D-ger Deal Viability Questioned But Maybe New Owners Have Grander Plans

Very interesting article on ESPN regarding the D-ger sale deal.  Economists are also shocked at the $2.15B price tag (the actual details seems to vary with the wind, but the latest I understand is it is $2B for the team, and $150M for the parking lot, where they own half and McCourt owns half, but the team would control everything and receive all monies generated, but any development would then benefit both).

Andrew Zimbalist, an economist who writes a lot of articles and books on team valuation, noted "At the end of the day, you have to question the deal."  Mark Rosentraub, a University of Michigan sports management professor said "It's the craziest deal ever; it makes no sense.  That's why you saw so many groups drop out.  I don't get it.  The numbers just don't work.  It doesn't make business sense.  ... [it] is over $800 million more than what pencils out for a profitable investment for a baseball team.  If making money doesn't count, this is a great move.  But now we're into buying art and I can't value art.  I can just run the model numbers and it doesn't make sense."  That extra money is basically McCourt's profit off the deal, from what I can tell from the articles I've read, he is suppose to come out of this with $7-800M after paying off debts and his ex-wife.

The article noted, "The problem economists have with the sale of the team being tied to the television contract is teams use their television deals as revenue to improve the team, not to offset the costs of overpaying for a franchise."

One of the economists also noted McCourt's continued involvement as a stunner, but as I noted above, subsequent info from the buying group stated clearly that McCourt's involvement is nil except as an equity partner.  Though I agree with the economists, for the money they paid, they should have been able to buy out everything and push him out completely, when you are overpaying by that much.  They also make the interesting point that McCourt has been in court frequently in the past suing his partners for one thing or another, which would be a headache that the new owners would have to deal with.

Lots of good info on TV deals reiterated here, so I thought I would bring that up.  Fox had offered McCourt a 20-year, $3B deal, which was basically what the Angels got last December from Fox, worth "at least $3B" and apparently the Rangers got a similar deal at similar terms as well. It also noted that a TV deal is not a done deal, that they could start their own regional sports network like the Yankees have with the YES Network (and Red Sox with their NES Network).  Looking this up on Wikipedia, the Giants own 30% of CSN Bay Area, with 45% owned by NBCUniversal (formerly Comcast) and 25% owned by Fox.

Giants Thoughts

Nothing like good D-ger turmoil to warm a Giants fan's heart.  Baer had his "play nice with your neighbors" message about it being good to have a competitive D-ger team, but I am more than happy to see the D-gers fall on their faces for an eternity.

I didn't look too deeply at the numbers, but I thought the deal looked kind of squirrelly financially, but I couldn't put my finger on it.  But the comment above confirmed the thought I had, that the potential TV deal appears to pay for the valuation, but then where is the money for the team?

But either economist noted that most teams are not bought for their financial flow into their owner's coffers.  They are usually bought for their long-term appreciation, which is when they would get their money back.  Still, overpaying by double is a sure way to reduce your ROI by a lot.

Here is how I think the value works out for the owners.  It has to do with the land involved and the new owners wanted to be aggressive and win the bidding outright, without much thinking on the part of McCourt or the MLB before they agree on the deal.  So that's why I think Magic's group went with their "Buy It NOW" bid, a la eBay (this article on Yahoo supports this notion, noting the new owner wanted to "win by two touchdowns."; this article has another figure on a TV deal, $4M over 20 years).

As Mark Purdy notes in his column, the new owner is the CEO of a huge $125B financial firm called Guggenheim Partners, and the official name of the new D-gers ownership group is Guggenheim Baseball Management LLC, and not named after Walters or anything else, implying that the assets of this firm could be intertwined with the D-gers in some way.  What is the mission statement for the new owner?  "all I want to do is get to the World Series."  (Sidenote:  obviously, he's never spoken with Barry Bonds, who, after losing the 2002 World Series, his wife at that time told him, "well, you got what you wished for, you wanted to get to the World Series, and you did...").

In the Purdy article, he noted that Andy Dolich, a long-time sports management executive in the Bay Area (stints with A's, Warriors, and 49ers), who was an advisor to one of the bidders, had his financial people run a financial model and came up with a bid of $1.2-1.3B as the one that made the most economic sense, which is in line with what one of the professors was quoted (he noted it was $800M over).  So he was blown out by the actual winning bid.

One of the theories he came up with that could explain the grander plans is one where Dodger Stadium would be razed and a new one built near the Staples Center, in the L.A. Live District, which is owned and run by Anschutz Entertainment Group.  AEG would partner with Guggenheim to build the new baseball park, which would benefit the L.A. Live District since there are 81 baseball dates each year (and 3-10 more if playoffs), while Dodger Stadium would be razed to build a new football stadium complex at Chavez Ravine.

