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20 October 2006

Killion pleads for Magowan to cash in & Warriors + Oracle = deal

The type of column written by Ann Killion in today's Merc was bound to happen sooner or later. Colleague Mark Purdy had been pushing in this general direction. Both are now arguing that the Giants should relinquish territorial rights for the health of the franchise, or else they won't get anything if/when the A's move to Fremont and effectively encroach on the South Bay.

Killion asked Wolff about territorial rights while both were in Detroit for the ALCS last week:

Wolff completely dismissed any lingering idea of moving the A's to San Jose -- a step that would require a deal with the Giants over territorial rights.

``That's over,'' Wolff said. ``Dead. Over. I'm not going to waste one more ounce of energy on it.''

And that statement is important, whether you believe Wolff or not. The A's have been in full-on sales mode regarding the new ballpark/village concept for some time now. At this point details are very important, especially the site. While San Jose may be more desirable for some in the Valley, the obstacles are enormous and it's possible that the financing plan being applied to the Fremont site can't work in San Jose without major modifications and delays.

Supposedly, the rub is that the Giants in the post-Bonds era could be in such dire financial straits that they may be looking for a bailout of sorts. Don't believe it. While Bay Area fans can argue for days about Brian Sabean's competency as Giants GM, the Giants will get enough players or stars to bring out a minimum of interested fans. A $75-85 million payroll allows for this - see Seattle for proof. That doesn't mean the Giants will be good, but they will at least have one overpriced slugger and probably one overpaid arm. Who knows, they may get rid of Sabean and overpay for a GM.

The idea that the Giants are going to be hemorrhaging money for the next decade is ludicrous. Let's remember some key facts about their operations:
  • They may have $20 million in debt service every year, but they can write off about $5-7 million of that thanks to MLB's stadium operations expenses deduction.
  • They're past the sixth year of their tenancy at China Basin, and officials have admitted that they can pull in 34,000 per game and still remain financially healthy. Below that, and they'd have to slash payroll a bit. Use this as a guide: each drop of 1,000 per game equates to $2.5 million in revenue. Even if they were to keep the entire amount (which they don't thanks to revenue sharing) that amount wouldn't even pay for a marginal player. If the G-men were to average less than 25,000 per game, then I'd be concerned. I don't see this happening.
  • Thanks to vested interests in both KTVU and KNBR, the Giants can hide ad revenue and local broadcast rights fees. In 2003, a season after the Giants went to the World Series, they reported non-gate revenue of $78 million. The A's reported $75 million. Who's kidding whom?
  • If it really does become dire straits for the Giants, they can do what the A's have been doing for years: suck on the teat of revenue sharing, if only temporarily.
Besides, even if the two teams actually got to the point of discussing the actual value of territorial rights, where would they begin? An immediate one-time cash infusion won't help since the Giants apparently can't pay off the debt early. Why would A's ownership want to buy the proverbial cow (territorial rights) if they can get the milk for free? Fremont creates a very compelling revenue trifecta for the A's:
  • They could secure better bond interest rates because revenue streams to secure the bonds would not be tied solely to stadium revenue (the Giants struggled with this initially). Entitlements would pick up a majority if not all of the cost.
  • Through some clever organizational setup (hiding revenue), the A's could still have the aforementioned stadium expenses deduction even though their stadium-related debt load would be near zero.
  • Not having to pay the Giants while having similar access to Valley companies equates to increased dividends for the owners - ahem - or increased payroll.
Both the A's and Giants would have interesting advantages in the Bay Area market if everything stayed status quo. The Giants would have the vertical integration that comes with media ownership stakes, while the A's would have little debt on a brand new stadium. Without delving too deeply into the numbers, I'd say that's a Wash.
The Warriors and the Coliseum JPA have finally hooked a big one for their naming rights deal: Redwood Shores database giant Oracle. Two interesting things about the deal: 1) It's only 10 years long, and 2) the venue will be simply called "The Oracle" with no apparent reference to Oakland. 10 years is a virtual blink of the eye in naming rights terms, and it doesn't cover the remaining balance on the expected naming rights fee contribution to the arena renovation's debt service. Perhaps there's an option that could be exercised by Oracle. Regarding the name, I suppose it's "fitting" that if the team doesn't have Oakland in the name, the venue doesn't have to either.

