A's Owes Giants Big Money If They Want to Move to San Jose

There was a recent column in the San Jose Mercury by Mark Purdy (I would like to link except that they put the article behind a paid wall after a while and I hate links that don't work after a short while) complaining about the Giants blocking the A's proposed move to San Jose by mocking the Giants connection with San Jose. 

One laughable part of the article was that the Giants showed how little they care about San Jose by not bringing any of the San Jose Giants staff to the World Series.  I don't mean to pop any bubbles and illusions, but big corporations don't usually reward every employee they have, it is usually the ones in the main corporation that gets the treats, not the ones in all the various divisions underneath.  And San Jose had nothing to do with this decision, I'm sure that any staff who lived in San Jose got to go too, they weren't left back at home just because they lived in San Jose.

Another laughable statement was that Purdy thought that the Giants owe the San Jose Giants for producing 10 of the Giants players.  FYI, the San Jose Giants did not produce the prospects, the Giants signed them and have been moving them though their Giants minor league affiliates using the Giants hired coaches.  San Jose is just one of the venues at which the Giants had THEIR players play in order to develop.  There is nothing in the San Jose air or water that "produced" our Giants players, except for former Giant Kevin Frandsen, who was born and raised down in the South Bay area, I believe in San Jose.  It would have been more appropriate to invite the parents and coaches of the players because they had more of a hand in producing the players than San Jose the city ever did.

I find that Purdy and the San Jose Mercury staff who have written about baseball in San Jose to be understandably biased towards the A's moving down to San Jose.  Afterall, the Mercury would become THE newspaper for a major league team and just think of the advertising revenues that would rain down on them should the move happen.  And they are particularly civic-minded and thus support initiatives that will bring big business bucks to San Jose.  Still, that is a bias.

But he does hit the nail on the head when he says that the Giants simply want money from the A's, and ultimately for the A's to move away, so why not be open about that.

Giants Thoughts

I agree that the move is about money, but that would be the decision of the owners of the Oakland A's to move because they could always pay the money to the Giants in order to move to San Jose.  Heck from what I gather, and I realize that I only know part of the whole situation, Wolff could have moved the A's to San Jose long ago if he were willing to pay off the Giants to move down to the South Bay.  And that is the Giants right to ask for such a relocation fee, just like in any other business.

A's Can't Give What Wasn't Theirs In First Place

Now there are some who opine that the Giants should not get any money because the A's "gave" them the South Bay territory when the Giants were looking to relocate to Santa Clara, that the Giants don't really own the rights.  Plus they note that Oakland is even closer to SF than San Jose, so any claims by the Giants on that territory is bogus.  But I don't understand that stance, once you look at the whole history of territory ownership in the San Francisco Bay Area.

From what I understand, the Giants owned the whole territory for the San Francisco Bay Area once they moved to San Francisco - much like how Baltimore owned their whole area - which includes the South Bay.  I don't believe that there was any relocation fee paid by the A's when they moved into Oakland and entered the Giants territory, probably because that wasn't important back then.  So bad on the Giants for not asking for a relocation fee back then.  I would bet Charlie O., cheap guy that he was, would have chose one of his various other choices, like Louisville, had he had to pay the Giants any money to relocate to Oakland.

However, later, the A's agreed to the Giants re-taking the South Bay territory.  So bad on the A's for not asking for money then too.

Money, Money, Money:  MONEY!

But as far as I'm concerned, the Giants have a long-term right to the South Bay territory, they owned it when they moved to San Francisco and that right was re-asserted when the A's conceded it to them later.  It was their territory the moment they became the San Francisco Giants.  They only ceded it when the A's entered the territory, but then got it back when the A's ceded it back.  If the A's don't want to pay that, they could instead move to another unclaimed territory and avoid the fee, that is how the MLB relocation game is played today.  

For example, the Nationals gave the Orioles around $50-60M in concessions in order to play in Baltimore's territory.  The Giants can't do anything about Oakland, since they got that territory now, but if the A's want to move down to San Jose, they should pony up similar amounts of money (plus inflation, baseball-style, at roughly 10% per year) for the right to move within the Giants territory once again.  It has been 6 years since that deal was struck, so we are talking about something in the $100M range.

Not Even Close

Purdy ends with the suggestion that it would be better for Giants fans in the South Bay to be able to attend Giants-A's games in San Jose than to visit the World Series Trophy.  Is he crazy?  I would rather visit multiple Trophies than to ever attend a single Giants-A's game in San Jose.  The key, for me, is that if the A's pay the Giants the money they want, then the Giants will be able to afford to win multiple World Series Championship trophies. 

Those young pitchers don't pay for themselves (well, sort of, in that they probably draw bigger crowds on the road and full houses at home, but you know what I mean).  But if the A's give the Giants something in the $100M range, they will be able to afford to keep Lincecum, Cain, Posey, Bumgarner, Sandoval to the latter part of the 2010 decade, which would enable the Giants to possibly win multiple World Series Championship Trophies to add to their 2010 World Series Championship Trophies (never gets old...). 

If the Giants can keep that core together, they will have a chance to add multiple, but that will take money, whether Neukom sells more shares in the Giants to raise money, sell the team to a tech billionaire who can spend a lot of money, or enforce his team's rights to the South Bay area and get a relocation fee from the A's.

Put Up or Shut Up Time

I can understand Purdy's and other San Jose baseball supporters' frustrations with the relocation process.  Wolff, now in his mid-70's truly might not make it to see the move happen.  But it all boils down to money, and the A's, at the moment, are not willing to pay the Giants enough to make them move off their position right now.

Many, like Purdy and others, seem to feel the South Bay should not rightfully be in the Giants possession, but a proper evaluation of the ownership of territory over the history of the Bay Area shows that the Giants should have had ownership of the territory for the entirety of their existence in San Francisco.  For that right, the A's should pay the going rate for such a move, which any other team would have to pay had they decided to do the same; the Nationals give the most recent example of what the going price is.

MLB baseball should be playing the mediator in this case, and work out the money details, like they did in the Orioles-Nationals case, but has been dragging its feet.  Perhaps Selig is still mad at his former college roommate for some slight?  (Wolff and he were college roommates, or something like that)  I had originally thought that relationship would favor Wolff, but if anything, Selig is taking a hands off approach, perhaps to show that he is not playing favorites.  Or maybe Wolff has been opposed to paying any money.

And payback is a bitch, sometimes.  Maybe the Giants don't want to play nicely.  Perhaps the A's should have been nicer to the Giants all those years when they were daunting their rivals with billboards pointing out the San Francisco Giants' lack of World Series championships.  Perhaps they should not have targeted the Giants negatively in their TV commercials ads.  They certainly could have ruffled the feathers of some of the Giants front office with their in-your-face advertising, and if so, the Giants front office would then not mind seeing the A's twist in the wind right now.

In any case, as all things in business, it comes down to Dough-2Give-2Me, and the A's hasn't been singing the right tune yet to the Giants ears.  I bet part of the slowness of the A's to realize this is because they are hoping beyond hope that since the A's "gave" the Giants the South Bay rights, they might be able to just take San Jose without paying anything.  Baseball dragging their feet suggests that this position is folly, and that the Giants rightfully own the territory, and the sooner they come to their senses and start negotiating with the Giants for the rights, the sooner they will call San Jose home.

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.