Economic impact of the Hall of Fame vote?

January 9, 2013

Across the country there are people who are holding their breath waiting to see what happens with this year’s Hall of Fame vote.  Many believe that this may be the first time that no players who currently eligible under normal standards will be elected (others could still be elected such as broadcasters, owners, older players who are no longer eligible).  If no players are elected, this could mean that there is not as much interest in the Hall of Fame this year, and could lead to decreased attendance at the induction ceremonies which occur in the summer.

Already many articles are pointing at the potential economic impact that this may have for Cooperstown, where the Hall of Fame is located.  The LA Times notes that some stores do about 15% of their annual sales during the induction weekend.  Professor McDonnell in this article of Forbes discusses the tie between Cooperstown and the Hall of Fame:

The village of Cooperstown is just as anxious to hear the Hall of Fame results as the candidates themselves. Cooperstown’s hospitality and tourism industries are inextricably tied to the Hall of Fame’s fortunes. They can ill afford to have a half empty dais on Hall of Fame weekend due in part to protest or lack of interest. Likewise, they need Main Street to be bustling with visitors who are spending their disposable income at the local restaurants, shops, motels and inns. A summer without a single living member of the Class of 2013 or a boycott of any kind by fans or current Hall of Famers could be detrimental to business owners that rely heavily on the allure of baseball’s history.

I understand that there is a good deal of business in hospitality and tourism that revolves around the Hall of Fame, but the Hall of Fame itself has been losing money over the last several years.  While it is a big deal for many local businesses, I begin to wonder how much we should be worried about the economic impact of the Hall of Fame vote.  Yes, some individuals and businesses will be affected, but at the same time, one has to question whether Cooperstown has literally put all of its eggs into one basket.  Furthermore, if we are talking about the vote mattering for the economy, then will not some writers feel more pressured to vote yes for individuals they think shouldn’t be in the HoF, all for the sake of propping up some businesses that have a great dependence on a event for a few days every year.

I hate to sound like I am not sympathetic, but at the same time I have to shake my head when I hear all this talk of the economic impact of the Hall of Fame vote.  It wasn’t like people knew this problem, I think better business planning and strategies needed to be created to try and offset some of these issues.


MLB Agreement to banish Pete Rose is for sale.

September 14, 2012

In our weird post of the month, it has been released on ESPN that the document signed by Pete Rose and Major League Baseball (MLB) officials 23 years ago to banish Mr. Rose from the game is up for sale.

Pete Rose was banished for baseball in 1989 after it was found that he was betting on baseball games, something that the league was clearly not happy about, as they forced him to sign this document that would effectively remove him from baseball.  To this point, it has pretty much served as a life ban, though there has been discussion over whether Pete Rose should be reinstated and allowed to be part of the MLB or at least one of its franchises.

Auction officials believe that this is one of the most important documents in history, and believe that the original will fetch more than the approximate $1 million that was paid in 2005 for the contract that was signed by Babe Ruth to play baseball all the way back in 1919.

And for those interested in history, you can read the PDF version of that document on sale right here.

Kansas City teams using taxpayer money to pay for pretty much everything…

August 1, 2012

It is not unusual for professional sport teams to use taxpayer money for upkeep and maintenance of their sport teams.  Well trouble may be brewing in the state I am based in (Missouri) as WHB 810 Sports Radio in Kansas City broke new yesterday that the Kansas City Royals, the cities Major League Baseball Team, is using only a small portion of the tax money they requested for maintenance and repairs.  This isn’t exactly illegal, but the Royals apparently are using only 9% of the $17 million in taxpayer money earmarked for maintenance and upkeep for stadium repairs.  What are they using the money for?  Well, in 2006 an amendment was added to the lease agreement to both the Kansas City Royals and Chiefs (the National Football League team for the city) which allowed them to use this fund to help pay for “game day operations”.  Well the Royals asked for money from the fund to pay salaries of employees ($4 million) and another $700,000 to pay for their taxes.  Both requests were approved, officially making it so that the Royals were paying their taxes with taxpayer money.  The best part?  The reporter from WHB 810 has actually provided with a list of what the Royals asked for and received from this special fund:

Security $287,377
Telephone $83,698
Supplies $657,838
Uniforms $86,301
Salary, Full-Time Associates $975,309
Payroll, Taxes and Benefits-Full Time $365,176
Salary, Full-Time Associates $321,355
Payroll, Taxes and Benefits-Full Time $133,617
Salary, Part-Time Employees $2,618,568
Payroll Taxes-Part Time Employees $200,320
Security    $236,113
Telephone $515,696
Stadium Services $691,322
Professional Services-First Aid $241,931
Utilities, Telephone, Cable TV $2,291,385
Day of Game Security   $247,528

And the Royals aren’t the only game in town, and it is now being noted from a source that the Kansas City Chiefs are doing similar things with the fund.  The Chiefs asked for $27 million, and used only a third of that amount on stadium repairs and upkeep.  It is noted that none of this tax money is allowed to pay for player salaries, but they are being used to cover other salaries of employees, and pretty much everything else.  The Jackson County Sport Complex Authority which approved these funds just sent re-nomination of their current head to Missouri governor Jay Nixon for approval.  Governor Nixon will need to think twice about this as citizens will clearly not be thrilled by this use of tax money.  This will also not improve Royals owner Dan Glass’ standing with the fans of his team.  They already are unhappy with the way the team is run and will not pay for players, now they find operations are being paid with their tax money, this can not go well.

Mets inching closer to major financial issues?

