Flashback Friday: Owning a team (1987)
The Milwaukee Journal had this story by Ray Kenney in the Business section of its Sunday, June 7, 1987. It covers the ownership of teams in the Midwest League with a special look at the Appleton Foxes and Appleton Baseball Club, Inc.
Big league investing it's not But many relish owning a baseball team
Appleton, Wis. - Even the local dentist advertises on the crazy-quilt outfield fence at Goodland Field here. So do some 30 other merchants who support the Appleton Foxes of the Class A Midwest League, one of the lowest rungs on the professional baseball ladder.
Beneath the grandstand, Russ Luebben, a director of Appleton Baseball Club, Inc., which owns the struggling minor league franchise, sells canned beer to the fans. Topside, Harvey Hoes, another board member, acts as an usher.
Daytimes, Luebben, a retired Wisconsin Electric employee, cuts the grass and manicures the infield. Such are the economic facts of life in professional baseball's launchpad and nursery.
"It's possible to make money investing in a minor league baseball franchise, but it isn't likely," one expert suggested.
The sale of minor league franchises probably offers the best hope for investor profits, according to Michael Megna, the resident guru on the evaluation of sports franchises at American Appraisal Associates in Milwaukee.
Around the country, about six of the 176 minor league franchises change hands every year, he said.
"If you want to watch minor league baseball, don't invest in it," warns Larry Dawson, general manager of the Foxes' operation.
It's up to Dawson to stretch ad revenues, ticket receipts, and concession dollars over $200,000 to $250,000 budget each year. It's not as tough as it sounds, but it isn't easy.
At this fourth level of competition, major league affiliates - the Foxes are affiliated with the Kansas City Royals - pay the players' salaries and many share in hotel expenses during road trips.
What does that come to? A younger player at Class A level is paid $700 to $1,000 a month during the five-month season. More seasoned players earn $1,100 to $1,300. Pit it another way: The Brewers operate five farm teams - at the AAA, AA, and A levels, and a team in the Rookie League, and a budget of $4 million a year for salaries, according to Richard R. (Dick) Hoffman, the Brewers' chief financial officer.
"We provide the players and they [the minors] provide the logistics," he explained. "Chalk it up to 'research and development'.
The minor league team pays the light, water, and maintenance bills. It provides bus transportation to road games and promotional funds.
"We don't make any money," Dawson explained. "Our goal is to break even. If there's any money left over at the end of the season, we buy a front-end spreader or paint the fence."
Peter O'Malley, owner and president of the Los Angeles Dodgers, which have been held out as an example of efficient minor league player development, said most major league teams offer minor league franchises the same type of contract. But when a new affiliation is made, another is canceled, he said.
O'Malley and Hoffman said the majors are spending more on farm teams than they used to, primarily because the free-agent clause is driving the salary of seasoned players out of sight. It's cheaper to revert to the old system of developing your own ballplayers, the baseball executives agreed.
The financial situation is pretty much the same all over the Midwest League, according to Commissioner George Spelius, Beloit, a Milwaukee native who now earns his true livelihood as a florist.
The only identification with the major league affiliate, besides a similarity in uniforms, is a sleeve patch that identifies the player as a member of the senior team's organization.
The 12-team league also includes the Madison Muskies, operated by Madison Professional Baseball, Inc., affiliated with the Oakland Athletics; the Wausau Timbers, operated by Timbers Baseball, Inc., and affiliated with the Seattle Mariners; the Kenosha Twins, operated by Kenosha Area Professional Baseball, Inc., and affiliated with Minnesota Twins; and the Beloit Brewers, operated by Beloit Professional Baseball Associates and affiliated as most Milwaukee fans know, with the Brewers.
Other franchises are operated at Burlington, Cedar Rapids, Clinton, and Davenport, Iowa, and Peoria, Ill. Next year, South Bend, Ind., and Kane County, Ill., will join the league.
"There are no luxury franchises," according to Spelius.
Some are city owned, some are privately owned, and one or two are owned by private groups, he explained. "There are a whole lot of people who want to buy," he said. "I don't know if it's ego or what. The [new] tax laws aren't kind, but there's plenty of [franchise] money out there."
As recently as 1982, a league franchise was available for $75,000 to $85,000, the commissioner said. Nowadays, the price is closer to $300,000.
When the Brewers hooked in with the Denver franchise, some of his arithmetic appeared in Business Week, Megna recalled, "and I started getting calls [from potential investors] from all over the country, offering $250,000 to $1 million."
A case in point is the South Bend franchise in the Midwest League. The original franchise was acquired for $20,000 in 1985 by investors in Champaign-Urbana, Ill., who turned around and sold it to an investment group in South Bend for $250,000. But the first ball has yet to be pitched. Play doesn't begin until next spring.
Whether the major league affiliate or the local organization pours more into a minor league franchise, gets a little fuzzy around the edges, according to Steve Wagman, general manager of the Madison Muskies, which are owned by a group of 30 investors.
With frenzied, free-agent bidding "a few years ago, it began to tip toward the major league affiliate," he acknowledged. "It probably depends on the nature of the [ballpark] lease."