And that is basically what I thought is how they plan on making the big money, doing something with the Chavez Ravine property, because it is a huge tract of mostly undeveloped land in land-locked LA, though this baseball-football plan is way beyond what I would have thought.  Kind of like what was envisioned for the 49ers, where there would be a hotel and commercial complex built around the stadium, where synergies would feed off each other for additional revenues beyond just the team itself.

Purdy also noted that Jed York once worked for Guggenheim, so Walter could have perhaps contacted him to discuss the NFL.  It makes sense, as Walter, per this theory, would be very interested in the 49er's quest for their stadium.  But this theory is a bit of a stretch, Walter won't know every employee who has ever worked in his $125B company, and it is not like people from rich families will necessarily seek either other out.  Still, you never know, maybe York sought out Walter's advice at some point, for some reason, when he was pursuing his 49er's stadium deal.

Meanwhile, Walter/Guggenheim has so much money that they do not need to pocket the $150-200M per year TV deal in order to make their investment work for them, cash flow is not the only way to benefit from an investment, which is what the economists above statically assumed.  This reminded me of the situation when the Texas Rangers were sold to their prior owner, he bought up all sorts of land around the stadium, with plans to build, build, build and profit off the synergies thereof.

It didn't work for him, but this football-baseball stadium theory makes a lot of sense.  As nice as I've heard Dodger Stadium to be, it is now around 50 years old, and even Yankee Stadium, the House that Ruth built, was razed (though Fenway and Wrigley still are kicking).  Stadium technology is way beyond now, and you know L.A. love their glitz and glam, and as nice as Dodger Stadium might be, it is neither.

And as the Giants park showed, and I'm sure other parks too, there can be a lot of commercial synergies between the park and the surrounding area, which will show up in the financial statements of the owners in some way, just not necessarily from their Dodger's investment (which was the Texas owner, Hicks, idea).  The owner does not care how the money gets into their pockets, whether through the Dodgers or their other investments, as long as it gets into their pockets.  And given the high probability that the new L.A. NFL franchise should be a huge money maker for the new owner (remember, Walter has many more billions that he can tap into, $2B is pocket change for him), if they can come in with a grand plan for a stadium/commercial complex, the NFL will probably come hat in hand with the coveted L.A. franchise.  

Which means that however the Dodgers go with their TV situation - a deal with a cable outlet or their own network (better bet given the big money involved) - that money stream will probably go straight to the team to be used for payroll and everything, not retained by the owners to get a return on their $2B investment.  And thus they will be a big bidder for free agent riches next offseason, much like the Angels were this off-season, when they signed Albert Pujols and C.J. Wilson.

So hopefully Baggerly's report that the negotiations between the Giants and Cain "have picked up talks again" is accurate and shows that both sides want to get things done.  As I noted in my post yesterday, it made sense that there would be a stall in negotiations to see what happens with the D-ger sale, to get a better feel - for both sides - of how much of a threat the new D-ger owner might be in the free agent market next off-season.  I think this boosts Cain's leverage a lot, and think something in the $110-120M range for 5 years is now possible, though anywhere from $100-120M is possible I think, the only clear thing now is that he probably will reach 9 figures.

Baggerly reported today that Baer participated in a chat via Twitter with fans and said that it is a mischaracterization to say that there is a hard deadline or that the Giants are lowballing Cain.  Given that talks have started up again, I rather doubt that the Giants were lowballing Cain (else, at this point, why bother continue talking with the Giants?), but rather, Cain's agents have been asking for the moon on the assumption that the new D-gers owners would be spending big bucks next season.  Particularly given the rumor that the Giants were willing to meet them halfway between their offer and Cain's agent's asking but was turned down.

While I think that the D-gers will be spending, that is not a certainty given what is known right now about the situation, it does look like the new owners overpaid and that they will be soaking in the TV deal to make their return on investment, per what the economists said.  And that situation will not be clarified for a long while, perhaps not even by next off-season, so if Cain's agents were to wait for free agency, they could be taking the chance that the D-gers might pass on free agents next off-season and not get into free agency in a big way until they get all their plans lined up.

Cain does not appear to be a dice roller, so I expect the negotiations to move a lot faster now that the D-ger situation is cleared up for his agents, and a deal will get signed at some point.  I would guess given Baer's statement, most likely no deal will get done before the start of the season, but that there will be more media  announcements like this that the two sides are continuing to talk and moving closer to agreement.  You have to talk tough as a negotiator and nicely once the deal is done, for maximum image as a negotiator in the public eye.

