Monopoly League Baseball

https://portside.org/2024-09-14/monopoly-league-baseball
Portside Date:
Author: Amos Barshad
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The Lever

It’s a late August afternoon in Portland, Maine, and the crispness in the air makes it clear that, up here, summer is fading fast. But the sobriety of autumn hasn’t hit yet: It’s Elvis Night tonight and out front of Hadlock Field — the home stadium of the Sea Dogs, the city’s treasured Minor League Baseball team — the people, simply, are going nuts. 

An Elvis impersonator backed by a ramshackle live band smashes through “Hound Dog” while the Sea Dogs’ mascot Slugger, in a bedazzled white pantsuit and big black sunglasses, busts out karate kicks. The band’s guitarist — a sixtysomething man bald except for the very back of his head, where the hair flows bountifully — flings his instrument over his back to shred a solo.

The banners behind the band advertise Horch Roofing’s “seamless gutter leak repair” services. Mustached security guards mimic the Elvis impersonator’s moves. Grinning, Elvis swings into a lovely rendering of the trademark hip shake, then shouts, “Man, they still work!” Squealing in delight, the fans mob Slugger and Elvis for selfies. 

Major League Baseball is the highest level of the sport, where players get paid millions to join the Yankees and the Red Sox. Minor League Baseball is an interconnected series of lower leagues where guys who hope to one day make it to the majors scrape together a living playing in towns like Wichita and Amarillo for teams with names like the Wind Surge and the Sod Poodles. Tickets are cheap; babies and grandparents are everywhere. 

The Portland Sea Dogs are quintessential Minor League Baseball. They’re also part of a newer American tradition: a private equity roll-up. In 2022, the team was acquired by Diamond Baseball Holdings (DBH), a subsidiary of Silver Lake, a Silicon Valley-based investment firm with over $100 billion in worldwide assets whose portfolio companies generate over $248 billion in annual revenue. There are 120 Minor League Baseball teams operating directly below Major League Baseball — DBH now owns more than 30 of them. 

As DBH has grown it’s been boosted, in part, by public taxpayers. In the three years DBH has been in operation, DBH-owned teams have extracted nearly $300 million in public money from local governments throughout the country, according to the Maine Center For Economic Policy

Columbus, Georgia, is coughing up $50 million in stadium renovation costs. Spartanburg, South Carolina, will spend more than $100 million in part to build a whole new stadium for a DBH-owned team. Those funds don’t go directly into DBH’s bank account — but when local municipalities foot massive bills for stadium repairs and construction, DBH avoids having to spend the money themselves.

A few months before Elvis Night, the Maine State Legislature approved a $2 million tax break for the Sea Dogs. While Maine’s contribution is small compared to other municipalities, the $2 million brings up the same essential question: Why are local taxpayers giving private equity-owned teams any money at all?

There is little proof that subsidies to sports teams benefit the public. There is a lot of proof that private equity ownership negatively impacts the industries it enters and the public at large. But if Portland refused to play ball, it might have encountered the same existential threat facing DBH-owned teams all over the country: the Sea Dogs, Elvis nights and all, could leave town for good. 

Pat Garofalo is the director of state and local policy at the American Economic Liberties Project, a think tank that promotes antimonopoly policies. “I’ve spent a lot of time working on ways to stop sports stadium subsidies,” he said. “There’s almost complete consensus among economists: None of this money does anything; the economic benefits are virtually nonexistent.”

And yet, since 2000, the American public has spent a collective $19 billion on major league sports stadium construction and renovation. Stadium projects tend to come in clusters as every few decades, sports owners get antsy and agitate for improvements on their allegedly aging infrastructure. As publicly-funded stadium projects move forward in New York, Tennessee, Oklahoma, and Florida, sports economists say the country is on the cusp of a new construction boom. 

The Tennessee project, a new stadium for the NFL’s Titans, secured $1.2 billion in taxpayer money, the largest single amount the public has ever given a sports team. 

Looming behind sports teams’ demand for public money is that cynical threat: If you don’t pay, we leave. Fans from Seattle to St. Louis have been scarred by the departure of their beloved major league teams over the last fifteen years; so far, two of the minor league teams that DBH has acquired — the Down East Wood Ducks and the Mississippi Braves — are scheduled to move to new towns. 

“No one wants to be the mayor who lost the team, who saw a piece of the community up and depart,” Garofalo says. “That’s why you see this play succeed again and again. Owners always have the nuclear option.”

Victor Matheson, a professor at the University of the Holy Cross and a sports economics specialist, points out that “learning how to extract subsidies out of local taxpayers” is a replicable strategy. Any given small-town government, Matheson said, won’t know “how the playbook runs.” After successfully navigating the thicket of one local legislative process, a company can show up in a new place and “seriously outgun any local municipality.” 

