The revenue streams in Wednesday's memorandum of understanding will not directly affect the Reds team the next couple of years. But Reds officials hope they at least begin to ease the dry spell. The Reds are in last place in the National League Central Division, very thin on talent at Triple-A Indianapolis and five years away from moving into a new ballpark.
They need money to develop talent -- the sooner the better.
Among items mentioned in the memorandum of understanding that will help:
The waiving of $5 million in disputed back rent.
Reduced rent at Cinergy Field this year through 2000.
Annual rent of $1 at Cinergy Field after 2000.
The arrival of the long-awaited memorandum of understanding, or MOU -- with its requirement the county must, within the next 60 days, hire a project architect and construction manager to begin design and feasibility studies -- could begin to stir some comatose fans.
Because of the MOU, Reds Managing Executive John Allen envisions a slight bump upward in the number of season ticket holders for next year, reversing the trend of the last two years.
Such reversals are important to the Reds, who in the past year had to dramatically pare the payroll to fund such improvements as adding four scouts and teams in Mexico and the Dominican Republic, and bankrolling a baseball camp in the Dominican.
In the Reds' pre-strike (1994) heyday, season tickets sales were close to 20,000. They are now in the 14,000-15,000 range -- still a relatively high figure in the National League, but well below where the smallish-market Reds need to be to generate revenue. "We don't anticipate our payroll dollars getting fewer than they are now ($22 million)," Mr. Allen said. "With the reduced rent and the (waiving of $5 million in disputed back rent) and those types of things, there are some positive strokes (for the Reds)." In the long run, the revenue streams discussed in the MOU -- conventional tickets, club seats, luxury suites, parking, concessions, sales of merchandise, corporate sponsorships, naming rights of the stadium, etc. -- are what will give the Reds a chance to field a team with enough talent to compete for a championship.
But Andrew Zimbalist, the economics professor who wrote the book Baseball and Billions, said the Reds' lack of "stable and proficient" leadership will not help the franchise gather early deals for naming rights and corporate sponsorships.
WHAT IT MEANS
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Voters who authorized a sales tax increase in March 1996 finally get locations of both stadiums resolved.
The grass-roots campaign for Broadway Commons fails. It was embraced by city council and planning groups. Backers trying for a countywide vote to try to force Hamilton County to build the Reds stadium at the site.
Financially struggling Reds get a lifeline to new revenue.
Reds President and CEO Marge Schott gets a new stadium but may not be in charge when it opens in 2002 or 2003.
Construction downtown over next few years will be unprecedented: football stadium, baseball stadium, Fort Washington Way, National Underground Railroad Freedom Center.
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Mr. Zimbalist said he would expect the Reds to be able to get between $1 million and $1.5 annually for naming rights to the stadium.
The Reds "might be able to have somebody pay them up front for naming rights, but anybody who names it would be smart to defer the payments," Mr. Zimbalist said. "You (as a corporation) don't want naming rights to go toward (naming the stadium now), given the difficulties the club is having."
A deal could be worked out that some advance monies could be put toward developing a better team, but that's where the issue of the "stable and proficient" ownership comes in, Mr. Zimbalist said. Corporations don't want to pour money into a "black hole," he said.
"As much as I think of John, is he going to be there very long?" Mr. Zimbalist asked.
Mr. Allen, however, believes naming rights won't be a problem. "If you talk to the Cinergy people, they've been very pleased . . . they've had a significant jump in their name recognition," Mr. Allen said. "So, from a naming rights' standpoint, I don't see that (lack of long-term stable ownership) as being a problem." What about corporate sponsorships?
"I get that question sometimes," he said. "Not only about me (as to whether Mr. Allen will still be the managing executive beyond this year) but as to what the future management of the Reds is going to be. Does it hurt us? I don't think so.
"I've got stacks of (letters from) people who've contacted us already who want to do this or do that with us. I think they see it's a 30-year deal and they want to get their foot in the door," he said.
Mr. Allen isn't ruling out that the Reds' payroll won't get smaller -- the trading deadline at the end of July could trigger the trade of a veteran for prospects -- but if it happens it will be for the anticipated long-term betterment of the team, not financial reasons.
Also to the benefit of the Reds is that they are no longer operating in the red.
The club has claimed it lost $49 million from 1994 to 1996.
Financial World magazine reported during the summer of 1997 that the Reds lost $14 million in 1996, the highest loss in sports. How many of the revenues discussed in the MOU -- deposits on 50 luxury suites, possibly some seat licenses on 3,000 club seats, advance ticket sales, naming rights for the stadium, naming a concessionaire -- can begin to be realized well before the new park is opened?
"Probably not a lot," Mr. Allen said. "Because of the $30 million upfront (Reds) contribution, a lot of those dollars may be used for that. The $30 million is from sources at our discretion. We may or may not decide to take an upfront contribution from a concessionaire. . . .
"There are a lot of creative things out there that we will certainly explore, but as of right now I can't say specifically."