I still think that $20M per season is fair market value for Cain.  I have seen comments that C.J. Wilson's deal sets Cain's price higher, but in researching it now, I see that most of those people were mixing contract numbers.  They saw him signing for 5 years and $78M and assumed the Marlin's $100M deal was for 5 years, but all the instances I found stated that was for 6 years, so really, the Angel's offer was actually very similar to the Marlins, only one year less.  So he only got roughly $16M per season, not the $20M that I saw some quote.

But the D-gers are now a wild card bidder that will provide some upward loft on Cain's salary.  While no sure thing, it is enough of a threat that the Giants will move higher than they had intended, but enough of a question mark that Cain's side must drop their asking price, because not many teams can afford $20M per season and most of the big spenders have spent their money already.  Cain's agents don't want to get into a situation like Madson this off-season or Ivan Rodriguez in 2003, where a very good player has to take a one year deal to wait for a big money team to offer big bucks to him.

That's huge additional risk to take when your client is a pitcher, as Ryan Madson's agent found out, pitching for a contract year to year.  His agents can't advise Cain to leave a 9 digit deal on the table, that would be fiduciary incompetence on the part of his agents, especially in light of the slow growth in the U.S. economy that threatens to implode if the EU or China hits a speed bump in their economies (or debt deals), as well as the possibility that the number of MLB bidders might be limited (the Mets are surely out).

But agents and players have done stupid things before.  There have been players before who turn down big deals (like the Red Sox's Nomar Garciaparra) or asked for contracts way beyond the market interest (like the Giants's Rich Aurilia) who lived to regret doing that.  And I don't want the Giants to accede to stupid outrageous salary demands, should Cain's agents be doing that as a big show for their big new client.

For as sure as it is now that Giants fans complains about the Zito signing, if Cain signs an outrageous deal and, say, his elbow implodes and he's no longer productive (see Noah Lowry for how fast things can change), you will find the same fans who derided the Giants for not giving Cain all the money in the world will be the same ones saying what idiots the Giants were to sign Cain to such a huge contract.

Your 2011 Giants: Punking Neukom

This has to be a Giant Punk, right?  Surprise, you've just been fired Neukom!

This is not a rumor, the Giants have acknowledged that this will be happening, officially as of the end of this year.  Mark Purdy broke the news for the Mercury - Huzzah! Mr. Purdy! - and Al Saracevic of the Chronicle also reports that the Giants acknowledgement after Purdy let their cat out of the bag.  Read both for a good overview of what is known right now.

Giants Thoughts

Change at the top is always unsettling.  The outward appearance is that this is all about Neukom spending money and the other owners not knowing about it until reading about it in the newspapers.  Communication.

Something like that normally is a hand-slap offense that you take care of with an owners meeting, heck, they were all owners, I am sure that Neukom was on their speed dial.  Just order him to communicate better.  Done.

Seems like there is more to this that we may never learn about.

It appears from the Chronicle's account that it is clear that Larry Baer is the new CEO and face of the Giants.  Not that he wasn't a face before, but now he's the guy making the decisions on everything.

I had speculated back when Neukom was first announced that he would be the transition between Magowan and Baer, running the Giants for a number of years (don't recall what I wrote back then, but I would guess 4-9 years) and then Larry would take over.  After all, Bow Tie was already 66 YO at that time, so that would put him around 70-75 for real retirement.  I assume the group decided that it was time to up the time table on that, for whatever the real reasons are.

I'm open to Baer as our new leader but I view him as part of the failed Magowan management team that resulted in Magowan's ouster.  I had been agitating for Magowan to be out since the whole "mediocrities are better than Vlad" debacle, so I was happy about the change.  Now, I'm not sure if there is any change.  I felt a lot better with Neukom, who has $600M net worth that he could inject into the team if he felt like it, in charge, than Larry Baer, whose main asset is probably his small slice of ownership of the Giants.  He will have to prove himself to me.

There could have been ego problems among the other owners, as Neukom is very much tied to the World Series Championship in the minds of many fans.  Maybe too many fans credit Neukom and the other owners are chafing about that.

I would agree that the average fan gives Neukom too much credit, judging by the sturm und drang on Twitter that I've seen about this move.  Lots of people complaining to the highest heaven about this move, like the Giants will suddenly become a pile of trash after this move.

I would disagree.  Sabean, Tidrow, and Barr have been the brains behind the Giants rebuilding efforts and thus the Giants overall success of the past three seasons, 2009-2011.  That solid core of players that the Giants control, or could control, for a long time, could keep the Giants competitive, barring another idiot taking out our star player for the season, for the rest of the decade.  The big picture still looks good.

