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Switch Hitter
by Bob Drury
September 2008 Issue
September 2008 Issue
Ousted Sony C.E.O. Peter Guber plays hardball in the minor leagues.
Some of the other big ownership groups in the minor leagues.
A back-of-the-napkin analysis of how much investors might be willing to pay for Chicago's beloved underdogs. Read More
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And for tonight’s act, Peter Guber presents . . . the sixth season of the Class AA Frisco RoughRiders.
Yes, that Peter Guber, the movie producer behind blockbusters like Batman and Rain Man. The same Peter Guber who was booted from his job as chairman and C.E.O. of
Sony Pictures Entertainment in 1994 for incurring the company’s biggest write-down ever. Since then, Guber has moved on from Hollywood to small-town America, refashioning himself as a mogul of a different kind: one who buys distressed minor-league baseball franchises and transplants them in second-tier cities looking for an economic boost. As he did at Sony, Guber has hooked up with deep-pocketed patrons, only this time around it’s local governments, which will foot the bill for pricey new stadiums. This is a standard yet perennially controversial arrangement, but it hasn’t prevented Guber from becoming one of the biggest owners of minor-league franchises today. He owns five teams, operates one, and is in the process of buying another, the Winston-Salem Warthogs.
Owning minor-league teams is not as sexy as moviemaking, he admits. “But there’s a sizable bottom line if you do things right,” he says, showing the same promotional savvy that made him famous a decade and a half ago.
Guber got into the minors almost by accident. After leaving Sony, he formed Mandalay Entertainment, a TV-and-film-production company (its most notable release is I Know What You Did Last Summer), and made a few bids on various major-league sports franchises, including the Oakland A’s and the N.B.A.’s Miami Heat. When those failed, Guber instead partnered with a father-son team that owned two successful minor-league franchises to form Mandalay Sports Entertainment.
Today, Guber relies on his own scouts to find cities that are in the market for a team. Back in 2002, for example, Frisco, Texas, a fast-growing town north of Dallas, was eager to acquire a club. Tom Hicks, owner of the major-league Texas Rangers, wanted to bring a team to Frisco to anchor a planned real estate development. He contacted Guber, who already had multiple teams in his stable, and they reached an agreement. Frisco would pay for a $22.7 million ballpark, while Hicks and Guber would reel in a team. Their quarry: the struggling Shreveport, Louisiana, Swamp Dragons, which they snapped up for just over $4 million, renamed the RoughRiders, and exported to Texas. Now Mandalay, which bought the bulk of Hicks’ interest in 2003, pays Frisco to lease the city-owned stadium, Dr. Pepper Ballpark. Attendance at RoughRiders games has increased dramatically as players’ on-field performance has improved. The team went from last in the league in 2001 to first in 2004.
Yes, that Peter Guber, the movie producer behind blockbusters like Batman and Rain Man. The same Peter Guber who was booted from his job as chairman and C.E.O. of
Sony Pictures Entertainment in 1994 for incurring the company’s biggest write-down ever. Since then, Guber has moved on from Hollywood to small-town America, refashioning himself as a mogul of a different kind: one who buys distressed minor-league baseball franchises and transplants them in second-tier cities looking for an economic boost. As he did at Sony, Guber has hooked up with deep-pocketed patrons, only this time around it’s local governments, which will foot the bill for pricey new stadiums. This is a standard yet perennially controversial arrangement, but it hasn’t prevented Guber from becoming one of the biggest owners of minor-league franchises today. He owns five teams, operates one, and is in the process of buying another, the Winston-Salem Warthogs.Owning minor-league teams is not as sexy as moviemaking, he admits. “But there’s a sizable bottom line if you do things right,” he says, showing the same promotional savvy that made him famous a decade and a half ago.
Guber got into the minors almost by accident. After leaving Sony, he formed Mandalay Entertainment, a TV-and-film-production company (its most notable release is I Know What You Did Last Summer), and made a few bids on various major-league sports franchises, including the Oakland A’s and the N.B.A.’s Miami Heat. When those failed, Guber instead partnered with a father-son team that owned two successful minor-league franchises to form Mandalay Sports Entertainment.
Today, Guber relies on his own scouts to find cities that are in the market for a team. Back in 2002, for example, Frisco, Texas, a fast-growing town north of Dallas, was eager to acquire a club. Tom Hicks, owner of the major-league Texas Rangers, wanted to bring a team to Frisco to anchor a planned real estate development. He contacted Guber, who already had multiple teams in his stable, and they reached an agreement. Frisco would pay for a $22.7 million ballpark, while Hicks and Guber would reel in a team. Their quarry: the struggling Shreveport, Louisiana, Swamp Dragons, which they snapped up for just over $4 million, renamed the RoughRiders, and exported to Texas. Now Mandalay, which bought the bulk of Hicks’ interest in 2003, pays Frisco to lease the city-owned stadium, Dr. Pepper Ballpark. Attendance at RoughRiders games has increased dramatically as players’ on-field performance has improved. The team went from last in the league in 2001 to first in 2004.
