Wednesday, July 04, 2007

Happy Birthday to the best sports owner – Darth Steinbrenner

Without any hesitation New York Yankees owner George Steinbrenner is the best owner in sports today. Steinbrenner turns 77 today and as he heads into his twilight years the Yankees owner can take tremendous satisfaction from maturing into becoming a great owner. The Steinbrenner of the 1970’s and 1980’s was bombastic, egomaniacal – one of the worst owners in sports history. The George Steinbrenner of today remains in charge of the Yankees but seems to understand owning a sports franchise carries a great deal of responsibility – let alone a franchise with the history the New York Yankees have.

Never imitated, never duplicated, George Steinbrenner remains what he has been since he purchased the New York Yankees for $10 million in 1973, a man driven and committed to success on every possible level of his life. Since “The Boss” took control of the Yankees, the Bronx Bombers have won six World Series, ten American League titles, 16 American League east titles and managed to win the American League wild card twice. Under Steinbrenner’s stewardship, the Yankees have become the model franchise for the entire sports industry. Steinbrenner is the owner which all others should be judged by.

Consider this. In April when Forbes Magazine released their 2006 financial valuation for Major League Baseball franchises, after becoming the first MLB organization to suppress $1 billion in value according to Forbes subjective but well respected annual MLB list of teams’ value last year, Forbes pegged the Yankees value at $1.2 billion.

Factor in these mind numbing numbers when it comes to the business of the Yankees. Forbes believed the Yankees had a value of $362 million in 1998, $491 million in 1999, $548 million in 2000, $636 million in 2001, $752 million in 2002, $849 million in 2003, $950 million in 2004, $1.026 billion for 2005 and a staggering $1.2 billion for 2006. That is an amazing return on investment, for what was a $10 million purchase 33 years ago.

According to Forbes 2007 business of baseball report, the Yankees value continued its steady increase in value – despite the Yankees (with the highest payroll in baseball) actually managing to decrease their team payroll last year. And how surprised was Forbes? The publication reported that: for the first time in at least twenty years, the Yankees cut their payroll. The Yankees lopped $5.5 million off their payroll last year and had their luxury tax bill cut $8 million, to $26 million thanks to the lower payroll and higher tax threshold. The fiscal restraint came on the heels of a $50 million loss in 2005. Revenues for the Bombers surged to $25 million in 2006, thanks to a team-record 4.2 million fans attending games at The House That Ruth Built. The Yankees new stadium, scheduled to open in 2009, will increase revenues by at least $50 million annually.

Michael Ozanian, Forbes senior editor, echoed those sentiments earlier this week in a New York Daily News report.

"I believe it's going to explode when they move into their new stadium (in 2009)," Ozanian says. "Conceivably, in five years, I wouldn't rule out the possibility that this could be a team worth $2 billion."
Ozanian added in the Daily News report, "If you look at the Yankees as a product, he revitalized the brand. After fixing the product on the field, he was able to leverage that into creating these tremendous revenue streams. So much of the attention in his early years was how cantankerous he was, but (Steinbrenner) was one of the first in baseball to realize the potential of creating revenue outside the stadium with TV and marketing deals, and forming ties overseas."

One shrewd business decision made by Steinbrenner a $493 million multi-year cable TV rights agreement signed in the late 1980’s with the MSG Network. According to a New York Daily News report the previous Yankees TV deal also with the MSG Network was worth $50 million. The genesis of the $493 million year agreement led to two important lasting legacies Steinbrenner will have left on the sports industry – he put most of additional revenues into the Yankees payroll and he believed the Yankees value as a TV product was so strong he could create his own network, the YES Network.

The Yankees own the majority of the YES cable TV network, which launched in 2002. YES, which also televises New Jersey Nets basketball games, has been valued at more than $1 billion. The network has two major sources of revenue, affiliate fees and advertising sales. Affiliate fees are paid to YES by the cable operators. The fees run $2 per cable subscriber, per month and total $188.5 million, according to John Mansell, senior analyst with Kagan Research. Mansell said in addition to those fees, YES also takes in more than $38 million in advertising sales, giving the network $227 million in revenue. The Yankees also get money from baseball's national TV contracts with Fox and ESPN. That works out to about $18.6 million per team.

"I think Steinbrenner's economic legacy on the sport is the way he illuminated the synergy between baseball and big cities, taking advantage of the fact that he was in the largest media market in the country and the entertainment capital of the world," Andrew Zimbalist, the author of In the Best Interests of Baseball? The Revolutionary Reign of Bud Selig (Wiley) told The New York Daily News. "What Steinbrenner did was basically say, 'Look, I can spend a lot more money on the players, and I can create a Broadway affect, and make this a prime entertainment venue in the New York market.'"