Not that Neukom did not bring some good things to the table.   I liked his "The Giants Way" theme he gave the team.  I hope the Giants keep that and continue to develop that.  It was always unspoken traits that players passed to prospects, like what Jack Clark talked about, but now it can be captured in a book that can be passed on to future generations of Giants without having players be the ones passing on the torch.  That will help the next time we get into rebuilding and run into a dry spell like the 70's and 80's.

I also like that he was willing to at least entertain the thought of making the best baseball moves by having Sabean bring these decisions to him and allow him the opportunity to make the finances work to do the baseball decision, instead of having Sabean give up on it immediately.  Had he been in place back then, the Giants might have been able to sign Vlad as well as get most of those other players without upping the payroll much more.  I examined that possibility back then, it was doable.

I also liked his public face.  He was a Giants fan, an ordinary joe, from what I saw in interviews and meetings.  I never got that from Magowan or Baer.  That could also explain the general fan's endearment of Neukom so strongly.

Ultimately, all I really care about is the future of the Giants.  The Giants need to make sure that they sign Lincecum and Cain long-term, maybe also Sandoval and Posey too, soon, if we are to dominate the decade as I've been saying for a few years now.  It is not a fait accompli.  As long as Larry Baer takes care of that, starting with signing Lincecum and Cain to long-term big bucks contracts this off-season, I will be OK with the change over.

If not, then I'll be agitating for Larry Ellison or any other Silicon Valley billionaire to buy the whole team - like I did when I was complaining about Magowan - so that the Giants can sign all our good young players long-term and not see them leave the team as free agents with only draft picks as compensation: that is not a good option to me, if we cannot sign them, let Sabean know now so that he can start trading them to get very good prospects in return, and rebuilding quickly, like how the Marlins transitioned from 1998 to 2003.

Ideally, though, I want an owner like the Angels got, a billionaire who enables a lot of things because he has the money, not owners like we have now with the Giants complaining about hearing of the good uses of the Giants money in the press rather than personally from Neukom.  The Angel's owner isn't worried about saving for a rainy day fund due to the extra money the World Series has generated for the Giants.  He has been looking for ways to better the team and spending that money.  We don't need owners worried about rainy days, we need an owner who will keep our potential juggernaut of a team going for the next decade.

We have the players in place.  We only need owners who have the cajones to make that happen.  These owners are showing me that they don't have guts to do it by taking out Neukom over a disagreement over how windfall money usage was communicated to the rest of the owners.  That is a bullshit explanation that everybody sees through, the fans are not idiots.  I give them a vote of no-confidence right now, but am willing to see how Larry Baer does now that he is in charge.  I am giving him very little rope right now and this off-season will be interesting in how the Giants handle the payroll and signing players.

How I Stopped Worrying About the Budget: the Intersection of the Internet and the A's

El Lefty Malo has been writing (latest here) about the payroll problem that has been building up with all the extensions signed over the past week plus the existing contracts and expected raises owed to arbitration eligible players over the next few years, including in particular Lincecum and Sandoval, as well as Sanchez. These are valid concerns but I'm not as up in arms as he is for a couple of big reasons.

BAM! MLBAM!

One reason is the MLB Alternative Media (or MLB AM) organization. Equally owned by all 30 teams, it has been an unadulterated success, beyond their wildest dreams. Expected to take a four years to repay the costs of creating it, it covered the costs in less than two and has been delivering $3-5M to each team (The Biz of Baseball had that covered here, with an in-depth look here).

It has been my hope that MLBAM will the linchpin towards reducing the disparity in revenues between the Yankees and the rest of the majors. Their advantage has come from their local broadcast rights, but as everything is moving to the Internet, it is my hope that MLBAM will eventually steal away most of the viewers of Yankees broadcast, thus sharing all those revenues with every team (since every team gets 1/30th). Don't know if there is a loophole somewhere or what, but given the simple view of this situation, MLBAM appears to be the trojan horse that brings down the Yankee's revenue advantage over all other teams. That could be why the Yankees got their new stadium built, to make up for potential future revenue shortfalls.

In addition, MLBAM has been much more successful than any other sport's on-line venture, and thus they have been handling the on-line ventures for other sports like golf (they run tigerwoods.com and used to run MLS's operations) and recently won a contract to handle ESPN's on-line technology infrastructure and customer support. They are a leader in streaming live video. Contracts like this plus expansion into other products, like the Bloomberg baseball stats analytics service, plus other gaming products, should contribute further growth.

There is also talk about an IPO, valuing the company at over $2B, which would roughly value each team's share at over $70M. These are all ways the Giants can generated additional cash to help pay for re-signing players.

