Squeeze Play

Forget steroids. It's spending that has baseball in a bind.

It’s been called the biggest deal in baseball since the Boston Red Sox sold Babe Ruth to the New York Yankees in 1920. And, as fate would have it, it was the Red Sox who once again let one of the game’s best players slip away when the Yankees acquired shortstop Alex Rodriguez from the Texas Rangers in February. Only weeks earlier, the Sox had abandoned efforts to bring A-Rod to Boston by restructuring his $252 million, 10-year contract.

Red Sox owner John Henry fueled the ensuing Boston-New York tabloid frenzy by grousing that “baseball doesn’t have an answer for the Yankees,” and calling for a salary cap. Sour grapes, shot back Yankees owner George Steinbrenner, taunting Henry for not going “the extra distance for his fans.”

Here we go again. As the duel between the two richest teams over the highest-paid player demonstrates, baseball does not reward financial control. “Baseball is a funny game,” muses Bob Furbush, longtime CFO of the Red Sox. “From the financial standpoint,” he says, pointing to his chest, “we’re here to make money. From the owners’ standpoint, they’re here to win the World Series. It’s a dichotomy.”

That’s far from the only contradiction in the peculiar world of baseball finance. Thanks to the soaring cost of buying and running a baseball franchise, almost all teams have CFOs, who are generally prized more for their CPAs or MBAs than for their knowledge of ERAs or RBIs. But between bosses who hold the purse-strings and a player’s union that controls the rules, those CFOs are constantly pitching out of a jam. One consolation: they can get away with reporting yearly losses—and most do—that would get them fired in any other industry.

In baseball, in fact, there is no bottom line. Even winning does not guarantee financial success. Florida Marlins senior vice president and CFO Michel Bussiere says the World Series champions “suffered an operating loss” last year—”as we did the year before.” Those losses are key to Bussiere’s argument that the team needs public funds to help build a new stadium (see “Build It and They Will Spend,” at the end of this article). But like most of his peers, he clams up when pressed about team debt and other financial details. “This is a private partnership,” he says. “I don’t normally disclose numbers unless the owners desire to.”

Indeed, the Yankees turned down CFO’s request to interview CFO Martin Greenspun, citing a reluctance to expose that front-office function to public scrutiny. Greenspun, like his fellow CFOs, has every legal right to guard his finances from public scrutiny (only three teams are owned by publicly held corporations). But baseball’s lack of transparency also fuels skepticism about the sport’s perennial claims of poverty.

Major League Baseball CFO Jonathan Mariner counters that teams do share their financials with MLB, which distributes the numbers to the other teams and the players’ union. Still, he admits, “one of the biggest challenges we face financially is the perception, in this fishbowl-like environment, that things aren’t right.”

Discuss

Your email address will not be published. Required fields are marked *