One of our corporate sponsors is Chevrolet [a General Motors brand]. General Motors has already told us that to the extent that they are able to, they would like to retain their sponsorship deal with Major League baseball. Why is that? Because, at the end of the day they have to sell cars — and to sell cars you have to advertise, you have to eke out a market.
But it’s also interesting that, for the first time, there are people now saying to companies, to clubs: “There is this outrage involved. Even though we can afford to renew our suite, even though we can afford to get those seats right behind home plate and a few rows back, optically we’re having a tough time renewing this year. We’re telling our employees we want to cut back. We’re telling our clients and other customers that things are tough, and I just can’t be seen sitting in those seats or in my suite.”
So that’s a new dimension that we’re facing that I think will have an impact on sponsorship sales beyond what we’ve seen in the past.
Now that you have all of this information about the clubs’ financial health, what are your biggest worries?
In the process that I described, we monitor our clubs’ financial health. We do not dig down into the ownerships’ financial health. And in this environment, there could well be an owner or two who could have their own personal financial crisis outside of the baseball team. The advantage for us is that [owners are] a very, very select club. To the extent that an owner had a personal financial crisis that caused his club to go into bankruptcy or to consider bankruptcy, the club is protected in two ways. Number one is our debt limits. One of the things that we focused on in enforcing our debt rules is that we limit the amount that a club can borrow with the club as collateral.
Technically, an owner can pledge his shares in the ownership of the club but he cannot pledge club assets. So the club itself is never subjected to being collapsed as part of a foreclosure process.
Secondly, if an owner has a problem financially and needs to sell the club —or worse, ends up in bankruptcy — the courts have recognized that ownership cannot change except by the express, exclusive, and reasonable permission of baseball.
Structurally, every single one of the 30 clubs has one person who we call the “controlled interest” person. The controlled interest person is that one person that baseball looks to for all decisions regarding the club. It is without regard to the financial or ownership stake that that person has. In order to be designated controlled person for the club, baseball must approve that person. And the only way to change it is if baseball says it can change.
So even if that person loses ownership status through his own partnership struggles, baseball can keep that person as the control person that it recognizes. If a club owner is in trouble and reaches bankruptcy, the only way ownership can change is through the baseball commission. We can control an awful lot of what happens in our franchises through both the debt monitoring and making sure that any transfer is done for the best interests of the league and the club.