San Jose A's

The A's are hoping to move down to San Jose, but the rights belong to the Giants right now. Similar to how the Orioles were compensated by the move of the Expos to Washington D.C., a nearby location in the area controlled by the Orioles, I have believed that the Giants and A's were on a course towards such a resolution. Hence the hard line by the Giants management since this came up, yet the rumors persisted until the A's requested the rights. Mark Purdy covers a lot of the issues in his recent column. Biz of Baseball also covered it, though not as biz as I would have liked, there was no clear final dollar amount.

Frankly, South Bay Giants fans are not going to change their allegiance just because the A's are close, though they might go there to get their fill of MLB baseball. Those going to games will still go. Corporate season ticket buyers will probably buy down there, but as long as the Giants have had a winning product, they have always been able to draw the fans into the park, they have always opened up their wallets to get their fix.

Now we are heading into the stretch. Bud Selig is reportedly considering the proposition - FYI, he and the A's owner were former COLLEGE ROOMMATES and long-time old buddies - and will report on this soon. He brokered/ordered the concessions made to the Orioles to allow the Washington Nationals to come into existence, and I expect that to happen again in this situation. And I expect the price tag to be pretty high, at least $20M, if not more (the Orioles got all sorts of cash and income, plus guarantees, which I assume the Giants will want on their 3M attendance - roughly - up to now, plus majority ownership of a sports network, which won't work for the Giants, so I expect some sort of cash buyout, over time).

Other Sources of Cash to Pay for Contracts

There are a number of other ways for the Giants to generate money for increases in their payroll. First, they own a percentage of the Bay Area sports network that was set up by Comcast. That could be sold and generate money to pay for players. Second, their mortgage ends in 2017 if I remember right. That is $20M in additional money right there, every year. They could use that to fund borrowing additional money now to help pay for player salaries today, and with the low interest rates, would not result in much discounting in terms of net present value. Third, they had been funding $5M per year in recent years to cover Barry Bonds's deferred payments, but it should be over by this year or next. That will be $5M more available.

Lastly, there is the old fashion and time proven way to get more cash: find more investors to pony up more money into the Giants. Neukom had been buying out other owners over time to get to his position, he has a lot of Silicon Valley and Redmond connections and networks that he should be able to tap into to find people willing to invest in the Giants.

Plus, he's not getting younger - he was older than Magowan when Magowan stated he was stepping down to spend more time with his grandchildren - and could bring in the next owner of the Giants. And Larry Ellison is a local billionaires with billions of dollars burning a hole in his pocket, and with his win in America's Cup, wouldn't the Giants be a great place to bring his sports obsession to, particularly with our history of no World Series championships in SF? He has reported kick the tires on acquiring the 49er's, and when rebuffed, looked into the LA football expansion possibility, and recently was noted as interested when Chris Cohan said that he's open to selling the Warriors (particularly since the IRS said there was mistakes made regarding his sale of his family's cable company that funded his purchase of the Warriors, and thus he owns millions to the IRS now).

And I've been beating the drums for Larry Ellison's purchase of the Giants since Sabean/Magowan noted that they basically passed up looking into getting Vladimir Guerrero because of finances, back when I was fanatical and not obsessed. :^) We need someone with deep pockets for the Giants to get our championship. The Angel's were helped by their billionaire owner opening up his pockets and the Giants could use similar deep pockets, particularly those as deep as Ellison.

Thank You Sue Burns, Largest Giants Shareholder: RIP

Sue Burns, the Giants largest shareholder (TV news report noted in the 40% range), passed away from late-stage lung cancer. She was only 58 and survived by two daughters and grandchildren, plus her mother, son-in-law, and brothers.

According to Baggarly, this was a kick in the gut to the Giants organization because of the quickness. Just on July 8th, she hosted a team party at her home and appeared well, but from what I heard on the radio, she got the diagnosis soon afterward and slipped away quickly. It as a bad coincidence that she received her diagnosis on July 10th, resulting in her missing the game that night, which happened to be the first Giants no-hitter in 33 years thrown by Jonathan Sanchez and thus first ever in AT&T Park. She held Sanchez's autographed game ball during her last days.

She was a devoted fan who wore orange all the time, apparently. It was she and her husband who were among the original investors who helped saved the Giants from moving in 1992. Her husband, Harmon Burns, was a vice president of the Franklin Templeton investment group in San Mateo, and he made his money there as that firm grew leaps and bounds (for those who are in the know, that's the Templeton of John Templeton fame who famously invested $10,000 at the depths of the Depression in low-priced stocks and who made a fortune when stocks rebounded). They bought up shares as many of the original founders sold out their shares until they were the largest shareholders (much like how Neukom built up his ownership). She inherited the full stake in the club when her husband passed away in November 2006.

