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

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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.

 

PREVIOUS ENTRIES 

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

 

Yankees star Judge hits 61st home run, ties Maris’ AL record

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TORONTO — Aaron Judge tied Roger Maris’ American League record of 61 home runs in a season, hitting a tiebreaking, two-run drive for the New York Yankees in the seventh inning against the Toronto Blue Jays on Wednesday night.

The 30-year-old slugger drove a 94.5 mph belt-high sinker with a full-count from left-hander Tim Mayza over the left-field fence at Rogers Centre. The 117.4 mph drive took just 3.8 seconds to land 394 feet from the plate, and it put the Yankees ahead 5-3.

Judge watched the ball clank off the front of the stands, just below two fans who reached over a railing and tried for a catch. He pumped an arm just before reaching first and exchanged a slap with coach Travis Chapman.

The ball dropped into Toronto’s bullpen and was picked up by Blue Jays bullpen coach Matt Buschmann, who turned it over to the Yankees.

Judge’s mother and Roger Maris Jr. rose and hugged from front-row seats. He appeared to point toward them after rounding second base, then was congratulated by the entire Yankees team, who gave him hugs after he crossed the plate.

Judge moved past the 60 home runs Babe Ruth hit in 1927, which had stood as the major league mark until Maris broke it in 1961. All three stars reached those huge numbers playing for the Yankees.

Barry Bonds holds the big league record of 73 for the San Francisco Giants in 2001.

Judge had gone seven games without a home run – his longest drought this season was nine in mid-August. This was the Yankees’ 155th game of the season, leaving them seven more in the regular season.

The home run came in the fourth plate appearance of the night for Judge, ending a streak of 34 plate appearances without a home run.

Judge is hitting .313 with 130 RBIs, also the top totals in the AL. He has a chance to become the first AL Triple Crown winner since Detroit’s Miguel Cabrera in 2012.

Maris hit No. 61 for the Yankees on Oct. 1, 1961, against Boston Red Sox pitcher Tracy Stallard.

Maris’ mark has been exceeded six times, but all have been tainted by the stench of steroids. Mark McGwire hit 70 home runs for the St. Louis Cardinals in 1998 and 65 the following year, and Bonds topped him. Sammy Sosa had 66, 65 and 63 during a four-season span starting in 1998.

McGwire admitted using banned steroids, while Bonds and Sosa denied knowingly using performing-enhancing drugs. Major League Baseball started testing with penalties for PEDs in 2004, and some fans – perhaps many – until now have considered Maris the holder of the “clean” record.

Among the tallest batters in major league history, the 6-foot-7 Judge burst on the scene on Aug. 13, 2016, homering off the railing above Yankee Stadium’s center-field sports bar and into the netting above Monument Park. He followed Tyler Austin to the plate and they become the first teammates to homer in their first major league at-bats in the same game.

Judge hit 52 homers with 114 RBIs the following year and was a unanimous winner of the AL Rookie of the Year award. Injuries limited him during the following three seasons, and he rebounded to hit 39 homers with 98 RBIs in 2021.

As he approached his last season before free agent eligibility, Judge on opening day turned down the Yankees’ offer of an eight-year contract worth from $230.5 million to $234.5 million. The proposal included an average of $30.5 million annually from 2023-29, with his salary this year to be either the $17 million offered by the team in arbitration or the $21 million requested by the player.

An agreement was reached in June on a $19 million, one-year deal, and Judge heads into this offseason likely to get a contract from the Yankees or another team for $300 million or more, perhaps topping $400 million.

Judge hit six homers in April, 12 in May and 11 in June. He earned his fourth All-Star selection and entered the break with 33 homers. He had 13 homers in July and dropped to nine in August, when injuries left him less protected in the batting order and pitchers walked him 25 times.

He became just the fifth player to hold a share of the AL season record. Nap Lajoie hit 14 in the AL’s first season as a major league in 1901, and Philadelphia Athletics teammate Socks Seabold had 16 the next year, a mark that stood until Babe Ruth hit 29 in 1919. Ruth set the record four times in all, with 54 in 1920, 59 in 1921 and 60 in 1927, a mark that stood until Maris’ 61 in 1961.

Maris was at 35 in July 1961 during the first season each team’s schedule increased from 154 games to 162, and baseball Commissioner Ford Frick ruled if anyone topped Ruth in more than 154 games “there would have to be some distinctive mark in the record books to show that Babe Ruth’s record was set under a 154-game schedule.”

That “distinctive mark” became known as an “asterisk” and it remained until Sept. 4, 1991, when a committee on statistical accuracy chaired by Commissioner Fay Vincent voted unanimously to recognize Maris as the record holder.