Monday, April 30, 2007

Great day to be selling Browns tickets, the worst of days to be selling Dolphins tickets

Sunday was a great day to be a season ticket account executive for the Cleveland Browns. You were sitting at your desk taking phone call after phone call from ecstatic Browns fans after the Browns captured nothing but positive attention after they drafted Joe Thomas with the third overall pick and then chose Notre Dame quarterback and Akron native Brady Quinn. At the other end of the dial, sales representatives of the Miami Dolphins were dusting off their resumes ready to start pounding the pavement looking for a new job. The NFL draft is all about offering hope to a teams’ football fans. Brady Quinn may never become an NFL franchise quarterback, but when it comes to consumer confidence and the business of selling football tickets, Saturday was the best of times for the Cleveland Browns and the worst of times for the Miami Dolphins.

As Saturday’s first round unfolded Dolfans everywhere were salivating at the prospect of the prodigal son being drafted by the Dolphins. The Miami Dolphins success has been built around white drop back quarterbacks. First Bob Griese led the Dolphins to their only two Super Bowls, the back to back titles in 1972 and 1973. While Hall of Fame quarterback Dan Marino never won a Super Bowl, he brought a sense of pride to the Dolphins. Ten quarterbacks have failed at replacing Marino since he retired six years ago; the Dolphins haven’t made the playoffs since Mario retired. After the Browns didn’t draft Quinn with the third overall pick and Tampa Bay’s Jon Gruden who never misses drafting a quarterback with the marquee value that Quinn offered, at long last the Dolphins who needed a big name quarterback to make Dolfans feel better about their team were stunned when NFL commissioner announced the Dolphins first round selection was “Ted Ginn” With all respect to the talented Ohio State punt returner Dolfans were stunned, angry and upset – all at the same time.

At the Dolphins draft day party general manager Randy Mueller stayed in the teams draft room leaving rookie head coach Cam Cameron to address a very unhappy group of football fans. According to The Miami Herald, Cameron’s interaction with the fans went something like this:

Cameron: “Let me tell you about the young man we just drafted.”

Crowd: Boo

Cameron: “I've known this young man for over 10 years. I've watched this young man for a long time.”

Crowd: Booo.

Cameron: “You will be thrilled every time you watch him as a punt returner.'”

Crowd: Booo.

Cameron: “Let me put it to you this way . . .”

Crowd: Brady, Brady, Brady, Brady.

Cameron: “Ted Ginn is a Miami Dolphin.”

Crowd: Cheers.

And then boos again.

''I understand it,'' Cameron said. “I'm a fan, too. The problem is I'm not a fan today. I understand why they reacted the way they reacted based on what they read.”

“I think what we'd like to think is that as these players grow, the fans will love these players as much as we do.”

The NFL draft is very much a by-product of the media. Carried live by both ESPN and the NFL Network Saturday and Sunday and driven by the internet, the Dolphins decision was attacked by every so-called football expert.

''In a word, ridiculous,'' ESPN draft analyst Mel Kiper said. “[Quinn] falls into your lap and you're the Miami Dolphins, you don't have to trade up for him, he's there at nine.

“You get a chance to get Brady Quinn at No. 9 and you pass on him for Ted Ginn, coming off a foot injury -- not real polished as a wide receiver -- you got to be kidding me.”

Pete Prisco,’s NFL draft guru, had these thoughts on the Dolphins selecting Ginn with the ninth overall pick: Ginn's a good player, but how the heck can they pass on Quinn? That makes no sense. Who's their quarterback of the future? Cleo Lemon? How terrible a choice does Prisico believe the Dolphins made? In his grading of the 32 first round picks and the order they were selected in, the Dolphins were the only team whose pick received a D grade.

And what did Prisco have to offer on the Browns picking Quinn with the 22nd overall pick of the first round: This is the best pick of the entire draft. They get a franchise passer in the back end of the first round? Are you kidding me? Good job by Phil Savage to go up and get Quinn. He will be a star. An A+ pick for the Browns.

ESPN’s John Clayton offered what was a great day for the Browns but a terrible day for Brady Quinn.

Cleveland Browns: All right, they gave away a potential top-five pick in next year's draft to get Quinn at No. 22. We all realize the Browns may not be very good next season. The roster has age in the front seven of the 3-4 defense and numerous other holes. The reason the Browns are the big winners is because they potentially filled two of the five major building blocks of a team, getting Quinn and left tackle Joe Thomas. Teams win with quality players at left tackle, defensive end, cornerback, wide receiver and quarterback. If the Browns lose next season, general manager Phil Savage and coach Romeo Crennel might not be around to reap the rewards of this draft. Regardless, Savage did a great job despite the price.

Brady Quinn: Not since Aaron Rodgers has an NFL draft seen a quarterback lose as much as Notre Dame's Brady Quinn. Slipping from a top-three pick to No. 22 could cost him as much in $33 million in contract dollars and maybe $18 million in guarantees. The Browns considered him with the third pick but took Wisconsin left tackle Joe Thomas. He could partially understand the Vikings passing on him. Halfback Adrian Peterson was available and coach Brad Childress invested time and draft choices to get Tarvaris Jackson last year. The killer was the Dolphins at No. 9. Television cameras caught him flabbergasted by the Dolphins' selection of Ted Ginn Jr. Vince Young, the third pick in last year's draft, received a six-year, $48 million deal that included $24.9 million in guarantees. The 22nd pick, being a quarterback, might get a five-year deal that could max out at $15 million or maybe $20 million, although Quinn's agent, Tom Condon, can be creative. Regardless, Quinn was the biggest loser on the first day.’s Don Banks had this to say about the Dolphins selecting their “quarterback of their future in the second round” I like BYU quarterback John Beck. I really do. They say he's a gym rat who eats, drinks and sleeps football. But let's face it, if Miami's second-round pick (40th overall) doesn't turn out to be a better NFL quarterback than Brady Quinn, whom the Dolphins passed on at No. 9, Miami fans aren't going to let Cam Cameron and Randy Mueller forget about this one.

At the top of USA Today’s winner’s list: The Browns exited day one with two (Brady Quinn, Joe Thomas) of the five players rated highest entering the draft. GM Phil Savage and coach Romeo Crennel are fighting like there's no tomorrow ... which might be true for them if they don't produce some wins.

At the bottom of USA Today’s loser’s list: OK, the Dolphins passed on Brady Quinn because they thought John Beck at No. 40 gave them better value. But do they really think Ted Ginn Jr. is worth the No. 9 pick? Miami surely could have traded down and still selected the Ohio State product later in the first round. It's a big investment on a return man whose receiving skills are no sure thing in the NFL.

Fox offered two views on each player drafted in the first round, starting with the Dolphins selecting Ginn: Well, Ted Ginn, Jr. was the draft's first shocker. All you had to do was look at Brady Quinn's facial reaction when Miami's selection of the Ohio State receiver was announced. All week, the Dolphins spoke with the Bucs about moving ahead of the Vikings, and Tampa Bay officials thought the Dolphins were interested in Quinn. I mean, what do you do if your only quarterback is Cleo Lemon? Yes, the Dolphins believe they will eventually be able to make a trade with Kansas City for veteran Trent Green (for a fourth-rounder this year?) It is obvious now that scouts were right about Quinn from the very beginning — that he wasn't a top ten player in this draft because of his lack of accuracy and his non-production against top college defenses. Still, this seems to be a reach for the Dolphins. It's like they took Ginn to cover the loss of all-around Wes Welker, who was traded to the Patriots. Ginn is a game-breaking kick returner, but he needs work as a receiver and his foot still hasn't healed from the national championship game. Most teams would say he was taken 10 picks too high.

The first big surprise of the draft! The Jets fans come out in force, instantly organizing, developing, and executing a fabulous "Miami Sucks" chants. It's amazing how the Jet fans could come together and form such a harmonious spit of venomous hatred so fast. Imagine they put that much work into solving global warming? The speed of that chant forming was nothing short of mesmerizing. And so is the Ginn pick. A.J. Hawk's brother-in-law, meanwhile, is near tears. Could make for a wonderful G.Q. shoot, no? Somewhere in Arizona, Matt Leinart's on a couch with three topless women, texting him, "It's all good, brah." Or, he's in a hot tub with the entire waitress staff from the local Hooters watching "Harold and Kumar Go To White Castle" and not paying any attention at all to the draft. Either or. Ginn is a great player with breakaway speed. He'll be the perfect target, CLEO LEMON!

And on the Browns picking Quinn with the 22nd overall pick: The great news for Browns fans is that Cleveland ended up with Quinn after taking the draft's best offensive lineman, Joe Thomas, with their first pick. Granted, the trade with the Cowboys was pretty steep — a third-round pick this year and next year's first-round pick. But the Browns need help now, not next year. If Quinn can develop into a quality quarterback, GM Phil Savage has filled two great needs in Cleveland. Quinn, a native of Ohio, wanted to play in Cleveland — and how many college kids say that? — and he presents tremendous value at this selection, considering many teams had him rated between 8th and 15th overall. The Browns had him rated higher than that. Savage wanted JaMarcus Russell, but the Raiders wanted way too much. He settles for the second-best quarterback in the draft for a lot less in compensation and doesn't have to wait until next year to get him. The only downside for Cleveland is if that first-rounder ends up being among the top five selections once again.

A.J. Hawk's wife's brother goes to Cleveland. The Browns fans are ecstatic — euphoric even. Guys in dog masks everywhere, each one going bonkers with toy milk bones. The kid in the Brady Quinn jersey from before has found his Notre Dame hat and is 100% jumping up and down. His father, broken hearted only hours earlier, has found new life and looks like the dad from "7th Heaven" — happy that it all came out alright by the end of the episode. Menawhile, Quinn, himself — seems to be invigorated. After a day of walking around New York aimlessly that included games of hopscotch, trips to the Village and a hot dog from a vendor, he's going home to Cleveland. The Dublin, Ohio native makes his way to the stage with a team of roughly 7,000 handlers, looking like that chip is ALREADY on his shoulder. But wait — why are the team of handlers going up there?! Umm, guy — you were just the 22nd pick. TEN after Marshawn Lynch, NINETEEN after where you were supposed to go! Leave the entire entourage in the green room at this point. Oh well. Meanwhile, the Browns give him a #1 jersey to hold up, which makes little to no sense because he a) wasn't the first pick of the draft, and b) wasn't the team's first pick. Intangibles, though? Well, he's number one in that department baby. So intangible, in fact, you can't even touch him. All the while, Steve Young, Ron Jaworski, and Chris Berman just inducted Quinn into the NFL Hall of Fame. Yep, he's already in there. As the best quarterback to ever live, it's only sensible to do it now. Why wait?