Giants Thoughts

Just wanted to say Thank You to Sue and to give my deepest condolences to her family and friends. From what I gathered from the KNTV report and Baggarley's report, she was loved by all who passed through the Giants organization. She reportedly influenced the Giants to sign Bonds one more time in 2007 and he reportedly flew up to be with her one last time in the past week. Dusty Baker gave a quote and altered his flight in order to pass through SF and give a visit, though I don't recall if that was before or after she passed. But she treated everyone equally and she is being mourned by the Giants organization, top to bottom, from the management to the players to the ushers and security guards.

Just also wanted to say that all Giants fans, near and far, owe deep gratitude to the Burns family for their substantial help in keeping the Giants here. Without their financial support, the team first would have moved to Tampa Bay, and second, the ownership team could have been on shaky grounds again when other founders sold out if they did not buy up additional shares, and third, without a solid ownership team, the Giants might not have been able to get the loans necessary to finance the beautiful stadium they built in China Basin.

According to Larry Baer, in an interview on KNTV (plus reported on by Baggarley here and here), her two daughters will retain the ownership (Baggarly reports as between 30% and 40%)and nothing will change as her daughters and her son-in-law are big Giants fans too. So, in death, as in life, she keeps the Giants safe once more. May she rest in peace.

It's Official: Neukom KominK In-K

It was pretty much a foregone conclusion, but the MLB uninanimously and officially voted Bill Neukom into that 30-man fraternity known as the "Owners" of an MLB club, it was announced on sfgiants.com today.

Thank You Peter!

I will forever be thankful to Peter Magowan for getting the Giants this far as a franchise:

• Keeping the Giants in SF
• Building that beautiful park by the Bay despite decades of inertia in the SF political scene
• Making it possible to keep the Giants in SF for the indefinite future, with no future potential move hanging over the franchise for many years to come
• 8 straight years of winning baseball, the longest stretch for the Giants since the 14 straight years of winning baseball from their first season in SF to basically when I became a fan (a coincidence, I assure you :^), the longest stretch of winning in the past 36 years (next longest is 5 years from 86-90), which means that in the last 36 years, only 13 were in stretches of sustained good performances, 23 years were either losing or winning just one season before losing again
• Bringing the pride in the franchise back again
• Bringing Barry Bonds (and by extension, Bobby Bonds) back home, where he belonged
• Making the Willies (Mays and McCovey) a big part of the Giants scene, as well as a lot of other past Giants, great, loved, or both

When It's Time to Change, You Got to Re-arrange

But it was time for a change.

As I've been writing since the 2003 season, the Giants could either dream big by spending extra money to shore up the team by getting Bonds' replacement (Vlad, Ordonez, Beltran, for examples), or they could pinch pennies and buy a bunch of mediocre players. Peter Magowan chose the latter path, leading to our current, long losing seasonal streak. As managing partner, he could have either brought in new investors to boost the cash flow to sustain such an expanded spending during those critical years or convince the current owners to pony up more money. He was unable or unwilling to do either.

Lucky for us, Sabean has been able to cobble together an excellent pitching rotation and closer, plus promising pieces in the bullpen and lineup (basically many of the rookies and near-rookies who have seen some playing time this season), while fulfilling the general order from ownership to buy the best vets available within the budget we had. In addition, there are a number of promising players now in the farm system who should be arriving starting in 2010 (and perhaps as early as late 2009), starting with Bumgarner, Alderson, Posey, Sosa, Villalona, Noonan, Gillaspie, and Rodriguez.

If these pieces were not in place already, I would be on board with changing GM today, but I'm not willing to jeopardize this re-build - and risk having the new GM trade away Cain or Lincecum, as many fans today irrationally feared - by making a change today. But we need to see progress each year still or then we risk losing our star pitchers to free agency before we start winning. If we do not progress each year, I would be OK with a GM change.

Long Live the Neukom!

I've already liked the stances and his messages thus far, which I'm paraphrasing. "We will do what we need to do in order to win, winning is the prime directive. " Which to me says if we need money to do what we need to do, he will bring it in, somehow. "Build the Farm." Which we all know is the right way to build a club. I am sure there are others, but these two come to mind fastest.

In this latest opportunity to send his message to the public, he added another nuance, which is something I've complained about and asked for over the years: add more coaches. Here is the quote: "That means we've got to keep building our farm system and our coaches, because those are the people who teach so the kids can play the game in the Major Leagues at the highest level." (italic bold emphasis is mine).

Invest in Coaches and Other Services

In today's world where the team spends literally $100M on the MLB payroll plus tens of millions on the draft bonuses plus on top of that the expenses for the farm system, why aren't there more coaches at each and every level, helping each team. I don't mean rovers, but actual coaches on every team. Heck, you can probably hire and assign someone to focus on and mentor our top prospects.

