Wednesday, January 16, 2008

Calling Cuban to Pittsburgh

Yesterday I completed reading through my first issue of Sports Illustrated, and I'm glad I was resolved to go through it from cover to cover, because the very last article caught my attention: A Changeup for Bud's Boys. In it, SI's Chris Ballard outlines his case for why the famous (even infamous, in some ways) owner of the NBA's Dallas Mavericks, Mark Cuban,, is the right choice as the next owner of the Chicago Cubs. Ballard is very much on point with his argument from my perspective. I think he's absolutely right, that having Cuban in Chicago would be great for baseball. However, I think there's a place where he would be better for baseball - Pittsburgh. That's right, I want Mark Cuban to buy the Pirates.

This is not a random whim, as Cuban has ties to the Pittsburgh area and has been linked to possible purchases of city sport teams in the past. And the reality of this case seems to be that, despite his interest, he won't be buying the Cubs, for the reasons that Ballard cites, which are basically about MLB owners not being comfortable bringing a pot-stirrer like Cuban in when they have another viable option. The Cubs are an attractive purchase, and so MLB is in a position of strength. For the small market Pirates, who haven't had a winning season in 15 years, the market would likely be much smaller, and so the other owners might not be left with much of a choice if Cuban wanted in.

To be fair to the current MLB owners, I understand their hesitations, to a point. I am not a big fan of Mark Cuban, the guy. The NBA certainly could do without his loud-mouth, attention-grabbing, referee berating antics. He's constantly in the news, usually for the wrong reasons, most often getting fined. What the NBA can't do without, however, is Mark Cuban, the intelligent and fan savvy team owner. During Cuban's tenure as owner, the Mavs have gone from one of the NBA's bottom feeders, to one of the marquee franchises, consistently being among the top handful of teams. Whether the NBA brass would admit it or not, Cuban has clearly brought more positive to the league than negative. And, for a number of reasons, it's quite likely that Cuban would not be as ever-present with a baseball team as he has been with the Mavs, so MLB shouldn't expect to deal with those issues as often as the NBA does.

Ballard's article makes a very solid case for why Cuban would be a great owner of the Cubs, and most of those points would translate to any team, so I'm not going to spend much time restating why I think he would be a great owner in Pittsburgh. What I seek to bring to this discussion is a case as to why having Cuban as a great owner in Pittsburgh is better for baseball than having him as a great owner in Pittsburgh. First of all, the Cubs don't need Mark Cuban. The team is a big time revenue generator as is, with a die-hard following that goes well beyond the city of Chicago. Any ownership group that isn't totally incompetent should be able to come in and find success in Chicago. In Chicago, Cuban is just another big market, cash cow owner, like the ones we already have in Boston and New York, among other places. Hardly noteworthy, and not really having any grand significance outside of Chicago.

Pittsburgh, however, is a different animal. It's a pretty small market in baseball terms, and one that has been downtrodden for the better part of the last 20 years. It does, however, have a strong baseball tradition. And the current ownership group has bought into the standard small market "party line" of bemoaning baseball's economic disparities and saying they just don't have enough money to compete with the big boys. Meanwhile, they turn some of the biggest year to year profits as that economic system that they decry takes money from the big boys and lines their pockets, with no formal expectation that they actually invest it in the team.

Now, don't get me wrong. I'm not saying that I think baseball's economic structure provides a perfectly level playing field. However, it is markedly improved from the pre-revenue sharing days, even if the small market teams refuse to acknowledge that fact. As long as these teams continued to be owned by groups who are concerned solely about the present day bottom line, they will continue as a group to rack up nice profit margins, while putting a poor product on the field. And, as long as no one "breaks ranks", they can continue to point the finger at the MLB system when their fans complain. However, my opinion is that, at present, there is at most 1 (and that's an extraordinary situation in Florida) team that doesn't have the resources to be consistently competitive, assuming they use those resources well.

This is where Cuban comes in. I understand that baseball is a business. I don't expect owners, who are obviously skilled businessmen, to come in and just lose money year in and year out to put a winner on the field. However, his tenure in Dallas demonstrates that Cuban understands the concept of spending money to make money. Cuban has also demonstrated a strong ability and willingness to invest in and build a fan base and a market. Listening to the fans to the extent that he does is a great way to start that process. In his 7+ years in Dallas, Cuban has almost tripled the value of the franchise (based on Forbes' yearly valuations), and has taken the team from the bottom 1/3 of the league in yearly revenues to the top 1/3 (also according to Forbes). Now, Forbes also shows that the Mavericks consistently lose money annually from the basketball operations, but given their high revenues, the Mavs could clearly be profitable if they chose to do so. Cuban seems to be willing to pour extra money into the Mavs in the name of his competitive spirit.

Now, it generally takes a little longer to turn a baseball team around, for a variety of reasons, so I wouldn't necessarily expect Cuban to be so quickly successful in Pittsburgh. However, I believe within 5 years he could have Pittsburgh in a very competitive position once again, and could keep them profitable, if that was his objective. Whether he was necessarily raking in money on a yearly basis, he would clearly be making out in terms of what would happen to the value of the team.