Fan polls are anything but scientific, are purely subjective in nature but are a reflection as to how football fans feel about how the draft went for each team. An ESPN Sportsnation poll (as of 9 PM EDT Sunday) with 18,039 voting on the Dolphins drafted believed the Dolphins deserved an F for their 2007 NFL draft efforts. 45.7 percent and 26.3 percent D. At the same time of the 29,683 voting on the Brown selections 19.7 percent gave the Browns draft an A grade.

It was comical; call it a Greek Tragedy to watch Quinn fall in the draft. Sitting alone in the green room, the cleaning crew having arrived in the green room to clean up the mess left behind by the four players drafted early in the first round and on their way to their new NFL homes, a forlorn looking Quinn was by NFL commissioner Roger Goodell. Taking pity on the falling star, Quinn left the players green room (in part so they could finish cleaning the green room) for the sanctity of the Commissioner’s green room. Quinn who should enlist a personal grooming coach in the near future looked both relieved and happy when Goodell announced his name towards the end of the longest first round in NFL history.

“No, actually I was sitting. It's been a long week here. We've also been bussed around doing a lot of different things. I actually had gone back to go to the bathroom and as I came back out, you know, the Commissioner came out and I talked to him. He said, hey, you know, based on the situation, you're probably not going to be taken for a while. So if you want, feel free to come up here and sit down. There's no use putting your face on camera during teams that are picking when you're not going to be picked. You know, I said, "Hey, that's fine. I'll come and check it out for a little while."

“I didn't intend on being as long as they were. We made a commitment to come out here and I think sitting in the Green Room is part of it if you make that commitment. But again, we started talking to teams and trying to deal through some other teams and it ended up that the entire family was able to come and we stayed there,” a relived Quinn related after he was finally drafted.

For Browns general manager Phil Savage it was a dream come true: "This is a day that will go down as the day that the fortunes of the Browns turned," Savage said. "This is going to be one of those stepping-stone days.

"When you're able to add a left tackle, a potential quarterback who can play for a long time and then you combine that with what we've been able to do with the addition of Eric Steinbach and Jamal Lewis, and with (Kellen Winslow) and Braylon Edwards coming back, we're more legitimate than we've ever been."

Brady’s agent Tom Condon acknowledged his client’s the loss of income to The Cleveland Plain Dealer -- an estimated $20 million in guaranteed money from the No. 3 pick to the No. 22 pick. Then factor in the lost endorsement potential (anywhere between $5 million and $10 million) and Saturday’s free-fall represented a loss of between $25 million and $30 million in money Brady Quinn will never realize.

According to CNBC’s Darren Rovell, Quinn did have at least two endorsement deals in place before the bottom fell out of his Saturday. One of Quinn's deals is with Hummer General Motors Corp (GM) and the other with Nike. Word on the street is that Nike paid Quinn about $750,000. If that's on, that means Under Armour paid both their endorsers Joe Thomas and Patrick Wills and made their commercial for less than Nike paid Quinn.

"But it's not about the money for Brady," said Condon. "It's about being a leader for a great team. We know the Browns think very highly of him, and I expect they'll treat him well."

Back to the scene Sunday, today and the rest of the week in the Browns ticket office – that’s the message you want your general manager delivering. Regardless of whether or not Brady Quinn becomes the franchise player the Browns desperately need, Savage bought the Browns at least one full NFL season where Browns fans will be happy regardless of whether or not the team wins or loses in 2007. The Dallas Cowboys may end up, likely will end up with a top-five pick from Saturday’s trade (a shrewd move by Cowboys owner Jerry Jones) but the Browns needed to send a message to their fans, a message of hope.

"I'm so excited to be in Cleveland," Quinn, who grew up in the Columbus, Ohio suburb of Dublin rooting for the Browns, said during a conference call with the Cleveland media. "It's a dream come true."

As bad a day as it was for Brady Quinn, the furor surrounding the Dolphins not picking Quinn hurt what should have been a great day for Ted Ginn. Called the worst pick in the first round, his selection booed by Dolphins fans, what should have been the day Ted Ginn had dreamed about since he first player Pop Warner football turned into an embarrassing day for a pretty good Ohio State football player.

“I said, `Oh, geez,'” former Falcons GM and longtime NFL executive Ken Herock said. “I'm not enamored with Quinn, but there were better players than Ginn there. I know you don't need linebackers, but Patrick Willis is a much better player, [so] maybe try to trade down. This draft is heavy with second-round receivers.”

NFL Network's Mike Mayock said No. 9 ''is way too high for Ginn. His teammate, Anthony Gonzalez, runs better routes. You're getting a good return guy but you're not getting a polished receiver.'' Former Cowboys executive Gil Brandt, with, said Ginn ''needs to improve his route running, but that can be taught.''

The moment in time during Cameron’s ‘talk’ with Dolphins fans at Saturday’s draft party came when the coach had apparently had enough of the fans booing him (they weren’t upset with Cameron just the team missing on the prodigal selection) came when a clearly frustrated Cameron according to the South Florida Sun Sentinel tried some happy talk about the player whom the Dolphins had drafted, Ted Ginn Jr. He mentioned Ginn's speed, talent and then something non-sensical about drafting, "the entire Ginn family" (Dad at tight end!). Fans then began chanting. "BRA-DY! BRA-DY!"

Dolphins’ owner H. Wayne Huizenga had dinner with Mueller and Cameron on Wednesday, and "knew then what their plan [for quarterbacks] was," he said after Ginn was picked. "But you have to stick around for the second pick to understand it."

Not only did Huizenga not offer a ringing endorsement of Mueller and Cameron’s decision but by suggesting you have to look at the ‘bigger picture’ the Dolphins owners is testing the patience of football fans from a team that hasn’t made the playoffs in five years.
Huizenga's 'true feelings' and reaction was reported by the Miami Herald: Huizenga stood grimly off to the side as Cameron addressed the hostile constituency, arms folded across his chest.

Asked earlier if Cameron and GM Randy Mueller were right in choosing Ginn over Quinn, the owner had said tersely, ``They better be right.''
And as bizarre as reactions where in Miami Ginn himself was shocked to be selected over Quinn.

''For sure,'' he admitted on a conference call. ``You're knowing Miami is hurting for a quarterback right now, and Brady is a great quarterback.''

For Mueller and Cameron it’s likely their careers at stake. Not necessarily resting on what Ted Ginn does but more on what Brady Quinn accomplishes with the Browns. Monday a great deal to be selling Browns tickets and those working for the Dolphins are getting ready to jump ship. Both teams needed to deliver a message to their most important stakeholders (their fans). One stood and was counted, the other failed miserably. In an era when how people spend their discretional income, the Miami Dolphins are in a great deal of trouble, at least for the foreseeable future.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: The Miami Herald and The South Florida Sun Sentinel

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Friday, April 27, 2007

Darkness on the edge of Sebastian Telfair’s life

Imagine being 18-years old, they’ve made a movie about your life, there has been a book written about your life, you’ve been featured on the cover of several national magazines, you’ve appeared on national television, you carry the hopes and dreams of 17 people, and in the apartment building you live in two people are murdered during the filming of the award winning documentary. Such is the life Sebastian Telfair led and managed to live through as a high school basketball player. Not just any high school basketball player, arguably the greatest player in the illustrious history of New York City high school basketball. As a high school sophomore, junior and senior Telfair became the first high school basketball player to ever lead his high school basketball team to three consecutive New York City high school basketball championships. But as is so often the case, the legend that is Sebastian Telfair appears to be crumbling, the life and future of a 21-year old hanging in the balance.

Telfair was the 13th overall pick in the 2004 NBA Draft by the Portland Trail Blazers out of Lincoln High School. At 6' (many believe he’s no taller than 5’10), he is the shortest high school player ever to be drafted by an NBA franchise. He had committed to the University of Louisville and coach Rick Pitino during his senior year, but decided to turn professional instead. Telfair is the cousin of New York Knicks guard Stephon Marbury, and the half-brother of former NBA player Jamel Thomas.

On February 15, 2006, a loaded handgun was found in Telfair's pillowcase on the Blazers' private jet at Boston's Logan International Airport. Telfair told authorities the gun belonged to his girlfriend and that he inadvertently grabbed the wrong bag when leaving for the team's road trip. The gun was registered to Samantha Q. Rodriguez, Telfair's girlfriend of five years.

On February 21, the Massachusetts State Police announced that no charges would be filed against Telfair in the incident (Massachusetts has very strict gun laws, the violation of which can lead to a prison sentence). On February 23, the NBA front office announced that Telfair would receive a 2-game suspension for breaking the league's collective bargaining agreement, which prohibits NBA players from carrying firearms while on league business.

On October 16, 2006, Telfair had a chain reported to be worth $50,000 taken from him while he was outside P-Diddy's restaurant, Justin's. The following night, Telfair left a preseason basketball game against the New York Knicks at Madison Square Garden to attend a police lineup, where he did not make any identification.

A rumor began to circulate that he was seen making a phone call roughly an hour before rapper Fabolous was shot outside of the same club. Telfair voluntarily surrendered his cell phone records to police, and is not under investigation for any involvement, despite rumors to the contrary. It was later found that the chain belonged to Geonne Telfair, Telfair's younger sibling, and Telfair was reimbursed for the stolen property.

Telfair and a friend, Al Eden Fuentes, were arrested early on April 20 2007 and charged with felony possession of a weapon, after a traffic stop. The traffic stop was prompted when Telfair was spotted driving his 2006 Range Rover 77 mph on the Bronx River Parkway, a 45 mph zone. Telfair was driving under a suspended Florida license. When the police searched Telfair's vehicle, a loaded .45 caliber handgun was found under the passenger's seat. Both Telfair and Eden claimed to not have any knowledge of the handgun. Police have yet to determine the registration status of the handgun.

While the police have yet to determine how they’re going to handle the gun charge the Boston Celtics have made a decision regarding Telfair’s future with the Celtics. Traded from the Trail Blazers to the Celtics on June 28, 2006, the Trail Blazers traded Telfair along with center Theo Ratliff and a 2008 second-round pick to the Boston Celtics for guard Dan Dickau, center Raef LaFrentz, and the 7th overall pick in the 2006 NBA Draft, Randy Foye, who was traded to the Minnesota Timberwolves for the 6th overall pick, Brandon Roy. On April 24, 2007 Celtics managing partner Wyc Grousbeck announced that Telfair's nameplate on his Celtics locker had been removed and did not expect him back for the 2007-08 season.