When contacted, DBH declined to comment. 

Will The Ball Pigs Survive?

A statue of Slugger at Haddock Field in Portland, Maine. (Image courtesy of the Portland Sea Dogs)

Miles Wolff, 80, is one of the godfathers of the minor leagues. As the owner of North Carolina’s Durham Bulls, he helped build the freewheeling, gimmick-loving culture of the sport. When I called him up recently, he asked me a question. “Do you understand how Diamond Baseball hopes to make money? I’m mystified.” 

For Wolff, it’s astounding that DBH is acquiring clubs that had been locally owned for decades. Wolff tells me he knows of one group that had no intention to sell. “They loved owning it. But after a while, Diamond kept upping the figure, and they thought, ‘We simply can’t turn this down.’”

Wolff is not the only one who’s confused. In a largely gushing article profiling DBH, the website Baseball America noted, “Private equity is looking for market-beating returns. And generally, private equity isn’t looking to buy and hold for the long term. It’s hard for many to figure out how that will work in Minor League Baseball.”

So why is this happening in charmingly tumbledown Minor League Baseball, of all fields? Brett Christophers — a professor at Uppsala University and the author of Our Lives In Their Portfolios: Why Asset Managers Own The World — isn’t surprised to hear that private equity is moving into minor league baseball, mostly because he isn’t surprised to hear that private equity is moving into any field. 

While private equity has “never been anything but expansionist,” he says, in recent years, the industry has had “increasing difficulties finding appropriate targets in their traditional sectors,” which means they’re anxiously sitting on unspent capital: money that isn’t being invested and cannot provide their desired massive returns. That money is known in the industry as “dry powder,” meaning unused gunpowder. 

DBH’s parent company, Silver Lake, is one of the giants of the private equity world. Along with its Silicon Valley headquarters, it has offices in New York, Hong Kong, and London; it’s invested in Airbnb, self-driving car company Waymo, and Chinese internet giant Alibaba, among other multinational firms.

Its incursion into Minor League Baseball may be explained, Christophers says, by the fact that private equity companies often look to invest not necessarily in “highly profitable enterprises,” but in “monopolistic assets” that “throw off regular and predictable cash flows.” That cash flow can be used to pay off debt and, in turn, make investments in more and more fields, further accelerating the “expansionist” nature of the industry. 

DBH began buying up clubs in 2021 after Major League Baseball, the corporate overlord of the minor leagues, lifted certain restrictions on how many teams a single company could own. DBH’s founders are known to be chummy with Rob Manfred, the commissioner of Major League Baseball. As one minor league owner told the sports publication The Athletic about DBH, “Nobody else would be doing this if they didn’t have some understanding of what Manfred wanted, or at the very least, his blessing.” 

Effectively, the rules change created the opportunity to pursue a monopoly and, with the tacit blessing of Major League Baseball, DBH stepped up to take it. 

For Garofalo, of the American Economic Liberties Project, DBH’s growth is just one colorful story within the boom of consolidation that has impacted nearly every sector of the American economy. Private equity “seeks places where they can buy into preexisting monopolies or quickly create them,” Garofalo said. “Once DBH is in control of half of the league, who knows what they can do with that power.” And as they build their monopoly, their teams will continue to extract public money. 

When asking for public funds, DBH-owned teams often say they need the money to upgrade their stadium to be in line with Major League Baseball’s most recent guidelines on things like the conditions of locker rooms and training facilities. Without public money, they implicitly suggest they might need to leave for a city that would provide them with upgraded facilities. 

That’s what happened in Portland, where the stadium needed to build a new clubhouse. But DBH knew Major League Baseball would require it to make upgrades when it purchased the Sea Dogs in 2022 from the family who had founded the team 28 years earlier. Why wouldn’t they just be expected to pay for the upgrades themselves? 

Maura Pillsbury is a tax policy analyst at the Maine Center For Economic Policy, which advocates for policies beneficial to working families. “It’s part of their cost of doing business that they were able to pass on to Maine taxpayers,” Pillsbury said. 

Pillsbury provided expert testimony to the Maine Legislature against the $2 million subsidy, pointing out that the money would benefit an owner in an industry well known for its labor exploitation. Sea Dogs players make a minimum of $1,000 a week during the approximately twenty-week season and around $250 a week in the offseason. Those minimums were only granted in 2022 when, for the first time ever, Minor League Baseball players unionized

Only an estimated 10 percent of all minor league players make it to the majors, where they may be, one day, in line for a rich payday. As one professional baseball player put it, minor league teams “essentially prey on guys’ dreams.” Ahead of their next round of collective bargaining, the unionized minor league players will surely be keeping a close eye on how DBH’s roll-up impacts their industry. 

