Crystal Balling -- An Opinion on The Future of Minor League Baseball and Texas' Affiliates

It's hard to see from here, but there's writing on that wall. - Tim Heitman-US PRESSWIRE

I'm not sure what's gonna happen, but I think somethin's gonna happen.

Don't get me wrong, I'm cool with change. We're friends. I actually like it. Hell, every team I watch turns over its entire roster on a near annual basis. But those are the changes minor league baseball is accustomed to. The sea breeze blowing players out while the inland draw reels new ones in. I like it and I pity you big league fans for having to root for the same dudes every year. Change is my buddy, but the sea breeze feels more powerful lately. It feels capable of moving more than the names on the roster. This breeze might lift away more than the light-hitting shortstop who was repeating a level. As with any educated guess, it's important to tell you where we've been before we start speculatin' on where we're goin'. So let's get that started with an admittedly cursory look at the history we're talking about here.

Minor league baseball has been around for a zillion years. Well, more like 110, but who's counting? In the 30's Branch Rickey started the process of sort of assigning major league teams to some of the minor league teams by drafting Player Development Contracts, or PDCs, with the big clubs. It wasn't until 1963 that some consolidation and organization of what was, I believe, over 400 teams began to unmuddy the waters around what farm clubs were affiliated with what big league clubs. There have been so many minor league teams and leagues that you could write a book about it. No really, I mean that, you could and you should write a book about it, because I don't want to. After the '63 consolidation, major league teams began to mold into place what we have now, where each big league club has a rookie affiliate/short-season team (often both), a low-A, a high-A, a AA, and a AAA club that feed into the three-tiered stadium at the end of the rainbow. PDCs are of the 2 or 4 year variety and they basically stipulate that all uniformed personnel; players, coaches, trainers are employees of the big club. Wages, benefits, and equipment for these guys are generally the domain of the parent club. All other folks you encounter at a minor league game; ushers, concession runners, radio guys, promotions folks, are employees of the minor league team and whomever the hell owns that club. It's been a fantastic system for the big league clubs. Someone else foots the bill for the training facility their employees use. It's like getting to drive a Ferrari everyday and all you have to pay for is the gas. But...those winds of change are a blowin'. Sheesh, enough with the melodrama and crappy metaphors. It's not wind, it's money. The money is changing, and it's getting bigger.

In 1993, the roughly 160 affiliated and independent minor league teams, combined to draw 30.7 million fans. In 2012, the same number of clubs combined to draw more than 48 million fans. Total attendance for minor league baseball games is up 5-fold since the 1970's. Teams have new stadiums and they're basically city-funded miniature versions of big league caliber houses. They have great food, great sightlines, great parking, and in many cases great relationships with the smaller towns and communities where they reside. People are into it. As the cost of taking your family to a major league game has risen steadily, the financial appeal of minor league baseball has obviously grown. If your kiddo only knows cotton candy, foul balls, and throwing peanut shells directly on to the floor as a baseball experience, no one blames you for choosing to only spend $75 before the whole crew poops out in the 5th inning. In addition to the attendance spike, even the casual observer can attest to the dramatic rise in minor league merchandising. If I had one wish (well, this kind of wish anyway), it would be to get a look at the merch sales for the resplendent baby-blue cap worn by the Myrtle Beach Pelicans. It's an awesome lid and it moves well enough that I seem to spot at least one every time I wander into that colossus known as Rangers Ballpark in Arlington. The bottom line is, the money is growing and it's growing significantly enough that it's no longer just a whisper of a good investment. A juicy example was the sale of the Las Vegas 51s, AAA affiliate of the Mets, this summer. They've had trouble keeping a PDC as the big league clubs despise their dry air and generally old and dilapidated stadium. They finished 2012 48th in attendance behind many AA clubs and ahead of only 3 AAA clubs. Players and coaches and player development supervisors can't stand the place...and the club still sold for $20 million dollars this summer. That number certainly represents an extreme multiple of the actual annual profit the 51s are pulling in, and that's what big time bazillionaires like to do; take their money and multiply it.

All this leads up to the moment where we get to guess, speculate, what's gonna happen next. I'm gonna go to the games regardless of who signs the checks 'cause none of 'em are signing my checks, so let's float some theories as to how this relates to the game and to the Texas clubs in particular. In April, Seaport Capital announced they intended to sell their stake in Mandalay Baseball Properties. Mandalay (yep, same guys as Mandalay Pictures- you know- with the tiger logo) owns 5 teams; Dayton (A ball), Erie (AA), Scranton/Wilkes-Barre (AAA- a team they co-own with the Yankees), Oklahoma City (AAA), and Frisco (AA). They're attempting to sell the group as a package and the teams will combine for more than $40million in annual revenue. This sale will be important because it might become the bellwether for future deals. If they're able to sell the entire package, what does it go for? 3X earnings? 5X earnings? Do they have to break up the teams in order to get a deal done? 3 of these teams (Dayton, Frisco, and OKC) rank in the top-20 of Forbes' "Most Valuable Minor League Franchises". Dayton holds the pro sports record for consecutive sell outs with well over 900. But what are they worth? In 2011 Forbes valued the Dodgers at $800million, in 2012, a bunch of rich dudes bought the same Dodgers for $2.1billion. I think the answer to valuation is the same as it's always been; they're worth whatever someone will pay for them. This sale could be very important.

