The Plight of the Oakland Athletics Organization

 

I am an Oakland Athletics fan.   I was on the A’s when I was in little league and I have watched them all my life.   Yet despite my fond memories of the A’s teams of yesteryear, I feel continuously let down as a fan.   It is not that we haven’t “won the last game of the year” (see: Moneyball).  It is not the inconsistent success we’ve had over the last decade-and-a-half.  It isn’t really even the minuscule payroll we constantly have to manage, because that is only a by-product of the true issue.   The reason I feel neglected is the sad state of the Oakland Athletics’ organization.

As a millennial, the immense divide between large-market, large-payroll teams versus small-market, small-payroll teams is nothing new.  That being said, it is a rather new phenomena in the 147-year-old organization of the MLB.  Beginning in the 1980s, a divide began to appear between these two types of teams.   It became clear that in the pursuit of free agents in a market with no limit for contracts, teams who could pay the big bucks would get the big players.  It was soon learned that everyone has a price, and in a market with no limits on said price, players were getting theirs, and loyalty to smaller teams dwindled.   Payroll spending of the top seven revenue teams compared to the bottom seven went from 2-to-1 in the 80’s to 3.5-to-1 in the 90’s, according to CBS.   Multiply that by the millions of dollars flying around, and that’s a big jump.  It showed in the subsequent seasons as well.  From 1995 to 1999, none of the 14 teams in the bottom half of payroll spending won even one playoff game, and every World Series was won by a team with a top seven payroll (hint: Yankees).

In order to combat this trend, and make smaller financial teams more competitive, Major League Baseball put in place a “Revenue Sharing Plan” within the Collective Bargaining Agreement in 2002.   This plan resulted in the following changes:

  • Every team paid the MLB 34% of their “local revenue”, or their total revenue minus their “central revenue”, which is money from national broadcasting deals (TV, internet, radio) and deals with MLB as a whole. Basically, local revenue is all the money made by the organization through their own means, separate from the league as a whole.
  • This money is then put into a pool and split evenly amongst all of the teams in the league. Therefore, teams with huge revenues would lose money, and teams with tiny revenues would make money.  This money was distributed with the intent of being spent on improvements to the franchise, i.e. stadiums, training facilities, or payroll.

The plan has worked, reducing some of the drastic differences between revenues and payrolls of small teams and large teams.  Nevertheless several issues exist.  The first is that the design of where the money got spent was never enforced by the MLB.  In essence, some small market teams would take this revenue sharing money and pocket it as net profit, including the Oakland A’s.  The A’s payroll did not go up, the facilities have not improved, and they have played in the same stadium since 1966.

And the worst is yet to come.   From 2013-2016 the top 15 teams, judged by size of market, will be disqualified.  In 2013, disqualified clubs will forfeit 25% of the net proceeds they otherwise would have received.  In 2014, it jumps to 50%, and so on until 2016 when the top 15 teams will forfeit 100% of the net profits from revenue sharing.  Major League Baseball has strangely decided that the Oakland A’s should be one of those teams, most likely because they’ve grouped the Bay Area into one market.  However, the revenue sharing plan is set up so that if the A’s stay in the Coliseum, they will not be disqualified from the revenue sharing plan, and their stream of of money will continue.  Therefore, as long as the A’s are in “stadium limbo”, they will continue to receive their revenue sharing checks.

The organization, and its fans, are now paying the price for it.  The owners have a disincentive to build a new stadium because of this loophole.  The owners can either stay in the Coliseum, and maintain their slow drudge towards non-competitiveness and keep their stream of revenue sharing checks, or invest in a new stadium, forfeit the revenue sharing checks, lose their insane profit margins for a little while, and then see their team’s value go up, brand power increase, and then maybe, just maybe, they’ll start investing in the team and raising the payroll.  This is the conundrum.  However, the owners, John Fisher and Lew Wolff, have had a frustrating off and on search for a new stadium site, as well as having no intention of selling.  Clearly their motives are maintaining the A’s as an easy source of income for them, with pretty little investment necessary.

I have an admission to make and it pains me to do so.  In the Bay Area, there is no shortage of Giants fans.  And as much as I hate 9 months of Halloween colors, and talk about how cool and funky and tight-knit and good the Giants are, I have to give them one piece of praise.  They run a great organization.  They have done everything right with their organization.  They moved into a beautiful stadium at a great time, they have developed a brand that is one of the most powerful in baseball, and they make boatloads of money.   It shows when the team value goes from $1 billion in 2014 to $2 billion dollars in 2015 to $2.25 billion in 2016.   Value growth that high in that short of a time period is unbelievable.

