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WHY DO SOME OWNERSHIP GROUPS GET CHOSEN OVER OTHERS?

"This is a business deal."

 
- Bill White, NL President 1989-94 [1]

What is Major League Baseball looking for when deciding who to award a new franchise to? In the most basic terms, it wants to award teams to ownership groups and locations that allow it to achieve expansion's goals - primarily, to make more money.

 

But what gives them the confidence that a new franchise would be able to do this? The below are the main points under consideration. No city will have everything baseball wants, but the two that tick the most boxes, and hit the most important criteria, will be the ones that win the race.

A SUITABLE OWNER

 

One of the most important determinants of whether an ownership group gets a team is whether the expansion committee, and by extension all of MLB’s owners, feel they can trust them – both on an personal level, and to spend the money necessary to field a Major League ballclub. One of the paramount criteria is “how [the owners] feel about the financial capacity and the character of the individual that they’re going to welcome in the family.”[2]

 

This can be seen in previous expansions. In 1993, Wayne Huizenga was awarded a team for Miami – a city previously considered to have an outside shot – because the expansion committee found him so impressive. During his initial presentation to the committee, he “came across as if he was already one of them, someone they knew, someone they liked, someone they could trust” and impressed them with his willingness to pay the $95 million expansion fee alone, financed by selling stock in his business rather than borrowing money.[3

 

In contrast, the St. Petersburg bid during that round was not awarded a team in large part because MLB did not trust their ownership group. The Kohl brothers, who were financing the bid, scaled back their investment at the eleventh hour and no replacements could be found. Clearly this raised questions about the St. Petersburg ownership group’s financial resources, but as Rick Dodge, a St. Petersburg official involved with the bid, put it: “It wasn’t just the money, it was the guy’s commitment and word that got withdrawn. It violated one of the basic principles – are you one of the guys?”.[4]

 

Denver’s success in the 1993 expansion was also largely put down to MLB’s comfort with their ownership group. In 1985 they had presented to MLB’s long-range planning committee and it had gone poorly, in part because their prospective owner John Dikeou was not seen as someone who the existing owners would want to do business with on both a financial and personal level.[5] In the 1993 expansion their group had an entirely different composition, including with a $30m investment from Coors Brewery.[6] John Frew, who was involved in the bid, said that “not only did we need their money but it was home state, well known, conservative Republican, all the things that the owners all identify with.” [7]

 

Hitting just one of these two criteria is not enough. At the 1993 expansion, a Washington bid led by John Akridge that seemed otherwise impressive fell short, hamstrung by “the lack of a ‘zillionaire’ owner.”[7] In the same year, one of the reasons the Orlando bid led by Richard DeVos – at the time one of the wealthiest people in the United States – was unsuccessful was because he left a poor impression on the owners. A contemporary newspaper report suggested that he “must have left the owners aghast” by criticising the owners’ plans for revenue sharing as “socialism” and admitting he knew little about baseball.[9] And while DeVos was very rich it was not clear that he was committed to pouring his money into baseball. As Pat Williams, who helped lead the bid, put it: “They did not have a solid feeling about us in that regard”.[10]

 

Smart prospective owners have compensated for perceived weaknesses on one of these two fronts. Jerry Colangelo’s Phoenix-based ownership group was always a front-runner in the 1998 expansion, in part because he mixed in the same social circles as baseball’s owners. But the knock on him was that his ownership group had too many constituent parts and that his personal wealth did not match his potential fellow owners. He joked with the committee during his first presentation that “assuming the price is $75 million or $80 million, we’ll have an all-cash deal” – no doubt reminding them that he did in fact have the requisite resources at his disposal.[11]

 

SUITABLE MARKET SIZE AND MARKET SHARE

Ticket sales make up roughly 30% of teams’ revenue. A similarly large proportion comes from local TV deals. 

 

Selling enough tickets and getting enough eyes on a regional sports network requires a team to have a big enough regional following. This largely depends on their market size – the number of people in the metropolitan area where a team is based and their willingness to spend disposable income to support baseball.

 

In 1993 this made market size “a big issue, probably first on the list as far as most owners were concerned, because it was a factor in everything from attendance to the value of local television and radio contracts to how much the team could reasonably expect to take in from sponsorship deals, and therefore the principal money-related item on the checklist.”[12] Orlando’s bid that year suffered from a lack of faith in Richard DeVos, but also the sense that “the market isn’t there yet.”[13]

 

It is not just market size that matters, but also market share. There is evidence that sports teams in the same market can ‘crowd out’ each other by competing for the same pot of scarce disposable income. The owners will not just be looking at the raw characteristics of a market, but also assessing the chances of a baseball franchise being able to take a large share of it.

