Monday, June 16, 2008

Z on Z

Andrew Zimbalist puts Sam Zell's intentions towards the Cubs and Wrigley under the microscope and comes to a pretty darn sensible conclusion:

If Zell is able to squeeze a bit more out of a stadium sale, at the end of the day it will mean lower profits for the franchise and diminish its value. While a few financial and tax considerations may come into play, the tradeoff will be close to a dollar-for-dollar exchange.

Many people in baseball look with admiration at the renovations that the Red Sox’s owners have made at Fenway Park since 2003. The owners have invested more than $150 million of their own money, but they already have reaped rosy returns. Few would disagree that Janet Marie Smith and Larry Lucchino have worked financial and architectural wonders at Fenway.

The Cubs’ new owners will have the team’s long-run interests in mind and they will be best positioned to exploit the potential synergies among the franchise, the facility and the surrounding neighborhood. If Wrigley Field is going to be renovated, it is best done, as with the Red Sox, by the same group that will own the team.
I'm no expert like Zimbalist is, but it has always struck me that separating the Cubs and Wrigley is ridiculous. It makes no financial sense for anyone wanting to buy the team -- think Jeff Loria in Miami paying rent to Wayne Huizenga -- and provides no real incentive for the facility owner to invest in sensible, long-term upgrades (though short-term and fan-alienating profit maximization may run rampant).

The mortgage meltdown notwithstanding, owning > renting, and that goes for baseball teams too.

(thanks to the diabolical Pete Toms for the link)


Pete Toms said...

Doesn't the ISFA own US Cellular also? I doubt Reinsdorf is getting screwed by anybody, particularly politicians.

I agree with Mr. Zimbalist - it would be beyond hubris and simply stupid of me to disagree - that the folks who buy the franchise will also buy the ballpark. This is most often the case for the reasons he explains.

Having said that, the devil has always been in the details on whether or not ISFA ownership of Wrigley would increase or decrease the value of the Cubs. If the ISFA dumped say $300 million into Wrigley upgrades, ate the taxes, handed the keys to the Cubs owners for nothing ( including rights to non baseball events, anybody noticing more and more awful classic rock type shows at ballparks? - albeit less important in a northern city ) gave the team all the concession and parking loot, the signage...that's pretty appealing to Cannings or Cuban or anybody. On the other hand, if the ISFA dumps $300 million into Wrigley and recoups the investment from rent & taxes from the Cubs and wants in on the beer and hot dog money, parking.....that's a lot different.

I would like to hear Mr. Zimbalist's opinion on whether Selig can effectively prevent Cuban from buying the franchise.

Osmodious said...

I recognize, though do not agree with, Our Great Nation's ingrained need to destroy our history with wild abandon. It seems to me that, as you point out, that move would hasten the ultimate destruction of either/both the Cubs and Wrigley. I mean, renaming Wrigley for another corporate entity is bad enough to consider, but the rest of it...

As my brother pointed out, the Red Sox have definitely one-upped the Yankees in one major respect...they did not discard their history like so much used kleenex. Renovation is far, far better than replacement...but only if it is done right.

It is my humble opinion that Cuban, a guy who truly wants to win, will be thrown over for someone in the Baseball 'good ol' boy network', and that will ultimately hurt baseball (it'll be another Loria/Angelos type, probably).

Baseball is becoming more and more about the bottom line. Yes, I realize that money has ALWAYS played a huge factor in this game (I'm not naive). In the past, though, the owners knew that WINNING is what put butts in seats, and what makes you money (spend some, make a lot). But now these corporate asshat owners (aforementioned Loria, etc) know that they can make money WITHOUT fielding a winning team (spend nothing, bank the revenue sharing and luxury tax payouts, get the city to build your stadium, etc.). As always, the fans pay, and the fans lose...(I could go on, but you all know all this stuff already)

Maybe that gravy train can keep on a rollin'...I don't know. I'd LIKE to think that people will wise up one day and start diverting dollars elsewhere, but there are two things there: 1) it would mean problems for the game I love and 2) I don't have that much faith in the intelligence of Americans as a group ("a person is smart...people are dumb, panic-y, etc...").

Pete Toms said...

Osmod, you're right, baseball went corporate. BIG TIME.

Rightly or wrongly it's the corporate guys who made MLB the HUGE - approx $6 billion per year industry - it has become. The old school guys who made a living from their teams from ticket and concession sales never dreamed of the possibilites...they didn't know about licensing and branding and RSNs and luxury suites and secondary ticketing and PSLs and digital media....

I don't know if the good ol days were as we remember them though...I've been to some shitty ballparks, Candlestick, whatever the coliseum in Oakland is called now, Exhibition Stadium, Olympic Stadium, Three Rivers, Shea.