"I wanted to let you know that we have removed Sebastian's nameplate from his locker in Waltham," wrote Grousbeck in an email to the Boston Globe. "The facts and circumstances of his case have not been determined but he does not have a Celtics locker and we do not anticipate that he will."

Have the Boston Celtics overreacted or has Celtics managing partner Wyc Grousbeck made himself judge and jury? Telfair has one year remaining on the $7.591 four year rookie contract he signed with the Blazers. NBA contracts are guaranteed and the Celtics will be responsible for the $2.56 million owed to Telfair. The Celtics can try and trade Telfair or attempt to challenge Telfair’s contract in the courts, but at the end of the day Grousbeck acting as judge, jury and in this case executioner has placed the Celtics in an un-winnable position. Telfair has had his share of legal “issues” but as a matter of record he has yet to be convicted of anything accept bad judgment.

"It is fair to say that if the charges were true, it wouldn't make me too proud to have somebody I know who was speeding without a license and with a gun in the trunk," said NBA commissioner David Stern to reporters during halftime of the New Jersey-Toronto playoff game Tuesday night according to a report in the Boston Globe. "I don't know what the ultimate disposition of that is going to be but our players do have an obligation to conduct themselves in a way that demonstrates the appropriate respect for the game."

Sports Business New spoke with Travis L. Gonzolez, Head of Global Basketball Public Relations for adidas Thursday afternoon. Even before he was drafted by the Trail Blazers adidas signed Telfair to a reported endorsement contract worth between $6 million and $10 million. The role adidas played in Telfair decision to enter the NBA draft after high school is featured prominently in the ESPN award winning film “Through the Fire”, which followed Telfair’s last year of high school through the moment he fulfilled his lifetime dream of being drafted by an NBA team.

Gonzolez, who has known Telfair since he was in eighth grade, told SBN the NBA’s official outfitter has yet to decide if adidas will continue their relationship with Telfair. The standard morality clause which allows a company to end their contractual obligations if they believe that person has done damage or harm to the reputation of their product through their actions (and no the same set of rules do not apply to the Celtics) will consider all of their options before making a decision.
“At the very least we owe Sebastian the benefit of the doubt and the time to investigate fully what did or didn’t take place,” Gonzolez told SBN. “We’re not jumping to any conclusions but at the end of the day we will do what’s best for adidas.”

“I’ve known Sebastian for a long time and in my heart of hearts I know he’s a good person who cares deeply about others and what people think of him. Not many people know this, but Sebastian is personally responsible for the welfare of 17 people, that’s a great deal of pressure for anyone, let alone a 21-year old.”

Telfair's attorney, Ed Hayes spoke with The Boston Globe about the Celtics actions and doesn’t seem impressed by the organizations decision.

"I just think that what [the Celtics] did was with the season over they saw a chance to take a public relations shot and they did," said Hayes. "He doesn't do drugs. He doesn't smoke. He takes good care of his family. He's never been involved in any of those deals with beating girlfriends or causing trouble in nightclubs. He is not a guy who embarrasses you. He's a nice young guy. He's had a tough year.

"Why do that [make a public statement about removing the nameplate]? Why not say, 'Give it a little time. We'll see what happened.' They should show more restraint after they told him not to cooperate with police against a group of hoodlums [in the Fabolous case] who have been terrorizing athletes and celebrities across the country."

The real question that needs to be answered isn’t what the Celtics did and what adidas might or might not do, but how did a 21-year old with at least $12 million end up making so many questionable decisions? SBN spoke with John F Murray, PhD, clinical and sport performance psychologist based in Palm Beach, Florida (one of the best in the business) about Telfair. Telfair grew up in a series of tenement buildings located in the shadow of Cooney Island, the dilapidated Brooklyn amusement park.

One of the stories told in “Through the Fire” relates to Sebastian’s older cousin Stephon Marbury. Marbury left Georgia Tech after his freshman year facing the same challenges Telfair listening to a consistent message from everyone around him – your skills as a basketball player is expected to deliver our family from poverty into the lap of luxury. Towards the end of “Through the Fire” one of Telfair’s older brothers is seen driving a Bentley Sebastian has bought him and Sebastian’s mother is excited she’ll never have to cook again. Her meal ticket is about to sign a multi-million shoe contact and join the NBA. How much is Sebastian Telfair a product of the environment he grew up in?

“I think it's a huge factor. So much of behavior is learned and if a person learns to cope with problems in a certain way they will tend to repeat that in the future. Much of this comes from parents, the neighborhood we are brought up in and the groups we gravitate toward. Some kind of positive role model is always helpful in a child's background to encourage smart choices and knowing the consequences of behavior is crucial. Give this, there is still free-will and all citizens are responsible for their actions regardless of upbringing as that is the only way society could survive.” Murray told SBN.

Still John Murray made it clear that is no excuse for the poor decisions Sebastian Telfair seems to be making.

“I think it depends on who that person chooses in his mind as role models. If a person decides that gangs and gang behavior provide the answer, and that crime will pay, it can lead to disaster. If, on the other hand, a teacher, religious leader or parent has greater influence, that person might go in a totally different direction. Coming from a rough background does not necessarily lead to criminal behavior. Great leaders often come from nothing and rich nurtured children can end up in the gutter or addicted to drugs. It comes down to positive influences and the right choices, and learning that cheating or crime is not the right answer to the problem of survival.”

USA Today columnist Ian O’Connor wrote “The Jump” which looked at the life and times of Sebastian Telfair and how he was handling the biggest decisions of his life and those around him as a 17 and 18-year old. Telfair’s appeared on the cover of Sports Illustrated, was the subject of an award winning documentary and during his senior year at Brooklyn’s Lincoln High School appeared on ESPN at least three times. In every sense of the word Telfair was a child protégé, however in his case he was put on a pedestal without a support system around him that could have helped provide some guidance.

“Knowing limits is important. As talented as a 13-year-old might be, if he learns that his talent alone is the ticket to unlimited success and glory, and that the rules do not apply to him, and that the media will always love him for his ability to place a ball through a hoop, he is severely missing the lesson that life is hard, and that discipline and proper choices is what leads to true success and well being,” Murray told SBN.

As for a teenager being showcased on ESPN, Murray offered this, “How is anyone supposed to deal with that? The only answer is maturity, which is kind of hard for a young person who expects to live forever. This is why it is so important to have programs and mentors in place to hammer home the message that true success will only come from a certain degree of humility and a strong dose of self-esteem as a person independent of a person's athletic prowess. It can all end with injury. There are no guarantees that it will always continue. People need to expand their awareness about life and find other avenues to identify with besides only sport or there could be a huge crash when the sport ends either by retirement or early for any number of other reasons. Success is always temporary and players need to understand that very well.”

“He needed to hear the message that everything that goes up must eventually come down and that money or fame is never the answer to all your problems. Many of the clients I see are less happy with tremendous wealth than when they are fighting to make it in their sports. What does that tell you? Figure it out. Happiness is not a function of fame and wealth. Inner peace and self-esteem is far more valuable even if it does not always pay all the bills.”

The pressure on Sebastian Telfair growing up in poverty, living around so many failed dreams and dreamers, death visiting his doorstep would be a great deal for anyone to deal with. But having to deal with the expectations of delivering his entire family to “The Promised Land” is a position an 18-year old should never be subjected too.

“Let's face it ... It's very unnatural to come from nothing financially and then to have a huge windfall as a result of athletic talent. Who can teach coping with this if nobody has experienced it in this person's social network? It has to come from the outside. Those who win the lottery often find their lives a wreck after they get paid off because they have not been educated to prepare for wealth. Everyone then wants a piece of their wealth
and relationships change completely. There is a need to teach restraint and to educate those who receive windfalls overnight - especially among those who are from lower income families and totally unprepared for the stress. The pressure of that can be almost more devastating that having no money.” Murray told SBN.
“It is highly unnatural. That is why good sport psychologists are so important actually in the NBA and all sports. You are talking about a stress actually - and no matter if the stress is good stress or bad stress it is still stress and it needs to be coped with religiously. Stress management programs and individual counseling can avert many problems before they occur. You might not be able to change 17 years of upbringing, but you can learn to anticipate problems and find solutions that have better consequences than carrying a loaded weapon around and getting tossed off a team.”

At 21 Sebastian Telfair has a long life to lead and one that will hopefully include many years where his ability to thrill basketball fans will be appreciated by an NBA team and its fans. That team may not be the Boston Celtics, but given the challenges Telfair and the Celtics have faced in recent years another chance may be what Telfair needs. More important than basketball (regardless of if Telfair ever plays basketball again he still has millions of dollars to his name) is what Sebastian Telfair does with his life and what he can learn from the challenges he’s currently facing.

“Where do we begin? I would first of all try to get him to commit to a certain number of sessions and then we would spend a long time talking about his well being, happiness, what makes him tick, what he wants out of life, etc.... And then we could devise a plan of action to help him become more well adjusted. His life has been very unusual, and he probably needs a lot of mental coaching or mentoring, whatever you want to call it.” Murray said.

And what of the Celtics, Murray shared some interesting thoughts on where the Celtics responsibility falls in regard to Telfair’s NBA future.

“I applaud the fact that teams are starting to get smart and tough! He still has a lot of money coming to him. He needs to now use some of that money for serious mental coaching. He will be a much happier person when he does. Hopefully he will get another great chance, but reversing this kind of behavior is going to take a lot of work.”
For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: The Boston Globe.

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Thursday, April 26, 2007

Character – the true test of this year’s NFL Draft

The Oakland Raiders are on the clock as football fans get ready for Saturday’s NFL draft. The Raiders a team whose fans have always been known for their spirited fans have the first pick. With the announcement earlier this month of the NFL’s first serious player conduct code more than ever character of players selected by NFL teams will be under tremendous scrutiny.

"It is important that the NFL be represented consistently by outstanding people as well as great football players, coaches, and staff," Commissioner Goodell said. "We hold ourselves to higher standards of responsible conduct because of what it means to be part of the National Football League. We have long had policies and programs designed to encourage responsible behavior, and this policy is a further step in ensuring that everyone who is part of the NFL meets that standard. We will continue to review the policy and modify it as warranted."

Added NFL Players Association executive director Gene Upshaw: "The NFL Players Association and the Player Advisory Council have been discussing this issue for several months. We believe that these are steps that the commissioner needs to take and we support the policy. It is important that players in violation of the policy will have the opportunity and the support to change their conduct and earn their way back."

The NFL Draft serves the building blocks for a team’s future. First round picks earn multi-million dollar bonuses but who a team selects in the second, third and fourth round often prove to be the key to whether a team contends for a playoff spot or are on left on the outside looking in. Teams’ can gamble with their fifth, sixth and seventh round picks but organizations have to be successful in their early round draft picks.

