Thursday, December 16, 2004

BP Says MLB Is "Bluffing"

You'll need a subscription (Nats Blog heartily endorses this event or product), but Neil deMause says that Baseball is "bluffing" by shutting down its operations in DC.

Among other things, Neil writes:

No matter. Cropp had transgressed the sacred "contract" signed by Mayor Williams and Supreme Leader Selig--called a "Baseball Agreement" on its cover page, because the mayor doesn't actually have the power to unilaterally sign contracts on behalf of his city--and if there's one thing the Selig administration knows how to do, it's play hardball in contract negotiations. Thus DuPuy's crabby response, which was meant to throw fear into the hearts of Washington baseball fans, who presumably are expected to bombard Cropp's office with angry phone calls demanding that she end their 33 years in the baseball wilderness, whatever the cost.

The angry phone calls materialized right on cue (reports are that
Cropp has received at least two death threats), but don't hold your breath waiting for the Expos to relocate again for the second time in three months. Oh, it's possible that DuPuy's bluster will escalate into pretending to play footsie with other cities. . . . But in the end, the other options are pretty crummy. The bridges are burned in Montreal, political support for stadium funding is nonexistent in Virginia, and places like Portland and Las Vegas have neither the population nor the stadium financing to pull off a last-minute play for the Expos. It's D.C. or bust, and Selig has to know that even a $400 million stadium bill is still better than nothing.

Neil, no offense, but you are a fool. Baseball never wanted to come to DC. There were too many problems - exactly one too many - to bring Baseball to DC. Despite the fact that DC has been the obvious choice to relocate the Expos for 3 years, Baseball hemmed and hawed and tried to find as many solutions as possible. That was until the people at the Washington Baseball Club told Tony Williams that the only way DC could get the Expos was to meet all of Baseball's demands. In other words, accept Baseball's offer. And much to his credit, Mayor Williams did that. Baseball, having been given everything it wanted, pretty much was backed into a corner, and struck the deal.

The bottom line is that Baseball doesn't need a reason to not come to DC. They need a reason TO come to DC. That reason got smashed into a million pieces on Tuesday night.


At 9:11 AM, Blogger tmk67 said...

deMause's Field of Schemes blog is must-reading for those who are following the DC stadium issue. But he is wrong on this "bluff" argument.

It is entirely rational for MLB to destroy the value of the Nats franchise to "prove their point". The question is not "What location is best for this franchise?", it is, "What deal is best for the 29 franchises that own the Nats?" deMause fails to take into account that the principle of "free stadiums are expected" is worth a lot to every team.

It is simple math--even if the sale value of the Nats in DC with a pritvately-funded stadium is far greater than the sale value of the "Nats" in Vegas/Portland with a publicly-funded stadium, the 29 owners are better off taking the Vegas/Portland deal. A $100 million diminishment in the value of the Nats costs each owner less than $4 million--the cost of a mediocre middle infielder for one year. They will gladly take that loss in order to be able to lord the Portland/Vegas free stadium over their respective cities.

At 9:54 AM, Blogger dexys_midnight said...

very well thought out TMK

At 10:06 AM, Blogger El Gran Color Naranja said...

He's wrong on the "bluff", but not for the reasons you state. Both Norfolk and Portland had near full funding proposals on the table in the months before DC. Vegas politicians had regularly been more receptive. But MLB always wanted the DC area. It makes the team the most profitable for sale. I don't think they cared, however, if it was DC proper or NoVA.

Why do I say that he's wrong on the bluff? Because if they accept this deal, then it becomes the new deal to base all future deals on. That would devalue the franchises looking for new ballparks. And the owners are crazy enough about protecting their huge investments to play the team in MLB's New York office lobby if it'll save their teams a few million dollars potentially.

At 1:32 PM, Blogger tmk67 said...

El Gran,

You and I are basically making the same point. A free stadium in a smaller market is more valuable to the 29 owners than a stadium they have to pay partly for in DC, regardless of the fact that the team in DC, even with a "privately-funded" stadium will no doubt sell for more than a Portland/Vegas team. The owners would prefer to crater the value of their investment in the Nats simply to avoid the loss in value of their own franchises that would result if they caved in to the DC Council, as you point out. Such a cave-in would so adversely impact their future bargaining position with their own cities that I bet that many owners (especially Reinsdorf) would be willing to write off the entire value of the Nats to maintain this principle. A complete write-off would only be about $300 million, or a little over $10 million/owner, a pittance.

DC and MLB are in what economists call a multi-stage game. Failing to recognize that you are in one and assuming your opponent will make a decision based on the individual rationality of each stage is an enormous mistake. Linda Cropp is making this mistake.

At 6:09 PM, Blogger El Gran Color Naranja said...

Yes we are. It's not the profit from the sale that's important to MLB, it's the terms. A baseball franchise is a long-term investment. I can be led to believe that some teams do lose money hand over fist since the rise in value of a franchise more than offsets these losses and makes ownership a profitable venture. A free or highly subsidized stadium whenever one needs such (say every 20-30 years or so) adds much to the potential sale value.

But this begs the question, why would they spurn such deals from smaller cities to before this? Could it be a "let's try one more time" thing? I just don't buy it. I believe that having a team in DC has a certain cache that MLB is willing to sacrifice more to get, even if it means only a limited increase in gain for the owners individually. Much like cities decide to sacrifice the money you lose on a stadium deal for the "intangible" benefits a team brings, I think MLB would do the same for the "intangible" benefits for DC. But 50%? The more I think about it, the less likely it seems.

At 9:43 PM, Blogger DM said...

As I see it, MLB has conceded on several points in this deal that lower the price of the Expos franchise:

(1) 18 % of the financing is rent paid by the new owner;
(2) tax on concessions that ultimately hit the bottom line of the new owners;
(3) payments/guarantees to Angelos;
(4) site of the new stadium would benefit D.C. more than the new owners.

Sure, this ain't McGowan in SF, but these are real considerations that must be acknowledged. It is also more than MLB gave to Cleveland, Baltimore and Texas. That is why I think it is a hard but fair deal for the city. Combine that with the fact that DC is in competition with other cities, and it's probably the best you could expect.


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