Steinbrenner biggest sports connection remains the Yankees, but that said some basic research offered some interesting insight into Steinbrenner’s interest in sports ownership before he purchased the Yankees in 1973. According to Wikipedia at a time when professional sports couldn’t deal with diversity issues, George Steinbrenner in his own small way made one issue abundantly clear – as far as George Steinbrenner is concerned the measure of a man has nothing whatsoever to do with the color of his skin.

In 1960, he bought the Cleveland Pipers of the National Industrial Basketball League. The team joined the American Basketball League the next year, with Steinbrenner making history by hiring John McLendon as the first African-American head coach in professional sports. The team went on to win a championship, and then pulled off a public relations coup during the off-season by signing Ohio State All-American Jerry Lucas. The signing led to the National Basketball Association admitting the team as its tenth team on July 10, 1962. However, since he was unable to raise $250,000 and the ABL was threatening to sue the NBA because of the shift, the deal collapsed on July 30.

The Pipers soon went bankrupt, with Steinbrenner returning to the relative anonymity of the American Ship Building Company, before eventually buying the company. During much of the next decade, Steinbrenner invested in Broadway productions and later gained a small piece of ownership with an NBA team, the Chicago Bulls. His involvement with Broadway began with a short-lived 1967 play, The Ninety Day Mistress, in which he partnered with another rookie producer, James M. Nederlander. Whereas Nederlander threw himself into production full-time, Steinbrenner invested in a mere half-dozen shows, including the 1973 Tony nominee for Best Musical, Seesaw, and the 1988 Peter Allen flop, Legs Diamond.

In 1971, Steinbrenner offered $9 million to buy the Cleveland Indians, but after agreeing in principle with Indians owner Vernon Stouffer, saw the deal fall apart at the last minute. Indians General Manager Gabe Paul had played a major role in brokering the deal, and when the New York Yankees became available the following year, he helped Steinbrenner achieve his dream of owning a baseball club. In gratitude, Steinbrenner offered him the opportunity to direct baseball operations for the club.

To suggest George Steinbrenner saved the Yankees when he bought the team would be an understatement. The Yankees had been floundering during their years under CBS ownership, a regime that started in 1965. In 1972, CBS Chairman William S. Paley told team president Michael Burke the media company intended to sell the club. As Burke later told writer Roger Kahn, Paley offered to sell the franchise to Burke if he could find financial backing. Burke ran across Steinbrenner's name, and Paul, a Cleveland-area acquaintance of Steinbrenner, helped bring the two men together.

On January 3, 1973, a group of investors led by Steinbrenner and minority partner Burke bought the Yankees from CBS for $8.7 million.

"We plan absentee ownership as far as running the Yankees is concerned," said Steinbrenner, according to an article in The New York Times reporting on the sale. "We're not going to pretend we're something we aren't. I'll stick to building ships."

He also said at the time "It's important to me, it's important to all of us, and it's particularly important to New York and to the Yankees, that the group that gets behind the Yankees at this point has the wherewithal and the interest to get the kind of job done that the sportswriters, that the fans, that the city and the media in New York deserve."

If you want to understand how George Steinbrenner owns and operates the New York Yankees look no further than his pursuit of Roger Clemens earlier this year. Desperate for pitching help, the Yankees announced Roger Clemens would return to the Bronx Bombers signing a pro-rated contract that makes Clemens the highest paid player in Major League Baseball for 2007 on May 6.
Decimated by injuries to several starters and ineffective pitching by the healthy starters the Yankees started May staring at a 6.5 game Boston Red Sox lead in the division. The Red Sox with four healthy starters and the expected return of Jon Lester later this season, the strongest Red Sox bullpen in years, Yankees general manager Brian Cashman knew he had to make a dramatic move if the Yankees were going to legitimately challenge the Red Sox.

The Yankees offered Clemens a pro-rated $28 million contract. Clemens will be paid about $18.5 million, the prorated share of his $28,000,022 salary, according to a high-ranking Yankees official with knowledge of the contract, the largest single-season contract in baseball history (the $22 is a nod to his jersey number). Then factor in the 40 percent payroll tax that will be added to the cost of the Yankees signing Clemens ($7.4 million) the Yankees Sunday committed $25.9 million to Clemens. The Yankees will pay Clemens $153,846 a day for the balance of the 2007 season.

