COVER

WATCHING THE BOTTOM LINE

BASEBALL IS BIG-LEAGUE BUSINESS

D'ARCY JENISH,LARRY BLACK October 2 1989
COVER

WATCHING THE BOTTOM LINE

BASEBALL IS BIG-LEAGUE BUSINESS

D'ARCY JENISH,LARRY BLACK October 2 1989

WATCHING THE BOTTOM LINE

COVER

BASEBALL IS BIG-LEAGUE BUSINESS

Since 1981, the Oakland Athletics have defied the odds. The current leaders in the American League West have had only two winning seasons during that period. Yet attendance at home games has risen steadily every year and now tops 2.7 million. The club’s box-office success, said business operations vice-president Andrew Dolich, is the result of a marketing strategy that seems more appropriate to an amusement centre than a ball park. Apart from baseball, the Athletics offer attractions ranging from Speed Pitch—would-be pitchers measure their arm strength by hurling a baseball past a radar gun—to Fantasy Play-by-Play. There, for a cost of $42 per inning, fans can sit in a fully equipped broadcast booth above home plate and record a mock commentary of a live game. The bottom line for Dolich: “We need to draw fans whether the team is good or bad, and the best way to do that is to take a page from Disneyland.” That aggressive marketing approach has been copied by at least six other major-league teams, including the New York Yankees and the St. Louis Cardinals.

Skyrocket: The activity reflects an underlying change in attitude among many baseball owners and executives.

As a result, big-league baseball is now a largely successful business. Overall attendance has risen annually during the past five years, television and radio revenues have skyrocketed and the value of most major-league franchises has increased at least fivefold in a decade.

At the same time, the players have shared the burgeoning wealth. The average major-league player now earns over $550,000, and 101 of the 680 players who began the season on big-league rosters this year will earn over $1 million in U.S. dollars. Despite those sums, professional baseball has retained much of its timeless charm. Said Eddie Einhorn, a lawyer and Chicago White Sox co-owner: “Luckily, between the white lines it is still a wonderful game, and the fans still love it.” Even amid the widespread prosperity, however, some of the 26 big-league franchises still

lose money. Jacqueline Autry, executive vicepresident of the California Angels, told Maclean’s that at least six clubs are struggling financially. According to the wife of Angels owner—and former singing cowboy—Gene Autry, that is an improvement: as recently as 1985, 21 teams were in the red. One of the

remaining money-losers is Einhom’s White Sox, who were 27V2 games out of first place heading into the final week of the season and drawing fewer than 6,200 fans per home game in the 43,000-seat Comiskey Park. With baseball’s gate receipts split on an 80-20 basis between the home and visiting teams, that means slim revenues for the White Sox and

their opponents. Einhorn said that he and his partner, fellow lawyer Jerry Reinsdorf, have pumped $15.5 million to cover losses into a club that they bought for $26 million in 1980.

But would-be owners covet even perennially losing teams—for reasons that range from hopes of future profits and a potential good resale value to the luxury of high local visibility. Without the New York Yankees, George Steinbrenner would be a wealthy—but littleknown—shipowner. But, as the Yankees’owner, he is a celebrity. And in Montreal, owner Charles Bronfman’s efforts to build a winning team receive as much scrutiny as Expos manager Buck Rodgers’s on-field strategies.

Winning: Across the continent, the Seattle Mariners joined the American League in 1977 as an expansion team along with the Toronto Blue Jays. But, unlike the Jays, the West Coast team has never had a winning record or finished higher than fourth in their division. Yet Indianapolis businessmen Jeffrey Smulyan and Michael Browning paid an estimated $90 mil-

lion in August to buy the team from Los Angeles developer George Argyros—five times the amount that Argyros paid for the franchise in 1981.

Similarly, a group of investors led by George W. Bush, the President’s son, bought a controlling interest in the Texas Rangers last March for an estimated $40.5 million. The former

owner, businessman Eddie Chiles, paid only $9.5 million in 1980 to gain control of a team that has never won the American League West.

Now, many baseball executives contend that last June’s completion of the Toronto Sky-

Dome, a $532-million stadium with a fully retractable roof, has made the Blue Jays one of the more profitable baseball franchises. After 27 games at Exhibition Stadium, their former home, and 51 home dates at the 50,000-seat SkyDome, the Jays have already attracted more than 3.2 million fans this year, an American League record. And in 1990, the Jays could become the first baseball team in history to draw four million fans.