After his junior year, Adam “Pacman” Jones opted to forgo his senior year and declare eligible for the NFL Draft. He was the first defensive player drafted, taken 6th overall by the Tennessee Titans. He then missed most of training camp, holding out in a contract dispute. Jones has been suspended for the 2007 season because of his behavior away from the football field. For the Tennessee Titans having the sixth overall pick in the 2005 draft should have resulted in a player delivering on the football field for many years to come. Pacman’s long-term future with the Titans is very much in doubt. If Pacman Jones ends up being cut by the Titans, the decision to draft Jones would represent a dramatic step backwards for the Titans. Jones has delivered everything that was expected of him on the field but his deviant behavior off the field has put his NFL future very much in doubt.

Chris Henry was selected by the Cincinnati Bengals in the third round of the 2005 pick. Cincinnati's No. 3 receiver has been arrested four times since December 2005, has been suspended for the first eight games of next season for violating the NFL's conduct policies. He spent two days in jail last January after pleading guilty to letting minors drink alcohol in a hotel room he had rented.

Jones and Henry are the poster-boys for the type of players NFL teams can’t afford to draft this Saturday.

"There has always been pressure to weed out at-risk (prospects) in the draft, and when the money began to get so big, the pressure increased because there was so much more financial exposure," said Indianapolis Colts owner Jim Irsay in an ESPN report. "But now, with the new player conduct policy and some of the things that (Goodell) has enacted, everyone seems to feel the heat even more. We're really under the gun."

"Every little thing you do," said Miami Dolphins general manager Randy Mueller, "is going to be magnified right now."

"Making bad picks, for skill or character, is costly," said Baltimore general manager Ozzie Newsome. "But you might be able to better (reconcile) the first. Because on the character stuff, well, if a kid's had problems in college, he's probably going to continue to have some similar problems. You don't want to miss on anybody, for any reason. But you really don't want to miss on the character stuff."

"There's a tendency to buy the bargain," Cincinnati coach Marvin Lewis acknowledged at the annual league meetings last month. "To believe in a guy's willingness to turn a corner in his life. To believe that he'll know and understand that it's a privilege to play in the NFL. But we're not in a position to do that anymore.

"Maybe you lose some players if character questions are going to take guys off your board. But it's not a bad choice. There are a lot of good players (with problems), but there are too many other good guys, too. You're spending too much time trying to change habits instead of coaching the good guys."

"Everybody knows who the bad apples are. But not every (team) judges the rottenness of the apple the same way. I mean, we always talk about guys having red flags next to their names on the draft board. Well, sometimes, those red flags have been more like pink flags. Other times, they're, like, fire-engine red. But with what's gone on lately, I think most teams now see red as red. No matter how tempting a guy might be, in the long run, you're probably better off not biting into that apple" Kansas City coach Herm Edwards

Earlier this week The San Diego Union Tribune offered a two-part look at NFL teams and the character issues that have surfaced in recent months and everyone involved with Saturday’s draft acknowledges will be a major factor.

The San Diego Union-Tribune reviewed hundreds of news reports and public records since January 2000 and found that the league's biggest problems with the law are in many ways just as ordinary: drunken driving, traffic stops and repeat offenders.
In addition, contrary to public perception, the arrest rate among NFL players is less than that of the general population, and fueled by many of the same dynamics, analysts say.

According to the Union-Tribune review, there have been 308 arrests or citations, not including minor traffic infractions.

Of those 308 incidents, according to the Union-Tribune report:

The most prevalent charge was driving under the influence, which accounted for almost a third of the arrests. Over half of all incidents came after traffic stops or were vehicle-related, including DUIs and searches that turned up drugs or guns.

Almost 40 percent (122) were committed by 50 players with multiple arrests, including DUI and other offenses.

Some teams are clearly better behaved than others. The St. Louis Rams (three incidents involving two players) might have something to teach the Minnesota Vikings and Cincinnati Bengals, who combined for at least 44 incidents since 2000.

The most troublesome positions were defensive back and wide receiver, which accounted for 130 incidents. By contrast, offensive linemen and quarterbacks combined for 41.

To analysts and those who study crime and race in society, this all adds up to one thing. They say it's a media-amplified microcosm of America, where rich young men like to party and, because of complex environmental factors, where the rate of incarceration for blacks in the United States is five times that of whites.

“You can say for sure the athletes have a problem, but athletes are not the problem,” said Richard Lapchick, director of the Institute for Diversity and Ethics in Sport at the University of Central Florida. “They are representative of society where many of these issues are epidemic.”

“With the attention these players get, it's not like, 'Gee, it's Friday night, and I don't have anything to do,'” said Dr. Robert Troutwine, an industrial psychologist who helps NFL teams develop personality evaluations of players. “Compared to some of us who have more pedestrian social lives, partying is part of the culture if you're young and you make a lot of money.”

“It makes sense for these guys to take a cab or take a limo,” said Dan Lazaroff, director of the Sports Law Institute at Loyola Law School in Los Angeles. “I don't know why you'd want to put yourself in harm's way. Maybe somebody has an expensive car and doesn't want to leave it behind.”

And the “money” issue. Consider some of these recent bonuses and contracts paid signed by young men who have either attended university for four years or in the case of Pacman Jones and many other high draft picks decided to leave school after their junior year for the opportunity to play on Sunday.

Alex Smith the first overall pick from the 2005 draft signed a 6-year, $49.5 million contract. Smith received $24 million in guaranteed money, which included his bonus. Smith's average annual salary of $8.25 million topped the $7.5 million average the Giants gave to quarterback Eli Manning, the first pick in the 2004 draft.

The $24 million in guarantees for Smith was a 20 percent increase over Manning's deal -- Manning had $20 million of his $45 million guaranteed in 2004. Both deals were negotiated by Tom Condon and Ken Kremer of IMG Football.

The first overall pick in the 2006 NFL draft, Mario Williams, signed a 6 year, $54M ($26.5M guaranteed) with the Houston Texans. Reggie Bush, picked second signed by the New Orleans Saints signed for 6 yrs., $62M ($26.3M guaranteed) and Vince Young, who was selected third overall signed 5-6 yrs., $58M ($25.7M guaranteed) with the Tennessee Titans. D'Brickashaw Ferguson, 4th overall, 6 yrs., $37.5M ($17.5M guaranteed) with the New York Jets.

It’s safe to assume whomever the Raiders draft with the first overall selection Saturday will earn roughly 20 percent more than Williams did last year. It’s safe to assume the bonuses paid to players in the first round will be anywhere from 10 percent to 20 percent higher than the same players drafted in those spots in the 2006 draft.

Commissioner Goodell has put NFL teams on notice in regard to the league’s new player conduct code. Firstly the conduct code applies to anyone working either for the National Football League or an NFL team and while the punishment clauses of the conduct code that Goodell announced only applied to players, Goodell plans on announcing in the near future a series of penalties that will apply to NFL franchises as well. Those penalties could include the loss of draft picks.

New England Patriots owner Robert Kraft took a stand against employing players with criminal records eleven years ago, setting a standard for every NFL owner that has yet to be matched. In the fifth round of the 1996 NFL draft, the Patriots picked Nebraska defensive lineman Christian Peter, who had been arrested eight times (and convicted four times) during college for a variety of offenses, including the assault of a former Miss Nebraska and the rape of another woman. When Peter's past came to light (it was Kraft’s wife who alerted her husband), Kraft cut the player before he was even offered a contract. "We concluded this behavior is incompatible with our organization's standards of acceptable conduct" said Kraft. While he received numerous letters of support from high school and college coaches, he was not praised by the NFL. Peter’s had a seven-year NFL career. None of the teams Peter played with have come close to winning the three Super Bowls the Patriots have since cutting Peter before he had a chance to wear the Patriots uniform. It would appear to Robert Kraft principal and what makes a man a man are as important as his ability to play on Sunday.

Said New England owner Bob Kraft, echoing the consensus view: "I think the American people are fed up with overindulged athletes who are making very high incomes, and can lead a certain style of life, and don't respect the responsibilities they have to conduct themselves in a certain manner. It's just good business to have good people connected with your brand name."

As ESPN’s Len Pasquarelli’s suggested: the NFL is the most preeminent sports entity of this or any time, with revenues exceeding $6 billion annually, and an economic standing for virtually everyone involved that would be envied by any big business. No one wants to kill the golden goose. And ensuring the stability and integrity of that goose might begin by guaranteeing that the NFL hatches even fewer problems with a process that begins at conception, with the draft.

"We want people in our league who not only contribute on the field but also contribute in the community," said Pittsburgh owner Dan Rooney. "That might be a little (idealistic) and, hey, I know you can't have a bunch of choirboys. But I don't think it's too much to expect your guys to behave themselves, to obey the law, to have some 'role-modeling' to them. It's still an achievable thing, having a team that plays well and behaves well. And it all starts with taking the right kind of people."

Due diligence aside, what is even more important that making sure your team doesn’t draft a Pacman Jones with the sixth overall pick, you take a serious look at the misadventures of a college football player. Remember at the end of the day they are teenagers and young men who can and will make mistakes. For every Chris Peter (a hallmark decision in the success the Patriots have enjoyed on the field), teams believing a college student who may have had one too many one night doesn’t necessarily mean the player should be bypassed in the NFL draft.

"Everybody knows who the bad apples are. But not every (team) judges the rottenness of the apple the same way," allowed Kansas City coach Herm Edwards. "I mean, we always talk about guys having red flags next to their names on the draft board. Well, sometimes, those red flags have been more like pink flags. Other times, they're, like, fire-engine red. But with what's gone on lately, I think most teams now see red as red. No matter how tempting a guy might be, in the long run, you're probably better off not biting into that apple."
For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: The San Diego Union Tribune and

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Wednesday, April 25, 2007

From the top to the bottom – the MLB outhouse franchises

The last few days HB’s Insider has taken a deeper look at the MLB franchises at the top of Forbes Magazines 2007 Major League Baseball franchise valuation report. For all the right reasons the top five on Forbes list include the New York Yankees, New York Mets, Boston Red Sox, Los Angeles Dodgers and Chicago Cubs. With the exception of the Cubs (who last made the playoffs in 2003) the other four franchise valuation leaders are contenders most years. What about the teams at the other end of Forbes list, the five bottom feeders. Bringing up the rear both literally and figuratively on the Forbes list: the Milwaukee Brewers, Kansas City Royals, Pittsburgh Pirates, Tampa Bay Devil Rays and last and certainly least the Florida Marlins.

