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.