If there is any team in the MLB whom I would like the A’s organization to emulate when it comes to running the organization, it’s the Giants.  I truly believe that the A’s can do it, and I believe the first step is a new stadium.   The A’s are 28th in overall team value, yet are 11th in operating income.  They brought in a total revenue of $209 million last year and pocketed $32.7 million.  That is one of the higher ratios of revenue to operating profit in the MLB.  This is caused by the small payroll, low stadium costs, and running a decently efficient system otherwise.  The revenue sharing checks don’t hurt either. The issue with building a new stadium is that the short-term profitability gets forfeited for stadium costs and upkeep, but the long-term benefits are numerous.

First, the new stadium would boost the valuation of the franchise which is important for two reasons: it makes the owners’ net worth go up, as well as the fact that it makes them that much more money when they eventually sell; and the power of the brand increases.  If the organization is worth something, the product it delivers carries some of that worth.  Cheap companies make cheap products, and the same goes for baseball teams.  Compare that to the cream of the crop like the Yankees.   Even during bad years on the field, the Yankees do not struggle to make money, not even in the slightest.  The reason I’m confident the new stadium will boost the valuation is by looking at the percentage impact the Coliseum has on the club’s valuation versus that of AT&T Park and the Giants.  AT&T Park makes up almost 25% of the valuation of the franchise, according to Forbes, whereas the Coliseum accounts for just 13% of the Athletics’ valuation. A new stadium will increase that portion, as well as boost the same percentage for the franchise’s brand.  By having a new facility the A’s can reestablish themselves a blue-chip MLB franchise, like they were in the 70s and 80s, and their brand will grow with their reputation.

The second benefit of a new stadium is that attendance might be less affected by the quality of the team.  If the team is really bad attendance will be poor.   But when the team is doing just OK, hovering around .500, that’s when having a beautiful new stadium boosts the franchise’s attendance numbers.   Those seasons are like swing states in the election.  Those are the seasons where you need to really fight to get good crowds by offering an exceptional product outside of the game itself.  That’s why the Giants, Yankees, Dodgers, Red Sox, Cubs, etc. will still make money in decent seasons because the experience they offer is first-class.

The other way that a new stadium will attract fans in the Bay Area is by distancing the organization from the reputation of Oakland.  Young families that live in the Bay Area don’t go to Oakland.  So why would they go there for a baseball game? Especially when San Francisco is beautiful and has a beautiful stadium.  By building a new, fresh stadium in an up-and-coming area of Oakland, the franchise can separate itself from the violent and industrial images that are often associated with Oakland.  To put it in another context, Bay Area rappers come from Oakland, not San Francisco.   The attraction of young families, a very profitable market segment, should be very important to the franchise, and a new stadium will deliver that.

Finally, if the ownership commits to a new stadium, I believe that they might just be committed to financially supporting His Holiness, Billy Beane, in the pursuit of winning the last game of the year.   If they commit to spending the money, taking the reduced profit for the duration, and come out on the other side making even more money than they did before, the pressure from fans and the sports world to invest in players will be too much, and they’ll do it.  I don’t see them doing it on their own, because if they had a true interest in the quality of the team, they wouldn’t be pocketing the revenue sharing checks, and would be using them for their designed purpose.  And if despite all that, they still don’t increase the payroll, then they will have confirmed what most believe: That they are the Worst. Owners. Ever.

Luckily, the pursuit of a new stadium is progressing, as both A’s majority owner John Fisher and Oakland Mayor Libby Schaaf toured the Port of Oakland Howard Terminal near downtown Oakland with the intent of envisioning a new stadium, according to the San Francisco Chronicle.  I like this location because it is waterfront property, close to a BART train station, and is close to Jack London Square, which is a nice part of Oakland.  The waterfront nature of the land comes with lots of bureaucratic red tape, but the city is currently finding a way around that.  The process has been very slow thus far, but I’m confident that this could be the new home for the Oakland Athletics.

The point of this article was not to say that a new stadium would solve all of the franchise’s problems, as I still believe the problems start and stop with the ownership and the decisions they choose to make.   This article was more to outline the distress I feel as a fan, and to provide an example about how twisted the sports world can be; because after all it is a business, and cash rules everything around it (see: Wu-Tang Clan).

So if John Fisher and/or Lew Wolff ever end up reading this, heed my call.   The fans still have faith in you, the organization, Billy Beane, and the team.   The trust in the green and yellow is part of the reason I love being an A’s fan.  But the time has come for the Oakland faithful to be rewarded with a franchise that they can be unashamedly proud of, and it starts with an investment from those who can make it happen: the owners.

Posted by Alby

Ride or die Oakland Athletics fan. I enjoy sports talk of any kind, but I find that sports business often gets overlooked. Additionally, I am huge movie guy; am from California/New York, but think Montana is the best state in the Union; and Classic Rock is the soundtrack to everything.

Website: http://Check%20Down%20Sports