Instead of just another big market villain, Cuban would be someone that other small market fans can point to when their ownership groups cry poverty. He would blow away the lie that a lot of ownership groups are trying to sell: "We're doing the best we can under the current system." With Cuban putting the model on display in Pittsburgh, these owners would basically be faced with a choice of either putting forth a real effort to compete, or selling to someone who will.

From my perspective, those are better options than the present day, where they cry poverty and try to convince their fellow owners to vote them a bigger share of the big market revenues in the next CBA.

4 comments:

Andrew Stevens said...

As for market disparities, baseball has always had a bit of a problem in this regard. It's not so much that there is this two-tiered big market/small market gap that the media (and baseball itself) likes to portray. It's more that there is one big outlier - New York City, both the largest city in the country and a huge baseball city as well. It's got twice the population of Chicago, but still has two teams as Chicago does. It might not be a bad idea to add two expansion teams and put them both in New York/New Jersey, paying some sort of compensation to the Yankees and the Mets (since it will reduce the value of their franchises).

Pittsburgh is a small market in baseball term though it's bigger than Cleveland, Kansas City, Cincinnati, and Milwaukee.

I really like your idea, though. I'm glad to see the Tribune selling the Cubs since I hate corporate ownership of sports teams. Sports teams ought to be the toys of very rich men. I'm perfectly fine with the fact that George Steinbrenner also happens to make money off of it, but this is (and should be) a secondary goal for him. Mark Cuban is a great owner from a fan's perspective; businessmen are terrible owners. Having said that, I'm not saying that all owners should be perfectly willing to lose tens of millions of dollars, but I have no sympathy for owners who view their sports teams as "investments" or, worse, cash cows as the Tribune has been using the Cubs for years.

Scott said...

I think you're spot on with your assessment of the market situation as it relates to baseball. I'm sure at some point in future I'll lay out my take on baseball economics in much more detail.

For the last several years, if you remove the outliers (on the high end the Yankees, and the Red Sox have snuck in there the last year or so, and on the low end 3 or 4 small market teams that haven't convinced me they are even trying and routinely pocket upwards of 20 million dollars a season) you get a salary spread that is pretty comparable to every other major sport, all of which have salary caps.

Between revenue sharing and luxury taxes, I think the Yankees sent in excess of 70 million to the small market teams last year, and the Red Sox probably were on the hook for over 45-50 million.

I'm perfectly comfortable with that model at present, and think that the small market teams that don't want to even spend what they have are a bigger problem than the high outliers right now.

Andrew Stevens said...

I pretty much agree with your assessment. People point to the halcyon days of the '80s, the only time in history when baseball was truly competitive and any team had a chance to win. I believe this was because of the advent of free agency in the '70s. What happened is that free agents were still being underpaid in the '80s as the market tried to find the right level: the Yankees, Mets, etc. were underbidding, allowing other teams to compete since the player was worth more to them than they had to pay him. Right around the early '90s, the market found the right level and free agents were paid about what they were worth, allowing the big spenders (like the Yankees and Red Sox) to start dominating the standings again. Every year during the '80s and '90s we'd hear about how such and such a player got a "ridiculous" or "obscene" contract. I had put together statistical models (with the help of some fellow sabermetricians) which showed me both A) how much each additional win was actually worth in terms of revenue to each team (hardly surprisingly, the Yankees and Mets got the most extra revenue per win) and B) how many wins a great player was worth. None of these "ridiculous" or "obscene" contracts turned out to be truly ridiculous; they were all quite rational. I still remember the first contract where I balked - that was Alex Rodriguez's. It was not clear to me, in the economic climate of the time, that anybody, even Babe Ruth in his prime, was worth $25 million a year to any team in the league. (This may have changed so that some players are now; I no longer update my models.)

The biggest problem with changing this is, quite simply, that a superstar like Alex Rodriguez is worth more to baseball as a whole if he's playing for the Yankees than if he's playing for anyone else. So as long as you have anything like a free market, it will always be the case that the Yankees will, perfectly rationally, pay more for the best players than other teams will. Those players are worth more to the Yankees, in terms of revenue, than they are worth to the other teams. Yankees fans, unlike Cubs fans, are ruthless in punishing their team if it's not winning, but they will show up in droves if it is. Unfortunately, that means it is in baseball's best interests, as a whole, to have a strong Yankees franchise and a strong Red Sox franchise and a strong Mets franchise. It makes the pie bigger even though it also robs the smallest teams (or teams with the bad luck to be in the A.L. East) of their hope to be competitive.

Scott said...

Ah, the wonderful, collusion filled 80s.

Yeah, you're correct, it clearly took a while for the market to figure itself out after free agency started.

And it makes sense that it would be the case, because the market for a given player is primarily defined by what similar players make. It was going to take a number of free agent cycles to adjust, especially with the owners colluding to keep prices down.

I'm sure the rise of the powerful sports agent didn't slow the process any either...