Being lucky made all the difference for George Steinbrenner
Wednesday, 14 July 2010 08:03
BY EVAN WEINER
THE POLITICS OF SPORTS BUSINESS
There is a lot of revisionist history that is being tossed around following the death of George Steinbrenner in terms of his building the Yankees into a global brand name. There was hard work, no doubt, and a lot of good people pitched in but George Steinbrenner never did want to buy the Yankees. He was from Cleveland and wanted the hometown Indians. The New York Yankees baseball team was his consolation prize when he and his group bought the team from CBS in 1973.
Steinbrenner had owned the American Basketball League's Cleveland Pipers in 1961. His team won the ABL title. Steinbrenner once tried to trade his whole team for Pittsburgh Rens star and future Hall of Famer Connie Hawkins. He wanted to move the Pipers into the National Basketball Association with his major signee Jerry Lucas in 1962 but had two problems. He didn't have the money on hand and his father would not advance him the cash needed to join the NBA and the American Basketball League claimed Steinbrenner had a deal with their league. Steinbrenner dropped out of the ABL and the ABL folded on New Year's Eve 1962. He nearly bought the Indians in 1972 but at the last moment Indians owner Vernon Stouffer backed out of the agreement.
The Steinbrenner Years have been well documented. But there is a question that should be asked. Was George Steinbrenner a good baseball owner/businessman or was he just very lucky? The answer is that he was very lucky.
He got baseball's most famous, but weakened, franchise for about $250,000 as part of a group who put up about $10 million for the New York Yankees. He was at the right place at the right time to cash in on cable TV and the Yankees brand name became bigger than baseball, which allowed him to make more marketing dollars.
Steinbrenner, by virtue of being in New York, had more money available to him except for the Los Angeles Dodgers in terms of how baseball revenue was raised in the period after 1973. His first big free agent singing was Catfish Hunter on New Year's Eve 1975 after Oakland A's owner Charles Finley made a mistake in sending out Hunter's 1975 contract. Steinbrenner missed out on the first class of free agents which consisted of two pitchers, Andy Messersmith and Dave McNally. He did sign Reggie Jackson in 1977 but the first championship teams were built the old fashion way through trades and players from the farm system.
Steinbrenner became bigger than the team over time. He was a lunatic who was compulsively driven to win. The guy from Cleveland became a symbol of New York which is odd because he didn't live in New York and was not part of the city's business community. He was in the middle of Tampa's business community. New York George was a commercial pitchman, a baseball owner, a Saturday Night Live host, the punch line of many jokes, a buffoonish character in Seinfeld, a twice suspended owner and finally an elder statesman.
He owned the Yankees, the New Jersey Nets (two years with him in ownership, the Nets played in the NBA Finals) and the Devils. He also put up money to make sure the Tampa Bay Lightning survived and became an NHL franchise. He was a big wheel in the Olympics movement. But the shipbuilder from Cleveland was a reluctant Yankee at first.
Steinbrenner spent a lot of money in the 1980s and had virtually nothing to show for it. The 1980s was the first decade since the 1910s that the New York Yankees did not win a World Series. The transformation of the Yankees into a dominant brand started in 1988 and this is where Steinbrenner got very lucky. Gulf and Western owned the Madison Square Garden Network, a cable TV station that had a lot of sports programming between October and May with New York Rangers hockey games and New York Knicks basketball but the channel virtually ran the soundtrack of crickets in the summer.
There was some talk in the cable TV industry that the MSG Network could be swallowed by Charles Dolan SportsChannel, an entity that had the cable rights to Mets and Yankees baseball along with New York Islanders and New Jersey Devils hockey and New Jersey Nets basketball. Gulf and Western made a strategic decision to save the network.
Go after Yankees baseball and go for broke with the biggest TV contract ever offered to an individual team in North American history.
The ploy worked. MSG got the Yankees and had sports programming 12 months a year and with the Yankees on board, multiple systems cable operators away from New York City and the suburbs added MSG. Also, New York City was finally wired for cable.
Martin Davis and Gulf and Western never get credit for beginning the transformation of Steinbrenner's Yankees into a behemoth. The Yankees-Gulf and Western 12-year-agreement for about a half a billion dollars shook up the economics of baseball. The huge divide between high end revenue teams — there was one the Yankees — and the rest of baseball would take a few years to develop. The new cable deal though did not mean Steinbrenner was opening the checkbook to all free agents.
Davis and Gulf and Western outbid the Tribune Company's WPIX, Channel 11 and Dolan's SportsChannel.
