Even in the days when 25 cents bought a bottle of cold beer and $25,000 bought a star center fielder, owning a major-league baseball team was no sure way to get rich. For every Jacob Ruppert, mass-producing pennants and profits with his New York Yankees, there were three or four owners more like Connie Mack, in his later years, trading away standout ballplayers for cash just to keep his hapless Philadelphia Athletes going for one more season.
These days, ball-park beer is nearly a buck, $25,000 is an insult to a utility infielder, and baseball, for reasons even Little Leaguers know, is chancier than ever. Few balance sheets are made public, and only nine of the 24 major-league clubs claim to have made money last year (Milwaukee, Houston, California, Kansas City, Montreal, Cincinnati, Los Angeles, San Diego and Philadelphia. Staggering player salaries, soaring costs of running the home stadium and moving the team around on the road and every-multiplying distractions for already fickle fans are not the only risk factors.
After the Civil War settle the slavery issue, owning a ball club was the closest one could come to owning a plantation. A militant players' union and a series of court decisions -- the Andy Messersmith case last year effectively ended the notorious "reserve clause," which bound players to the first owner who signed them up -- have evened things up a bit for the field hands. The Major League Baseball Players Association minimum wage for a first year big-leaguer is now $19,000 and the player can shop elsewhere for a better offer after six years. Certified stars are now negotiating multiyear, multimillion-dollar deals through high-powered agents. To this, add chronic rumblings in Congress about applying antitrust statutes to the monopoly business that big-league baseball unquestionably is, and you have a state of affairs, that has shaken many franchises to their socks.
"I would say baseball is a growth industry," says Bowe Kuhn, the Wall Street lawyer who became commissioner of baseball in 1969. "You've got plenty of unused stadium capacity, which offers potential for increased attendance revenue." Kuhn is paid to say such things. Upon the death, in 1944, of Judge Kenesaw Mountain Landis, baseball's first (and, some would say, only independent) commissioner, compulsive optimism became part of the job description.
The fact remains that more major-league franchises are now, or soon will be, up for sale than at any time in recent memory. You can get them at prices lower than they would have commanded just five years ago. Three clubs are generally considered to be on the market right now -- the Houston Astros, currently owned jointly by subsidiaries of General Electric and Ford Motor companies, for perhaps $12 million; the Cleveland Indians for $10 million; the Oakland A's for $8 million.
Another three might soon be available if the present owners think the price is right -- the Baltimore Orioles, the Chicago White Sox and the Boston Red Sox.
Chicago Cubs executive vice president William Hagenah Jr., 56, pointing to his club's loss of $924,951 last year, says: "What is making a difference now is, we have gone from losing a tolerable amount of money to where we are losing an intolerable amount. The decisions we have to make are where we are going and what is going to keep us out of bankruptcy." Although Phil Wrigley, of the chewing gum Wrigleys, has owned the Cubs for 43 years, few would be surprised if he, too, was willing to sell -- for, say, $12 million.
Despite his losses, Wrigley has every reason to think that offers will be forthcoming. The rumor persists, occasionally supported by evidence, that owning a ball club is fun. For those who made it big (especially, for some reason, in the construction business --the late Lou Perini of the old Boston Braves, John Galbreath of the Pittsburgh Pirates) and for those who inherited big (Phi Wrigley of the Cubs, the late Joan Whitney Payson of the New york Mets), owning a big-league franchise was something like a hobby, if not a second career. By such means, one could be the dashing sport-about-town as millions (at least occasionally) cheered. As Charley Finley, 58, the volatile insurance man who owns the Oakland A's has good reason to know, it is also a reliable way to get your name in the papers.
A few sporting types survive. The St. Louis Cardinals, a subsidiary of Anheuser-Busch, Inc., the nation's biggest brewery, have lost money four of six years since 1970, an annoyance cheerfully tolerated by chairman august (Gussie) Busch, Jr. The Cardinals are his hobby. His investment, $3.75 million in 1953, is minor. The team has been marginally profitable, earning $620,000 more than it lost between 1970 and 1975, so even bad years are bearable to the Busch family, which owns about 20 per cent of Anheuser-Busch stock.