Finally, as it relates to your beloved Texas Rangers. This summer I had many discussions, mostly with scouts, about an admittedly weird situation. A major equity holder for the Rangers AAA club became the President of one of the Rangers' division rivals. Part of Reid Ryan's gig with Houston is that he is not required to relinquish his stake in the Ryan-Sanders owned Round Rock Express. He's an owner down there. Technically, he can do whatever he wants to. In more dramatic terms, he owns the highest level minor league club for the team he is competing with both on the field and off. That's just weird and not a formula for long-term success. When Reid took the Houston job, the Astros quietly announced they had fully acquired their AA team, the Ryan-Sanders owned Corpus Christi Hooks. I think in 10-15 years, MLB teams will own their affiliates outright. It's already starting to happen, not just with the Hooks, but the always savvy Cardinals own their AA club, the Braves own all but high-A Lynchburg, the Phillies own AA Reading, the Tigers own Lakeland, and there are a few others. Now, after all these years, there's money to be made in minor league baseball, and the major league teams know it. But that's long-term, in the short term, there's some sales and some positioning to be done.

Frisco has led all of AA in attendance for the last 9 seasons. They are a juggernaut and Forbes' most recent rankings had them valued at $28million, tied for 8th best in all of MiLB. Mandalay's gonna make $$$ off them. Myrtle Beach Pelicans owner, Chuck Greenberg, notably came to check out a game this summer. Surrounded by some suits, I had a very friendly conversation with him about the game while being completely stymied with my questions as to whether or not he was going to pursue the Mandalay funpack. Thanks for nothin' Chuck. (Just kidding, he's great- I knew he couldn't talk about it, but I had to ask anyway. He wasn't there to watch the game). The next night he was in Oklahoma City visiting the Redhawks- another of Mandalay's "for sale" teams. Keep that in mind for the short term future. It would be a savvy play to acquire an asset you know is going to grow, and you know is likely to have a very willing, able, hungry, and wealthy potential buyer in the next decade or so. Imagine the strangeness in 2021 when Mr. Davis and Mr. Simpson, presumably, have to sit across from Mr. Greenberg and hammer out a price for the Rough Riders. It could happen.

On to the AAA quagmire. This thing is just straight up bizarre. At the end of the 2012 season, 8 months before Reid landed the Astros job, Texas signed a big, juicy PDC extension with Round Rock that takes them through the 2018 season. So is the Astros' President going to own the Rangers' AAA team...along with his father...the Rangers' President...for 5 more years? Too many conflicts of interest. Too weird. I have no idea what's gonna give, but I do know Forbes ranked Round Rock as the 2nd most valuable franchise in all of minor league ball. The $35 million valuation is top dollar for a minor league club and think back to what I said about the Dodgers sale- it's worth what someone will pay for it. Oklahoma City's PDC, remember they were the Rangers AAA affiliate for the 30 years leading up to 2011, with Houston expires after 2014. One need not read much about Jim Crane to imagine how badly he wants to recapture the Central Texas fanbase for the Astros. The Rangers success and affiliation with Round Rock, as well as the Astros downturn has led to a run on Rangers hats in the burgeoning Austin area. That's probably not Mr. Jim's favorite part about visiting our capital. Crane has mentioned his desire to put a club in The Woodlands or taking over the independent league team in Sugar Land, but those solutions aren't thought of as being very high on the feasibility meter in the next few years. I simply envision some type of a quiet, backroom bidding war for the Round Rock franchise. I don't know how iron clad a PDC is, and I don't know the emotions and all the vested interests, but if Crane's cronies wanna hand Nolan, Reid, Reese, Don Sanders, and company a huge check for the Express, would Texas turn around and buy OKC from whomever owns them at the time, possibly Chuck Greenberg? It could happen. Might Texas' ownership group be trying to buy Frisco from Mandalay right now? Will everyone simply wait until the Rangers' PDC with Round Rock expires in 2018? Are really rich powerful guys generally known to be very patient? Is Nolan's end game to just sell Round Rock to the highest bidder between his two favorite clubs before riding off into the (very wealthy) sunset? I don't know, but I can't wait to find out.

If you've made it this far, I feel like you should get a map to some of Walter White's cash stash, but you won't. You'll just get the same tired head I've gotten from trying to figure out what's likely to happen to the minor league game over the next 10 years. Or maybe it doesn't matter much to you. Yeah, that's actually what I hope. I hope you're gonna go to the games to watch Texas' future ballers at bargain basement prices in comfortable seats with close parking, regardless of the name at the top of the letterhead. Yeah, you just grab your crew and get to the park. I'll worry about the rest of this crap...and I'll meet you out there.

As always,

Enjoy Baseball! Love Ya!

-Tepid

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