DBH’s public-money extraction has happened without much pushback. But when the public gets to weigh in directly, they often kill spending on sports infrastructure. This past April, Question 1 in Jackson County, Missouri — a ballot measure proposal to raise $2 billion for two hugely popular Kansas City sports teams — was crushed

The sports economics researchers Rick Eckstein and Kevin Delaney have argued that subsidies are often pushed through against popular will by “local growth coalitions” — effectively, cabals of influential politicians, local businesspeople, and newspaper editorialists. 

Watching DBH-owned teams rack up public money at the scale of hundreds of millions of dollars, Wolff, former owner of the Durham Bulls, seems both envious and incredulous. “I’m part of the generation where there wasn’t money,” Wolff said. “You were buying a franchise to lose money. It boggles my mind that people will spend this much [public] money for a new ballpark.”

The public investment doesn’t necessarily trouble Wolff so much: He himself once attempted to raise public money to build a new stadium for the Bulls. (The attempt failed after a public referendum.) What really worries Wolff is the potential impact of DBH’s monopolization on the culture of the sport he loves.

In the old days, he said, “You had a hundred different owners doing different things and you never knew what you were gonna get.” Wolff ticks off some of his favorite gimmicks: the massive sign of a bull in Durham that snorts actual smoke; the farm pigs in St. Paul that bring balls back to the umpire. Along with those time-tested bits are newer beloved traditions. For the Brooklyn Cyclones, a themed Seinfeld Night has recently become an annual hit. The keynote event is an Elaine dance contest.

Now, Wolff said, “It’s all gonna be pretty corporate, like going to a McDonald’s. With that many clubs, you can’t be doing things that different.” If a DBH-owned team wants to try something like employing ball pigs, he frets, first they’ll “have to ask the lawyers.”

How To Make Corporations Behave

The Sea Dogs’ mascot performs at Elvis Night at Haddock Field. (Image courtesy of the Portland Sea Dogs)

During the debate over the $2 million tax subsidy in the Maine Legislature, a state representative named Cheryl Golek stood up in the House Chamber. 

“I love the Sea Dogs,” the Democrat said in her perfect New England accent. “I could stand here and tell you stories, the fun times, the memories. But I’m standing here dumbfounded that we are debating giving a billion-dollar company money when we have so much need in our state.” 

Maine is facing an acute housing crisis; it also has a severe workforce shortage credited in part to inadequate affordable child care access

With the millions being thrown around, Golek said, “My God, how long could we keep our shoulders open” with that money? “How long could we increase food supply to those in need? How many people could we house that are homeless?” 

The afternoon before Elvis Night, I met Rep. Golek in her district just north of Portland. We sat at a coffee shop across the street from the headquarters of the regional clothing chain Cool As a Moose. Golek — emphatic, quick to grin — told me she comes from “extreme generational poverty” and grew up in nearby Cooks Corner, a heavily wooded area near the Androscoggin River, in a family that “hunted to eat.” 

She began advocating on poverty-related issues as part of a local organization, Equal Justice Partners Circle, around 2016. Soon after, she said folks started asking her when she would run for office. In 2018, she took a Maine AFL-CIO candidate training course. In 2022, on her first attempt, she won her seat in Maine’s House of Representatives. 

“I’m not anti-corporate,” she said. “I just think we can utilize tax credits better for the people of this state. The bottom line for me was: Do we really understand who this company is?”

Many Minor League Baseball fans may welcome a DBH takeover, especially if that takeover brings stadium improvements and higher-profile entertainment options. The general manager of the DBH-owned Fresno Grizzlies has boasted that after DBH took over, the Grizzlies were able to book mid-tier country singer Thomas Rhett. 

But some minor league fans have gotten wise to the bigger picture. On a Reddit thread dedicated to discussing the DBH-owned Harrisburg Senators, one fan posted, “Surely it isn’t hard to find examples of when a single entity controlling 25% or more of the participants in a market ended up being bad for consumers or workers... let’s see... airlines, Ticketmaster, ride-share apps, grocery stores... but yeah *this* time it’s gonna be great!”

In Maine, Golek wasn’t the only dissenting voice on the subsidy. Writing for the Maine Beacon, former Portland Mayor Ethan Strimling urged the state’s legislature to reject the bill. In 2018, when he was mayor, Strimling successfully pushed back against spending public money on the Sea Dogs under threat of the team relocating if the money wasn’t spent. 

Sitting in a diner booth, Strimling — who, if he wasn’t actually a politician, could certainly play one on TV — told me the story. 

“They wanted us to spend half a million bucks replacing all their lights,” he said. “We were trying to rebuild our elementary schools where all these black and brown kids were going into classrooms with roofs leaking. So I just said, ‘It doesn’t make sense.’” Ultimately, Strimling said, the lights were replaced: The Sea Dogs just paid for the repairs themselves.