Civic pride and self-interest are also enhanced by the presence of a big-league club. A recent study by the Pittsburgh Chamber of Commerce and the University of Pittsburgh indicated that major-league baseball pumps $21 million a year into the local economy. Pirate games attract some 560,000 people each season from outside Allegheny County. The average visitor spends $5.77 in Pittsburgh proper after the game. Visiting teams alone mean $400,000 for the area's hotels and restaurants. "The Pittsburgh Pirates can be thought of as a large multiplant business," said the study. "The major-league team, the minor-league farm clubs, the Florida training headquarters and a subsidiary that manages Three Rivers Stadium are all part of the . . . organization."
But other money aspects of the game are changing -- and not all to the owners' advantage. Tough as it has been in the past to make reliable profits in big-league baseball, it is getting harder still. All things considered, and leaving out straight gambling and wild speculation in the commodities market, baseball now looks like the world's worst investment.
Most clubs continue to operate typically under one of three financial structures: The normal corporation (the Baltimore Orioles, for example); a subchapter "S" corporation, organized like a corporation but taxed to the individual shareholders as if they were partners (the Kansas City Royals); or a limited partnership (the Milwaukee Brewers).
In the latter two forms, depreciation charges, chiefly on player contracts, shelter an individual taxpayer's earnings to a degree, and any losses can be deducted from personal income. But the depreciation game is not what it was. In a ruling in 1975 (now on appeal) involving the Atlanta Falcons football team, a federal district court lowered the amount of depreciation allowed on player contracts, a team's major asset, from about 90 per cent to less than 50 per cent. The tax laws have also been interpreted so that if a team is sold after less than five years, the government can "recapture" any tax revenues lost as a result of depreciation write-offs in those years.
"If a man is looking for a tax shelter, there are a lot better shelters than a baseball team," says Allan (Bud) Selig, 42, president of the Milwaukee Brewers and one of the 16 partners who own it. "This is such a high risk business that if a man is looking for a tax shelter, he should go into real estate."
By virtue of their monopoly, of course, baseball owners have always controlled, absolutely, the number of major-league franchises kicking around. Because of that, and because of generally rising, although varying, revenues from television any resale of a big-league club has tended to inspire hopes of whopping capital gains. Alas, it doesn't always work out that way. True, experts in these matters believe Gussie Busch could probably get at least $11 million for the St. Louis Cardinals. That would almost be three times his investment in 1953. But more recent purchasers are less sure of capital gains. CBS, Inc., bought the New York Yankees franchise in the mid-60s for $13.2 million, sold it in 1973 for $10 million. Alva T. Bonda was a member of a group that bought the Cleveland Indians in 1972 for $11 million and could count himself lucky if he could get $10 million for the franchise today.
Several factors -- notably, the size of the stadium, broadcasting revenues and, most of all, whether the team is a winner -- determine what a franchise is worth. But clearly depressing has been the dramatic expansion of their number. As recently as 1960 there were just 16 major-league clubs, eight in the National League and eight in the American. This year, there will be 26 -- 12 in the National League and 14 in the American. The new American League clubs are the Toronto Blue Jays and the Seattle Mariners. The expansion was approved by the American League against its own better judgment; the alternative was the strong possibility of losing a $21-million lawsuit brought by Seattle, King County and Washington, still miffed because the old Seattle Pilots blew town in 1970, at the end of their first season, tarrying only long enough to get relief in a bankruptcy court before pushing east to become the Milwaukee Brewers.
Prospective owners, however, like the people they would buy from, probably aren't worried about saving a few tax dollars or making a killing. If they are thinking about buying the life-style -- the annual spring trip to Florida, Opening Day and -- oh, miracle -- the President of the United States, or even Bob Hope, throwing out the ceremonial first ball at their team's World Series. It is also a business where there is no mandatory retirement at 65, which is why men in their late 60s and 70s can still run clubs.
But Robert Howsam, 59, president of the reigning world champion Cincinnati Reds, thinks potential investors would be well advised to simply wait and see what happens. "If a friend of mine was thinking about buying a baseball team," says Howam. "I would say at this time it would be better for him to hold off until we know where we are going. There have been so many changes you have to be careful."
Milkaukee Brewer president Alan Selig, who sports the nickname "Budget" for his strict budgets and cost controls, says baseball can test even the strongest men. Since leading a group that bought the bankrupt Seattle Pilots in 1970 for $10.8 million, he has had to put his family's Ford automobile dealership, and often his family itself, second to the demands of the team. He has taken up chainsmoking cigars and says he gains 15 pounds each baseball season just from worrying.
"All I can say is, if people do it for the ego trip," Selig warns, "it's the most horrible ego trip in the world."