For all Major League Baseball Fans, this week across the country many teams will celebrate the opening day of Major League Baseball with ceremonies featuring many different celebrities throwing the first pitch out to open the season. With all of the fanfare and hoopla that surrounds opening day and first week celebrations we can’t forget the fact that for many MLB fans the start of the season has little meaning due to the continued weakness of the economy and the fact that many fans remain unemployed with little prospect of finding permanent employment. Financially many fans are questioning their own futures. Major League Baseball as an industry is doing the same.
Major League Baseball is being affected by the same economic conditions that affect all fans. Both the New York Mets and Los Angeles Dodgers are dealing with the financial impact of the current economic situation. These two franchises are in financial trouble and continue to experience turmoil. The owners of the Mets are facing a lawsuit from the court appointed trustee who represents the people defrauded by Bernie Madoff. The trustee wants at least $300 million from the Mets owners, who are trying to sell a minority interest in the club from some $450 million to raise cash.
The Dodgers remain in financial limbo as everyone waits on the final disposition of the divorce case pitting the club owners, Frank and Jamie McCourt, against each other. It is quite possible that once the divorce is finalized that the club will have to be sold so that any proceeds left over after debts are settled can be split between the parties. The Dodgers have something like $450 million in debt incurred by Frank McCourt and guaranteed by the club.
One little known fact is that Major League Baseball has a rule that no club can have a debt to asset ratio of over 40%. As this is written it is likely that between three and five clubs exceed this figure. The Texas Rangers were facing possible bankruptcy before the sale of the club during the 2010 season to a group including Hall of Fame pitcher Nolan Ryan.
The lack of financial oversight by Commissioner Selig and MLB will impact MLB, small market teams, and their ability to renegotiate the collective bargaining agreement with the Major League Baseball Players Association after the present agreement expires at the end of 2011. The debt situation of the Mets and Los Angeles Dodgers, along with falling revenues, has the potential to impact the entire financial structure of all teams.
The financial troubles that are being experienced in two of MLB largest markets is a sure sign that the leagues can no longer allow franchise owners to be financially and fiscally irresponsible. There have been rumors of efforts to contract by eliminating two teams in the near future. It is highly unlikely that the players association will agree to negotiate away 50 jobs in any kind of future deal.
Anyone wanting a more detailed view of this problem should read Evan Weiner, a nationally syndicated columnist who writes about the business side of sport. Mr. Weiner is friend of the United States Sports Academy and a frequent contributor to The Sport Digest blog. The Academy is in the business of training the future business leaders of sport. These are the types of issues Academy students study as they prepare to be future leaders in the business of sport.
Fred Cromartie, EdD
Dr. Cromartie is the Dean of Academic Affairs and the Director of Doctoral Studies at the United States Sports Academy. He has masters and doctoral degrees in sports medicine and sports management from the Academy and has a professional background in sport education, human resources and management. He also has a sport background as a player and an official.