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05.30

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09.36

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The Mets' Sale: Should Mets Fans Be Happy?

07.36

The Wilpon brothers, who are majority owners of the New York Mets are in final negotiations with billionaire hedge fund manager David Einhorn to sell a 30-33% interest in the team to him for a reported $200 million. The deal supposedly includes a provision allowing Einhorn to purchase an additional 27-30% in three years, so that he would then own 60% at the same valuation. The Wilpons can avoid the latter sale and retain majority ownership of the club by repaying the initial $200 million to Einhorn, in which case Einhorn retains his 30% interest for essentially nothing while receiving a $200 million cash return on his $200 million investment. So, the question presents itself is how should Mets fans react to this sale?

It's no secret that the Wilpons, and their business and team ownership partner Saul Katz, have been distracted lately. It's also no secret that they and the franchise are in desperate need of cash. Both issues stem in part from the fallout of the Bernie Madoof saga, as the trustee for the victims in the Madoff affair are suing them for a $1 billion. As if that were not enough, the club is said to be hemorrhaging cash and is on pace to lose $70 million this season. Anything that can ease both situations, as this sale will do, has to be a positive for the team's performance. The idea that the Wilpons may be gone in three years probably brings new joy to the clubhouse - especially following principal owner Fred Wilpon's interviews in the New Yorker and Sports Illustrated last week.

There is another reason Mets fan should have reason to hope. The track record of hedge fund owners in professional sports is generally a good one. Whether it's the application of lessons learned in the hedge fund business, the ability and willingness to spend the necessary time to lead the organization - since most of them are billionaires and have the luxury of time, or it's the knack for picking the right personnel, the track record holds up across sports. In baseball, there is John Henry, whose Red Sox broke an 86 year drought two years after he bought the team. In basketball, there is James Pallotta, a member of the ownership group of the Boston Celtics. In hockey, you have Philip Falcone, who owns part of the Minnesota Wild.

Which brings up a somewhat unrelated topic, but interesting nonetheless. I'm sure many of you are aware of the Stadium Effect; the negative effect on stock price and financial performance of companies that enter into naming rights agreements for stadiums and arenas. There may be a corollary to that rule emerging and it would indicate that investors in Greenlight Capital, the hedge fund managed by David Einhorn, should be wary. This curse applies to investors in hedge funds whose managers acquire sports franchises. There appears to be a negative correlation between fund performance and franchise ownership. Whether due to distraction or market luck is hard to say, just that the correlation is apparent.

Boston Red Sox

King James Comes to Liverpool

07.55

Bud Selig

Tuesday Tidbits, Wednesday Edition

23.15

Auburn

NCAA: Bring Back the Death Penalty

18.01

Tonight, we have a national championship game that in some sense presents the dilemma facing the NCAA in microcosm. On the one hand, you have UConn, a relative power in the game representing the Big East, a BCS member conference, the best conference in basketball and one that is deep in bed with both ESPN and CBS. It is presided over by a coach who had his hand slapped by the NCAA for "failure to maintain an atmosphere of compliance" earlier this season. The NCAA punished Calhoun for violating one of its core principles - the institution and its leaders are to be held accountable for compliance, i.e. institutional

control - by suspending him for three games NEXT season. We wouldn't want to interfere too much with the TV product that CBS paid billions for now would we?

On the other hand, we have Butler, a supposed mid-major who has had players represented on the Academic All-American team in each of the last four years. The Bulldogs are members of the Horizon Conference, a league without a regular national TV contract and composed of schools that do not play Division I football. There has not been a hint of scandal in Butler's past. Who do you think NCAA President Mark Emmert is secretly rooting for?

Major college athletics is supposed to be about the experience of a student-athlete, with an emphasis on the first part of that hyphenated word. Again, the final game is instructive. While admittedly only a crude measure, the Academic Progress Rate is a standard established by the NCAA to measure schools and administer penalties for failure to encourage sufficient academic progress among their athletes. An APR of 925 is the minimum needed to avoid penalties, which translates into a roughly fifty percent graduation rate; not a particularly tough standard, but the NCAA never sets the bar too high. What about our finalists: UConn, 930, barely over the edge; Butler, 1000, a perfect score, enough said.

The last couple of weeks have not been good ones for the image protectors at the NCAA. We have seen pay for play scandals at both Auburn and Oregon, the participants in last year's BCS National Championship. We have the Jim Tressel saga at perennial power Ohio State, where the head coach not only failed to notify his superiors about violations but actively engaged in covering them up by alerting quarterback Terrell Pryor's "mentor" about them, presumably so he could help the cover up. Of course, there is Tennessee with its twin scandals in men's basketball and football, that have cost basketball coach Bruce Pearl his job, but not until the Vols exited the tournament, and will result in penalties for both programs that have yet to be determined. So far, the reaction of the NCAA to the play for pay revelations coming out of Auburn and Oregon is mostly silence. Won't it be fun if both BCS National Championship Game participants are placed on probation and, heaven forbid, forced to forfeit games from the 2010 season. Oh, and I almost forgot about that tawdry Fiesta Bowl saga which is outside the NCAA's control.

