Tuesday, October 30, 2001
Diamondbacks betting it all on this roll
NEW YORK Their business model is madness. The Arizona Diamondbacks can win the World Series and still lose millions. They are symptomatic of an industry seemingly intent on suicide.
Baseball is bleeding in cactus country. Jerry Colangelo has spent so extravagantly to build his fledgling franchise that he has been compelled to hit up his partners for $53 million in cash calls and borrow another $10 million to be sure the bills get paid.
His payoff is a place in the World Series and all the residual benefits that accrue from that feat. His problem is that his profitability pretty much depends on supremacy in the standings. Which, in baseball, is a tricky thing to budget.
I've got it under control, Colangelo insisted, standing by the dugout rail at Bank One Ballpark. Everything's fine. There's no concerns about where we go and where we're going. I'll be able to deal with our situation and compete ... We've reached the point where enough has been said about our finances.
This depends on your perspective. With another collective bargaining donnybrook looming, with contraction scenarios being reported as fact, with playoff games playing to thousands of empty seats and with TV ratings in retreat, baseball is a business fairly screaming for fiscal restraint.
$350 million investment
What it has, in Arizona, is a formula for foreclosure.
Between franchise fees, start-up costs and stadium contributions, Colangelo says his group's initial investment ran $350 million. When the Diamondbacks drew 3.6 million fans in their first season (1998), and banked a $21 million profit, servicing the debt seemed doable.
But as the novelty of the new game in town has dissipated and Colangelo has spent aggressively on player salaries to truss up the turnstile count, the Diamondbacks' debts have become burdensome.
In a sport that reeks of recklessness, the D'Backs are Evel Knievel. They reported combined losses of $41.5 million in 1999 and 2000 and yet continue to spend like counterfeiters. Their 2001 player payroll is in excess of $80 million the precise figure varies based on the accountant and Reggie Sanders is the only significant veteran whose contract expires at the end of the season.
To help balance his books, Colangelo persuaded 10 players to restructure their contracts and defer some salary. This has allowed him some short-term breathing room, but has deepened his long-term liabilities. Down the road, Colangelo figures to face a painful reckoning.
Unless the Diamondbacks can indefinitely sustain the cash windfall of this World Series, they will eventually be forced to economize. They were able to sell 1,000 season tickets in one day last week by using World Series tickets as bait, but there are no guarantees about getting back.
Short-term, it should mean $10-$16 million to the good based on how far we go in the World Series, Colangelo said. But the long-term impact is more important, in my opinion. It increases your season-ticket base. There's more interest. We had two (sponsorship) deals that we'd been working on that were on the cusp. As soon as we made the World Series, we made the deals.
Colangelo says the World Series should enable the Diamondbacks to break even on a cash-flow basis. Lord help him if he ever starts losing.
E-mail email@example.com. Past columns at Enquirer.com/columns/sullivan.
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