Friday, January 1, 2010

Do you know the way to San Jose?

Do you know the way to San Jose?

By Evan Weiner

January 1, 2010

(New York, N. Y.) --- To all those prognosticators, and you know who you are, who are trying to predict the top business sports stories of 2010, you have missed what is going to be the biggest fight. Oakland Athletics owner Lewis Wolff and the city of San Jose against the San Francisco Giants, the San Jose Giants, the city of San Francisco and Major League Baseball and the battle will center on the 1922 United States Supreme Court decision that gave the National League and the American League of baseball an antitrust exemption.

Wolff, whose lease with the Oakland Coliseum ends in 2013, would like to locate his baseball business in San Jose. Because of the 1922 Supreme Court decision that baseball was a game not a business, he has many hurdles to climb in his quest, hurdles that would not be there without the SCOTUS ruling.

A little background on this upcoming battle is necessary. In 1967, Kansas City Athletics owner Charles O. Finley decided that Oakland was his best destination after deciding that Kansas City would not support his baseball team and moved his franchise to the city that the writer Gertrude Stein once commented that “The trouble with Oakland is that when you get there, there isn’t any there there.”

Finley moved his team to an area that already had a major league baseball team, the San Francisco Giants, and agreed to an unwieldy deal that limited his ability to truly be a San Francisco Bay Area franchise as he agreed that the A’s territory was Oakland, Alameda County and Contra Costa County which is a relatively small area when examining the entire market. In 1967 neither San Jose nor Santa Clara County, California were considered major league areas but Santa Clara County became the headquarters of National Semiconductor that year and Intel moved there in 1970.

The Silicone Valley was born and all of a sudden a lot of people were not just singing “Do You Know Your Way to San Jose” because it was a hit song in 1968.
The Silicone Valley became a major money area.

Finley apparently was never enamored by Oakland and looked at moving his team to New Orleans in 1978 but he could not break his lease and actually sold the team to Marvin Davis who planned to take the team to Denver but again he could not break the lease. Finley subsequently sold his team to the Haas family in 1980. The Haas family sold the team to Stephen Schott and Ken Hoffman in 1995 and Wolff bought the team in 2005.

Wolff has been looking for a new facility virtually since his first days as A’s owner. He floated an idea of building a “Ballpark village” in a parcel of land next to the Oakland Coliseum and Arena parking lot but could not get Oakland officials to go along with the plan. He then went down I-880 and decided that Fremont, an area as close as he could get to San Jose without infringing on San Francisco Giants territory would be a perfect solution. That deal fell though.

Oakland would like to maintain the franchise, which at the present location is much closer to the San Francisco Giants corporate multi-named home field in China Basin than it would be in San Jose, but so far it appears that Wolff would like to travel into Giants territory and attempt to get a San Jose stadium.

Wolff has some options if he wants to go to San Jose. He can somehow convince the 75 percent of the other 29 baseball owners that it would be in their best interests if he could move to San Jose or he can challenge Major League Baseball’s antitrust exemption.

The San Francisco Giants ownership has territorial rights to an area where voters twice rejected the team’s request for public money to build a baseball park. Yet the Giants ownership has exclusive rights to the territory and will not cede anything to Wolff.

A San Jose group, with ties to the Single A level baseball team, the San Jose Giants of the California League – which is partially owned by the San Francisco Giants ownership—plans to fight any attempts to Wolff and San Jose officials to build a Major League state of the art baseball park in the city if taxpayers funding is used. That, of course, is a bit hypocritical by the San Francisco Giants ownership group because they know that San Francisco has provided every sort of tax break imaginable for their “privately” funded China Basin stadium.

The city of San Francisco is now getting into the fray as City Attorney Dennis Herrera has sent a threatening letter to Major League Baseball and Major League Baseball Commissioner Bud Selig that urges baseball not to invade the Giants San Jose territory.

San Francisco has a privately funded baseball park, why is the city fighting a battle for a private business, the San Francisco Giants? That is rather easy to explain, the city of San Francisco has a major investment in the “privately” funded park. A 2008 Port of San Francisco Economic Impact Study will point this out immediately.

The Giants ballpark, which transferred monies spent at Candlestick Point when the Giants hosted 81 baseball games annually to China Basin, revitalized the area although the report did not point out the financial redistribution of money that left another part of the city, Candlestick Point behind.