 

This means that it is not only about having a large-enough population, but also about having a large-enough pool of baseball enthusiasts. MLB is unlikely to want to repeat the Miami experience – on average the city’s minor league team drew fewer than 125 spectators to games in 1989, a portent of the level of support for its major league team which has consistently been one of baseball’s worst attended since its inception.[14] [15]

 

Winning bids in the past have often emphasised their region’s baseball-loving credentials – in 1998 Jerry Colangelo’s presentation emphasised “the region’s history of enthusiastic support for collegiate, spring training and fall league baseball”, while during the 1993 expansion process the Denver bid ran a “challenge the majors” night which attracted 32,926 fans to a local minor league game in one of various stunts designed to prove the city’s appetite for a major league team.[16] [17] The outpouring of support for baseball during the expansion committee’s visitation of Denver brought multiple committee members to tears and was key to cementing the city’s frontrunner status.

 

Finally, it is also about those baseball enthusiasts being supplemented by people interested in baseball, who might become enthusiasts if they are given a local team to support. As economist J.C. Bradbury put it to The Athletic:

 

“an owner is going to know that they are going to be splitting revenues with more teams in the future, but they will want a new owner that will capture back that expected lost future revenue by growing the overall pie. Are these revenues that weren’t available to us before because nobody was watching TV there? What revenue are we missing out from not having a team there?”[18]

 

A SUITABLE STADIUM (OR PLANS TO BUILD ONE)

       

In 1962, [Gerry] Snyder, a Montreal city councillor and vice chairman of the municipal government’s executive committee, and Lucien Saulneir, the committee’s chairman, sat in the New York office of Commissioner Ford Frick to promote Montreal as a potential expansion city.

“Do you have a stadium?” Ford asked, almost immediately. 

 

“No” was the answer. 

Well, when you have a stadium, come back to me,” Frick said.[19]​

An appropriate stadium – or at least concrete plans to have one in the near future – is another essential requirement to being awarded an expansion team. During the next round of expansion this is likely to be heightened even further by MLB’s experience with the Rays and Athletics, with the long-term viability of both franchises having been an open question for years because of their outdated ballparks.

 

Why is a stadium so important? Baseball teams play 81 home games a year and around 30% of teams’ revenues are from ticket sales. A bad stadium, or a poorly located one, can discourage fans from coming to games and so stunt a franchise’s ability to make money.

 

In previous rounds of expansion, the expansion committee has been fixated on making sure potential teams have suitable stadiums. In 1985, the long-range planning committee informed potential expansion contenders that they would need a “baseball-only stadium with natural grass, luxury boxes [and] a state of the art video scoreboard.”[20] The baseball-only requirement was not just about aesthetics, it was also about control – “who controlled the scheduling, the revenue from luxury boxes, the stadium advertising?”[21]

 

At the 1993 expansion the “National League wanted to know, among other things, about field dimensions, parking, lighting, whether or not the stadium was equipped with luxury suites (how many?) and a video board, whether it was owner outright or leased, and if it was leased, on what terms.”[22] Denver’s bid heavily promoted the sweetheart lease the franchise had secured on its proposed baseball-only stadium, Coors Field, which “made a big impression on the owners, exactly as it was intended to do”.[23]

 

Meanwhile, in 1998 Jerry Colangelo “wowed members of the committee” with a scale model of his proposed stadium, complete with a working retractable roof.[24And ironically, given that the stadium later became the paradigmatic outdated facility, the success of the Tampa-St. Petersburg bid in that same year owed a lot to the construction of Tropicana Field almost a decade prior, giving the Rays what was then a modern baseball stadium to move into on day one.

Increasingly, controlling the land around a ballpark has been lucrative for franchises and that will also be desirable in bidding cities during the next round of expansion.

 

A LARGE POOL OF CORPORATE SPONSORS

 

In a business as expensive as Major League Baseball, diversified revenue streams are crucial. And “large corporations account for not only sponsorships, but potentially large blocks of season ticket and suite sales”.[25] Having a substantial number of them within a franchise’s market increases the likelihood that it will be sustainable in the long-term.

 

Recognising this, a high potential for corporate sponsorships is something that been favourably looked upon during previous rounds of expansions. In 1998, Jerry Colangelo’s bid was boosted by the fact he had “secured commitments from Valley corporations or individuals to lease all 77 luxury suites” in his proposed new stadium. [26] And while John Fisher’s bid to bring a team to Northern Virginia in the same expansion process was unsuccessful, the emphasis he placed on attracting corporate sponsorship – which he said was “key to convincing Major League Baseball to award a team to the area” – further indicates the important role being backed by businesses can play.[27] With the number of avenues through which teams can generate revenue via corporate sponsorship only growing - most recently, with the addition of a sleeve patch on teams' uniforms - this is likely to be an even more important factor in future expansions.

