When John Crotty and Peter Lyons learned the National Football League’s New York Jets were being put up for sale this summer, they asked each other a seemingly naive question: why can’t Jets fans like us buy the team ourselves?
The 30-year-old boyhood friends from New York decided to find out. They created a website, BuyTheJets.com, and launched a bid. “Upon receiving significant expressions from you, the fans, we will assemble an ownership vehicle,” they wrote in their site manifesto, which included a guarantee that the team would never leave the New York area. In just two months, 11,000 people signed up and made tentative financial commitments totaling more than $20 million.
Despite the overwhelming response, however, the NFL would not even send BuyTheJets a prospectus. The league prohibits public ownership, with the one grandfathered exception of the Green Bay Packers.
Nevertheless, the idea clearly touched a nerve with a public wanting both to dream about owning a team and to send a message that fans deserve a greater voice in pro sports. The NFL’s decision to summarily disregard the BuyTheJets bid was fittingly emblematic of the unsportsmanlike conduct with which the industry too often treats its passionate and loyal supporters.
In addition to recurring work stoppages, ticket prices have risen more than three times the rate of inflation over the last decade. A Major League Baseball seat cost 10% more on average this past season than it did the year before. Including the $2 sodas and $3 hot dogs, it runs a family of four $267 to attend an NBA game, up 31 percent from just four years ago, according to the Team Marketing Report.
Worse, taxpayers are routinely forced to ante up even more dough to satisfy “if you don’t build it, I will leave” owner demands for new facilities. In 1999 and 2000, pro teams will be playing in new homes costing the public $9 billion. In Seattle, the Mariners’ mediocre record playing in new Safeco Field pales in comparison to its performance paying for it. After a stadium ballot measure was rejected, the Mariners made a deal with the state legislature that they would pick up only $45 million of the $417 million price tag on the facility but would also pay for overruns. Safeco went $100 million over budget, and now the Mariners are refusing to pay. The team, principally owned by Nintendo of America, says it needs the public to cover the extra cost in order for it to compete financially.
Owners complain about the financial hardship involved in running pro teams. Yet, peer behind the doom and gloom talk, and it becomes clear that teams have never been more valuable. Franchise prices—both existing and expansion—continue to go up. The NFL awarded its newest expansion team to Houston this fall for $700 million, up from the $140 million entry price of just five years ago. Last month, the Cleveland Indians were sold for a record $320 million by Richard Jacobs who bought the team in 1986 for $45 million. As Yogi Berra might say, buying a sports team is such a bad deal, everyone wants one.
The pro sports business does provide Americans with a unique, wildly popular and state-of-the-art product. That’s why Crotty and Lyons have been able to sign up thousands of people, and why there’s a line of billionaires ahead of them. That success, however, doesn’t mean it should be able to play without any refereeing.
The $10 billion industry is run by almost completely unregulated monopolies. Elected officials seem to confuse governmental oversight with the view from their front row seats. In addition, pro sports’ failings don’t get the coverage they deserve in the press. The national sports media are frequently “league partners” or even franchise owners (Fox and TimeWarner are good examples), rendering their journalism on the subject less than objective. The local press does a good job covering the games but doesn’t follow the larger off-the-field issues as thoroughly. And sports talk radio for the most part prefers to stir up public discontent rather than harness it constructively. In short, no one is playing defense for the public.
Twenty years ago, Ralph Nader tried to form a sports consumer group to organize fan interest. He failed, but now he’s trying again. “It’s a strange thing. It isn’t anything like the car, food or drug industries. People can be angry and pay through the nose, but they’ll still root for their team,” he says. Nader is a perfect example—a boyhood New York Yankees fan who (believe it or not) has continued to root for the Bronx Bombers, albeit a little less rabidly—through the reign of George Steinbrenner.
Nader’s effort faces huge challenges. Organizing fans—with their parochial and often opposing interests—is about as easy as trying to get fans to agree on who’s better, Sosa or McGwire. Perspectives on revenue sharing and franchise relocation differ from one ballpark to the next. Growing cities desperate to have a team of their own want to make franchise movement easier; cities eager to hang on to prestige organizations obviously don’t.
Additionally, fans have never been willing to use their ultimate leverage over owners and players: their butts. Despite the public vitriol over the NBA lockout, hoop enthusiasts returned to their arena seats and TV rooms when play resumed. It is an interesting paradox: the public has never been so angry, but pro sports have never been so popular. For most fans, sports are an escape from real life; they’re not going to punish themselves to punish the industry.
Unfortunately, teams don’t always have the same loyalty to their fans. Sports franchises in the 1990s threaten and sometimes even leave communities that have been devoted to them for generations. Even worse, teams use this devotion to force local governments into lucrative subsidies for the development of new stadiums. Earlier in the century, most pro sports stadiums were entirely privately financed. In the ’60s and ’70s, a number of cities built dual-purpose facilities which they would then rent to baseball and football franchises. The cities themselves kept much of the revenue from concessions, parking and stadium advertising. In the ’90’s, that almost seems quaint.
