Capitalism, Yes; Salary Cap, No!

The old adage, “Be careful what you wish for,” should be a siren call to Major League Baseball owners and executives calling for a salary cap in the wake of the Yankees’ off-season spending spree. 

Oakland A’s owner Lew Wolff, Milwaukee Brewers owner Mark Attanasio, Houston Astros owner Drayton McLane, and Pittsburgh Pirates President Frank Coonelly took turns lamenting baseball’s status as the only Major League team sport without a salary cap. All four suggested that a salary cap would be a panacea for both parity in MLB and preventing the Yankees from acquiring the best – and most expensive - free agent talent.  As my father used to say every time I made a suggestion he was loath to embrace, “It sounds good.”  

Indeed it does.  After all, in leagues with a salary cap, there is no equivalent of the Yankees, a team that can purchase any free agent it chooses regardless of the price.  And, so the theory goes, there is more parity in leagues with a salary cap, particularly the NFL which is the poster child for sharing revenues equitably.  Except it’s just not true.   

The NFL shares a higher percentage of revenue (approximately 70%) than the NBA, NHL and MLB.  But the revenue discrepancy between the richest and poorest teams in the NFL exceeds $100 million.  Because a salary cap in sports also includes a floor - a minimum amount each club must spend on payroll – the lower revenue clubs make significantly less money (they spend a higher percentage of their revenue on payroll) than the higher revenue clubs.  

The NFL does have parity - how else to explain the Arizona Cardinals in the Super Bowl?  Most teams, with the exception of Detroit and Cincinnati, begin each season with a reasonable chance of making the playoffs.  But that’s as much a function of the nature of the sport and the limited number of games in a season as it is a salary cap. 

The NBA’s salary cap would be laughable, except it’s no joke.  The intricacies of the salary cap are known to only a handful of humans, living or dead.  And the bottom line in constructing a team has nothing to do with talent and everything to do with the bottom line:  Making sure each team stays within the parameters of the salary cap/floor.   

As for parity, unless the Celtics decide to guard anyone other than LeBron James in their expected playoff matchup with the Cleveland Cavaliers, does anyone believe the two teams in the NBA finals will not be named the Lakers and the Celtics – again?   

In the NHL, clubs such as Nashville and Columbus are hemorrhaging millions thanks to the minimum salary requirements, while Phoenix will reportedly lose $30 million this year and teeters on the brink of bankruptcy.  The strongest teams in the salary cap era – Detroit, San Jose, New Jersey – were also dominant prior to the advent of a salary cap.  Can you say good management? 

A salary floor in MLB would require teams such as the Florida Marlins to increase payroll by as much as $50 million over last year’s figure. 

The only realistic source for that money would be increased revenue sharing -  taking more money from the Yankees to distribute to other clubs.  Which is what all the crying and grandstanding is about.  Clubs want to reduce the Yankees’ spending power; but owners can’t increase revenue sharing or implement a salary cap without the consent of the union.  Peace will come to the Middle East before MLB negotiators convince the union to agree to a salary cap.    

What the whiners fail to acknowledge is that parity in MLB doesn’t take a backseat to any league, including the NFL.  In the last eight years, 13 different MLB teams have played in the World Series – the Yankees only twice and they lost both times - compared to 12 different NFL teams that played in the Super Bowl.       

A salary cap in MLB is merely a pipe dream.  It’s also a convenient crutch for incompetence on the part of team management.  If the Pirates had drafted as well as Tampa Bay over the past 12 years, they - not the Phillies - would have played the Rays in last year’s World Series.  Now that’s something for Coonelly to focus on.

Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He is an Assistant Professor of Sport Management at Eastern New Mexico University, teaches the Business of Sports at the University of Wyoming, and is a contributing author to the Business of Sports Network. Jordan can be reached at jkobritz@mindspring.com.

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Piling on Clemens

For Roger Clemens, the fallout seemingly has no end.

Last November, Clemens was asked to end his involvement with a charity golf tournament he had co-hosted for the past four years in his hometown of Houston. With Clemens’ help, the tournament has raised millions of dollars for local charities that benefited kids.

A month later, a Houston hospital announced it was removing Clemens’ name from a sports medicine institute created in 2006. The Roger Clemens Institute for Sports Medicine at Memorial Hermann became known as the Memorial Hermann Sports Medicine Institute, effective January 1. Clemens had given liberally of his time and money in support of the clinic. He was also a major contributor to other needs of the hospital, having donated a reported $3 million towards a new pediatric wing at the time the sports medicine clinic was founded.

Why now? Why, after a year of denying the allegations in the Mitchell Report that he used performance enhancing drugs, was Clemens suddenly discarded like yesterday’s newspaper? Was his name suddenly more of a liability than an asset? Was the association with Clemens costing more in contributions than he could offset? Did the hospital return any of Clemens’ contributions? No one representing the hospital was willing to answer any of those questions.

