I’m invoking the Sports loophole to allow myself to talk about economics & capitalism in this post. I’m mildly sorry.
Underdiscussed, I think, in the conversation about blockhead MLB owners fucking up the return of baseball, is how debt financing may be hanging in the air above the negotiations. Yes, Rob Manfred is being an incompetent boor by repeatedly offering the same fundamental deal to players, but my guess is hard line owners - particularly new owners - may not be giving him much choice. I expect these hardliners are fundamentally inspired by greed, but greed filtered through the rhetorical sieve of “debt obligations.”
Let’s take a look at the last 10 team transactions in the MLB:
I can’t find full deal breakdowns for each team purchase, but here are some anecdotes:
Jim Crane borrowed $200mm from BofA to finance his $615mm Astros acquisition (that’s 35% debt financing)
The Ricketts Family (genuine scum of the Earth as only America can spew out) borrowed $250mm from a family-run trust, and $445mm from various banks, kicking in only $150mm of the $845mm deal themselves. (Depending on how you view trust “ownership,” that’s either 52% debt financing or 82%(!!))
The Miami Marlins deal is so insane its like the outsider art version of finance, but I’ll summarize this way: at least $500mm in debt financing on the $1.3bn deal, not to mention minority owners whose portions were almost entirely debt financed (such as Derek “biggest pervert in sports history” Jeter).
(Incidentally as late as 2008 MLB had a rule that every team had to maintain at least a 60-40 debt ratio, but it appears even that sketchy line in the sand has been abandoned.)
I promise not to go all Big Short here, but suffice to say debt financing is one of those financial tools that makes just enough sense for the corporate world to use it almost exclusively for nefarious purposes. Here’s the scam that private equity built in the 80s: I see a big public, or flagging private, company that has a lot of valuable assets like say, land, intellectual property, lucrative contracts etc. I propose buying them but I don’t have enough money, so I take out a shitload from a bank to buy them. This isn’t a problem, because now that I own the company, the debt I used to buy the company is the company’s problem, and I (the person who again, owns both the debt and the company) can prioritize paying back my lenders (also me). So you sell off all those nice assets - the land, the IP, the contracts - to pay back the debt. Of course, then you don’t have much of a company left. That’s fine, you can still take out debt against the company’s value to keep it alive - if only to pay bonuses to executives who tore the place apart. This is what people do to companies they don’t care about, that only look like “assets” to them.
Now imagine some cocksuckers go and do this to your fucking baseball team.
Well, it’s happened. It is happening.
Teams have been cutting back on expenses and raising prices on everything for years now. The free agency market is drying up. Tthe current crop of owners are not looking for long-term, sustainable success (and the profits that come with it). They want their assets (storied MLB franchises whose histories comprise threads in the very fabric of American culture) to be light on debt and high on margin, because that is what an asset you bought through debt needs to look like to be deemed a success.
I implore you to read the story of those disgusting Ricketts slugs and what happened when they bought the Cubs. And then imagine that these same people, with the same dull, boardroom thinking processes that they brought to their acquisition of the team, are the ones deciding what matters most in bringing baseball back. The National Pastime is not even a point of interest for them. Their decision is based on what is done with an asset, alienated from any identifying features, beyond its expected yield and cost in the short term.
The biggest nightmare for these cowards is actually paying your debts. Captains of industry do not pay debts out of their pockets, they always pay off interest from profit. If they play baseball, they will have to take a pay cut, which means less margin, less interest from profit, and - the most horrifying concept of all - the possibility that they’d have to actually pay debt from their own pockets.
It’s all so bloodless and boring, this version of evil. You at least gotta give it up to the gilded age robber barons for their perfectly human Sovereign complexes: The desire to throw cash everywhere, to adorn everything with your name, in the interest of influence and personal glory, is at least a relatable desire. Instead, in America in 2020, our overlords have no passions. They have won due to their dispassion, and they look at us and our simple “interests” with complete contempt. And what choice do we have but to cough up a hundred bucks a seat, to continue to pay their debts.