The Frisco arrangement is similar to a deal Guber struck in 1999 involving the Rockford, Illinois, Cubbies. According to a person close to the club, Guber scooped up the franchise for $4 million, renamed the team the Dragons, and forged an affiliation with the Cincinnati Reds. An intermediary introduced Mandalay to city executives in Dayton, Ohio, who offered to finance a $23 million downtown ballpark in order to entice a team to move there.
As part of that deal, the city of Dayton and Montgomery County issued municipal bonds worth $18 million to pay for most of the stadium’s cost. Mandalay put in $4 million. In return, it secured a 20-year operating lease with an option for an additional 10 years. Mandalay is currently working with the city on a multiuse real estate development surrounding the park. If the deal, worth $250 million, goes through, Mandalay will be an equity partner. At the time Mandalay connected with Dayton, “baseball people thought we were crazy,” Guber says. “They said we were too close to the fan base of the Reds, that depopulated Dayton couldn’t support a team, that I was just another Hollywood guy with a silly jones for baseball.... Well, sure, I’m a fan, but this is not philanthropy for me.”
Though Guber is prone to making exaggerated statements, this doesn’t appear to be one. Over the past decade, minor-league teams have become the toy of choice among wealthy businesspeople and are known for performing better financially than their major-league parents. The teams are relatively cheap, costing anywhere from $1 million to $25 million, depending on their class affiliation. There is also a built-in financial advantage, in that major-league affiliates pay minor leaguers’ salaries and injury costs. Minor-league team owners, who don’t get involved in scouting, trading players, or hiring and firing coaches, operate like movie-theater owners: Guber makes money through sponsors, ticket sales, and concessions, which can generate profit margins of 15 to 20 percent.
While the rate at which team values were appreciating has recently slowed, the minor leagues retain some advantages. Major-league teams, for example, collect only 6 percent of their minor-league affiliates’ ticket sales. And minor-league owners are allowed to keep all the revenue from concessions and merchandise sales.
Tonight, though, Guber’s attention is on the RoughRiders, who are taking on the Midland RockHounds at Dr. Pepper Ballpark. While the RoughRiders go through their pregame drills, Guber, who is attending the game with his two 14-year-old sons, looks down at the crowd-pleasing Newlywed Game unfolding atop the visiting team’s dugout. The action is broadcast on the stadium’s giant outfield screen, bringing roars and howls from the crowd. Guber cheers right along.
“I love this team. I love all our teams, because I love this game,” he says. Just then, the crack of the bat echoes in the stands. All heads turn—except Guber’s.
He is counting the house.
As part of that deal, the city of Dayton and Montgomery County issued municipal bonds worth $18 million to pay for most of the stadium’s cost. Mandalay put in $4 million. In return, it secured a 20-year operating lease with an option for an additional 10 years. Mandalay is currently working with the city on a multiuse real estate development surrounding the park. If the deal, worth $250 million, goes through, Mandalay will be an equity partner. At the time Mandalay connected with Dayton, “baseball people thought we were crazy,” Guber says. “They said we were too close to the fan base of the Reds, that depopulated Dayton couldn’t support a team, that I was just another Hollywood guy with a silly jones for baseball.... Well, sure, I’m a fan, but this is not philanthropy for me.”
Though Guber is prone to making exaggerated statements, this doesn’t appear to be one. Over the past decade, minor-league teams have become the toy of choice among wealthy businesspeople and are known for performing better financially than their major-league parents. The teams are relatively cheap, costing anywhere from $1 million to $25 million, depending on their class affiliation. There is also a built-in financial advantage, in that major-league affiliates pay minor leaguers’ salaries and injury costs. Minor-league team owners, who don’t get involved in scouting, trading players, or hiring and firing coaches, operate like movie-theater owners: Guber makes money through sponsors, ticket sales, and concessions, which can generate profit margins of 15 to 20 percent.
While the rate at which team values were appreciating has recently slowed, the minor leagues retain some advantages. Major-league teams, for example, collect only 6 percent of their minor-league affiliates’ ticket sales. And minor-league owners are allowed to keep all the revenue from concessions and merchandise sales.
Tonight, though, Guber’s attention is on the RoughRiders, who are taking on the Midland RockHounds at Dr. Pepper Ballpark. While the RoughRiders go through their pregame drills, Guber, who is attending the game with his two 14-year-old sons, looks down at the crowd-pleasing Newlywed Game unfolding atop the visiting team’s dugout. The action is broadcast on the stadium’s giant outfield screen, bringing roars and howls from the crowd. Guber cheers right along.
“I love this team. I love all our teams, because I love this game,” he says. Just then, the crack of the bat echoes in the stands. All heads turn—except Guber’s.
He is counting the house.
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