Yankee Ingenuity

For 34 years, George Steinbrenner has run the New York Yankees the way General Douglas MacArthur ran Japan: somewhat more imperiously than the emperor. By investing all profits in new players and paying them more than any other owner was willing to, he made a dormant team a winner again. Under Steinbrenner’s stewardship, the franchise has not only won 15 division titles, 10 pennants, and six world championships but has turned into the biggest attraction in sports. The Yankees’ annual revenue exceeds the average team’s by $132 million. Sports economist Andrew Zimbalist estimates the Yankees’ total value to Major League Baseball at $500 million to $700 million, which is between $50 million and $100 million more than the No. 2 team, the Boston Red Sox.

Wherever the Yankees play, their games are almost guaranteed sellouts. When they don’t make the World Series, ratings plummet. When Steinbrenner has lambasted a player, his rants have become back-page headlines. For four decades, the Yanks have been a three-ring circus, and he has been their clown, their ringmaster, their Barnum. “There is no such thing as apathy when it comes to the Yankees,” says Bill Giles, chairman of the Philadelphia Phillies. “He has made his team into something you either love or hate.”

The same can be said of Steinbrenner himself. His force of personality is such that he’s admired even by some who have reason to despise him. “Les Yankees, c’est moi” is Steinbrenner’s attitude. Surely no modern owner is more meddlesome—he has been involved in almost every facet of the team, from negotiating major player deals to running the parking concession for a day—and surely none is more powerful. “Baseball rewrote its collective bargaining agreement in 2002 for the purpose of getting its hands on some of his money,” observed Sports Illustrated baseball writer Tom Verducci, “both to chip away at his power and to prop up the weaker clubs.”

The value of the club Steinbrenner bought 34 years ago from CBS for $10 million—his initial equity contribution was $168,000—has increased to an estimated $1.2 billion, the highest in baseball. The $302 million that the Yankees grossed last season came largely from ticket sales: A team attendance record of 4.2 million fans generated gate receipts of $155 million. Of the $103 million the Yankees pocketed from broadcasting rights, more than half came from the YES network, a regional cable station in which the team has a 35 percent share. The combination of YES money and lucrative marketing deals accounts for how the Yanks lost more than $25 million yet accrued $170 million in value last year. Investment bank Goldman Sachs, which owns a minority stake in YES, has been exploring a possible sale of the network—analysts say it could be worth at least $2 billion. “Goldman is merely testing the market,” Rubenstein says. “They do not represent us. The Yankees have no interest in selling their share in YES.”

The new $1 billion ballpark set to open in 2009 will make a team that’s already the most bankable in sports even more attractive, boosting annual revenue by another $50 million to $60 million from the sale of tickets and luxury suites.

The Yankees will cover 80 percent of the construction and receive a $44 million tax break. Most of their financing comes from a 40-year bond to be paid off in yearly increments of $55 million. If the Yankees don’t field a good team, they’ll be saddled with some very handsome fixed costs. There will be more pressure than ever on the owner to produce a competitive champion, which is why, in the winter of the patriarch, the person who draws up the flight plan for the Bronx Bombers matters.