Despite simmering concern that pro sports are taking advantage of the American public, the sports industry has managed to keep legislators away. The promise (or threat) of new (or lost) franchises adds juice to the industry’s lobbying efforts. And it doesn’t hurt that so many legislators are sports junkies. Major league baseball provided tickets to more than 200 legislators, staffers and their families to last year’s World Series at sold-out Yankee Stadium. You can bet that there will also be a healthy Washington presence in Atlanta for this year’s Super Bowl whether the Redskins are in it or not.
The industry’s high-powered lobby has long been augmented by the connections and financial contributions of its owners. In the last election cycle, according to the Center for Responsive Politics, Jerry Reinsdorf of the Chicago White Sox and Chicago Bulls made contributions totaling $51,250; Micky Arison of the Miami Heat donated $60,500; and Abe Pollin of the Washington Wizards and the MCI Center gave $85,000.
Representative of the strength of the pro sports business in general and Pollin in particular are the recent changes in the congressional gift ban regulations. Thanks in part to Pollin’s lobbying, House members are now allowed to receive gifts up to a value of $50. As any sports fan could tell you, $50 is not going to buy you a luxury box seat to an NBA game. That is unless you’re a congressman or senator at the MCI Center where club seats for Washington Capitals and Wizards games have been priced at . . . $48. It may be the only ticket in sports whose price will not outpace inflation.
Over on the other side of the Hill, the Senate Ethics Committee made an equally dubious ruling on luxury box pricing. The committee decided the valuation, for the purpose of the gift ban, would be “the price of the seat in closest proximity bearing a face value.” As luxury boxes (a.k.a. Sky Boxes) are often at the top of the building, the Senate is valuing them at the rate of the cheap “nosebleed” seats. Of course, nosebleed seats don’t have plush couches or televisions.
Congressmen are also known to get a little weak in the knees at the star power that sports lobbyists can summon when it suits their purposes. “I know it sounds a little crazy,” observes a Senate aide who has worked on sports-related issues, “but an autograph from Cal Ripken, and then a ‘thank you’ note from Roger Clemens can have a lot of impact.”
Given the emotional nature of pro sports and the big money involved, the best mechanism for addressing this complex situation would be a special commission convened by either congress or the president to undertake the first-ever comprehensive review of sports policy. The commission would comprise knowledgeable stakeholders—league management, owners, players’ unions, media, political leaders and fans—who would take a careful look at sports policy issues, including franchise movement, stadium construction, antitrust, ticket prices and community ownership. Sports policy is rarely discussed in a careful, in-depth way, but instead usually under the gun in an overheated atmosphere after a team has threatened to leave. Why would the industry participate? Perhaps to avert the possibility that local legislatures will take matters into their own hands, or that a spurned town or city will launch a lawsuit that will imperil the delicate legal balance that the leagues have created. A national commission could also be a vehicle for the NFL, NBA and NHL to argue for an expansion of their antitrust powers.
First, the sports industry needs to be weaned off the public construction subsidies it receives. Senator Arlen Specter has proposed a bill that would require the pro sports leagues to set aside 10 percent of their television revenues for a special stadium construction fund. Under Specter’s proposal, if the leagues do not create the stadium fund, they will lose the broadcasting antitrust exemption granted to them by congress in 1962. That exemption allows the teams to pool their media rights for sale. On the other hand, if the teams agree to the stadium fund, all of the pro sports leagues will be granted an exemption from federal regulation along the lines currently enjoyed by major league baseball—which continues to benefit from a 1922 Supreme Court ruling that the national pastime cannot be regulated by the federal government because it is not interstate commerce. This may actually be good for fans. If a league is exempt from federal regulation, then its commissioner can guide the movement of franchises with less concern about being sued under federal antitrust law. Pro baseball has not had a team move since 1972.
But television money may not be the right lever, given that contracts vary widely by sport. The NFL has established a special construction allowance for its teams, but much more of a private contribution is necessary. One shining model of this from another sport is San Francisco Giants’ owner Peter Magowan, who raised $319 million almost entirely through private sources for Pacific Bell Park, which opens this coming season. Magowan sold $130 million in commercial sponsorships and then leveraged those commitments into $170 million in loans. Pac-Bell Park is one of only three major pro facilities built in this decade entirely with private funds. Granted, this approach may not be feasible or suitable in all markets, but Magowan deserves enormous credit for accomplishing what more owners should be attempting.
The federal government needs to examine what it can do to reduce the spiraling corporate welfare bidding war between different communities over teams. No city or state likes being at the beck and call of sports owners. But, like a presidential candidate in favor of campaign finance reform, it is difficult to stop the competition unilaterally. Legislation authored by Senator Daniel P. Moynihan and Representative Barney Frank would eliminate a federal tax exemption that currently applies to financing for the construction of new sports facilities. This makes sense. Research has largely discredited the idea that stadiums are engines of economic development. Why, then, should federal taxpayers be helping cities pay for them? Existing law is a textbook example of concentrated benefits and distributive costs, and the Moynihan/Frank bill is one of the rare economic initiatives enthusiastically backed by both The Wall Street Journal and The Nation.