41 comments:

Bleacher Dave said...

Good stuff.

1) Doesn't KNBR own 1.5% of the Giants, not the other way around? Why would the Giants give Cumulus a discount for the broadcast rights? I believe the just re-upped recently for a pretty penny, and KNBR was pissed because MLB announced the deal with XM shortly thereafter.

2) Why wouldn't the A's have stadium construction debt?

3) I heard Robert Rowell say it's not "The Oracle", just "Oracle."

Georob said...

Rhamesis, why do you do this? This will again fire up those who insist that it's going to be the "San Jose A's". It's not good for their health having their emotions go up and down like the hydraulics of a '64 Impala at the corner of King and Story.

(If that doesn't get a response from Tony, I don't know what will:))

In all seriousness though, I'm convinced that it's not about Magowan keeping the A's out of Santa Clara County. Instead, the Giants want the A's OUT OF THE BAY AREA, period.

Problem is that there's really nowhere else for the A's to go that has a decent corporate base. And contraction just puts MLB one step closer to losing its anti-trust exemption.

So, Selig instead tells Wolff to stay in his current territory. Except someone forgot to tell him how far south that territory went.

Poor Bud. He should have stayed in Milwaukee.....
.....All together now:
"1,2,3,4,5,6,7,8. Schlemiel, schlimazel, hasenpfeffer incorporated!"

Marine Layer said...

BD -

1. It's not about the Giants giving KNBR/Cumulus a discount. It's about cooking the books so that the ad revenue and rights fees aren't so high. Thus, the hoarding of revenue on both sides.

2. They would absolutely have debt, but with entitlements fees acting as security, little team revenue would be required to pay it off. It's almost liability free given the Bay Area housing market.

3. I heard that too this afternoon on the Fitz-Brooks show, but I'm going by the press release instead.

anthony dominguez said...

You're just to funny Rob...how and the heck did you know about King & Story and lowriders? You've been doing your homework on SJ...PROUD OF YA! I know it's easy for all of us here to dismiss everything Purdy and Killion say about the A's future, Giants T Rights, and such. However, there's one thing they have over all of us (R.M. included, I think)...THEY'VE ACTUALLY TALKED TO LEW WOLFF PRIVATELY ON MANY OCCASIONS! Perhaps it's just my wishful thinking of the A's relocating to SJ proper, but I just don't feel these two columnists would print "nonsense" without the approval of THE MAN HIMSELF! And let us never forget that Lew Wolff's a part (10%) owner of the A's; not THE owner! Anyhow Rhamesis, isn't the Giants window for writing off their construction costs against revenue sharing over in 2010?

murf said...

rob said:
"Instead, the Giants want the A's OUT OF THE BAY AREA, period."

I think most of us understand this. Magowan (and Selig, mind you) knew that if Wolff couldn't work a deal in Oakland, he'd want to move to San Jose. By refusing negotiations for Santa Clara County, and knowing that Oakland was a logistical long-shot, Magowan played his hand and hoped Lew would fold and leave town.

This was before the Fremont ace-up-Wolff's sleeve was pulled. Even if Magowan now wanted to negotiate, Lew's got no reason too.

That's why I can't really compute the Oak-SJ bickering that still exists. It's Fremont, or, we can cross out fingers for Sac, or gone.

Anonymous said...

Off Topic:

Has former A's radio station KFRC disappeared off the AM and FM dial?

Earthshaker said...

ML, now that Lew Wolff has emphatically stated that the A's will not move to San Jose, do you think he will now try to get the proposed ballpark site for the Earthquakes soccer stadium he wants to build?

bartleby said...