March 15, 2012

It has been noted that the New York Mets are not in the best of financial situations, especially in regards to their cash flow.

Things got even worse when victims of the Bernie Madoff ponzi scheme filed a $303 million lawsuit against the owners of the Mets who had taken money from Madoff to help support the team.  The Mets lost an important ruling in federal court today, with the judge ruling that the Mets must show that they didn’t know about Madoff’s ponzi scheme.

The above linked story notes that the Mets lost over $70 million last year, were ordered to repay $83.3 million of profit from a fictitious Madoff company, and still face another $303 million if they can’t prove they had “willful blindness” to Madoff’s financial schemes.

I’m sure Bud Selig and the MLB front offices do not like what is going on.  After the Dodgers financial debacle, I’m sure the last thing they want is the Mets also having to go into bankruptcy as well.

Yu Darvish and the Posting System

January 24, 2012

Last week, the Texas Rangers finished their deal signing Japanese pitching superstar Yu Darvish to a 6 year deal worth $60 million.  While the $10 million a year may not seem to be that much when comparing Yu Darvish’s salary to that of other star pitchers in Major League Baseball, the total price for Darvish is another thing.  Because Darvish was under contract to a Japanese professional baseball team, the Hokkaido Nippon Fighting Ham (the best or worst name for a team in sport history), MLB teams were forced to bid on the rights to try and negotiate a contract with him.  This system works like a blind auction where teams interested in negotiations with a player submit bids.  The highest bidder ends up getting the chance to talk to the player.  This is the same system which brought Daisuke Matsuzaka to the Red Sox a few years ago.  Yu Darvish set a new posting record, with the Rangers bidding $51.7 million for exclusive rights to negotiate with him.  That $51.7 goes to the club in Japan, who can use the cash for whatever they wish.  This system has it’s ups and downs.  While it allows players who want to come to the U.S. to leave their clubs in Japan, and still have the clubs get compensated, there is also a private bidding war going on when star players become available.

In the end, the Rangers end up paying a total of $111 million for the player, and $51.7 of it goes to Darvish’s club in this case.  Some question whether someone is worth this much money and risk, but it is important to note that bidding high and winning means that no rival team has a chance at getting him under contract for at least another year.

As for the Japanese clubs, the money that the Seibu Lions brought in from Daisuke Matsuzaka was quite helpful in stadium renovations that they wanted to make.  In essence the posting system transformed the stadium into the house that Daisuke built.  The question is, what will the Nippon Fighting Ham do with the $51.7 million?

Miami Marlins and the SEC

December 6, 2011

Things in South Florida just got more interesting both on and off the field. Known for a small payroll, the Florida (now named Miami) Marlins have signed two of the top free agents for next season. This is prior to opening a brand new stadium beginning next season.

Last week, a story by Jeff Passan of Yahoo Sports reported that the Securities and Exchange Commission (SEC)  issued subpoenas to the Marlins organization to understand the agreement reached by the city and the team on a new stadium. Among items that the SEC wanted to see was the Marlins financial records, communications with the MLB commissioner, other meeting minutes, and campaign contribution.

Passan outlines the Marlins story up to the SEC subpoenas. The Marlins wanted a new stadium because they were supposedly losing money. The Marlins threatened to relocate the franchise if the city did not provide the team with a new, baseball only, stadium. The local government requested financial records from the Marlins but were denied. However, the government still voted to build the new stadium which also gives the Marlins all stadium related revenue.  The stadium is expected to cost the city 2.4 billion dollars. When Deadspin posted team financial statements last year, the financial statement of the Marlins showed that the Marlins made tens of million of dollars. Now the SEC has stepped in to investigate. As Passan writes:

While the subpoenas issued by the SEC do not explicitly detail the purpose of the investigation, the feds’ motives are evident: They want to understand how, exactly, a group of county commissioners agreed to fund 80 percent of the Marlins new stadium, which cost more than $600 million, without ever seeing the team’s financial records – and whether bribes had anything to do with it.

It remains to be seen what the SEC investigation will conclude.  This situation has the potential to be very ugly for the Marlins, the city, and Major League Baseball.

MLB Changes and Houston Astros Sale

November 21, 2011

Last week, MLB approved the sale of the Houston Astros as well as some other policy changes. According to an article by the Associated Press, the Astros were sold for 750 million dollars. MLB executives, however, wanted the Astros to move from the NL Central to the AL West. By moving the Astros into the AL, both the NL and AL will have an equal number of teams (15). With 15 teams in each league, that means that interleague play will take place throughout the entire season and not during specific times in the season. Also, MLB is also expanding the playoffs by two additional teams (1 in each league).

What makes the Astros sale interesting is that MLB would not approve the sale unless the new owner agreed to move the team to the AL West Division. As a result, the new owner negotiated a 70 million dollar discount on the franchise sale price according to reports. Half of the 70 million dollars is being paid by MLB and the other half by the old team owner.

What makes a change to the AL worth 70 million dollars to the owner? Certainly, there may be some additional traveling involved as Houston will have to travel to Seattle. It is approximately 1900 miles to Seattle by air compared to 1150 to Pittsburgh, the furthest team from Houston in the NL Central.  Houston will also have to travel to Oakland and Anaheim compared to Chicago, Milwaukee, Cincinnati, and St. Louis. By moving to the AL West, Houston will play the Texas Rangers, their geographic rival and new division rival, more times than just one series per year under interleague play.  Playing the Rangers should provide the Astros with increase revenue for these games to help offset some travel cost.  The question remains as to why changing leagues “costs” 70 million dollars.