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Greener Grass, Episode 9: How it Could Work in San Jose

I am going all Journal of the Whills on you. The only difference is I actually completed all 9 Episodes (if you get this joke you are as big a geek as I and I love you for it).

To review... What other markets? What about the existing market? What specifics can we glean in San Jose? What are some potential spots in Oakland? What about attendance history? How do we make the fan experience awesome no matter where the stadium is built? Does transportation from the East Bay to the South Bay really suck? What sort of plan would keep the A's in Oakland?

This brings us to the final post I plan on making in this series that didn't start as a series... If San Jose then how?

The first step here is to identify the barriers to entry for the A's when it comes to the Capitol of Silicon Valley. Unlike Oakland, a stadium site and corporate support are not the expected challenges. I think we can all agree that MLB Territory designation is the highest hurdle. Second is the completed purchase of the land to be used for a stadium. Last is public support for the project.

To be honest, it is my belief that the second and third things on my list above will take care of themselves provided the first one does. As such, I am going to devote this post to MLB Territory, how the A's can get permission to go there and what a deal to cement the South Bay A's might look like.

MLB Territories are defined in Article VIII of the Major League Baseball Constitution (caution: this link is a PDF). Some common statements in the debate of MLB Territory as it relates to the A's and Giants are "All the other two team markets are shared so why isn't this one?" And, "The Giants own the rights to San Jose and can sue to block a move." There are other statements, but I think they all can be answered by looking at these two.

First, the two team markets that seem relevant to the territory discussion are Los Angeles, Chicago, New York and the Bay Area. The newest two team market (DC/Baltimore) is a different bird and we will get into that shortly. We all know what the Constitution says about the Bay Area: the A's get Contra Costa and Alameda Counties while the Giants get San Mateo, San Francisco, Santa Clara, Santa Cruz, Monterey and Marin Counties. But what about the other two team markets?

From the text of the MLB Constitution in Article VIII (Clubs and Territories), New York:

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Chicago:

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Los Angeles:

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To save space, I have only included the language for one of the two teams in each market. That being said, the other team always has identical language with the exception of the last sentence (for obvious reasons).

In summary, it is true to state that the other two team markets are shared markets, more so than the Bay Area. The question then becomes how do the A's get permission? Can the Giants really sue to stop a move?

The answers to these two questions are also found in the MLB Constitution. First, how to get permission. Most things in MLB's business rules can be changed with a simple majority vote. There are two specific sections of the Constitution that deal with circumstances where a 3/4 majority is required to make changes. These are Article II, Section 9 (Election of the Commissioner) and Article V, Section 2(b). This second Article and Section contains eight separate clauses the last of which I have included the actual text below:

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If you recall from above, Article VIII is what sets the territories of the Clubs. This means that to change territories a 3/4 vote of all the owners is what the A's would need.

But what if the Giants dissent? Who makes the call? This section of the Constitution provides the answer:

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But what if the Giants don't like what Bud has to say? Bill Neukom is a lawyer you know? This is the relevant section of the MLB Constitution:

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In other words, the Giants are contractually obligated to adhere to the arbitration decision of the Commissioner. To me, this does not mean that Bud Selig (if he decides San Jose is the way to go) will impose his will and take a territory from a team, it means he will broker a deal between two teams for a shared territory and get the support of the necessary owners to have it ratified. So what might that deal look like?

Admittedly, the deal between Los Natspos and the Orioles is not a case of apples v. apples when compared to the Heroic Nine in Green and Gold and the Black and Orange Bad Guys. The challenge that Peter Angelos had with the new Washington Club was media revenue, not operating territory. Because of this, the deal was not actually agreed upon until well after the Nationals were moving in. I don't expect that to be the case this time. If a deal is struck it will be in place prior to any announcement of a move. So what does that barrel of apples say about our bucket of oranges? Or, how is the Orioles deal relevant to a potential Giants deal?

First, let's look at what the Orioles got in the deal and why. There were three points:

  1. MLB guaranteed a franchise value of $360 Million
  2. MLB guaranteed media revenue by giving the Orioles controlling interest in a new regional sports network
  3. MLB guaranteed over all revenue would not dip below $130 Million.

These three points addressed Angelos' concerns that the Orioles would lose value/revenue by losing some of it's fanbase (sound familiar?) and lose a dominant position in the television market (not really an issue with San Jose). In 2004, the season before the move, the Orioles were worth about $300 Million on revenues of about $130 Million (based on Forbes reports).That is where the numbers included in the deal came from.

So how did this deal work out for MLB? In 2009, the Orioles are worth $400 Million with revenues of $174 Million... looks like MLB won't have to be shelling out any cash to them based on the agreement. Meanwhile, the Nationals are worth almost 4 times as much as the Expos were. I'd call that a good deal for all involved and a sort of blueprint for any future deals of a similar nature.

What is a good deal in terms of the Bay Area? The Giants current value, per Forbes, is $471 Million on revenues of about $200 Million. So the deal starts at maintaining those revenues and guaranteeing a slight uptick in franchise value. The Orioles were guaranteed 20% in franchise appreciation over their present value in 2004, I'd expect less of a percentage for the Giants because the A's are already in direct competition for fans. The Giants other concern is paying a mortgage and this concern replaces the media domination the Orioles sought. So here are the deal points that should appease the Giants:

  1. Franchise value guaranteed by MLB at $518 Million (a 10% increase).
  2. Annual revenue guaranteed by MLB of $200 Million.
  3. Annual payments by the A's to the Giants from year one of a new stadium through 2017 of $8.5 Million (or half the Giants mortgage).

This is a deal that should get the A's the right to pursue the South Bay. The question becomes "does the stadium debt the A's take on in San Jose plus the annual payments to the Giants erase the revenue gains they expect by moving into a new stadium?" Another question would be "does this total number compare favorably with whatever deal is structured in Oakland?" Only time will tell, I suppose.

In closing out these Greener Grass posts I want to thank everyone who has taken part in the discussions of each article. I didn't set out to write these with a plan for convincing people of any particular scenario outside of the fact that the A's are best served staying in the Bay Area. I hope that I have challenged your assumptions and that you have found these to be constructive on the whole. I have learned a tremendous amount about a lot of things in the course of writing these and I hope you have learned something in reading them.

Go A's!

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