Steinbrenner was kicked out of baseball by Commissioner Fay Vincent in 1990 for paying Howard Spira to spy on Dave Winfield. While he was gone, Yankees brass decided to build a farm system and eventually that farm system would produce Derek Jeter, Andy Pettitte, Jorge Posada and Bernie Williams. Steinbrenner was back in the picture in 1993 after Vincent was fired by Steinbrenner's fellow owners. Those owners that led the campaign to get rid of Vincent included the Chicago White Sox Jerry Reinsdorf and Eddie Einhorn (Steinbrenner friends who George once called "the Abbott and Costello of Baseball) and "Buddy", Bud Selig, the owner of the Milwaukee Brewers. The Tribune Company's Stanton Cook who ran the Chicago Cubs was also a key player in Vincent's dismissal.
Cook's Channel 11 in New York was still carrying a number of Yankees games at the time as part of a secondary deal with MSG.
In 1998, Steinbrenner was tired of the rebuilt Yankee Stadium. The 22-year-old stadium version of the original park was not in the same league as new parks that were coming on line. Yankee Stadium had narrow corridors, few luxury boxes and lacked the other gadgets that other owners had like food courts and other revenue generators.
While Steinbrenner was grousing over his old, non revenue producing stadium, he had the huge TV deal and another multimillion dollar marketing agreement with Adidas America that was signed in 1997. The nine-year, $95 million contract drew the ire of his fellow owners and Steinbrenner sued his fellow owners to make sure they didn't interfere with the marketing deal. Major League Baseball had an exclusive deal with Russell Athletic to produce baseball uniforms. Adidas and Steinbrenner were partners until 2008. Adidas was replaced by Nike in 2009.
The Steinbrenner-Adidas deal echoed a deal that Dallas Cowboys owner Jerry Jones signed with Pepsi in 1995 despite the fact that the NFL's official soft drink sponsor was Coca Cola.
The Steinbrenner-Jones connection should not have been dismissed as coincidence.
Steinbrenner's Yankees and Jones' Cowboys along with the Goldman Sachs Group and CIC Partners formed a food and retail company in 2008 called "Legends Hospitality Management LLC". The venture runs catering, concessions, merchandising and other management services at the new Yankees and Cowboys stadiums. Goldman Sachs was a minority partner in the regional sports cable network that the Yankees launched in 2002 after the Yankees-MSG deal ended. Steinbrenner finally got his new stadium in 2006. The new place opened in 2009 at a price tag of more than a billion dollars. It was a long slough for Steinbrenner who first pushed for a stadium in the 1980s.
New Jersey voters said no to a publicly funded stadium in 1985 but that didn't stop George from playing New Jersey versus New York for his affection. By 2001, New York City Mayor Rudy Giuliani was carrying water for George and for the Mets Fred Wilpon in Queens.
New stadiums mean fresh revenue streams. Teams use new ballparks as an excuse to raise ticket prices and create high-priced club seats along with more luxury boxes. Wider concourses would allow more people to stand on concession lines and spend more money for beer, hot dogs, yearbooks and whatever else teams sell. It all brings in more revenue.
"There is a good chance that we will be able to work things out with the Mets and the Yankees," said the mayor, who has been a Yankee fan for life, in front of Yankee Stadium on opening day. "We are talking to them on a consistent basis and I have been in involved in some of the [talks]. I think there is a good chance we can work that out.
"The reality is, as I have said many times, both of them need new ballparks in order to be competitive. Maybe not this very year, but in order to be competitive over the next 10, 15, 20 years with their major competitors. Boston is getting a new ballpark; Baltimore has a new ballpark.
"Atlanta has a brand new ballpark. That's all going to enhance their revenues.
And if the Yankees and the Mets want to remain competitive with Baltimore, Boston or Atlanta, then that's something we just have to do."
Steinbrenner's Yankees always had money for free agents and Steinbrenner would pay for Reggie, Winfield, Dave Collins, Kenny Rogers and Alex Rodriguez. Whatever it took, the Yankees and Steinbrenner had the cash on hand which is a far different cry from 1962 and the Pipers.
In the game of sports business, George Steinbrenner, who was twice suspended from baseball, who fired people at his whims yet always took care of people in need, built a global brand in a sport that is played in North America, the Caribbean, the Pacific Rim, parts of South America and Australia. The New York Yankees compete with Manchester United (a former Yankees strategic partner) for world name recognition. Was it a master blueprint that made the Yankees and Steinbrenner brand names or was it just being in the right place at the right time?
There are a lot of what ifs. What would have happened if the Pipers continued to play? What if Stouffer said yes? What if Martin Davis and Gulf and Western didn't come up with the $500 million offer in 1988? Sometimes it is far better to be lucky than good.
Last Updated ( Wednesday, 14 July 2010 08:12 )