The observation that Macgowan would like the A's to leave the Bay Area is so blindingly obvious and irrelevant it does not warrant repeating as often as it has been. EVERY professional sports team, in every sport, would love the luxury of not having to compete with other teams. The Yankees would love the Mets to leave New York. The Cubs would like the White Sox to leave Chicago. For that matter, the Avalanche would love the Nuggets to leave Denver. It's not happening. So what?

Macgowan may: (A) have refused to negotiate T-rights on a gamble that Bay Area politics would frustrate the A's efforts to get a stadium anywhere in the Bay Area and they would then leave (as Murf has suggested). High risk gamble. Or, (B) he may believe that Fremont is enough of a step down from San Jose that he's still better off with the A's there than downtown SJ proper, even with a payoff.

Who knows?

One thing is for sure: Macgowan would have to be monumentally stupid (and I don't think he is) not to have foreseen the possibility of an A's stadium in Fremont. If you're going to make a major bet for your business on a "territorial rights" strategy, you're going to sit down and think, hmmm, where could the competition build a stadium in their territory if the T-rights hold up? It's not like there's no precedent for a suburban stadium. Hell, years ago when T-rights first came under discussion, I said to my buddies: "The A's ought to just build in Union City right next to the Dumbarton Bridge and validate tolls for people coming through from the peninsula."

Wolff has a good business strategy, but it's not rocket science. Selig understands how close Fremont is to San Jose as well. And the idea of contraction is a joke. MLB gets hundreds of millions in rights fees for every new team. They would have to buy out existing owners to the tune of hundreds of millions to contract. There will be expansion again in MLB long before there is contraction. In fact, there will NEVER be contraction; that's just an empty threat for trying to scare the player's union.

Georob said...

The answer to the KFRC question is yes and mostly yes. The old AM 610 is now KEAR (Family radio) which happened when CBS/Infinity traded the AM station for KEAR's FM station at 106.9 which is FM talker KIFR Free FM.

99.7 still has the call letters KFRC but is now called "Movin 99.7", playing 80's and 90's R&B stuff. It's actually quite good, but the oldies are now gone completely and I'm guessing that KFRC is never mentioned on air except at hourly station ID breaks.

bartleby said...

ML, one issue I haven't seen discussed yet is the impact New Yankee Stadium may be having on the A's situation. As I understand, Steinbrenner will be able to deduct new stadium costs for purpose of the luxury tax calculation. Presumably, this will dramatically decrease revenue sharing in future years, since the Yankees pay most of the luxury tax.

How much do you think this affects the A's strategy? For example, one might think the A's would bide their time, get close to a deal in Fremont, then use this as leverage to get T-rights in Santa Clara County. On the other hand, if they're about the take a big hit to revenue due to decreased revenue sharing, this might put a premium on getting a deal done NOW, even if a better deal for the long haul might be out there.

What are your thoughts?

Anonymous said...

What about the Earthquakes new stadium in Fremont surrounded by the village/development...and the A's Stadium in Downtown San Jose which will be closer to transit, etc.

tarmas said...

"So your telling me there's a chance" Killon's powers of deduction are on par with Jim Carrey in dunb and dumber.

anthony dominguez said...

What's more depressing than the A's not coming to Downtown San Jose? The prospect of a soccer stadium at the Diridon South site! Could you imagine the horror Murf...16 games a year (vs. 81 home games for MLB), with an average attendance of only 10k, for a third tier sport on par with single A baseball? THANKFULLY, IT WILL NEVER HAPPEN! And don't give us this crap Earthshaker about "friendly's" and concerts making up the rest of the MLS off-season. Hey Rhamesis, how much longer before MLS folds?

bartleby said...

How about a new stadium for the Raiders on that Diridon site? (Or at the Spartan Stadium site, for that matter). :-)

Marine Layer said...