Most of the teams utilize municipal facilities, "but every lease is different," said Wagman, who joined the Muskies when he was in search of a summer job as a University of Wisconsin - Madison student six years ago.
Like the Foxes' Dawson and other general managers, he answers his own telephone, accepts ticket orders, pays the bills, and fixes the faulty plumbing if no one else is available. In summer, the Muskies' staff of two expands to 10 or 15 employees, including part timers.
"You might want to own a baseball team; the risk is so small," Megna said. "But you'd probably do better [investing] in money market mutual funds or certificates of deposit."
Back in Appleton, about 150 loyal fans huddle together on a damp spring night for a double header - two seven inning games - against the Cedar Rapids team, cheering the local heroes - Francisco Laureano and Kenny Jackson. There is room in the seats for about 4,300, and attendance generally runs between 400 and 1,000 according to Dawson. There is no sponsor for tonight's twin bill, which followed a rain-out the evening before, so the stands are virtually empty.
General admission is $2 - $1 for students - and parking is free, so the night is not exactly a financial success for Dawson.
About 25 of the 70 home games each year are underwritten by Fox Valley merchants. For $950, the sponsor gets the right to print 3,500 tickets and promote the event, Dawson said.
There are no major league scouts in the seats. Those were the old days. Now, the minor league franchise sends computerized performance reports each night to the major league affiliate. The numbers determine which are the high and which are the mighty - the few that will make it to the majors.
Milt Drier, a Foxes vice president and director, is ahead on "dividends".
He popped a snap-top beneath the stands and toasted a visitor.
"I knocked this off," he quipped, "I stole it," suggesting that Luebben never got to collect. "I even went to spring training and I knocked off the Royals for a few."
"But I love it," he added. "I can't think of any other place I'd rather be. It's better than sitting home and getting hollered at."
Notes:
Of all the Wisconsin teams mentioned in that article, only the Beloit and Appleton franchises remain. Wausau moved to Kane County, Madison moved to West Michigan, and Kenosha moved to Fort Wayne.
Of the 12 Midwest League teams mentioned in the article, only Beloit plays in the same stadium now that they did in 1987. Davenport, Clinton, and Burlington each had major remodeling jobs done on their stadium. The Foxes became the Rattlers and moved into Fox Cities Stadium, and Peoria moved into O'Brien Field.
Springfield's history gets a little convoluted. The franchise mentioned in the article moved to Madison and became the Madison Hatters at the start of the 1994 season because the Muskies had moved to West Michigan after the 1993 season. The Hatters would leave for Battle Creek to start 1995 and are now the Great Lakes Loons.
However, Springfield received another franchise for 1994 and 1995 after the Waterloo Diamonds were sold because...
When Tom [Dickson] learned that the Waterloo Diamonds were for sale, the team drew only 500 fans on a good day, was losing $100,000 a year, and was playing in a run-down stadium. Despite the team's anemic condition, the lure of owning a baseball team had attracted nine groups of potential investors when Dickson rushed in with an offer to buy.
Sherrie [Myers] and Tom used their own money to make the downpayment (which they risked forfeiting) and were ready to put all the money they had into the purchase. The couple talked to everyone in their baseball network in search of prospects to put on their money list of investors. Nothing was easy. The financing wasn't nailed down completely until the day the deal closed. Then, six weeks before opening day in 1994, Waterloo's city fathers reacted against the idea that the team had been unloaded and would be eventually relocated. They suddenly announced that the token $1 annual lease for their rickety stadium was being raised to $500,000. Sherrie remembers it as a time of panic.
I remember saying that we had to move the team, and Tom said that we didn't have the time. I said that the only way to problem solve is piece by piece. Don't worry about things like the name of the team in a new location or about selling tickets. We need a roof over out head, and we can't pay half a million in rent for it. With help from the league president, George Spelius, we located a roof in Springfield. Tom flew to Springfield, met with the mayor, and they signed a two-year lease with a third-year option.
So there's that.
For more on that story, here is a link
to Business Week with an excerpt from Women
Entrepreneurs Only: 12 Women Entrepreneurs Tell the Stories of Their Success
Just so you know, the book refers to the business of minor league baseball thusly: Sherrie's and Tom's road to Lansing was no joyride. They had spent a year networking in the self-centered world of minor-league baseball, learning its inbred ways, making contracts, and looking for a franchise to buy.
If you are interested, there
is a book recounting Waterloo's 1992 season by Richard Panek. The amazon.com description: Only a fraction of minor league baseball players ever make it to the major leagues. The trip starts in places like Waterloo, Iowa, a town of "working-class and poor," that is the home of the Waterloo Diamonds, a San Diego Padres farm team in the Class A Midwest League. Freelance writer Panek here takes us through the 1992 season, on the field and off, in a city in trouble. Industry has deserted Waterloo; the Diamonds, on the other hand, are a franchise worth about $1 million, and the team brings some $2.495 million into the local economy. City and team need each other to survive, and each is wary of the consequences if the other fails.
Sounds like an interesting read.
Oh, and the commissioner still runs his flower shop.