This isn’t an attempt to defend Clemens, either for using PED’s or lying about using them. I know; Clemens hasn’t been convicted of anything. But my Cornell Law education to the contrary notwithstanding, anyone who still believes Clemens’ denials is in serious denial themselves. Common sense says Clemens used drugs illegally, cheated on his wife, and lied about both.

Come to think of it, that profile fits a number of current and former politicians, and if you believe the research, a majority of the people in this country. Should Roger Clemens be held to a higher standard than the rest of us, just because his physical talent is superior to ours?

Have John Kennedy’s, Richard Nixon’s or Bill Clinton’s names been deleted from the many buildings and roads named after them? Is there any reason to think George W. won’t have his name emblazoned on buildings and road signs around the state of Texas, if not other parts of this country? Why should athletes be held to higher standards than presidents?

Clemens is no different than the hundreds - perhaps thousands - of current and former Major Leaguers who used PED’s. No different than former teammates Jason Giambi and Andy Pettitte, both of whom played in the Major Leagues post the Mitchell Report. Except Pettitte and Giambi admitted using (sort of, in the case of Giambi) and apologized for it; while Clemens, due to a combination of hubris and bad advice, responded to the accusations by attacking his accusers, which is the same way he approached the opposing team.

MLB drug users’ biggest offense was against their fellow players. The fact remains that their teammates and the union treated replacement players – those who agreed to play during the 1994 strike - with more disdain and acrimony than the players who used PED’s. Should we treat the druggies worse than their teammates did?

Failing to admit guilt and say he was sorry has already cost Clemens dearly, with more likely to come. His reputation is in tatters, his lock on the Hall of Fame has evaporated, and criminal charges appear likely. And now, his hometown is turning against him. After so many years of supporting his neighbors, friends and people in need, those who should stand up and say “Thanks, you did wrong, but we appreciate all the good you’ve done for us and others,” can’t seem to find the will to do so.

The person Roger Clemens hurt the most was himself, followed closely by his family. So far, it appears as if his family is standing behind him. Good for them. If Hilary and the country can stand behind Bill, then Debbie and his Houston neighbors can do the same for Roger.

As Willie Nelson croons, “Forgiving you is easy forgetting seems to take the longest time.” There’s no need to forget all the wrong Clemens has done. But a little forgiveness from those who accepted his help along the way would seem appropriate.

Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He is an Assistant Professor of Sport Management at Eastern New Mexico University, teaches the Business of Sports at the University of Wyoming, and is a contributing author to the Business of Sports Network. Jordan can be reached at jkobritz@mindspring.com.

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Yankees Do What Yankees Do

Enough already.

After the Yankees swooped in and signed Mark Teixeira for eight years and $180 million, most of the civilized and nearly bankrupt world predicted an end to the baseball firmament as we know it. Spare me.

What did their critics expect them to do? These are the Yankees. They were only doing what they normally do, what only they can do, and what we all should have expected them to do after missing the playoffs last year for the first time in 14 seasons.

After their latest indulgence, the Yankees now feature a lineup with the four highest paid players in MLB, not to mention the highest paid players in all of baseball at six different positions. They’ve spent $423 million on free agents this off season and they’re not done yet. Add that to the more than $400 million they spent on their own free agents last year and you can be excused for thinking Wall Street and the auto industry should have hit up the Steinbrenner family for a bailout instead of the U.S. taxpayer.

But the vitriol aimed at the Bronx Bombers is misplaced. If you’re looking for a scapegoat, blame the system. The Yankees play in the biggest and best market, are moving into a new stadium that will generate obscene amounts of money, and own a one-third interest in the YES Network. In short, they’re the sports equivalent of Fort Knox.

Even with revenue sharing, to which the Yankees will contribute in excess of $80 million this year on top of a luxury tax bill of $27 million, the imbalance in the ability to generate revenue among MLB clubs continues to grow. As pointed out in an earlier column, the 300 seats that go for $2,500 per game in the new Yankee Stadium will yield more in ticket revenue than the amount that at least half of MLB clubs generated last year from their entire ballpark.

And lest we forget, MLB doesn’t have a salary cap and no amount of wishful thinking will result in one. The union will never agree to a salary cap and MLB isn’t in a position to pull an NHL and close up shop for an entire year in an effort to implement one.

If you want to criticize the Yankees, there are ample grounds on which to do so. They bullied and intimidated the City of New York for $940 million in tax exempt bonds to subsidize their new ballpark. Not satisfied with that handout, they have the chutzpah to request an additional $259 million of tax exempt bonds while lavishing exorbitant contracts on free agent players.

Acres of parkland in the Bronx that were appropriated to build the new ballpark will likely never be replaced, in spite of a commitment by the team to do so. That’s unconscionable, and yet the Yankees can get away with flaunting the agreement because…well, because they’re the Yankees, which means they operate with an arrogance that is unrivaled in professional sports.