 

LOCAL POLITICAL SUPPORT

 

Political support is important to the profitability of an MLB franchise. Teams often seek tax breaks, subsidies and contributions to the infrastructure around their stadium to maximise the money they are able to make – and MLB wants to deal with political leaders who are not only willing to spend this money but also extol the virtues of doing so in public, portraying the league’s presence in an area as a positive good and therefore protecting its brand. As baseball’s long-range planning committee put in in 1985, the league wants to deal with a local government that “that understands it must minimise or eliminate political pressures”.[28]

 

MLB also likes to award expansion teams to areas willing to plough public funds into securing a franchise to set a precedent that other cities must follow. In his book Playing Hardball, David Whitford describes the point at which Denver’s baseball backers realised that “schmoozing and lobbying are not enough… the only way to win is with a staggering investment of public funds.”[29]

 

As such, prospective owners tend to emphasise their political connections, and local politicians lobbying for a team make clear that they are willing to be profligate with taxpayers’ money. In both 1993 and 1998 it was extremely common to see elected officials accompany ownership groups to their presentations to the Expansion Committee. For example, having recognised the importance of demonstrating political backing, Denver’s presentation featured Colorado Senator Tim Wirth, the state’s Governor Roy Romer, and the city’s Mayor Frederico Pena “forming a kind of political chorus to sing the praises of Denver”.[30]

 

NOT LOCATED DEEP WITHIN AN EXISTING FRANCHISE'S TERRITORY

MLB’s elaborate system of territorial ownership can be a roadblock to establishing an expansion franchise in in some cities. In existing franchises’ operating territories – the area where the majority of their ballpark-attending fans live – there is very little chance of a new franchise being established because the existing team can, in practice, veto their presence. For example, the San Francisco Giants’ opposition to the Oakland Athletics’ planned move to San Jose in 2012 led to MLB blocking the plan.

 

Meanwhile, any new franchise based in the U.S. would encroach on an existing team’s television territory – the area in which they have an exclusive right (sometimes shared with other clubs) to broadcast on cable television. Part of the reason that Washington was not awarded a team in the 1998 expansion was “worries about putting another team close to the Baltimore Orioles”.[31] The eventual relocation of a franchise in Washington in 2004 caused issues that MLB would rather avoid. The Washington Nationals and the Baltimore Orioles, who previously had exclusive rights to the Washington area, have been engaged in a long-running dispute over the Nationals’ television deal.

 

Rob Manfred recently commented that “as a general proposition, I do not see the television territories for the clubs as a significant issue in considering expansion in domestic markets…I think the Baltimore/Washington matter was just too tight in terms of proximity” and that moving a new team into a club’s “outer territory” would be unlikely to present a huge problem.[32]

 

In any future expansion process, the owners are likely to shy away from awarding a franchise to a city deep within an existing franchise’s TV territory, for fear of triggering a dispute akin to the ongoing one between the Nationals and Orioles. 

 

LOCAL OWNERSHIP

Major League Baseball’s stated preference has always been to have a principal owner who lives in their franchise’s local area. Both Jerry Colangelo and Vince Naimoli, the two owners awarded teams in the 1998 process, did so, as did Wayne Huizenga in 1993. And to address concerns raised by Bill White, the chair of the Expansion Committee for the 1993 process, Denver’s two principal owners Steve Ehrhart and John Antonucci agreed to move to Denver if they were awarded a franchise. Denver, of course, was awarded a franchise – unlike Orlando, whose prospective principal owner Richard DeVos lived in Michigan, something that expansion committee member Doug Danforth acknowledged was "of some concern".[33]

 

CONTRIBUTING TO AN EAST COAST/WEST COAST BALANCE

 

Although divisions are becoming progressively less important within MLB – with the expansion of the Wild Card and move to a schedule which sees every team play each other every year – there is still a need to have enough teams based near each other to generate local rivalries and reduce travel for players and fans.

 

Baseball remains an east coast dominant sport, leaving some teams and fans on the west coast in search of convenient road trips and natural rivalries. The need for more westerly teams has historically been taken into account by expansion committees – in the 1993 process Denver was seen as “close enough to the west coast teams to provide them with a convenient opponent” and Phoenix was seen in much the same way in 1998.[34] It is likely to be so again in the next round of expansion – although it is unlikely that being based on the west coast would alone make up for other shortcomings.