Before he was mayor, Strimling was a Maine state senator serving on the taxation committee. There, he said, he constantly fielded requests for “corporate welfare” for everyone from Hollywood productions to the hunting and fishing retailer Cabela’s. He said that the sports teams’ threat to leave town is echoed by one industry after another. Cabela’s, for one, threatened to place a retail center outside of Maine if they weren’t afforded certain tax breaks. The Legislature held firm — and Cabela’s is still in Scarborough, Maine

To business leaders asking for corporate welfare, Strimling likes to say, “You guys cry wolf every fucking time.” 

As politicians, Strimling said, “People come to us all the time asking for unreasonable things. So honestly, I don’t blame [DBH] for doing everything they can to make more money. I blame the elected officials. Why do we give it to them?”

Outside the United States, the idea of giving public money to professional sports teams is perceived as bizarre. After the co-owner of the world-famous English soccer team Manchester United recently floated the possibility of using public money for stadium renovations, a government source told the press, “It’s just not something we’d entertain. Where would it end?” 

Imagining a way to use public money giveaways to actually benefit the public, Strimling points to a City of Portland policy called “tax increment financing,” passed while Strimling was mayor. Under the policy, when public money is given to a corporation to fund a certain project, that project must pay its workers above a certain threshold. 

Strimling extends the concept back to when he was mayor, and the Portland Sea Dogs asked for public money to repair the stadium’s lights. 

“If they had said, ‘Look, we’ll make sure that the workers who put those lights in get health care or a higher wage’ — then you’re having a conversation,” he said. “There are actually some good ways that public money can be used to influence private businesses to do the right thing. In fact, you kind of have to, because they won’t do it on their own.”

The People’s Teams

A statue titled “For the people of Portland” at Haddock Field. (Amos Barshad)

Former wrestler and Minnesota Gov. Jesse “The Body” Ventura (Reform Party) once told the House Judiciary Committee that stadiums should be thought of like another publicly funded institution: “When we build a public library, we don’t have to pay to get in. But when we build a stadium, we have to pay the owner every time we go to a game.” Nestled within that statement is a bold vision of an altogether alternative model. What if the public owned its teams?

In 2022, Michael Waters at the worker-owned sports site Defector wrote about the Columbus Clippers, a minor league baseball team in Columbus, Ohio that, since the 1970s, has been owned and operated as a “public utility” of the city. As Waters wrote, “The case for public ownership centers on a total reimagining of what sports teams are and who they are for. Are they investment vehicles for the wealthiest people in the world, or can they be something more like a public good, not so different from a park or museum?”

Unsurprisingly, the major sports leagues have taken concrete steps to prevent such alternative-ownership models. The NFL’s Green Bay Packers are technically owned by thousands of fans who hold shares in a company called the Green Bay Football Corporation. Without this unique ownership model, the Packers might have been moved out of tiny Green Bay years ago. But the NFL has rules in place that effectively means no other team can replicate the Packers model. 

In the 1980s, after inheriting the San Diego Padres from her husband, McDonald’s owner Ray Kroc, Joan Kroc wanted to hand it over to the city of San Diego. It never happened; in response to Kroc’s plan, Major League Baseball passed its own resolution prohibiting public ownership. 

In the 1990s, Rep. Earl Blumenauer (D-Ore.) proposed the Give Fans a Chance Act, a bill explicitly forbidding leagues from prohibiting public ownership. Despite repeated pushes by Blumenauer, the bill never came close to becoming legislation.

The idea of a major professional sports team becoming publicly owned feels quixotic until you remember that, all over the country, the public is already spending its own money on private sports teams. As Defector’s Waters put it, “If cities were to begin to demand ownership shares in exchange for their generous subsidies, then local fans might begin to share in the prosperity of the professional teams that quite literally would not exist without them.” 

As DBH continues to expand, they’ll do so safe in the knowledge that the next municipality that shells out public money for baseball likely won’t expect anything in return. This spring and summer, DBH continued its growth: the Charlotte Knights, the Arkansas Travelers, and the Binghamton Rumble Ponies have all recently joined the company’s portfolio. DBH boasts they are not done yet. 

For Golek, the Main House representative, the conversation over the Sea Dogs’ money was never a conversation about sports financing. To be honest, she doesn’t really care what sports teams do. For her, the mandate has always been to find ways to help people. 

“I would have liked to see the tax credit go to something that was going to directly impact people’s lives,” she said. “Entertainment’s great. Housing and food’s better.” 

She circles back to DBH’s parent company, Silverlake, and their $100 billion in assets. She points out that Maine’s gross domestic product in 2023 was $73 billion. 

“OK, this company has more money than our entire state. And you want me to give them a tax break?” she asks. “To this day, I can’t wrap my head around that. I will forever remain baffled by this bill.”

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Source URL: https://portside.org/2024-09-14/monopoly-league-baseball