Several weeks ago Hall of Fame New York Times writer Murray Chass suggested the Boston Red Sox were on the verge of one of the greatest collapses in recent baseball history. Chass predicted the Yankees who at one point were 14.5 games behind the BoSox would pass the Red Sox by July 4. Partially written in gist – unless the Yankees can part the Hudson River for the first time since 1993 when the Yankees finished with an 88-74 record. With both the Red Sox and Yankees winning last night the Red Sox have a commanding 11.5 game lead over the Yankees. More importantly in terms of making the playoff the Yankees are 8.5 games behind the Detroit Tigers in the race for the AL Wild Card spot. With a 39-41 record the Yankees are going to have a tough time making the playoffs this year.

The Clemens move was classic Steinbrenner – doing what he believes needs to be done in order for his Yankees to win. Last year on MLB trade deadline day – the Yankees did what the Yankees do best, traded away from non-descript prospects for players the Yankees believed they needed to overcome their long time rival – the Boston Red Sox. While not owning the commanding lead they have this year (the BoSox led by 3.5 games on July 4) a lead that had dwindled to a .5 game lead by July 30 – Yankees general manger with Steinbrenner’s blessing made the classic Yankees trade deadline decision.

The Yankees traded four prospects (none of whom may ever amount to anything in the major leagues) to the Philadelphia Phillies for Bobby Abreu and the late Cory Lidle. Baseball fans from 29 other teams once again have to stare and watch as George Steinbrenner’s shock and awe campaign proves once again at least when it comes to the business of baseball -- Darth Steinbrenner is The Boss.

The rationale for the Phillies was simple – the Yankees were the only MLB franchise prepared to assume the financial obligations the Phillies had to both Abreu and Lidle. The Yankees assumed one-third (the remaining two months of the 2006 season) contractual obligations owed to Abreu (4.5 million) and Lidle (1.1 million). The Yankees also took on Abreu’s $15 million 2007 contract. The Yankees also agreed to pay Abreu $1.5 million to waive his no trade clause.

Financially the Yankees did more than add 7.1 million to their 2006 team payroll. Because the Yankees had surpassed the MLB team salary payroll threshold of $136.7 million, and because the Yankees surpassed the team payroll threshold level for the fourth consecutive season, Abreu and Lidle cost the Yankees an additional 40 percent ($2.82 million). The Yankees opening day payroll was projected at 198,662,180.

The Yankees were slapped with a $26 million luxury tax by the commissioner's office for the 2006 season, raising New York's total to $97.75 million over the last four years. Has the luxury tax had any real impact on Steinbrenner’s Yankees spending habits?

"I would say it has an effect," Yankees president Randy Levine told the Associated Press. "But at the end of the day, it's always been George Steinbrenner's philosophy to win. If a difference-maker is attainable, the Boss goes and gets him."

What’s made George Steinbrenner a great owner he’s focused on providing his franchise with the best possible opportunity to win each and every year. Earlier this year everyone expected Steinbrenner to fire Yankees manager Joe Torre and general manager Brian Cashman. The Boss again proved the new boss is nothing like the old boss. Joe Torre is in his 12th season as Yankees manager. In his first 11 seasons as Yankees owners Steinbrenner changed managers 19 times before hiring Torre. Steinbrenner should be applauded for his unwavering support of Joe Torre – another sign of what has made George Steinbrenner a great Yankees owner.

There is only one honor left for Major League Baseball to bestow upon George Steinbrenner – enshrinement into the Baseball Hall of Fame. Should George Steinbrenner be welcomed to the Hallowed Halls of Cooperstown? Yes, yes and yes again. If members of the Baseball Hall of Fame are to be based on how one contributes to the game then open up the doors to Steinbrenner (and Marvin Miller at the same time). Is Steinbrenner likely to ever be considered, of course not!

We live in a society where all too often success isn’t rewarded or recognized it’s resented. Is George Steinbrenner a perfect person, are you kidding he’s been called Darth Steinbrenner by yours truly for years, but that doesn’t mean George Steinbrenner hasn’t earned respect and admiration. George Steinbrenner future Hall of Fame member, great sports owner, and a person who’s made some terrible mistakes. Enough with those jealous of the success George Steinbrenner had enjoyed. Better the sports world looks to George Steinbrenner for the examples he has offered, not simply the overspending, mistakes he’s made.

For SportsBusinessNews this is Howard Bloom. Sources cited and used in this Insider Report: The New York Daily News and Wikipedia

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