At number 26 on Forbes list, the Milwaukee Brewers. The Brewers are owned by Mark Attanasio, who bought them in 2005 for $223 million from Bud Selig’s family. It was the passion and dedication of Selig that led to Major League Baseball returning to Milwaukee in 1970 when the Seattle Pilots moved to Milwaukee after their one and only season in Seattle. Owning the Brewers before he became commissioner on a full time basis in 1998 (his daughter Wendy became the de facto owner of the team) gave Selig an understanding of what it was like to own and operate a small market MLB franchise. That didn’t help the Brewers either on or off the field, but has proven to be a key in making Selig an effective commissioner in the last five years.

That said a new owner was exactly what the Brewers needed and it made even more sense for Selig and his family too no longer be associated from the day-to-day operations of the Brewers. As Forbes pointed out: things have been looking up for the Brew Crew since California banker Mark Attanasio purchased the team in 2005 from baseball commissioner Bud Selig. Attendance was up for a third straight year last year despite a 7% ticket price hike. Attanasio has been putting the increased revenue towards payroll which has doubled since 2004. The team has struggled to sell-out luxury suite inventory, so it combined five suites this winter into a 9,000 square foot area called Club on the Club. The all-inclusive party area will hold 240 people and cost up to $99 per person. Another party area got a new name last year when Mercedes-Benz signed a three-deal to sponsor the picnic area at Miller Park.

The Milwaukee Brewers opened Miller Park in 2001. Miller Park has a capacity of 43,000. The Brewers hosted the MLB All-Star Game in 2002. In Miller Park’s inaugural season the Brewers sold 2,811,041 tickets, averaged 34,704 fans per game and played to 81.7 percent of Miller Park’s capacity. The honeymoon was over quickly for the Brewers and fans buying tickets to Brewers games to experience what it was like to attend a game at Miller Park.

Despite hosting baseball’s mid-summer classic in 2002, the Brewers experienced one of the biggest single season attendance drops in Major League Baseball history in 2002. The Brewers sold 1,969,153 tickets, averaged 24,310 fans per game and experienced an average attendance drop of nearly 25 percent -- playing to 57.2 percent of Miller Park’s capacity. The Brewers were a terrible team on the field in the years preceding their move to Miller Park and haven’t won more than 81 games (they finished at 81-81 in 2005), since the 1992 season. Brewers’ fans have been forced to endure 14 consecutive seasons of losing baseball. Brewers’ fans are proof sports fans won’t get fooled again.

The Brewers 2006 attendance -- 2,335,643 fans, an average of 28,835 fans per game, playing to 68.0 percent of capacity. The Brewers increase in attendance – not the teams’ on field presence, appears to have more to do with new ownership than anything else. Attanasio has worked at curing the Brewers image. It remains to be seen if he’ll be successful, but Attanasio already knows unless he delivers a competitive product he’ll have serious issues selling tickets. Bottom line, the Brewers are where they are in part because of Selig, but it’s a safe assumption if it wasn’t for Bud Selig Milwaukee might still be looking for a MLB franchise to call their own.

At the start of the 1990s, the Kansas City Royals had been hit with a double-whammy when General Manager John Schuerholz departed in 1990 and team owner Ewing Kauffman died in 1993. With a current value of $282 million the Royals are 27th on the Forbes 2007 MLB financial valuation list. Seven years ago Forbes believed the Royals had a value of $122 million.

Kauffman's death left the franchise without permanent ownership until Wal-Mart executive David Glass purchased the team for $96 million in 2000. Partly because of the resulting lack of leadership, after the 1994 season the Royals decided to reduce payroll by trading pitcher David Cone (again) and outfielder Brian McRae, and then continued their salary dump in the 1995 season. In fact, the team payroll was sliced from $40.5 million in 1994 to $18.5 million in 1996.

As attendance slid and the average MLB salary continued to rise, the Royals found it difficult to retain their remaining stars, and the club traded players such as Kevin Appier, Johnny Damon and Jermaine Dye for prospects rather than pay higher salaries or lose them to free agency. Making matters worse, most of the younger players that the Royals received in exchange for these All-Stars proved of little value, setting the stage for an extended downward spiral. Indeed, the Royals set a franchise low with a .398 winning percentage (64-97 record) in 1999, and lost 97 games again in 2001. The records would have been even worse without the rapid development of center fielder Carlos Beltrán (Rookie of the Year in 1999) and first baseman Mike Sweeney. The Royals have lost at least 100 games each of the last three seasons.

The teams’ ineptitude on the field has had a dramatic impact on the franchises ability to sell tickets and market the team. The once proud Royals have serious issues both on and off the field. The Royals have been consistent in being near the bottom in the standings and attendance for the last five seasons. In 2006 the Royals sold 1,372,684 tickets, averaging 17,158 fans per game or 42.1 percent capacity.

The Royals have finished fifth in the AL Central the last three years, third in 2003 and fourth in 2002. The Royals had a winning record in 2003 (83-79), but have had a losing record every other season since 1993. In the last ten seasons, the Royals have averaged 66 wins each year. That’s a decade of pathetic baseball, embarrassing baseball. Since Glass bought the Royals in 1996 the teams’ attendance has dropped by 18 percent while the teams’ value has increased by an average of 17 percent annually.

The Forbes report was very critical of Glass and his stewardship of the Brew Crew. According to Forbes: Glass has profited from rich handouts under the league's revenue-sharing program, imposed in 1997. Each year teams contributed 34% of their revenue from ticket sales, parking, concessions and local broadcast rights (minus stadium expenses) to a pot that then is redistributed to the weakest teams. In 2006, $326 million was paid out to the losers.

Thus the Royals' annual collections from this socialistic setup have doubled since 2002, to $32 million last season (of a total $123 million in team revenue that year). But the team's player costs inched up only 6% to an estimated $65 million in that same period. Thus the losing Royals have turned an annual profit of close to $10 million a year (earnings before interest, taxes, depreciation and amortization).

"I feel pretty critical about the way Glass has managed the team," says Andrew Zimbalist, an economist who has consulted Major League Baseball on its system of sharing the wealth. "He looked at a welfare system in baseball and took advantage of it."

The glass being half full report from Forbes concerning the Royals: in April, 2006 Jackson County voters barely approved an overhaul for the Truman Sports Complex, which houses Kauffman Stadium (Royals) and Arrowhead Stadium (Chiefs). The proceeds for the $575 million renovation will come from a three-eights cent sales tax increase to raise $425 million, $50 million in tax credits from the state, $75 million from the Chiefs and $25 million from the Royals. Although no definitive deadline has been set for the completion of the upgrades, we have bumped up the value of the Royals to reflect the approval of the financing.

During the 2006 off-season, Glass appeared to be opening up his wallet. The Royals outbid the Cubs and Blue Jays for free agent pitcher Gil Meche, signing him to five-year, $55 million contract. Reliever Octavio Dotel also inked a one-year, $5 million contract. The Royals have signed various new players, adding bulk to their bullpen and hitting, and under general manager Dayton Moore the Royals were arguably the most aggressive team in the off-season.

Among one of Dayton Moore's first acts as General Manager was instating a new motto for the team: "True. Blue. Tradition." The Royals plan on a slogan that will bank on new general manager Dayton Moore’s ability to restore the Royals’ once-rich history. The Royals also ditched their black and sleeveless jerseys, instead reviving their "old" jerseys from years past. Kansas City enters the 2007 season looking to rebound from four out of five seasons ending with 100 losses. The good news, the Royals have only once place to move and that’s forward.

After hosting the 2006 MLB All-Star Game Pittsburgh Pirates fans have little if anything to get excited about when it comes to their Pirates. Long gone are the days of Willie Stargell and the “We are Family” team that won the 1979 World Series. Forbes determined the current value for the Pirates to be $274 million.

The good news as Forbes reported: the Pirates have a new person in the captain's chair this year with Bob Nutting's approval as controlling owner of the franchise. The Nutting family was an investor in the group led by Kevin McClatchy that purchased the team in 1996. The family gradually bought out minority stakes and built its interest to more than 50%. McClatchy will retain his role as CEO to the dismay of fans who lament 14 straight losing seasons by this once proud franchise. The Pirates are among a group small market teams that have seen their revenue sharing payments increase without a corresponding rise in player costs drawing the wrath of their big market brethren.

The Pittsburgh Pirates moved into PNC Park at the start of the 2001 season. The Pirates enjoyed their first year in their new ballpark, selling 2,428,661, an average of 30,742 fans per game or 80.1 percent of PNC Park’s capacity. Strikingly similar to the attendance problems the Brewers had in their second year at Miller Park, the Pirates, in 2002 sold 1,784,988 tickets, an average of 22,594 fans or 58.9 percent capacity of their stadium’s capacity. The Pirates share one more important distinction with the Brewers. The last time the Pirates had a winning record, 1992. The Pirates won 96 games that year. In 1993 the Pirates won 75 games. Since then they have offered their fans nothing more than losing records for 14 consecutive seasons. Coincidently the last year the Pirates had a winning record and made the playoffs – 1992 – the last year Barry Bonds played in a Pirates uniform.

A report in last week’s Pittsburgh Post Gazette doesn’t help the Pirates efforts. The Post Gazette reported the Milwaukee Brewers (26th on the list) are set to spend $20 million more than the Pirates on their team payroll this year. What drew the attention of the Post Gazette; the Brewers, based in the National League's smallest market and a region two-thirds the size of Pittsburgh's seem on the surface more committed to winning than the Pirates do.

Each is based in one of Major League Baseball's six smallest markets, with the Pittsburgh metropolitan area home to 2.2 million and Milwaukee's home to 1.5 million. Each has played in a new, taxpayer-built stadium since 2001. Each receives a comparable revenue-sharing check from MLB, the Pirates getting $25 million last year and the Brewers $23 million. Each has a local broadcasting deal in the range of $10 million.

It shouldn’t come as a surprise to anyone finishing 29th on the Forbes list the Tampa Bay Devil Rays with a financial valuation of $267 million and the ultimate bottom feeder MLB franchise the Florida Marlins dead last at a value of $244 million.

Major League Baseball continues to fail miserably in Florida. The Tampa Bay Devil Rays finished 29th in MLB attendance, their brothers to the south, the Florida Marlins dead last in 2006. In the last six MLB seasons, the Marlins and Devil Rays finished in the bottom five each year, and would have held the two lowest attendance totals in five of the last six seasons, if not for the dreadful Montreal Expos holding that distinction in their last four seasons in Montreal (2001 through 2004).