For example, we should have RHP and LHP on call who can come out and pitch extra batting practice when hitters need or want it. If it is something Barry Bonds (he had a LHP pitch to him at home and on the road), who is arguably one of the best hitters ever in MLB history, felt would improve his performances, it might help those lesser mortals, like Dan Ortmeier or any of our lefty hitters, to get more practice against LHP and perhaps not be labeled platoon potential starters. Likewise, have a RHP on call for the right-handed hitters, just for repetition. That's not coddling, that's ensuring your investments mature and develop and get the practice they need.

In addition, something I've touched on over the years is expanded medical care. There should be no excuse for Eyre not realizing that he needed drugs to help him with his ADD or countless other hitters who we suddenly discovered that he needed glasses to help him see the pitched ball. Our doctors should be catching such things and taking care of them proactively, not reactively.

And how much would that cost per season? I'll bet no more than $3-5M per year. Which is a small insurance policy amount to help ensure that we get the most out of our players. Overall, the team is probably spending at least $150M with regards to players and their development and care. That much extra per year is a pittance to the benefits those services can bring the team.

I was going to go over this in one of my segments in my Hey Series, but this was a good time to get it out there, given that the changing of the guard is now official. Hopefully, Neukom is both a man of his words and a man of action, and put all his directives into motion. But he probably wouldn't have been selected to head the powerful American Bar Association (I still think of a pub when I hear that :^) for a two year period if he weren't either of those. I believe that the Giants are in good hands and that he will bring needed changes to the culture and philosophy of the club.

To the Toppermost of the Poppermost: Neukom

I was going to include this with the Magowan piece, but thought that Magowan deserved to have the post all to himself, mostly. This post will cover what is known about Neukom and what's been said, by him and others. This info came from a great research piece on Neukom from the Chron and a great interview that Andy Baggarly did with Neukom for the Merc, which was posted on his blog for the Merc.

Neukom's Background

He actually has a Bay Area connection and, in fact, a San Francisco Giants connection: he grew up in San Mateo (attended San Mateo High) and his father gave him 10 shares in the company that owned the Giants during the Stoneham era, plus he got his law degree at Stanford (all this info is from the Chron and Merc). He will purchase more control of the team with a group and will buy a home in the SF area when he becomes managing partner, and he should have no problem gettig approved by the MLB, Selig has already said as much.

He joined the ownership group in 1995 by cold-calling Magowan and buying a stake then. He continued to add to his stake as other investors didn't have the nerves to handle all the capital calls in the lean years after the strike with Candlestick. Eventually he got enough of a stake to join the executive committee, then became a general partner in 2003, along with Harmon Burns.

General partners have more responsibilities than the other owners. And the managing general partner has final say on matters instead of having to go through votes to make decisions. Apparently he already had a big enough stake that he could become managing partner without having to purchase more shares, though it was reported that Magowan will probably sell some of his stake, and Neukom has a group of investors buying a portion of those shares.

As noted, Baer is getting a promotion, partly because Neukom is taking on some of the duties Baer used to do, while Baer will take on duties that Magowan used to do, in that Baer will be more involved in the baseball side than before. That is what fuels my thought that Baer is being groomed to take over when Neukom is ready to pass on the title. At 66, he probably won't do more than 5-10 years as managing partner.

It was also noted that Brian Sabean will have expanded authority, though I did not see how much he will get. He did not give Sabean his full backing, but that's understandable, he's a lawyer and just wants to do his due diligence to make sure Sabean is the right person for the job. However, clearly, he respects and likes Sabean, based on what was said in the interview, he gave a great gift of a Willie Mays picture to Sabean when he came in for the announcement.

Neukom: The Man We Need Now

Neukom is reportedly "charming, thoughtful, charsimatic" and is "extremely competitive." "He is passionate about baseball and his hometown Giants. This will be good for the Giants and the Bay Area. He's outgoing, friendly guy, a quick study and a good listener." "He doesn't like to lose." That is a good trait for our new managing owner to have, because he is going to do things that will better the team and if money is the problem, he will find the investors who can come in and not make it a problem. I've been advocating for years that the Giants sell more shares to bring in more money and maybe now Neukom can do that.

Here's another good quote (also from Chron): "He as the audacity to really set ambitious goals, and then he does it by sheer force of personality." Sounds like exactly what we need in the managing owner after Magowan. To be competitive in the next few years, we need an influx of cash so that we can acquire a good hitter or two, whether by free agency or the draft should a Boras client fall to us.

The good news (most of the rest is from Merc blog by Baggarly, interview with Neukom)is that Neukom believes that the best way to build up the team is to invest and reinvest in player development and the draft, so that should mean more funds will be made available to not only sign more talent in the draft, but sign more talent from the international market. That should mean both in the Carribean as well as the Asia-Pacific region, where the Giants have not done much but take on other people's rejects, Shinjo and Yabu.

