimated at $81 million. When Jacobs Field opened in ’94, the franchise was re-valued at $100 million, or about a 25% increase.
In 1999, the Dolans bought the Tribe for $320 million. So in the three years after the opening of the new stadium, the Jacobs family’s return on investment was a gargantuan 295%.
My point in all of this is that the fan base should be realistic about ownership’s motives. No owner views his team as a charitable foundation for the entertainment of the fans. He views it as (shock and surprise!) another business. So the idea that the Dolans are operating differently than the Jacobs family is on some level a misinformed one.
But if it’s true that owners make money for next to nothing just by owning the team in the first place, what’s the motivation to create a winner? And is it not only possible that the Indians made these trades to try to become a better baseball team, but likely?
These questions and more to be answered in part 2.
-T
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