Both franchises sold less than 40 percent of their available ticket inventory last year. The Devil Rays decade of terrible baseball (the D-Rays have the worst record in baseball over the ten years they’ve been a “major league” team), managed to sell 1,369,031 tickets last year, averaging 16,901 fans per game or 38.6 percent of capacity. The Marlins who ‘managed’ to sell out their last game of the season in 2006 against Philadelphia, pushing their 2006 season total to 1,165,120, averaging 14,384 fans per game, or 38.8 percent.

Ownership issues aside for both franchises, the Marlins and D-Rays play in two of the worst baseball faculties ever conceived. The D-Rays are stuck with the terrible Tropicana Field and the Marlins have little if any political support for their new stadium plans. Dolphins Stadium is a football, not a baseball facility.

The Tampa Bay Devil Rays are owned by Stuart Sternberg, who bought them in 2004 for $200 million from Vince Namoli. Namoli was arguably the worst owner in baseball during his reign of terror. Namoli was responsible for bringing MLB to the Tampa area, but was an unmitigated disaster as an owner. Just before the start of the 2005 season (Namoli’s last) The St. Petersburg Times offered a laundry list of mistakes Namoli had made as the D-Rays owner, including but in no way limited too:

Major League Baseball put the new owners (the D-Rays were granted a franchise the same year the Arizona Diamondbacks joined the National League) in a financial hole before the team ever took the field, raising the expansion fee to an unprecedented $130-million and forcing them to forfeit millions in national TV revenue at a time when the overall costs of competing were soaring. The financial wherewithal of the Tampa Bay ownership group was immediately challenged, and has been a persistent concern.

Just how often have those who own professional sports franchises taken a greedy approach when it comes to establishing the parameters for expansion. Tough enough of a challenge to pay a $130 million franchise fee, next to impossible when MLB decided to ‘penalize’ the D-Rays by denying the franchise MLB national TV revenues. When Bob McNair paid the National Football League a $700 million expansion fee for the Houston Texans he was immediately eligible for the league’s lucrative network TV deal.

While the Rays stocked their inaugural roster with veteran players, they fielded too many rookies in key management positions. The owner, Naimoli, had never owned a sports team; the general manager, Chuck LaMar, had never been a general manager; the manager, Larry Rothschild, had never managed. Of the six department-leading vice presidents on the 1998 staff, only one had done his same job before.

It’s almost amusing to note the Devil Rays followed a pattern similar to the NHL’s Tampa Bay Lightening. Then Lightening General Manager Phil Esposito believed the only way he could build awareness for hockey in Florida was with established players. Baseball is a known and established product in Florida. The D-Rays paid a price for making bad decisions,

The promising Tampa Bay baseball market turned out to be something of a mirage. Projections for massive fan support turned out to be overly optimistic, as the Rays have ranked at or near the bottom of the league in attendance the past six seasons. They struggle to cross the regional barriers that define the area and to connect with transient fans that preferred to stick with their successful "home" team. In a recent Times survey, less than 30 percent of Tampa Bay area baseball fans named the Devil Rays their favorite team.

The sad sack Devil Rays Forbes pointed out: took several steps forward during the first year under Stuart Sternberg's watch. The team spent $10 million to spruce up dreary Tropicana Field, including $2 million for an upscale club. The Rays, who have the best young outfield in the major leagues, also invested heavily on player development and have stockpiled some of the best talent in the minors. Business picked up, as the team also inked a lucrative sponsorship deal with Anheuser-Busch and attendance rose 22%. One area that didn't improve was on the field where the team lost 101 games in 2006, the most in baseball. The D-Rays have finished in last place in eight of the nine years the team's been in existence racking up at least 90 losses each year.

If SBN believed Vince Namoli was the worst owner in MLB in 2005, SBN’s 2006 labeling of Florida Marlins owner Jeffrey Loria as a ‘franchise killer’ makes Loria among the most despised figures in sports today. In a recent ESPN poll more than 80,000 sports fans (not exactly an objective group) believed Loria was the worst owner in all of sports. That was determined from a list of 118 different major sports league owners. One common characteristic each of the MLB teams share among the five least valued teams, all five either have or have had recent ownership issues with their team that clearly have affected each teams ability to generate revenues in their individual markets.

Loria first gutted the Montreal Expos roster of any major league talent, cutting the teams’ payroll, making the team nothing more then a glorified Triple-A baseball franchise playing Major League Baseball. MLB may have been dying on the vine when Loria arrived in Montreal in 1998 but Jeffrey Loria managed to kill whatever was left of the Expos in very short order.

The Marlins somehow won the 2003 World Series, with Loria and and his son-in-law David Samson running the franchise. Loria and Samson as they did in Montreal, cut all of the players who brought Miami its second World Series title in 2003, slashing the teams’ payroll to $15 million last year.

The mark of Jeffrey Loria’s ownership style -- the Marlins received more then $30 million in MLB revenue sharing this year, with little if any of that money being directed back into the Marlins on-field product. With the Marlins contending for a playoff spot last year, the team did nothing at the July 31 MLB trade deadline to improve their playoff position. What message did Jeffrey Loria send to South Florida’s business community when he stood ideally by and did nothing to enhance his business? Did that help or hurt the image of the Marlins?

Last year the Marlins joined “Loria’s Attendance Hall of Shame”. The Marlins finished dead last in MLB attendance by only managing to fill 38.1% of Dolphins Stadium. When Marlins starter Anibal Sanchez pitched the first no-hitter in the Majors since Randy Johnson threw a perfect game on May 18, 2004 in September, the announced attendance was a shade over 12,000. Various media reports pegged the actual crowd at around 5,000. Throughout the three seasons Loria ran the Montreal Expos (1999 through 2001) the Expos were at the bottom of Major League Baseball attendance – Loria’s MLB business history repeating itself.

Sentiments about Loria aside as Forbes alluded too: the Marlins, are second-class tenants in a stadium owned by Miami Dolphins owner Wayne Huizenga, are getting closer to building a new ballpark of their own. The team, city and county have committed to paying $460 million of the $490 million estimated cost to build a retractable-roof stadium. Supporters of the stadium are asking the state to pay an additional $60 million over 30 years to finance the remainder. If owner Jeffrey Loria gets his new digs the value of the team should increase by at least $40 million the first season. The current Marlins lease at Dolphins Stadium ends after the 2010 season. Expect a new stadium deal to get done by the end of this year or expect Loria to seriously begin planning to move his Marlins elsewhere.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: Forbes Magazine’s 2007 Business of Baseball report.

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Tuesday, April 24, 2007

Mixing and Matching, delving into the top of the MLB Forbes List

There is a great deal more to the 2007 Forbes MLB franchise valuation list with the Yankees once again finishing at the top of the list. The Yankees cross-town neighbors the New York Mets are second on the Forbes list, followed by the Boston Red Sox, the Los Angeles Dodgers and the Chicago Cubs rounding out the top five on the Forbes list.

The Yankees who like the Mets will move into a new stadium in time for the 2009 season are valued at $736 million, nearly a $500 million behind the Yankees $1.2 billion. Forbes determined the Mets had a value of $604 million last year (remember Forbes annual valuation is based on the previous season), $505 million in 2005, $442 million in 2004, $486 million in 2003, $482 million in 2002, $454 million in 2001 and $314 million in 2000.

Contributing to the Mets growth last year according to Forbes: First up was the launch of their own regional sports network called SportsNet New York. Time Warner and Comcast received equity stakes in the network that aired 125 games in 2006. Later in the summer the Mets broke ground on their new 45,000 person stadium scheduled to open in 2009. The team is picking up 75% of the stadium's $600 million tab. In the fall, the Mets signed the richest naming rights deal in the history of sports, a 20-year, $400 million agreement that christens the new ballpark, Citi Field. In between all of this, the Mets finished tied for the best record in baseball in 2006 and drew a record 3.4 million fans to Shea Stadium. The naming rights agreement was the biggest deal in sports history.

The team warmly welcomed its newest outlet by winning its first National League title since 1988. Success on the field helped the network bring in 135% more households and achieve a 40% prime-time ratings increase over former local cable rights holder MSG. The debut of SportsNet New York was a key to the long-term growth of the Mets. It’s tough enough for Mets owner Fred Wilpon, who bought them in 2002 for $391 million to compete with George Steinbrenner and the Yankees, the Mets had to have their own televisions network as the Yankees have had since 2002 (the YES Network).

Both the New York Yankees and New York Mets made it to the post-season last year. The Yankees lost to the American League champion Detroit Tigers in the American League Divisional Series, the Mets were eliminated by the St. Louis Cardinals in the seventh game of the National League Championship series.

‘Big Apple’ Major League Baseball enjoyed its greatest single attendance year in 2006. The Yankees regular season attendance topped 4.2 million. The Yankees drew more than 4 million fans for the second consecutive season. The Mets, winners of the National League’s eastern division with 3,379,551. All told, the Yankees and the Mets sold more than 7.5 million tickets to 162 games. In 2005 the Mets and the Yankees drew a combined 6.87 million fans. The Yankees won the AL East in 2005. The Mets finished fourth in the NL East winning 83 games. New Yorkers have many choices they can make with their disposable dollars. A winning team in Flushing led to the Mets for an increase of 700,000 fans in 2006 over the 2,782,212 they drew in 2005.

But what really created shockwaves in the sports industry that directly related to the Mets in 2006 -- annual rights fees paid by Citigroup the New York based financial company is expected to be worth at least $20 million annually, be for a term of 20-years, and include an option to extend the agreement to 35-years. Over the life of the agreement, the Mets stand to generate between $400 and $650 million from the sponsorship agreement. The agreement will obliterate the $10 million annual fee Reliant Energy pays the Houston Texans to call the home of the Texans Reliant Stadium.

The Mets establishing the highest annual sponsorship fee paid to a sports team in corporate stadium/arena naming rights has to be regarded as a positive step forward for MLB. Prior to today’s agreement, only one of the top ten most valuable naming rights deals belonged to a Major League Baseball stadium naming rights agreement, the $170 million, 28-year agreement with the Houston Astros, a little more than $6 million annually.

Just behind the Mets, Forbes believes the Boston Red Sox are worth $724 million. The Boston Red Sox are owned by John Henry, Larry Lucchino and Tom Werner, who bought them in 2002 for $380 million. Henry and company also picked up Fenway Park and an 80 percent stake in the New England Sports Network as part of their purchase, pushing the total sale price to $700 million.

The Red Sox won the 2004 World Series the organizations first since the team traded Babe Ruth to the York Yankees after the 1918 season, creating the infamous “Curse of the Bambino”. More than a championship Henry, Lucchino and Werner offered Red Sox Nation what Yankees owner George Steinbrenner offered Yankees fans, an opportunity for the Yankees to win every year. But like Steinbrenner Henry, Lucchino and Werner’s effort have dramatically increased the value of the Red Sox.

