The Bottom Line: Observations and Arguments on the Sports Business

Part II. League Structure, Design, and Performance

II League Structure, Design, and Performance 64 Fewer Families Own Sports Teams: It's OK Americans often form deep attachments to their sports teams. In return, they expect their teams minimally to try to win and to show some loyalty to the communities. When Walter O'Malley moved his Brooklyn Dodgers to Los Angeles in 1958, it marked the era of disloyal teams and changed the sports world forever. Despite O'Malley's perfidy in the eyes of Brooklyn, for many, family ownership is associated with stability in sports. Now, Peter O'Malley, Walter's son and the present Dodger owner, is about to sell this storied franchise to Rupert Murdoch, media magnate par excellence, for a reported $350 million-$400 million. (The highest previous sale price for a baseball franchise is $173 million, suggesting that Murdoch views the Dodgers as more than a simple baseball investment.) Murdoch's Fox will thereby joins Disney Corporation (Angels), Time Warner/Turner (Braves), and the Tribune Company (Cubs) as major media corporate owners of Major League Baseball teams. Walter O'Malley made his name and fortune as a bankruptcy lawyer during the Great Depression and took over for Wendell Wilkie as the Brooklyn Dodgers' lawyer in 1942. Two years later, Walter purchased a minority interest in the club along with the baseball innovator Branch Rickey. Over the ensuing half century, the family presided over the team that introduced Jackie Robinson into baseball in 1947, introduced Major League Baseball to the West Coast in 1958, and introduced Japanese and Korean players into the major leagues in the 1990s. What does the O'Malley family's departure mean for baseball? Certainly, the days offamily ownership offranchises are fading. As franchise prices have skyrocketed from less than $5 million in the 1950s to $10 million-$20 million in the 1970s to in excess of $100 million today, there are fewer families who can afford to be sole proprietors. Instead, there has been a gradual process that began with CBS's purchase ofthe Yankees in 1964 for $14 million toward corporate partnerships and joint-stock-company ownership. Fans have nothing to fear in this trend. Family owners have been no more likely to show loyalty to their host city than corporate owners. To be sure, the NFL, which still proscribes corporate ownership, has experienced more franchise movements than either baseball or basketball. Some express the fear that corporate owners, with their deep pockets, are more likely to spend indiscriminately to monopolize top talent, but Chicago Cubs fans know better. If anyone, it has been the well-heeled family owners u.s. News and World Report, January 20, 1997 League Structure 6S such as Ewing Kaufman, former owner of the Kansas City Royals, who have treated their teams as playthings and elevated winning above making profits. Corporate owners are unlikely to subordinate profits to pleasure. And even if they were so inclined, baseball's new revenue-sharing and luxury-tax systems would provide powerful disincentives. Further, corporate ownership is more likely to be professional and proficient ; less likely to be eccentric and errant. Corporate executives are at least responsible to a board of directors. They cannot readily divert funds to other businesses, pay themselves multimillion-dollar consulting fees, publicly berate ethnic groups, or embrace Hitler it la Marge Schott without losing their jobs. There is, of course, also a potential downside. Large corporations have power, political and economic. A coalition of Disney, Time Warner, and Fox is more likely to lobby successfully for the preservation of the interest exemption on municipal bonds for stadium construction or for baseball's anomalous antitrust exemption. And Fox's Murdoch, if history is any guide, is more likely to lead a confrontation with the players' association (not to mention Ted Turner). Nonetheless, Congress has consistently genuflected before MLB sans Murdoch, and one would like to believe that baseball is sufficiently chastened from the debacle ofthe 1994-95 strike to resist any call to arms from Murdoch. 66 If Competitive Balance Spoils the Show, Congress Waits in the Wings It is by now a cliche to note that the ownership of professional team sports is changing. By one estimate, in early 1998, sixty-six public corporations had direct or indirect ownership interests in sports teams. A large share of these public companies are in the media business. Media business-owned teams often have a different objective from stand-alone teams-namely...