Slightly overshadowing the big news yesterday that infielder Doug Bernier has been invited to Spring Training, today we found out that Mario Lemieux and Ron Burkle, co-owners of the Pittsburgh Penguins, made an unsolicited offer four months ago to buy the Pittsburgh Pirates from Bob Nutting, according to Dejan Kovacevic. Nutting, as usual, said the team is not for sale, and that no serious talks had taken place. Sources on the Lemieux/Burkle side categorized the offer as “very serious”.
The subject of ownership of the Pittsburgh Pirates is always a hot topic. In fact, the topic gets beat to death so much, that many bits of speculation get passed off as fact. The most common ones are “Bob Nutting is only in this for the money” or “Nutting is just waiting for his opportunity to sell the team”, or “Nutting is only interested in pocketing profits, and not on winning”. I know one thing that is a fact. That is that no one knows what Bob Nutting is really thinking, other than Bob Nutting. Anything suggested by fans, bloggers, and media members is just speculation.
The offer made by Lemieux and Burkle was four months ago, and we haven’t heard about it until now. Dejan Kovacevic also mentioned that it’s unlikely anything comes from this. Speculating on the impact this sale would have on the Pirates seems like a waste of time, but the way I see it, what else do we have to talk about at this point in the off-season?
The big topic here will be whether a sale to Lemieux and Burkle would help the Pirates. I’m not convinced that a sale would change the situation the Pirates are in. I feel that no matter what owner comes in to Pittsburgh, they’re going to be in the same situation Nutting is in, unless they wanted to invest their own money and take a personal loss year after year. I’m also not convinced that Nutting is in this for the money. To review all of this, let’s tackle it one issue at a time.
1. Nutting’s motivation
I said above that no one knows the intentions of Bob Nutting. The most common thing I see suggested is that Nutting only cares about profits, and not about winning. A similar comment suggests that Nutting is just waiting to cash out and make a ton of money. Let’s just assume for a second that Nutting isn’t in this for the profits, and that he’s not looking to sell the team. What if he just wants to own the Pirates, and maybe keep the team in his family. Would that be too hard to fathom?
What if tomorrow you decide to play the lottery, win that lottery, and win a few hundred million dollars (I don’t particularly know if any lottery is up to that amount right now, but let’s just say this is possible for the sake of this hypothetical scenario). Now let’s say a local sports team becomes available, and with your new found winnings (we’re assuming you win enough that after a lump sum payment and taxes, you have enough to buy a professional franchise…yeah, big assumption) you decide to buy this professional team, well, because you always wanted to own the team.
Let’s say you ended up with $500 M, the team cost you $350 M, and you have $150 M remaining in the bank. You’re not hurting for money, as you’re covered for life. This new purchase not only fulfills your desire to own your own sports team, but guarantees that your family will be set for life, and potentially turns in to your family business. Would you sell the franchise just because someone offered you a lot of money? Even if someone offered you $500 M for the team, which is a $150 M profit over what you bought the team for, it wouldn’t make sense for you to sell. When you had $500 M in winnings, you were fine with just $150 M in the bank and a sports team. If you only cared about money in the bank, you probably wouldn’t have spent $350 M on a team.
Nutting has been buying up shares of the team ever since he first bought in to the franchise. He also owns a newspaper business, which isn’t exactly the most stable long term industry in the US, and a ski resort, which isn’t a year round business. Now it could be like one of the local ski resorts, with revenue opportunities year round (ours has a water park for the summer), but let’s think about this. Which is the better business to hold on to? A publishing business when everything is going digital, a ski resort, or a baseball franchise? Assuming Nutting is in this for the short term, and that he’s just going to cash out and settle down with a ski resort and a newspaper business for the long term is a HUGE assumption.
2. The Ted DiBiase Approach
If you’re familiar with Ted DiBiase (who am I kidding, you’re Pittsburgh fans, professional wrestling is in the sports section up there), then you know about the “everybody’s got a price” catchphrase he always used. I agree with that to a certain extent. However, it’s a very simplistic approach that I see thrown around way too much when talking about buying Nutting out.
The best comparison of a business like the Pittsburgh Pirates, and a common investment would be a house. Both appreciate in value over the long term in the majority of cases, and both can be passed down from generation to generation. So let’s assume your house is worth $300 K, and that you’re happy with your house. If someone comes along wanting to buy it, you’re likely not going to sell at the value of the house. Assuming you’d need to spend $300 K on a new house if you sell this one, what would it take for you to sell the house? Maybe $500 K?
Let’s assume you do sell it for $500 K. Good for you, you’ve made a $200 K profit before taxes. What about the new owner of the house? He now owns a house that is worth $300 K, and he owes $500 K. It will be years before he can break even on this investment. The only way this wouldn’t matter is if he wants this house to be in his family for a long time. We’re also assuming in this scenario that you don’t have the same feelings, and that you care more about the $200 K profit than having the house in your family for a long period of time.