 

EXISTING SUPPORT ON THE EXPANSION COMMITTEE

 

For a prospective ownership group, convincing the expansion committee you have what it takes is a lot easier if they already have a relationship with you. That is not to say expansion committees only pick groups that they know – for example, in the 1993 process Denver had “no close ties to anyone in the baseball establishment” and was still awarded a team.[35] But history shows it is advantageous to already be an insider.

 

For example, in the 1993 process Wayne Huizenga won a franchise for Miami off the back of an impressive presentation in which he “came across as if he was already… someone [the owners] knew” and could trust.[36] But it is likely that part of the reason they felt that way, however, is that many did already know him. The owner of Blockbuster, at that point the exclusive distributor of MLB videos, Huizenga had dealt with some of them before – and “even those in the room who had never met Wayne before at least knew who he was”.[37]

 

Similarly, in the 1998 process the Tampa-St. Petersburg bid had “a lot of friends on the committee” – not least influential owner George Steinbrenner, who was open in saying that “I’m pushing like hell for Tampa-St. Pete”.[38] [39] Arizona’s bid, meanwhile, benefited from Jerry Colangelo’s existing friendship with numerous owners through his involvement in the NBA’s Phoenix Suns.

 

Ultimately the expansion process is a business deal, and the ‘harder’ factors are the most important in determining who is awarded an expansion franchise. But like in any business, relationships matter, and having one foot in the club already is far from a bad thing.

References:

[1] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[2] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[3] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[4] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[5] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[6] "With Molson Coors’ HQ leaving Denver, could Coors Field see a name change?", Denver Post, Joe Rubino, 30 October 2019, https://www.denverpost.com/2019/10/30/coors-field-name/

[7] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[8] "D.C. bid shy only a 'zillionaire'", The Daily Progress, Associated Press, 5 June 1991.

[9] "Baseball biz gets curioser and curioser", The Bradenton Herald, Mike Mersch, 21 September 1990.

[10] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[11] "Phoenix, Tampa backed for teams", Arizona Republic, Associated Press, 8 March 1995.

[12] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[13] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[14] "The Making of the Marlins", SABR, Stephen R. Keeney, (no date), https://sabr.org/journal/article/the-making-of-the-marlins/

[15] "Miami Marlins Attendance, Stadiums and Park Factors", Baseball Reference, https://www.baseball-reference.com/teams/FLA/attend.shtml

[16] "Arizona Diamondbacks team ownership history" SABR, Clayton Trutor, (no date), https://sabr.org/bioproj/topic/arizona-diamondbacks-team-ownership-history/

[17] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[18] "What next for MLB expansion: Portland, Charlotte, even Vegas? Let’s check the data", The Athletic, Eno Sarris, 25 January 2021, https://theathletic.com/2330266/2021/01/25/mlb-expansion-cities-data/

[19] "‘Les Expos Sont La’: The Expos Are Here", SABR, Danny Gallagher, (no date), https://sabr.org/journal/article/les-expos-sont-la-the-expos-are-here/

[20] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[21] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[22] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[23] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[24] "EXPANSION COMMITTEE HEARS PRESENTATIONS FROM FOUR CITIES", Sports Business Journal, (no author), 2 November 1994, https://www.sportsbusinessjournal.com/Daily/Issues/1994/11/02/Leagues-Governing-Bodies/EXPANSION-COMMITTEE-HEARS-PRESENTATIONS-FROM-FOUR-CITIES.aspx

[25] "The Secrets To Landing A MLB Expansion Team", Forbes, Maury Brown, 8 August 2016, https://www.forbes.com/sites/maurybrown/2016/08/08/the-secrets-to-landing-a-mlb-expansion-team/

[26] "Phoenix, Tampa backed for teams", Arizona Republic, Associated Press, 8 March 1995, 

[27] "Baseball mogul pitching", Fairfax Journal, Bryan Walpert, 13 January 1994.

[28] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[29] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[30] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[31] "D.C. bid shy only a 'zillionaire'", The Daily Progress, Associated Press, 5 June 1991.

[32] "MLB Commissioner Rob Manfred Touts Mexico As A Possible Expansion Location", Forbes, Maury Brown, 1 October 2015, https://www.forbes.com/sites/maurybrown/2015/10/01/mlb-commissioner-rob-manfred-touts-mexico-as-a-possible-expansion-location/

[33] "Orlando finds new baseball backer", Tampa Bay Times, John Harris, 5 September 1990.

[34] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[35] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[36] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[37] Playing Hardball: the high-stakes battle for baseball's new franchises, David Whitford, 1993.

[38] "Tampa Bay sports has big backer", Tampa Bay Times, Hubert Mizell, 28 April 1994.

[39] "Baseball talking expansion", Tampa Bay Times, Marc Topkin, 5 January 1994.

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