guncurug

This quarter's baseball meetings will be memorable for Bud Selig upsetting the natural order of things as he caught the realignment bug from the NCAA.  In order to create more inventory for baseball's television partners, Selig forced the Houston Astros to move to the American League West,  more on that in a moment, added a new wild card team and fundamentally altered inter-league play. What additional inventory did the TV networks gain? One playoff game in each league between the two wild card teams.

The Houston Astros were the designated franchise for realignment because Selig had the power to force the Astros to move.  The sale of the Astros has been pending since early Spring and has been held up until the additional playoff game could be worked out with the players' union.  Once the owners got the green light, the sale was ready to be approved but only on the condition that the franchise move to the American League, a prospect which doesn't particularly thrill the fans.  That move cost Drayton McClane, the selling owner $70 million, as the price was reduced to entice Jim Crane to go through with the sale and the league switch.  I don't know if that is a reflection on the American League or, more likely, the  long history of the Astros in the National League. 

Interleague play will now take place every day during the season.  Since each league will now have 15 teams, in order for all teams to be playing everyday, one interleague game must be played.  So, rather than the three or four windows that fans could anticipate and teams could design marketing plans around, interleague games are likely to become just another game.  That's a prospect that I don't think is particularly beneficial to baseball, especially when it's done in return for a single playoff game in both leagues. 

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.

Upper Deck is bringing out a new line of trading cards which will, for the first time, feature more than 30 active college basketball coaches, including Bill Self, Tom Izzo, Jim Boeheim, Tubby Smith, Bobby Huggins and Jim Calhoun. The coaches cards will be part of a 400 card set covering multiple sports and featuring autographs and memorabilia inserted in the packs. Other stars featured in the set range include Tiger Woods, Landon Donovan, Dara Torres, Amanda Beard (no word on whether the card features her Playboy shoot), Sidney Crosby, Wayne Gretzky, Michael Jordan in his UNC days, Sasha Cohen and inexplicably Jose Conseco representing baseball.

In the most jarring example yet of the pressures being felt by athletic departments across the country caused by the Great Recession and the college sports arms race, University of California Berkeley announced it was dropping baseball, a sport which it had fielded a team since 1892. In addition, it is also dropping men's and women's gymnastics and women's lacrosse and is reducing men's hockey to club status, all as of the close of the 2011 academic year.

The athletic program has been receiving millions in subsidies from the school; in fact, last year the university provided athletics with $12 million in support.  With budgets tight across the entire university, the administration decided it could no longer justify support at that level.  These reductions will supposedly reduce the need for support down to a more manageable level of $5 million.

You have to wonder if cutting baseball was the most appropriate response.  Berkeley is not exactly a hockey hotbed and travel to other D-I hockey playing schools is expensive as they are few that are close.  The same is true for lacrosse, so cutting those programs makes sense.  However, baseball is a Pac-10(12) sport with a more than 100 year tradition at Cal and it's hard to picture a BCS school, particularly one that fancies itself as a major athletic institution without a baseball team.  Cutting baseball has also not gone down well with certain vocal and well-heeled alumni, including current major league ballplayers, which may lead to significant fund raising losses.

Here are a few of the things I have been reading:

Corked baseball bats don't help power hitters (Scientific American via Abnormal Returns)

NFL now caught between its twin monsters: TV ratings and ticket sales (WaPo)

Penn State receives $88 million to fund arena and men's and women's hockey teams (PSU); will Big Ten hockey soon follow (Star-Tribune)

Muni Bond Watch turns eye on minor league stadium bonds and picture isn't pretty (WSJ via Sports Economist)

The next boom in sports television: high school football (Dallas News)

What have you been reading?

How bad is the economy? Bad enough for even NFL teams to go down in value (Forbes)

Financial Statements of five major league teams were leaked last week:  Pittsburgh Pirates,
Tampa Bay Rays, Florida Marlins, Los Angeles Angels of Anaheim, Seattle Mariners,
Texas Rangers (Deadspin)

It takes cojones; Sosa fumes because Cubs haven't retired his number (Hardball Times)

Here's a first, NBC adjust ad breaks to Notre Dame's no-huddle offense (USA Today)

Is live streaming the wave of the future in youth recreational leagues? (NYT)

Will there be NHL players in the 2014 Olympics: players want it but as usual the owners
led by Bettman are reluctant at best. (NYT)

There must be at least a dozen different ways to gauge the popularity of a major league sports franchise. If we're talking about a European soccer team, the easiest way may be to look at the value of its jersey deal - how much is it getting paid to wear its sponsor's name on the front of its jersey.  With the exception of Major League Soccer, that idea has yet to catch on in the US so we must look at other metrics.  In the case of baseball due to its long season and deep involvement in regional sports networks, one of way is to look at the viewership of games on those networks. 

In what surely must be one of the biggest surprises of this or any other year, unemployed Army and Air Force veteran and virtual unknown Alvin Greene captured the Democratic primary for election to the US Senate from South Carolina.  Greene had spent little money, had not campaigned at all and trumped the Democratic Party's preferred candidate retired judge Vic Rawl, who spent $250,000 by 100,000 votes.  So, why do I bring this up on a sports business blog?  

Sorry for my absence from the blog this week.  I came back to the Bluegrass from a brief visit to Chicago to visit relatives and immediately upon returning to the Ohio Valley Steamroom was felled by some ailment caused no doubt by the thick layer of ozone that has been hanging over the Valley for the last couple of weeks.  I know the Northeast got 100+ days this week, but we've had something like 25 90+ degree days since June 1 with no end in sight. The humidity has been hovering around 90% and it's not safe for man or beast out there.


Enough complaining.  I'm finally returning to some semblance of a normal life so it's back to the blog.  I know you struggled through The Decision without me but I'm sure you managed better than Dan Gilbert did.  Someone must have taken his lithium away.  Good luck to the Heat - if they don't win a championship this year, there will be hell to pay in South Beach.

I haven't been able to keep up with much this week, so here's a few links to carry you through the weekend:

Why not a seventh Canadian team for the NHL, a TSN, Globe and Mail series (TSN, Globe and Mail)

Is there a sinister bias for calling fouls in soccer? (Paul Kedrosky)

ACC lands a new media deal with ESPN for about $1.86 Billion though 2022-23. The deal should double each school's current television revenue.  (News&Observer, ACC)

Fatwa issued in UAE against  vuvuzelas above 100 decibels (The National via Bloomberg)

How different are major league baseball stadiums - at least those without roofs? (Snippets)

The long awaited debut of the Nationals number one draft choice, phenom Steven Strasburg took place tonight in Nationals Park.  Unfortunately, due to some difficulties I was experiencing as a result of DirecTV pushing out its 3D technology to my set-top box last night, I was finally able to turn into the broadcast just in time to catch the post-game wrap-up.  Apparently, I missed one helluva debut.

The liquidation of the Tom Hicks sports empire took another step closer to reality yesterday when the Texas Rangers filed a pre-packaged Chapter 11 bankruptcy petition in an effort to get approval to sell the club to a group led by attorney Steve Greenberg and Nolan  Ryan.  The group already has the approval of Major League Baseball Commissioner Bud Selig.  An interesting graphic from the Wall Street Journal attempting to illuminate the transaction is below:

Now this is something I didn't expect to see and I suppose it's another example of the changed focus of the Cubs new owners.  The Cubs and the White Sox have gotten together and found a unique way to sell naming rights to the annual Crosstown Classic played as part of interleague play each summer.  The teams play two three game series, one in each stadium.