John Harrington managed the Red Sox for the Yawkey Foundation before the $700 million sale after the 2001 season. Forbes determined the Red Sox financial valuation was at $284 million in 2000 and $339 million in 2001. The Red Sox value increased to $426 million in 2002, $486 million in 2003, $555 million in 2004 (the year the team won their first World Series in 86 years), $563 million in 2005, $563 million in 2005 and $617 million last year.

According to Forbes: since buying the team and 80% of the NESN cable channel in 2002, the Boston ownership team of John Henry and Tom Werner has transformed the Red Sox from a sleepy asset into a cutting-edge organization. In February the team bought a 50% stake in Nascar's Roush Racing, a move that will allow Henry to cross-market the two sports. Premium seating has been added to Fenway Park (400 standing-room seats have been converted to field box seats) and beginning this season the Red Sox will receive $16 million a year for their radio rights, a 50% increase over their previous deal.

The Fenway Sports Group (the parent company that own the Red Sox, the 80 percent share in NESN, the 50% stake in the NASCAR team and other related sports properties) has become a money-making machine.

The Red Sox will sell out their 319th game tonight when the “Old Towne Team” meet the Toronto Blue Jays to close a five game homestand. Last year the Red Sox became the first Major League Baseball team to form their own travel agency. According to a Bloomberg News report, Red Sox Destinations, operated by the Red Sox sister company Fenway Sports Group, will run trips to 11 series of games this year that the company says will generate more than $1 million in sales.

“We have sold out 309 straight games. It's a good problem to have, but we need to look for new revenue streams,” said Tim Zue, Fenway Sports Group's director of business affairs, who runs the travel company. “If you can do it yourself, you can maximize the revenue potential.”

The Red Sox ‘technically’ play in the second smallest stadium seating capacity in MLB. Only Oakland's McAfee Coliseum, with 34,077 seats, is smaller -- and that's because the team closed the upper deck due to lack of ticket sales. Fenway's capacity is 36,108.

Fenway Park may be the smallest ballpark in the MLB, but the Red Sox have demonstrated the true meaning of how the law of supply and demand works when it comes to selling tickets. The Red Sox remain the most expensive average ticket price in MLB, with an average ticket price of $47.71 in 2007 a 2.7 percent increase over their 2006 average of $46.46.

TMR’s Fan Cost Index (FCI), which estimates what it would cost a family of four to attend a sports event pegs the FCI at Fenway for the 2007 season at $313.83 an increase of 9 percent over the 2006 season FCI at $287.84. The cost of tickets increased by a modest 4.27% at Fenway last year. After winning their first World Series in 86 years, Red Sox tickets increased by 9.30% in 2005 to a league leading average ticket price of $44.56. The average ticket price for Red Sox games in 2004 was $40.77. 2003 -- $38.59. 2002 -- $39.68 (the first year under the teams’ current ownership group). According to TMR the Red Sox have had the highest average ticket price since the 1998 season. The Yankees had the highest average ticket price in 1997 -- $18.36. The Red Sox average ticket price nine years ago, in 1997 stood at $17.93.

In the last decade, the average Red Sox ticket price has increased by more then 250 percent. The ever evolving secondary ticket market had to have opened many eyes in the Red Sox front office in September. Yes the Red Sox managed to sellout their September home games, but hundreds of tickets were available at face or less then face value through the secondary ticket market. On August 17 the Red Sox were 1.5 games behind the Yankees. Two weeks later the Red Sox were 8 games behind the Yankees as August turned to September. The Red Sox where 6.5 games out of the wild card playoff spot – to Red Sox fans the season was over. The Red Sox have sold more than 2.5 million tickets for the 2007 season (the season is virtually sold out). If the Red Sox 2007 season falls by the wayside before September, it will be very interesting to see how Red Sox fans react when it comes to so willingly prepared to pay the highest ticket prices in baseball.

Fenway’s capacity for 2006 was listed at 36,109. According to’s MLB attendance database, the Red Sox averaged 36,182 fans per game for 2006. Using that figure, multiplied by the teams projected 81 home games (the Red Sox reschedule every rainout as a day/night doubleheader, with two separate admissions), times the Red Sox average ticket price of $47.71, the Red Sox projected ticket revenues for the 2007 season stands at an awe inspiring $139,913,623 for the season or $1,727,328 at the Fenway Cashbox. Fenway Park may have the smallest capacity of any MLB ballpark but the Red Sox generate more revenues in ticket sales than the other 29 MLB teams by a considerable margin.

Bostonian Frank McCourt did his best to buy his beloved Red Sox from the Yawkey Foundation losing to Henry and company. McCourt turned around and bought the Los Angeles Dodgers for $355 million in 2004. There are those who believe McCourt hasn’t been good for the Dodgers but results suggest otherwise.

According to Forbes: McCourt arrived in LA in 2004 with an onerous debt load from his purchase of the team, causing fans to worry the Dodgers would suffer from payroll cuts. But McCourt has kept payroll in the $100 million range and last year the team reached the playoffs for the second time in McCourt's three-year tenure. McCourt has also poured $40 million into renovating Dodger Stadium. Last year the team replaced almost every seat in the stadium and added 1,100 box seats with tables for dining and concierge service that cost as much as $150 a game. Fans like the new look as the team drew 3.8 million fans to Dodger Stadium, the highest attendance in team history.

The Dodgers increased their 2007 ticket prices by 26.9 percent following the 10.3 percent increase Dodgers fans experienced in 2006. Two years ago the 2005 average ticket price for Dodgers game stood at $18.94. Fans can look forward to paying $26.28. Is the increase of more than 35 percent in two years a market correction or price gouging? Bottom line -- the Dodgers sold 3,758,421 last year, establishing a single season Dodgers attendance record. Bottom line the Dodgers sold more than 82 percent of their available ticket inventory last year, a 3 percent increase over 2005. The Dodgers made the playoffs in 2006. Clearly in the Southern California market the Dodgers ticket price increase as significant as they may have been over the last two years appear to be a market correction, ticket prices clearly didn’t reflect how the market would react.

Forbes believes McCourt’s Dodgers are worth $632 million this year, $452 million last year, $424 million in 2005, $399 million in 2004, $449 million in 2003, $435 million in 2002, $381 million in 2001 and $325 million in 2000.

One area Forbes believes helps generate significant revenue for the Dodgers – local television revenue. Forbes estimates the Dodgers generate as much as $45 million from local media rights. Viacom-owned KCAL signed an eight-year agreement valued at $80 million with the team to become its new television home beginning with the 2006 season. (KCAL was the former home of the Angels.) Since Infinity Broadcasting, a fellow Viacom property, operates KFWB-AM, the team's radio rights holder, the two outlets are able to capitalize on cross-promotion opportunities previously unavailable in the two-team market. The irony of the Dodgers improving bottom line and the organizations growth in local media sales – Rupert Murdoch who sold the Dodgers to McCourt (and owns the Fox Network and the Fox regional sports network(s) couldn’t make economic sense out of owning a MLB team).

If the Barry Bonds saga will grab the attention of baseball fans throughout the 2007 season, the sale of the Chicago Cubs promises to be one of the bigger sports business stories.

Earlier this month, the Tribune Company announced that the Tribune’s board had agreed to accept a revised $34-a-share proposal from Chicago real estate magnate Sam Zell to buy out the company's public shares in a complex, $8.2 billion transaction structured around an employee stock ownership plan, or ESOP. However (and here’s the sports angle to this mega deal) to help fund the agreement, Tribune said it would sell the Chicago Cubs and its 25 percent stake in local cable channel Comcast SportsNet Chicago after the 2007 season.

It’s rare a sports franchise as iconic as the Chicago Cubs are put on the market. The last baseball franchise with as much “panache” as the Cubs being put up for sale was when John Harrington the trustee for the Yawkey Foundation placed a for sale sign on the Boston Red Sox. In 2002, the Red Sox sold for a MLB record $700 million, a price that included an 80% stake in NESN, the cable channel that airs the team's games. It’s important in understanding the value of the Red Sox; John Henry purchased the team, Fenway Park and revenue generating NESN.

Before the sale to Zell, the Tribune’s company’s assets directly related to companies baseball operation included: the Cubs, Wrigley Field, WGN, WGN Radio and a 25 percent interest in broadcast partner Comcast SportsNet Chicago. While any actual sale of the Cubs is months away, confusion was the order of the day in terms of what actually would be offered along with the Cubs earlier this month. A report in the Chicago Tribune on April 4 suggested Zell has every intention of keeping both WGN and WGN Radio, and another report in the Tribune (the company that has been sold) notes nowhere has it been said Wrigley Field will be a part of any package that includes the Cubs.

If the Tribune company had decided to package the Cubs, Wrigley Field, WGN, WGN Radio and Comcast SportsNet Chicago as a package, those five properties packaged together could have sold for as much as $2 billion, at the very least for $1.5 billion. The Cubs sold on their own (with Wrigley Field) might sell for between $500 and $700 million.

Without Wrigley Field, the new Cubs owner would be forced to pay rent for Wrigley Field and could easily be held hostage by whoever owns Wrigley Field. As attractive as owning the Cubs maybe to a select group of people, if the new owners of the Cubs have to answer to the owners of Wrigley Field it would be nonsensical for anyone to purchase the Cubs – it would be a terrible decision.

Noted sports economist Andrew Zimbalist told The Tribune Tuesday, establishing what the Cubs can be sold for will be easier said than done.

"Unless you know where the revenue streams are and how long they last, you really can't tell what the Cubs are really worth," Zimbalist said.

Robert Caporale of Game Plan, a Boston sports investment firm, told The Los Angeles Times in November he believed, the Cubs could sell for "even more than what the Red Sox and NESN fetched."

Despite Caporale’s belief the Cubs could sell for more than the Red Sox did, that makes little if any sense. The $700 million John Henry’s group paid for the Red Sox included NESN. Cubs’ games are televised on WGN and the radio rights holder is WGN Radio and neither of those key media properties will be included in whatever price the Cubs are sold for.

Regardless the Tribune Company will experience an amazing return on their initial investment in the Cubs. The Tribune purchased the Cubs for $20.5 million in 1981. Its reasonable to assume the Cubs (with or without Wrigley Field) will sell for at least $500 million once the 25 percent stake in Comcast SportsNet Chicago is factored in.

Forbes believes the Cubs have a value of $592 million, $445 million last year, $398 in 2005, $356 in 2004, $335 million in 2003, $267 million in 2002, $247 million in 2001 and $242 million in 2000.