The mayoral race has to shake out first before any public statements can be made, but I've heard there are people working behind the scenes to get a deal done. SVS+E is looking at the land for their concert hall, and downtown soccer advocates know Diridon South is the only place a SSS will fit. I wouldn't be surprised to see a deal in which both end up on the land, with SVS+E operating both venues (and the arena) and the A's-Quakes giving SVS+E a cut. Maybe an ownership stake? The remaining questions would be related to parking and NIMBY matters.

bartleby - the Yanks will no doubt benefit from the deduction, but they'll still be paying debt service for the stadium. Besides, so-called small market teams like the A's can take advantage of this as well - as I explained in the "trifecta" possibility. The effect of the revenue drop if the Yanks' deduction goes through might be $1-2 million per year per team. It means something on an aggregate level, but not per team. CBA negotiations are about to wrap up. I'm curious to see what the new revenue pool system looks like.

anon - if the A's went to SJ and the Quakes to Fremont, the A's and Giants would have to deal with the TR situation. Again, I don't see either side budging.

anthony dominguez said...

What's more depressing than the prospects of a soccer stadium at Diridon South? Rhamesis giving credence to the idea! Cmon R.M., you the man and all, but I just don't see the city of SJ spending millions to acquire the Diridon South plot for a 22k seat, 16 MINOR league games a year, money losing Sucker specific stadium! Look, if soccer proponents want to push a SSS at the Fairgrounds, that's fine. But Diridon South, at $10 million per acre? Again, I just don't see it happening. If not a Ballpark, a concert hall might work, as well as high-end retail, a cineplex, and high-density housing. HERE'S TO A BALLPARK AT PAC COMMONS AND A "SANTANA ROW" ON STERIODS AT DIRIDON SOUTH!!

Anonymous said...

Georob, thanks for the update on KFRC. I wonder if the A's may switch to KEAR .

anthony dominguez said...

Soccer fans, and proponents of a SSS at Diridon South, read and weap!:

http://community.foxsports.com/blogs/
jamietrecker/2006/09/27/mls_systematically_
lies_about_its_attendance

Again R.M., unless the city of SJ wants to throw hard-earned taxpayer money into the fire, I just don't see soccer happening at Diridon South (thankfully!).

Anonymous said...

>>If the G-men were to average less than 25,000 per game, then I'd be concerned. I don't see this happening.<<

Many of the "charter" season ticket holders had 7 years of price protection, which ran out this season. Some were hit with 50% price increases on already pricey tickets. Much grumbling in G-land these days.

If it weren't for the ASG in 2007, they'd be awash in non-renewals; they manage to hold that off for a year. Still, those charter rights can be had (in many cases) for less than they sold for originally; it'll only get worse over there.

Bottom line: sub 30K a game average may not be far away. Sinking to 25K would take some bad teams as well, but is not out of the question.

anthony dominguez said...

Great post Anon 7:00 PM!
Who knows, maybe Ann Killion really does know what she's talking about when it comes to the Giants financial situation.

Marine Layer said...

If the Giants don't re-sign Bonds they'll have $30-50 million free for payroll, which is less than $40 million for 2007. Many of their kids are under control, so to keep the fanbase interested they need to sign 2 or 3 major free agents. The renewal situation makes it all the more important. They'll overpay for someone. They won't do Marlins-style fire sale. Two or three more seasons of mediocre play with no stars and I'd be worried.

bartleby66 said...

I'm with Tony on soccer downtown. Putting an MLB team downtown makes the statement "We are a major league city." Devoting your last stadium-worthy land parcel downtown to MLS makes the statement "We are a second-tier city and expect to always be a second-tier city." Frankly, I'd rather see them put a nice minor-league baseball stadium there, if it came to that.

Bleacher Dave said...

I was talking to a Giants charter holder a couple of days ago. He was hit with a 70% increase, and they want you to re-up for two seasons to score ASG tix.