What is going on in collegiate athletics can be traced to one place: NCAA headquarters. The punishment being meted out by the NCAA when it manages to catch rules violators is so disproportionally light in connection to the potential rewards that there is no incentive to comply. First, the chances of actually getting caught aren't too great because the NCAA has a small enforcement staff, and if you do, a few games suspension for a coach or a player is hardly a penalty to be concerned with when the potential payoff is millions of dollars. The incentive for the institution is just as great. Winning football and basketball programs generate millions of dollars that flow back to the institutions. Granted, the immediate dollars the athletic departments generate go to operate the departments, but winning programs create happy alumni who donate more. They also generate favorable publicity for the school and that generates more interest in the school and more applications for admissions. Set against that backdrop, why should a coach comply with the rules he thinks his conference rivals are not obeying?

It's time the NCAA took one of two steps to clean up college athletics. One, and the less drastic of my two suggestions, is to bring back the death penalty. Although it remains on the books, it has not been administered since it was given to SMU. It would seem that the NCAA is now too afraid of the TV networks to hand out the three most meaningful penalties in its arsenal: exclusion from the post-season, exclusion from TV appearances and the death penalty. If you wondering when might be and appropriate time to hand down a death penalty see Auburn, Tennessee, Oregon and Ohio State. UConn probably deserves to be excluded from TV and the tournament for two to three years and Calhoun, the only coach I know whose recruiting was so dirty it inspired a rules change, should be issued a "show cause" order, i.e. demonstrate to the NCAA why he should be allowed to coach. (The reason that D-I schools now play exhibition games against lower division schools and not AAU teams is Jim Calhoun).

The other solution for this mess is just to do away with scholarships altogether. Do you see these kind of scandals in the Ivy League or the Patriot League (okay, some schools in the Patriot League give out scholarships, but still...). You don't see these problems in D-III either. Would some of the players we see now not be able to attend college? Sure, but tell me, does everyone on Auburn's football team or UConn's basketball team really belong in college in the first place? If the NBA and the NFL want minor leagues, let them pay for them like Major League Baseball does. The NBA already has the NBDL - start using it for the players who don't really belong in college. The system we have now prostitutes higher education and demeans the very institutions that participate in it. It's not in the best interest of the institution and it's not in the best interest of most of the athletes to be placed in a situation where the athlete does not really want to be and is unlikely to be academically successful. If there were no athletic scholarships, then the athletes who do participate are students who we are more likely to feel assured want to be students and not stopping at a way station on the way to a pro tryout in order to fulfill some mandatory wait time.

Even if the NCAA is not up to either of these ideas it must take a good hard luck at itself. It is at crossroads and the very nature of college sports is at risk. The business model has been very successful but the public may not want to buy in much longer if game stories continue to be crowded out by scandal stories. As for tonight, well, Go Bulldogs.

Dallas Cowboys

Real Madrid: World's Highest Grossing Professional Sports Franchise

19.16

Most Americans, if asked, would tell you that either the New York Yankees or the Dallas Cowboys were the most profitable teams in professional sports and either of those would be a good guess for an American centric audience. However, those guesses don't take into account the worldwide phenomenon that is global soccer. No sport captures the imagination of sports fans around the world in quite the same way as soccer.

For years, the revenues of the largest soccer teams in Europe have been growing exponentially due to ever increasing television revenue. Since not all European leagues distribute television money equally, or even negotiate league wide television deals, the disparity between clubs in the same league can vary even more widely than it does in Major League Baseball. The two teams sitting atop the Football Money League, compiled annually by Deloitte demonstrate just how much the powerful club at the top of perch make in comparison to the rest of the league. Real Madrid, the richest, highest grossing professional sports club in the world, generated 438 million euros (roughly $603 million at today's exchange rates) in 2009/10 about 40 million Euros more than second place FC Barcelona and a staggering 100 million Euros more than third place Manchester United.

Real Madrid had a relatively even split in revenue sourcing among the three main drivers: broadcast, commercial (sponsorship and merchandise) and gameday. For a sense of scope, Real Madrid received 158.7 million Euros in broadcast revenue pursuant to a contract it holds individually since La Liga allows its clubs to negotiate individually rather than through a centralized league contract as in the English Premier League, or all major North American leagues. That contract gives Los Blancos more broadcast revenue than half of the Money League clubs combined. Real Madrid receives over 150 million euros in commercial revenue, one of only two Money League clubs to do so. It has a 20 million euro contract with Bwin for jersey sponsorship that runs through 2012/13. However, that contract has recently been challenged in court as being contrary to Spanish competition laws.

In contrast, the highest grossing MLB club, the New York Yankees, made $441 million in revenue last year, $319 million of which came from gate receipts (gameday in paragraph above). That is less than Manchester United, the third place club on the Money League list.

The value of broadcasting contracts is significantly higher in the NFL than in MLB. In fact, the total value of the NFL's various broadcast contracts was in excess of $3.4 billion in 2009, and it grows annually, assuming no lockout this year. The Dallas Cowboys, the NFL's most valuable franchise grossed $420 million in 2009, of which only $112 million came from gate receipts. Could explain the recent interest of NFL owners in purchasing European soccer clubs.

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