As Forbes noted in their report: the Cubs went on an unprecedented spending spree this winter after finishing with a National League high 96 losses in 2006. The team committed nearly $300 million in new contracts in an attempt to bring Wrigleyville its first World Series title since 1908. The biggest contract was an 8-year, $136 million deal with outfielder Alfonso Soriano. To help pay for such largesse, the team has been signing up corporate sponsors at Wrigley which for years was ad free. Last year the team signed a deal to dub Wrigley's famed bleachers the Bud Light Bleachers. This year, the Cubs became the last baseball team to have advertising on its outfield wall when it announced a deal with Under Amour.

The Cubs haven’t won a World Series in 103 years, but that hasn’t stopped the Tribune Company from creating their own version of the Red Sox law of ticket supply and demand. Wrigley Field seats 41,160 one of the smaller stadium capacities in MLB. The Cubs sold 3,123,215 tickets, averaging 39,040 at Wrigley Field or 94.9 percent capacity last year. The Cubs average ticket price for 2007 stands at $34.30 the same price the second priciest MLB tickets where in 2006.

Forbes believes the Cubs generate as much as $42 million annually from local media sales.

The Cubs are the only team whose local rights are held by media outlets owned (WGN television and radio) or co-owned (Comcast Sports Net) by its parent, Tribune, making them an interesting value proposition for the next owner. How the media rights factor into the package the Tribune Company puts in the marketplace will determine how much the Cubs will be sold for.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: Forbes Magazine’s Business of Baseball Report.

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Monday, April 23, 2007

The Yankees Win, the Yankees Win, the Yankees Win

One of the more popular phrases New York Yankees broadcaster John Sterling utters after each Yankees win “"Ball-game over! Yankees win! Theeeeeee Yankees win!!"

Sterling’s famous line has no connection whatsoever with Forbes annual financial Major League Baseball valuation, but while Yankees owner George Steinbrenner does his best to put the Yankees in a position to win each baseball season, its likely the Yankees continued domination of Forbes annual list has Steinbrenner thinking of Sterling’s celebrated broadcast line.

George Steinbrenner. 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. Last week 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.

Did that mean in anyway The Boss (as Steinbrenner is often called by those who respect, loathe and fear the man) was fully financially committed to the Yankees success? What took place on July 30, 2006 served as the perfect example as to Steinbrenner never letting the dollar get in the way of the Yankees success.

The New York Yankees did what they do best that Sunday afternoon – robbing their own cradle to feed the big club. 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 had to stare and watch as George Steinbrenner’s annual shock and awe campaign proved once again, at least when it comes to the business of baseball -- Darth Steinbrenner is The Boss.

The rationale for the Phillies at the time may have seemed so 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 then add 7.1 million to their 2006 team payroll. Because the Yankees 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 2006 opening day payroll was projected at $198,662,180. The Yankees may have reduced their payroll but Yankees General Manager Brian Cashman believed the Yankees needed Abreu and Lidle to win in 2006. When the Yankees made the trade they were .5 game behind the Red Sox. Two months later when the season ended the Red Sox were 11 games back, the Blue Jays finished second in the AL East, but still ten games behind the Yankees. Yes, the Yankees lost their American League Divisional series to the Detroit Tigers in four games, but the bottom line – Steinbrenner added value once again to the Yankees by putting the needed pieces in place.

The New York Post offered an interesting look at the business of the Yankees last year. Among the ‘interesting’ points the Post raised in their report:

*TV: 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.

*Ticket sales: The Yankees have already sold more than three million tickets for this season and are expected to top last year's record home attendance of 3.7 million. The most recent figure for gate receipts is $119 million for the 2003 season, and analysts say the team is well ahead of that figure. Carter at The Sports Business Group also said there are even more dollars generated by the sales of hot dogs, soda and beer and other concessions and souvenirs.

*Sponsorships: The Yankees have benefited from some of the biggest sponsorship deals in all of sports, including a 10-year, $94 million deal with Adidas. "Everybody wants to back a winner and it's obvious that you're going to get more bang for your buck," with the Yankees, Jim Andrews, editorial director with IEG Sponsorship Report, said.

*Luxury Suites: Yankee Stadium has 35 suites that lease for an average of $280,000 each per year, according to Jim Grinstead, publisher of Revenue from Sports Venues. It's difficult to pin down an annual amount of revenue generated by the suites since some are rented on a per day basis for anywhere from $2,600 to $4,500, Grinstead said.

The best may be yet to come for the Yankees. On June 15, 2005, just four days after the New York Mets announced their plans to replace Shea Stadium, Steinbrenner announced the Yankees would build a new Yankee Stadium at a cost of $800 million. While $200 million in infrastructure costs will be borne by taxpayers, the Yankees will cover the cost of the new ballpark and any cost overruns.

According to the information the Yankees released to the media: Tradition and the look of old Yankee Stadium prior to its renovation in the 1970's will be incorporated into the new stadium. The new Yankee Stadium will seat approximately 51,800 fans.

The main grandstand will consist of four levels that stretch from foul pole to foul pole, with nearly 30,000 seats in the first two levels. The third level will contain 60 luxury suites and the fourth level will be the upper deck. Additional seating will be beyond the outfield fence as it is today at Yankee Stadium. Many elements will be incorporated into the new stadium that were lost when Yankee Stadium was renovated in the 1970's.

The stadium will be comprised of two separate structures: one, the exterior wall, constructed to replicate the original Yankee Stadium, built in 1923, and the other the interior stadium itself, rising over the top of the exterior. From the outside the structures will look like one building, almost identical in materials and design to the original stadium.

The signature frieze, the lattice work that once rimmed the original stadium roof and was recreated in the outfield of the current stadium, will be added to the new stadium's roof. The famously cavernous concourses will give way to open spaces with sightlines to the field from nearly every vantage point. Monument park will be moved to a new location beyond the outfield fence once the new stadium opens. The new stadium will have the same dimensions and bullpen placements as the old Yankee Stadium had.

The key differences between the current and the new ballparks – the 60 suites. The current Yankee Stadium has 17 suites. Those 43 additional suites will represent millions of additional dollars in revenue for the Yankees each year. Then factoring in a majority of the new ballparks seats being located in the lower deck, the Yankees who have already surpassed 4 million tickets sold for the 2006 season (marking the second consecutive season the Yankees have achieved that attendance figure) the slight drop in capacity from 54,000 to 51,000 will drive Yankee season ticket sales and again result in millions of dollars in additional revenues with an increase in premium seating.

2002 an epic year when it came to the Business of Steinbrenner. He started the YES Network, Sporting News recognizes the feat by naming him the Most Powerful person in sports (he was number two in 2001). Before YES launched their network in 2002, Steinbrenner reached a marketing agreement with Manchester United, bringing together two of the biggest brands in sports.

Steinbrenner moved forward with YES after making a reported $64.5 million (that according to MLB’s Blue Ribbon report) with the Yankees between 1995 and 1999. Unlike far too many professional sports owners, Steinbrenner time and time again has taken the money he’s made from the team he owns and invested those profits directly back into the Yankees. Should that not be the standard which professional sports owners are not judged by? Too many owners today have either a take the money and run belief as to how their team should be run or are simply not prepared to invest in their business.

The Yankees $26 million plus luxury tax bill for 2006 brought their four year to $97.75 million. The Yankees paid tax in all four seasons of the recently-expired collective-bargaining agreement: $11.8 million in 2003, $26 million in 2004 and $34 million for last year.

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."

The message was that Burke would continue to run the team as club president. But Burke later became angry when he found out that Paul had been brought in as a senior Yankee executive, crowding his authority, and quit the team presidency on April 29, 1973, but remained a minority owner of the club into the following decade. It would be the first of many high-profile departures with employees who crossed paths with "The Boss." At the conclusion of the 1973 season, two more prominent names departed: manager Ralph Houk, who resigned and then signed to manage the Detroit Tigers; and general manager Lee MacPhail, who became president of the American League.

The 1973 off-season would prove to be controversial when Steinbrenner and Paul sought to hire former Oakland Athletics manager Dick Williams, who had resigned immediately after leading the team to its second straight World Series title. However, because Williams was still under contract to Oakland, the subsequent legal wrangling prevented the Yankees from hiring him.

Free agency and George Steinbrenner were made for each other. First signing Jim ‘Catfish’ Hunter to a then unheard of 4-year, $2.85 million contract in 1974, to the signing of Reggie Jackson in 1976, and Steinbrenner bought success back to the Bronx. And for the record it’s well worth noting that Steinbrenner was against free agency when Marvin Miller and the Major League Baseball Players Association managed to secure that right for baseball players in the mid 1970’s. However once that door opened, again playing within the rules, Steinbrenner used the opportunity to his advantage to build a Yankees dynasty.

While the Yankees didn’t win a World Series in the 1980’s they had baseball best record. Steinbrenner turned the teams failures of the 1980’s into four more World Series between 1996 and 2000, and two more American League pennants. He helped create unparallel success and under the leadership he has provided the Yankees are baseball’s premier brand, all again working within baseball rules. Is that not again what outstanding ownership of a sports franchise should be judged by?

Steinbrenner has had serious issues outside of baseball while he has owned the Yankees. Notably in early 1990's after the Yankee owner came under fire from owners around the league denouncing his "overly dominating" business practices. In 1990, baseball Commissioner Fay Vincent ordered the Yankees owner to resign as the club's general partner and shockingly banned him from the day-to-day operations of the team for life. The ruling came as a direct result of Steinbrenner's $40,000 payment to confessed gambler Howie Spira for damaging information about the since-traded Dave Winfield. Later Spira was sentenced to 2½ years in prison for attempting to extort $110,000 from the Yankees organization, but regardless of the motive, the suspension still remained. In his absence which was repeatedly under appeal, Vice President and Chief Administrative Officer Joseph Molloy, (Steinbrenner's son-in-law), was appointed as the "acting" managing general partner of the club.

Steinbrenner paid a terrible price, being forced to be nothing more then become an observer of the Yankees day-to-day operations of the Yankees, Steinbrenner returned as Yankees Managing Partner three years later. One of his first decisions, negotiating a ten-year $93 million sponsorship agreement with Adidas (one that was recently renewed).

Steinbrenner moved forward with YES after making a reported $64.5 million (that according to MLB’s Blue Ribbon report) with the Yankees between 1995 and 1999. Unlike far too many professional sports owners, Steinbrenner time and time again has taken the money he’s made from the team he owns and invested those profits directly back into the Yankees. Should that not be the standard which professional sports owners are not judged by? Too many owners today have either a take the money and run belief as to how their team should be run or are simply not prepared to invest in their business.

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 Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: Forbes 2007 MLB Business of Baseball report

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