Anonymous said...

Well said, bartleby66, well said. I agree with everything you said at 10:52. The day SJ builds a soccer stadium on that prime piece of real estate is the day it gives up being taken seriously forever.

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

Wow, what did he say?

Marine Layer said...

It was a personal attack against one of the posters. That won't be tolerated.

Kevin said...

It really is pretty amazing what the Giants are asking their STH to put up with just to get rights to the ASG. I know of a couple of STH who are renewing just to get the rights. If it we up to me, I'd say "forget it" and just take my chances on Craigslist. Gotta give Macgowan credit though for lobbying MLB to give them the ASG. He knew many of his original STH were up for renewal this year. 2007 was suppose to be the American League's turn to host the game.

One thing is certain, this will be a huge off season for the Giants. It will determine the success of the Giants for the next 5-7 years. Failure to sign the right FAs will saddle them with a high payroll and a mediocre team. With the mortgage they have on ATT, it's imperative that they keep their attendance up. Macgowan has used up all of his bullets. Bond, a new ballpark, and now the ASG. After this year, it will all fall back on how the team performs on the field.

Earthshaker said...

Hey Anthony Dominguez, why all the hate on soccer? There isn't a single soccer fan that doesn't understand that a baseball stadium would be a much more economically lucrative venture for San Jose, though no one ever explained how it would be paid for. However, the A's have stated they would fund the entire construction of a soccer stadium if they were given the land. With the climate we have in San Jose it is a crime that there is not a modern multi-use outdoor stadium that could be used for soccer, as well as other activities. The Home Depot Center near LA has been very successful, so, who is to say a similar facility in San Jose would not be.
P.S. If you want to talk about cooking attendance, look into the history of the Florida Marlins.

Anonymous said...

hey Earthshaker, the home depot center is in Carson, not downtown la! apples and oranges pal. a soccer stadium belongs at the fairgrounds not dtsj.

Anonymous said...

Exactly. Having a soccer stadium as your prime downtown landmark just screams "third-tier city."

Earthshaker said...

Yes, and having no stadium screams podunk backwater.

When I went to the US-Japan game at Pac Bell (or whatever they call it these days) people were there from all over the country, and thousands flew in from Japan. You can't buy that type of attention for a city. If San Jose had a proper stadium the game would have been played here. Your baseball or nothing attitude for downtown just cements San Jose's image as the "third tier" city of the bay area. Enjoy the drive to Fremont :)

Anonymous said...

I disagree. Not having a soccer stdium there does nothing to negatively affect SJ's image. However building one only calls attention to the fact SJ has no teams in the top sports (unfortunately hockey alone no longer cuts it).

However, you do raise a good point. Internationally, a soccer stadium doesn't have the same image problems. Quite the opposite in fact. Being in Silicon Valley, SJ should cultivate an international image. So there is a benefit. But domestically it just cements SJ as having a collection of second-rate sports teams. Perhaps I put too much emphasis on that aspect.

Marine Layer said...

The Quakes stadium could very well be in Santa Clara, not in San Jose. Let's see how it shakes out.

Earthshaker said...

Normally, "something" is better than "nothing". Perhaps San Jose should see a soccer stadium as something positive to build on, rather than only pursuing the current pie in the sky dreams of MLB baseball and NBA basketball.

I don't want to get into a long discussion on the problems the Earthquakes had in San Jose, but in a nutshell what they were lacking was ownership committed to making the team a success and control of their own venue. Lew Wolff and the A's are set to rectify those deficiencies. Lew and the A's have made a pretty generous proposal regarding construction of a soccer stadium, what remains to be seen is how the city responds. If San Jose can't work with Lew and make this golden opportunity a reality then I wouldn't hold out any hopes for much more costlier endeavours.

Regarding soccer's second class status. Certainly that is where the sport stands now, but, the league is only ten years old, give it some time. They have made great strides in the last few years regarding stadium construction, TV contracts, and major sponsorships. The league is not that far away from achieving profitability.

