Tuesday, November 09, 2010

A true American Legend – George Steinbrenner and the Baseball Hall of Fame

Monday the Baseball Hall of Fame announced that eight former major league players, three executives and one former manager will comprise the 12-name Expansion Era ballot for the Committee to Consider Managers, Umpires, Executives and Long-Retired Players for Hall of Fame election, to be reviewed and voted upon at the 2010 Baseball Winter Meetings by a 16-member electorate. One of the ‘executives’ on the ballot is the one, the only George Steinbrenner who passed away earlier this year days after his 80th birthday. Without any hesitation Steinbrenner’s impact on baseball and in particular the Yankees makes “The Boss” a sure-fire Hall of Famer.

Steinbrenner guided the New York Yankees franchise, as principal owner, from purchasing the team in 1973 to his death in 2010. His teams won 11 American League pennants and seven World Series titles under his ownership.

In his last few years as Yankees owner his time was spent largely observing his son Hal manage the teams’ affairs. In the years leading up to his death, Steinbrenner was recognized as one of, if not the best owner in sports. However, as history tells the Steinbrenner story – the Boss evolved into a great owner.

The Steinbrenner of the 1970’s and 1980’s was bombastic and egomaniacal – one of the worst owners in sports. The George Steinbrenner of today remains in charge of the Yankees but seems to understand owning a sports franchise carries a great deal of responsibility – let alone a franchise with the history the New York Yankees have.

Never imitated, never duplicated, George Steinbrenner remains what he has been since he purchased the New York Yankees for less than $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 became the best team in baseball. Under Steinbrenner’s stewardship, the Yankees have become the model franchise for the entire sports industry. And for that, Steinbrenner is the owner by which all others should be judged.

Consider this. In April, when Forbes Magazine released their 2006 financial valuation for Major League Baseball franchises the Yankees were pegged at a value of $1.2 billion. This came a year after they became the first MLB organization to surpass $1 billion in value according to Forbes subjective but well respected annual MLB list.

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 by $8 million to $26 million thanks to a 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.

Forbes believed the Yankees are currently worth an estimated $1.6 billion, not quite the $2.2 billion Forbes believed the Yankees would be valued at by now, but worth more than any other MLB franchise.

According to Forbes much of the Yankees current value is directly linked to when they moved from the House that Ruth Built to the House the Boss Built (the New Yankee Stadium) at the start of the 2009 season. The Yankees won their 27th World Series championship the first year the team moved into their new stadium

As Forbes pointed out, the path to their 27th World Championship was extremely profitable for the Yankees. The postseason generated $20 million net of expenses (needless to say the 2010 post-season didn’t generate as much revenue for the organization).

Forbes believes the Yankees will enjoy benefits down the road from further brand extensions. YES, the regional sports network the Yankees own one-third of, is the most viewed and most profitable RSN. YES was viewed by an average of 82,000 households during prime time in 2009. YES, which has sent dividend checks to the Yankees exceeding $100 million on top of the $84 annual million rights fee they pay to the team, is branching out beyond the New York market (exclusive of live Yankee telecasts).

Legends Hospitality Management, a concession business the Yankees started with the Dallas Cowboys and Goldman Sachs, is run on the same economic model as YES and has gotten off to a fast start. It recently started a joint venture with IMG that will help colleges generate revenue from personal seat licenses, concessions and merchandise. In 2009, the Yankees were also the first MLB team to have its games streamed live online within its home market to people with Cablevision subscriptions for TV and broadband.

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

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

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

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

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

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

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

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

On January 3, 1973, a group of investors led by Steinbrenner and minority partner Burke bought the Yankees from CBS for $8.7 million. The most recent Forbes Major League Baseball financial valuation pegged the Yankees estimated value at $1.6 billion the most for any MLB franchise. Not a bad return on Steinbrenner’s investment.

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

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

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

There is only one honor left for Major League Baseball to bestow upon George Steinbrenner – enshrinement into the Baseball Hall of Fame. Should George Steinbrenner be welcomed to the Hallowed Halls of Cooperstown? Yes, yes and yes again. If members of the Baseball Hall of Fame are to be based on how one contributes to the game then open up the doors to Steinbrenner (and Marvin Miller at the same time).

We live in a society where all too often success is not rewarded or recognized it is resented. Is George Steinbrenner a perfect person, are you kidding he has been called Darth Steinbrenner by yours truly for years, but that does not mean George Steinbrenner has not earned respect and admiration. George Steinbrenner is a future Hall of Fame member, a great sports owner and a person who has 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 has made.

Will The Boss be selected by the Baseball Hall of Fame’s veterans’ committee? A candidate receiving votes on 75 percent of the 16 ballots cast will earn election to the National Baseball Hall of Fame and will be honored during Hall of Fame Weekend 2011, July 22-25 in Cooperstown, New York.

The 16-member electorate charged with the review of the Expansion Era ballot features: Hall of Fame members Johnny Bench, Whitey Herzog, Eddie Murray, Jim Palmer, Tony Perez, Frank Robinson, Ryne Sandberg and Ozzie Smith; major league executives Bill Giles (Phillies), David Glass (Royals), Andy MacPhail (Orioles) and Jerry Reinsdorf (White Sox); and veteran media members Bob Elliott (Toronto Sun), Tim Kurkjian (ESPN), Ross Newhan (retired, Los Angeles Times) and Tom Verducci (Sports Illustrated).

Based on the success the Yankees enjoyed while Steinbrenner was the alive and the Yankees owner, how he successfully managed the franchise, how he contributed to the growth of the sports industry (the new Yankee Stadium, the YES Network) there is no doubt the answer should be yes. But at the end of the day, Steinbrenner likely will not get in this first time, if ever. Between the mistakes he made during the first part of his Yankees ownership, and those mistakes were considerable, and must be factored into it, it would be a big surprise if The Boss makes it when the announcement is made on December 6, 2011. But again, be very sure. The Boss has earned his ticket to Cooperstown.

For SportsBusinessNews.com this is Howard Bloom. Sources cited and used in this Insider Report: Forbes Magazine

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