That goes back to issue number one. We don’t know what Nutting’s intentions are. Maybe he wants a family business, or maybe he’d sell for a massive profit. However, if it’s option number two, are the Pirates better off with an owner who is in a huge amount of debt right off the bat? Fans want a bigger payroll, but is that more likely to happen with Nutting, or with an owner who just spent way more than the franchise is worth to buy Nutting out?
3. How would Lemieux help the team?
If this was just some random person offering to buy the team, there would probably be some talk about the subject, but I doubt we’d have so much of the “This would be great for the Pirates” talk. There’s a reason for this. In Pittsburgh, Mario Lemieux is synonymous with success. He led the Penguins to back to back Stanley Cups in the early 90s. He saved the Penguins at the turn of the century. Under his ownership the Penguins won a Stanley Cup last year, and have become one of the top teams in hockey. He’s arguably the most important sports figure the city of Pittsburgh has seen, just based on his impact on the city.
The question is, what would change if he owned the Pirates? Let’s take a look at how the Penguins did before and after Lemieux bought the team prior to the 1999-2000 season.
I couldn’t find information on the 1999-2000 payroll, or anything before the 2000-2001 season, although I did find the 98-99 payroll cited in an article in the Washington Post. That payroll was around $34 M. Lemieux bought the team before the 1999-2000 season. The payroll didn’t go up over the $34 M range until the 07-08 season, and we all know the reason for that is due to the salary cap, salary floor, and revenue sharing plan that currently exists in the NHL.
Attendance saw a spike right when Lemieux bought the team, although two things contributed here. First, from a paragraph in the Washington Post article:
Lemieux already has moved to make the team more accessible to fans, lowering ticket prices for 3,500 seats between $5 and $9 per game. He has also created alcohol-free family sections, where parents can purchase tickets for $25 each and up to six childrens’ tickets for $10 a piece on an individual game basis.
I don’t care who owns the team. When you cut ticket prices, you’re going to see attendance go up. That’s just the laws of supply and demand. There’s also Lemieux’s comeback in the 2000-2001 season which really explains the big jump that season.
I’ve seen plenty of people already saying things like “I’ll purchase a 20 game plan if Lemieux buys the team”, both on message boards, and on blogs. I don’t doubt that people would buy more tickets the first year, due to the novelty. Even if we assume that these are new purchases (as in, the people saying this didn’t already go to 5-10 games a year), there’s the question of what contingencies lie with these commitments.
If Lemieux comes in spending in the same payroll range as Nutting, will people continue to buy extra tickets, just because Lemieux owns the team? Lemieux didn’t raise payroll when he bought the Penguins. What if he takes the same business approach as Nutting? Neither know anything about running a baseball team, so they would defer to the CEO and General Manager. With payroll expected to be at the same level, the best approach is the one we’re taking right now.
That’s no different than what we saw from the Penguins under Lemieux starting around 2001. They traded off stars like Jaromir Jagr and Alexei Kovalev, investing in prospects, and building their future with draft picks like Marc-Andre Fleury and Evgeni Malkin. The NHL at that point was similar to baseball in that not all teams were able to maintain their best players. Granted, the NHL saw teams actually losing money, and I don’t think that exists as much in baseball. However, if you believe that the Pirates only made $11 M over the last two seasons, and you consider the cost of keeping the 2008 team together in order to keep players like Jason Bay, Xavier Nady, and Freddy Sanchez around, then you’ll see that there’s no way to avoid the “build through the draft and with prospects” approach in Pittsburgh (at least when there’s no salary cap/floor/fair revenue sharing like hockey now has).
I’ve always contended that the problem in Pittsburgh isn’t the ownership, but the approach to building a team. I think that no matter who owns the team, we’re going to see the same approach that Huntington and Coonelly are taking, and that’s an approach I favor. The idea that someone is just going to come in and up the payroll to $75 M a year, with no guarantee of a long term spike in attendance to prevent losses is pretty far fetched. Lemieux is viewed with rose colored glasses for all of his achievements, but there’s nothing that says he will come in and put the Pirates on a different track, with a payroll in the range of Milwaukee and Cincinnati. Therefore, we’d have a new owner, but the exact same situation we’re in now of hoping our prospects pan out.
Overall any potential purchase, by Lemieux or anyone else, wouldn’t impact my thinking on the team one bit. I feel that the Pirates need one thing, and that’s for their rebuilding plan to succeed. I don’t think that a new owner is going to change the approach to that rebuilding plan. I don’t think Mario Lemieux owning the team is going to make Pedro Alvarez hit ten more homers per year, or give Jose Tabata a better chance of success. Bottom line, the only thing a new owner will change is the name of the owner. The team, the payroll, and the approach will stay the same.