A more ambitious proposal, offered by Representative David Minge, would slap a federal excise tax on economic incentives that states and localities use to recruit and hold on to companies. The idea would discourage the bidding wars that erupt when cities fight over pro sports teams. Rep. Minge’s proposal to tax state and local economic development incentives goes more directly and comprehensively at the problem. But it would have significant ramifications beyond sports, and therefore is only a starting point for discussion.
Congress should reconsider the automatic 50 percent write off corporations receive on sports tickets. New arenas are built with the confidence that businesses will purchase—and deduct—expensive luxury seating. This has the perverse result that average citizens end up paying for the tax break that raises the prices of sporting events out of their reach.
When a major public investment is made in stadiums and arenas, it should be subject to approval by referendum. Though the result doesn’t necessarily dictate ultimate government policy, the process at least makes for a more open discussion of the issue. And, it was a referendum defeat that led Peter Magowan to try to finance the PacBell Park privately.
If the public is going to contribute to stadium construction, local governments should be getting something tangible—i.e. low price ticket set asides, a revenue royalty, or a stay-put guarantee. Beginning this season, the NBA has mandated that each team make 500 seats available before every game at $10/ticket. Last month, President Clinton visited Newark to highlight the owners of the New Jersey Nets who are donating team profits to local youth development groups. With top league officials in attendance, Clinton implored pro owners to: “Think about the obligations owed to the people in your city. Make investment in your community second only to your priorities to bring home the championship trophy.” But the role of sports teams in communities cannot be separated from construction financing, franchise movement and ticket prices. In addition, if President Clinton believes community-oriented ownership is the ideal, why doesn’t he support allowing the public to bid for their teams along the lines of BuyTheJets.com? Rep. Earl Blumenauer’s “Give Fans A Chance Act” would require leagues to allow community ownership, which is currently either explicitly prohibited or discouraged. Blumenauer isn’t saying every team should be publicly owned, only that other ownership models should be considered.
Government regulators also need to keep a closer eye on sports television, particularly as media companies like Fox, Time Warner, and Cablevision are increasingly doubling as team owners. If, for example, Cablevision purchases the New York Jets or Mets as has been rumored, the company would control three teams, two television networks and a cable system in the New York area. That content and distribution control is somewhat reminiscent of the type of vertical integration outlawed in the film business earlier in the century, which resulted in movie studios having to sell their theaters.
When it comes to looking after the interests of the public, it’s not just politicians who have dropped the ball. Despite the proliferation of channels and programming, television isn’t covering sports policy or consumer issues effectively. It’s possible that the relationship with the sports industry is just too symbiotic. Typical is ESPN’s current advertising campaign for “SportsCenter” (its nightly news program), which features pro athletes singing the praises of the show and its announcers. (It also may be that journalists have a different experience from their viewers and readers; they don’t, for example, pay for tickets, refreshments and parking.) The print media has done a better job than television, but it still falls far short. Though many newspapers now have a sports media reporter, few cover the sports business, law, and political beats with any regularity.
Sports talk radio, which has grown meteorically to 250 stations nationwide, would appear to be well suited for the role of consumer advocate. But too many hosts either provoke listeners irresponsibly, aren’t willing to be critical at all, or don’t have enough knowledge to have an impact.
A strong and responsible national fans consumer group could also have a positive role. If Ralph Nader can’t get his organization going, maybe Frank Stadulis will have more luck with his nascent USFANS. The former IBM executive is pursuing the same goal of organizing public discontent with a different approach. He’s trying to create a mini-Internet sports portal and even hopes to give fans a chance to play in the online equivalent of the Super Bowl, an IPO. It’s not your typical consumer advocacy model. But it’s not inconceivable that a dot com might be more appropriate than a dot org in an industry whose mantra is “show me the money.”
Professional sports deliver a uniquely successful product, and they should not be recklessly tampered with. But that very success—and the concomitant emotional connection of the public—underscores why addressing these issues is so important. However, there is not one magic solution to bring more balance, accountability, and fiscal sanity back to how the government deals with professional sports. One home run swing won’t win the game, which is why a special sports commission would be the right first step.
“A lot of people depend on us for their daily feelings,” observed George Steinbrenner in the midst of the Yankees’ World Series celebration. “Our job is to make them happy.”
The professional sports industry does exactly that on the field. But it still has a lot of work to do off of it. It’s time that the fans, whose dollars have fueled the growth and made everyone else rich, have some say in how sports are governed.
BuyTheJets’ Peter Lyons and John Crotty tried to do just that. Even though their bid was not considered, they feel they have helped raised the issue of public representation in pro sports. Despite his bad experience, Lyons, like a typical fan, says he has not soured on the sport nor on his team. “I love pro football and I love the Jets,” he says with a laugh. “I’ll always be a Jets fan even if I can’t be a Jets owner.”