For Owners, Teams Are Just Part of the Portfolio

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The New York Sun

It wasn’t surprising when David Howard, the Mets’ executive vice president for business, said on a Bloomberg Radio program, “Our vision is not to be just a successful baseball team, but to be a world-class sports and media entertainment company.”

The owners of the Mets, Fred and Jeff Wilpon, along with Fred’s brother-in-law, Saul Katz, are looking to add a Major League Soccer franchise to their portfolio, which already includes the baseball team, the soon-to-be-opened Citi Field, and partial ownership of a regional sports cable television network with Comcast and Time Warner, SNY. The MLS is planning to take applications for expansion franchises through October 15. The league wants to have 18 teams by 2011. The Wilpons might get a franchise.

The Wilpons and Katz are just businessmen and a sports team is just a piece of a business portfolio. John Henry and his partners in Boston own the Red Sox, but they also have a real estate company, with Fenway Park as the centerpiece of their holdings. Henry and his partners control 80% of the New England Sports Network; have a piece of the radio station in Boston that broadcasts Red Sox games, and own minor league baseball teams, as well as a part of the Roush NASCAR team — in fact, the official name of the team is Roush Fenway Racing.

But there is another aspect of the Red Sox business operations that has gone under the radar screen. Last March, Hank Steinbrenner was quoted as saying that his Yankees and Red Sox “could become partners in a business venture.” On April 14 the Fenway Sports Group announced that it was selected as the sports marketing agency of record for Dunkin’ Donuts. On June 27 Dunkin’ Donuts announced a promotion featuring the Red Sox’s Jonathan Papelbon and the Yankees’ Joba Chamberlain. Steinbrenner was right: The Yankees and Red Sox are business partners. Business is so much different from how it was even 20 years ago.

When Joan Payson was granted a New York National League baseball team in 1960, big league sports was a part-time operation. In the late 1950s, the Chicago Bears didn’t have an office in the offseason — if someone wanted to contact the team, they would call George Halas’s sporting goods store. The Green Bay Packers held fund-raisers to keep the team going as late as the 1950s. The NBA played games when a promoter would put up money, and the NHL was just a six-team entity with two teams in Canada.

Now, baseball, basketball, and hockey owners are in various other businesses. In New York, there are three regional sports networks — Steinbrenner’s YES Network, which is partially owned by Goldman Sachs, the Mets’ SNY Network, and Charles Dolan’s MSG network. Dolan has a setup somewhat similar to Henry in that he owns teams — the Knicks, Rangers, and Liberty — and he owns real estate, Madison Square Garden. But Dolan differs from Henry in one sense: He owns Cablevision, a cable supplier, whereas Henry and his group just own a network. So Dolan, in a strategic business move, also is paying big rights fees to the New York Islanders and New Jersey Devils for cable TV rights. Even though Dolan is giving both the Islanders and Devils millions of dollars (far more than the ratings merit, frankly), he is doing so to protect his cable franchise licenses both on Long Island and in New Jersey.

Peter Angelos was given the Mid-Atlantic Sports Network by MLB in late 2004 when the barons of baseball relocated the Montreal Expos to Washington, D.C. Angelos had to take the Washington Nationals’ cable television baseball rights as part of the deal, and thus the Orioles baseball team also became a cable network owner. Down in Washington, Wizards owner Abe Pollin and his partners, Sheila Johnson and Ted Leonsis, not only have an NBA team, but an NHL team (which Leonsis owns), a WNBA team (technically, Johnson is the owner of that team), and an arena, as well as Ticketmaster.

The Giants and Jets are going into the real estate business, when their new stadium opens in 2010. Jerry Jones is doing the same thing in Arlington, Texas, when his stadium opens in 2009. New England Patriots owner Robert Kraft is also a real estate business owner: Earlier this month, he and CBS just opened CBS Scene, a business on Kraft’s Foxboro, Mass., property, which includes a restaurant, two bars, a private meeting space, a retail outlet, and broadcasting facilities.

The business model is changing — sports teams are just a part of an overall portfolio, and if an owner doesn’t diversify, his or her franchise will be in financial difficulty. The Mets trail the Red Sox in the business standings and that is the way sports owners judge their teams today.

The New York Sun

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