“AT&T Park serves as an anchor use for the neighborhood, drawing visitors from throughout the City, region, and nation to shop and dine in South Beach. During its seven years of operation,

AT&T Park has had more than 25.4 million visitors. In 2007, attendance at Giants home games totaled 3.2 million people. AT&T Park held one of its largest events in 2007 when it hosted the Major League Baseball All-Star Game. Giants officials counted 128,322 attendees at official events, while the San Francisco Visitors & Convention Bureau estimated that 250,000 visitors came to the City for the event, contributing $60 to $65 million to the local economy.

In 2006, paid attendance to events other than Giants games totaled 153,434.

This increased activity has established a sense of vitality and a positive neighborhood identity in South Beach, contributing to strong real estate values in the area. In any given year between 2000 and 2006, the median price of condominium units in South Beach was 15 to 44 percent greater than
comparable units in San Francisco. In addition, residential rents in South Beach have consistently exceeded citywide rents since 2002. The difference in average rents between the two areas ranged from one to 11 percent between 2002 and 2006, with the gap growing every year since 2002.

Before 2002, South Beach and San Francisco apartments showed similar average rents, with a difference of only 1.2 to 1.7 percent.”

San Francisco is worried that the city would lose revenues generated by people coming up the 101 from San Jose and Santa Clara, which is why the city is joining the melee.

But there is something striking in the Port of San Francisco’s report, which covered the years between 2000 and 2007.

Fisherman’s Wharf blows away the economic engine that the baseball park allegedly generated.

“Fisherman’s Wharf consistently remains one of San Francisco’s primary tourist attractions. Approximately 12 million visitors come to Fisherman’s Wharf annually, with an average visitor age of 42 and household income of $80,000. The Fisherman’s Wharf Community Benefit District reports that 71 percent of visitors in 2006 were from outside of the Bay Area.

Pier 39, located in Fisherman’s Wharf on Port property has offered a wide variety of specialty retail and restaurants since 1978. Pier 39 now contains approximately 110 stores, 14 restaurants, and the Aquarium of the Bay. The average household income of visitors is roughly $100,000, which is 25 percent more than the average Fisherman’s Wharf visitor and 6.5 percent more than the average San Francisco visitor.

At the end of calendar year 2006, Pier 39 retail and attractions grossed $181 million, representing a $2 million increase from the previous year. Visitors tend to
spend $79 during their average 3.3 hours visit.”

Would San Francisco stop San Jose is somehow that city could replicate Fisherman’s Wharf?

Of course not.

San Francisco never stopped Monterey, California’s development and the city does compete with Lake Tahoe, which is about three and a half hours away by car.

Why is baseball such a treasured business? Why should the Giants business get preferential treatment?

Baseball is a complex business and Supreme Court Justice Oliver Wendell Holmes had it wrong in 1922 even by 1922 baseball business standards.

The stage is being set right now and a fierce territorial battle may shape the future of baseball and determine whether or not San Jose can become the home of Lewis Wolff’s baseball team. Wolff has to decide whether he really wants to fight this war and the implications may be felt far beyond the Bay Area.

Selig and his Major League Baseball owners did allow Washington to house a franchise in 2005 despite the fact that it was Baltimore Orioles owner Peter Angelos’ territory. Selig and MLB played around with cable TV rights to satisfy Angelos. The cable TV set up is different in the Bay Area with Comcast (and one of sports major movers in the United States Brian Roberts) fully in control of cable TV sports rights. The distance between Washington and Baltimore is nearly identical to San Francisco and San Jose.

This could be a battle that extends to Congress but would the former San Francisco Mayor, Senator Diane Feinstein along with her colleague Barbara Boxer and the House Speaker, Nancy Pelosi of San Francisco want to get involved in the issue? Congress squawks about antitrust issues in sports but does nothing to correct inequities.

If Wolff wins his battle, what is to stop another owner from pursuing a team in the New York City market? Once upon a time there were three New York teams, the Yankees, the Brooklyn Dodgers and the Giants. There is still a huge, huge cable TV contract that is available in New York, which is bigger than a number of markets put together, and New Jersey has had eyes on a Major League Baseball team for years.

The antitrust exemption has kept a third team out of the New York marketplace and is preventing San Jose from making an offer to Wolff.

Wolff isn’t the only one who is asking do you know the way to San Jose? The San Francisco 49ers ownership is looking at Santa Clara as a new home and if that fails, the York family may disregard Gertrude Stein’s warning about Oakland. Oakland is a fallback for the Yorks if Santa Clara doesn’t materialize for them.

That story may be the second biggest in sports in 2010 but that is an issue for another day.

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