He states that you "have to have a medium view and long term view of how you develop and replenish your talent."

Most importantly, though he doesn't quite say it, but apparently money will not be the limiting factor for the budget but rather "what does it take to get a team on the field that is competitive? You start with that. Don't approach it from, 'How much is our budget?' Or, 'This is what we can allocate for baseball players.'"

That to me means if we need another big hitter and there's one on the market, he's going to get the other owners to either pony up or he would arrange to buy them out with his group (ownership share is unknown but it is probably at least 10% since they made him managing partner, and perhaps in the 15-20% range after Magowan sells some of his shares). Because he hates to lose and now he's in charge.

He believes that the goal of the team is to make the playoffs because (essentially the Billy Beane theorem) once you get in there, anyobdy can win since so many wild card teams have won the World Series.

World Series Victory or Bust

So if you put all that together, that means that the first goal of the team is to be competitive, budget not a limiting factor. And they will invest more in the farm system and in player development. Because he doesn't like to lose and like to set ambitious goals, I assume he wants to win the World Series while he is the managing owner, particularly since he has only been a San Francisco Giants fan, not a NY Giants like Magowan who experienced a World Series victory. That extra amount of hunger hopefully will fuel him.

Out with Magowan, In With the Neukom

With Magowan feeling a bit old (with 9-10 grandchildren, I have seen both numbers in accounts) and frustrated (not having his side of the story told in the Mitchell Report; imagine that, a lawyer not telling the other side of the story), Peter Magowan on May 16, 2008 announced that he was stepping down as the Giants managing partner as of the last game of the 2008 season for the Giants.

The newcomer coming in to replace him is Bill Neukom, former Chief Legal Counsel at Microsoft (he was a partner in Bill's father's law firm), who will become only the fourth San Francisco Giants owner calling the shots: Stoneham, Lurie, Magowan, and now Neukom. Concurrent with the change, long-timer right-hand man Larry Baer will be promoted to President. Magowan will then serve a year as President Emeritus in 2009.

Giants Thoughts

First off, I just want to say thank you to Peter Magowan from the bottom of my heart for not only helping to keep the Giants in San Francisco (just because the commissioner blocked it doesn't mean that they were permanently blocked if nobody would step forward with enough money to buy the team), but also for figuring out the Gordian Know that is San Francisco politics in order to build our stadium.

Without his leadership and foresight, we would not have one of the best venues in the majors today. People outside of S.F. regularly sing the stadium's praises. And it is still a tourist attraction today, whereas other teams' new stadium quickly got stale and old soon after.

Time for a Cool Change

Still, that said, I think it was time for a change. I like the symbology of Neukom, who is a Tech millionaire (made approximately $100M from Microsoft stock) taking over. Hopefully he can use his extensive Rolodex in the Tech industry to sell new investors who willing to answer the capital calls that will help fuel additional spending while we control Cain and Lincecum. We need to get another good middle of lineup hitter and hopefully we can get one next off-season via free agency or perhaps through a trade of one of our starting pitchers not named Cain or Lincecum. That will probably take more spending money, particularly since attendence is down this season.

And spending has been my main complaint of the Magowan era. Clearly our payroll was hamstrung by Nen and Alfonzo in the mid-2000's and the Giants needed an infusion of cash during that time period to fuel more spending while Bonds was still hitting well, particularly to pick up an RBI guy. Whether it would have been Vlad, Ordonez, or Beltran, the Giants owners needed to setp up to the plate and infuse the team with some cash to get someone. Magowan failed in this regard and that, to me, was the key failing in the post-World Series period, as we did not have to suffer through the Cruz/Tucker era had they put up the cash to get a good RF RBI hitter.

Particularly galling is the fact that there was an additional $7M available to sign Greg Maddux during that period but those funds was not made available so that the Giants could sign a better RF than Hammonds or Tucker, or a better RBI guy than Alfonzo.

That was in the pre-season before the 2004 season and with the tight funds situation due to pay raises, I wrote that the Giants could be bold and use what they had to et one great player or be middling and acquire a boatload of mediocrity. We know how that went.

Other Thoughts

Interestingly, Magowan is retiring at age 66, which is Bill Neukom's age today. I think Neukom is going to be the interim managing partner as Baer prepares (remember, he just got a promotion with this move) to take over when Neukom is done. Magowan probably thought the would last long enough until Baer is ready, but the Balco fallout (or rather Mitchell Report lynching, at least in his eyes) probably took a lot out of him. Plus that's a lot of grandchildren to show love to!