Said Jays president and chief operating officer Paul Beeston: “We would have to sell out every game, but certainly that is an objective.”

Drive: At least the dome’s retractable roof guarantees that home games will be played under temperate conditions. As a result, many fans who live up to two hours by automobile from Toronto can now plan an outing to the SkyDome, even for midweek evening games early in the season. According to Beeston, some fans regularly drive to the SkyDome from communities that are 200 km away. On weekends, fans arrive from even farther afield: as many as one-quarter of the fans who attend games against the Detroit Tigers come from Michigan. Said Beeston: “You should see what it was like trying to get a hotel reservation around here the last few weekends that we were playing. You could not get one.”

Male: With fans flocking to major-

league baseball in record numbers—

almost 53 million bought tickets last year— U.S. and Canadian TV networks and radio stations are paying huge amounts for broadcast rights. One reason: advertisers for products ranging from beer to automobiles have learned

that sports broadcasts attract large, predominantly male audiences. And, as advertisers bid to reach potential customers, major-league baseball’s revenues from broadcast rights have more than doubled since 1984 to almost $570 million this year. During a four-year span that begins in 1990, the 26 teams will share the revenues from CBS TV’s record $ 1.3-billion bid for an annual package of 34 games, which will include the all-star game, divisional playoffs and the World Series. Similarly, the U.S. cable system ESPN paid $475 million for a four-year baseball package.

Attaining such lucrative 'contracts was a major goal for Peter Ueberroth during his five-year term as baseball commissioner. And, before his tenure ended last March, Ueberroth devel-

oped two new sources of revenue: corporate sponsorships and licensing agreements. Such major corporations as Chevrolet, IBM and MasterCard International have paid about $35 million during the past four years to sponsor special events, including old-timer games, and

to pay for the most-valuable-player awards during the all-star game, the playoffs and the World Series. In 1987, the commissioner’s office began negotiating licensing agreements for team logos. Currently, about 1,500 prod-

ucts, ranging from babies’ bibs to adults’ leather jackets, are manufactured under licence for retail sales that are expected to surpass $830 million this year. The league collects royalties, which totalled $15.5 million in 1988, on the sales of these products and distributes them equally among the teams.

Still, for fans occupying seats ranging from luxury boxes to outfield bleachers, the salaries earned by the home-town heroes underline the fact that major-league baseball is big business. Established players, such as New York Mets catcher Gary Carter, and promising rookies, such as California Angels pitcher Jim Abbott, have one thing in common: they are well paid. Indeed, 21 players will earn more than $2 million in U.S. dollars this year, and another 80 will earn between $1 million and $2 million. At the top of the salary ladder is Dodger right-hander Orel Hershiser, who signed a three-year contract last February that will pay him $2.76 million in U.S. dollars this year. Besides starring in Los Angeles’s surprise World Series win over the Oakland Athletics last year, Hershiser led all National League pitchers with 23 wins and pitched a record 59 consecutive innings without giving up a run.

Money: Despite the staggering monetary rewards, most players and their agents claim that the salaries are not excessive. New Jersey-based agent Craig Fenech, who represents about 35 professional players, including Jays pitcher John Cerutti, said that most players can expect to spend up to four years in the minor leagues eaming between $700 and $1,500 per month. Most play another three to

four years in the majors before making the average salary of $550,000. Indeed, Cerutti, who has been one of the Jays’ better pitchers this year, said that he has earned about $1 million total from baseball since 1981. Added Cerutti: “We are not talking about a lot _ of money.”

Baseball is dwarfed by such truly giant enterprises as auto firms and oil companies. But few privately owned corporations function in such a fishbowl atmosphere of intense scrutiny, frequent criticism and sometimes intense public affection. For those reasons, some astute baseball executives acknowledge that they have been entrusted with community property. Said Beeston, who attends about 100 baseball games each year: “I am a fan and I am not ashamed to admit it.” Added White Sox co-owner Einhorn: “Almost everybody gets into baseball because they love it, not for the investment.” The game is still the thing.

D'ARCY JENISH with LARRY BLACK in New York City

LARRY BLACK