Yankee haters, of which there are legions, should take solace in the fact the team has spent almost $2 billion in salaries, revenue sharing, and luxury taxes since their last World Series title. And this year’s shopping binge won’t guarantee a playoff berth in 2009, let alone the team’s 27^th title. The Yankees’ annual payroll has exceeded the second highest total in the game by approximately 50% for the past several years, and they haven’t won the World Series since 2000 or a playoff series since 2004.

Last year at this time, the experts were predicting a World Series title for the Detroit Tigers after they acquired Miguel Cabrera and Dontrelle Willis in a trade with the Florida Marlins. But a check of the final standings for the 2008 season shows the Tigers looking up at every other team in the AL Central Division.

After gorging themselves in the free agent market, the Yankees will certainly enter the 2009 season as one of the favorites to win it all, and on paper, they should be. But games – and pennants – are won on the field, not with a checkbook.

Criticize the Yankees if you will. But remember, they’re only operating within the system.

Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He is an Assistant Professor of Sport Management at Eastern New Mexico University, teaches the Business of Sports at the University of Wyoming, and is a contributing author to the Business of Sports Network. Jordan can be reached at jkobritz@mindspring.com.

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Yankees and Cowboys Form Concessions Company

Two legendary sports franchises have teamed up to bring you the finest – and possibly, the most expensive – stadium cuisine in the country.

The New York Yankees and Dallas Cowboys, the two most recognizable brands in their respective sports, have formed a concessions company called – appropriately enough – Legends Hospitality Management (LHM) to operate the food, beverage and merchandise operations in their new stadiums. The new company also intends to compete with such industry stalwarts as Aramark, Sportservice, Centerplate and Levy’s for the concession rights to other ballparks and arenas around the country.

The Cowboys have operated their own concessions for 20 years, but concessions at Yankee Stadium have been operated by Centerplate, formerly Volume Services. The two teams will each own 34% of the new company with the remaining percentage shared by two investment banks, Goldman Sachs and CIC Partners LP

LHM was formed earlier this year but the “official” announcement came only after the company raised $100 million in debt last month. The company has been operating the concessions at the newly-named Steinbrenner Field, the Yankees’ spring training facility in Tampa and home to their Class A team in the Florida State League. According to Cowboys owner Jerry Jones, the company will assume responsibility for his team’s concessions operation immediately. Beginning next year, LHM will operate the concessions at the new football palace under construction in Irving, TX as well as the new Yankee Stadium in the Bronx.

Jones referred to the concessions operation as the “blood” of the new stadiums, both of which carry price tags in excess of a billion dollars. The teams intend to emphasize fan satisfaction, in terms of both quality and quicker service. The price of concession products wasn’t mentioned, but you can rest assured that, like the huge increase in ticket prices in both locations – the top seat in Yankee Stadium will fetch $2,500 per game and the Cowboys are selling Personal Seat Licenses for as much as $150,000, tickets not included – food and beverage prices will rise.

While you can debate Jones’ use of the word “blood” to describe the importance of concessions operations at the new stadiums, there’s no denying the financial impact concessions have on a sports team’s bottom line. Documents obtained by the NY Daily News show that the Yankees netted $65.3 million from their cut of concessions in 2007. While that sum may pale next to this year’s player payroll of $208 million, tell that to the average fan paying $5.75 for a box of Cracker Jack.

When teams use a third party vendor for concessions operations, their cut varies from 20-50% of gross sales, depending on the item and the location of sale (suite vs. stands). Keeping concessions in-house can easily add an additional 30-40% to the bottom line. And the team retains full control of the variety, quality and service of the operation, not to mention the marketing and sponsorship opportunities available with vendors.

Per caps also vary, depending on the sport, the weather, the location of the facility, opponent and time of year. The Sports Business Journal reported that Sportservice generated $39.55 per cap for this year’s Game 6 of the NBA Finals between the Celtics and Lakers at Boston’s TD Banknorth Garden. The figures set a record for the 13-year old arena. Meanwhile, when the teams played games 3, 4 & 5 at the Staples Center in lala land, the average per cap was $44.38. The message may be that fans on the left coast are more profligate than their brethren on the east coast.

Quality and variety of concessions vary from facility to facility. Although the staples – hot dogs, peanuts, popcorn and soda – are the biggest sellers, many concessionaires have added upscale menu items such as cedar-planked salmon in Seattle, roasted pork and provolone sandwiches in Philadelphia, and crab cake sandwiches in Baltimore.

The award for the most intriguing new concessions item for 2008 goes to the Sioux Falls Canaries of the Independent American Association. The team added the cleverly named “Fowl Balls” to their menu. If the name isn’t suggestive enough, the – allegedly – delectable item is actually deep-fried turkey testicles. A basket of eight sold for $3.

No word on whether Fowl Balls will make their debut in New York or Texas next season.


Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He is an Assistant Professor of Sport Management at Eastern New Mexico University, teaches the Business of Sports at the University of Wyoming, and is a contributing author to the Business of Sports Network. Jordan can be reached at jkobritz@mindspring.com.

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