Plus, the world is a shrinking place,(think globalization). Silicon Valley is full of major international corporations.Whether you like it or not, soccer is "the world's game". Popularity will only increase in this country.

Admittedley, a downtown soccer stadium can't match the prestige a baseball park would provide, but, that is no reason to not build one. In my opinion a soccer stadium could become a landmark for the city.

bartleby said...

I don't think the soccer-skeptics amongst us are saying SJ shouldn't build a soccer stadium, just that it shouldn't be downtown. At the fairgrounds, great. If they could build a replacement for Spartan Stadium that served both SJ State and MLS, even better. But the benefits of soccer just don't justify use of a prime downtown site and having MLS define the city.

MLS is kind of where Arena Football was ten years ago. Arena Football has also had great growth, but it's still pretty far from being what anyone would consider a major-league sport. It great that SJ gets more use out of HP Pavilion by having the Sabercats there, but that alone would not have justified building it.

I'm also doubtful that the international popularity of soccer makes much difference. Those countries that love soccer have big-time soccer leagues of their own to follow, they're not going to waste time watching our watered-down version of the sport.

Anonymous said...

Exactly right bartleby. Go ahead and build it somewhere else (not on the city's dime however) but not on prime downtown real estate. I'd be perfectly happy to see it built in either of the places you mentioned.

"Give it time" - you know, some of us have been hearing this exact same contention from soccer fans for almost 40 years now. Soccer is always just around the corner from becoming a big sport in this country. But it hasn't and it won't. I can't elucidate the reasons why (other than for me personally), but it just isn't a popular sport in this country.

Earthshaker said...

A soccer stadium at SJSU, the fairgrounds, or even Santa Clara is fine with me. As is downtown.

However, if the Quakes do end up in Santa Clara, and we have the A's next door in Fremont, San Jose will be 'defined' as the city that can't attract sports teams, nor keep the ones they had. San Jose will continue to be just the bedroom community for the Silicon Valley. People live there, but, go and spend their entertainment dollars elsewhere. Wow, that's some image we need to preserve.

You don't like MLS (or NHL) to define the city. So what? It looks like it will never be defined by MLB, but, if in the future an NBA or the Raiders was to relocate here wouldn't they then define the city?

anthony dominguez said...

This post should end this debate regarding soccer in the South Bay. I have a co-worker who played collegiate soccer at Gonzaga. He was also glued to the tube during the recent World Cup. And guess what...HE CAN'T STAND MLS!! He never attended Clash/Earthquakes games and probably never will. MLS is an inferior product akin to pro-lacrose and roller derby...is it any wonder the "best" of MLS want to play in Europe. ENOUGH SAID ABOUT SOCCER!!

Earthshaker said...

AD,

Your college soccer playing co-worker hates MLS, but, has never attended a game. What is he basing his opinion on?
Is MLS on a par with the best leagues in Europe? Not yet. But to dismiss the sport in this country because the MLS is not as competitive as the EPL makes as much sense as dismissing college football because it is not at the same level as the NFL.
Again, your arguments hold no water :)

anthony dominguez said...

Taking a break from the Chi Bears waxing!
This should FINALLY end this "soccer" war of words. Build a joint soccer/SJSU stadium at the SE corner of Alma Ave. and Monerey Rd. near the current Spartan Stadium (north of the Bold Knight restaurant). This land is already owned by San Jose's DiNapoli Family, who as you know are part owners of the A's (and presumably future EQuakes). The stadium could be a state of the art, compact 22-25k seat stadium for MLS and the SJSU Spartans. It would host not only MLS but NCAA football, bowl games, Friendly's, concerts, etc. The Alma/Monterey area is also near DSJ and marks the southern end of the resurgent Martha Gardens neighborhood; with condos, lofts, coffee shops/restaurants in the making. Peace out Earthshaker!