In the chain of dominoes that is the American economy, sports teams fall somewhere in the middle, knocked over by the owner, landing on top of the fan. For major league baseball's Texas Rangers and the NHL's Dallas Stars, the dominoes are wobbling as we speak. Both are owned by Hicks Sports Group, a group of investors organized by Texan Tom Hicks. The group is $525 million in debt and missed a $10 million payment due at the end of March, according to the Wall Street Journal (subscription required.)
Baseball is rife with corporate and Wall Street owners and one has to wonder if the economic downturns could also sap the budgets of the Atlanta Braves (Time Warner, TWX), the Los Angeles Angels (Walt Disney Co., DIS) and Dodgers (News Corp., NWS) and the Chicago Cubs ( Tribune Co. , TRBCQ).
Hicks Sports Group has reportedly hit the point where it can't fund the team's operating expenses and debt service simultaneously, and since only one is elastic, the boys in the cleats and pads should be concerned. While Hicks could lose both franchises, there are probably enough
suckers investors eager to rub elbows with professional athletes that he should be able to bring in new money, but not without cleaning up his bottom line.
An example of how the fortunes of the owners can ruin a sports team is baseball's San Diego Padres. It is only now slowly emerging from the nightmare of ownership gone sour. When John and Becky Moores, whose family owned 95 percent of the team, started divorce proceedings, they left the club in limbo, and forced it to dump some of its best players to lower payroll.
The new Padres ownership group, headed by Jeff Moorad, reportedly is paying $530 million for the team, but $240 million of that will be used to settle debt from the construction of Petco Park. That leaves $290 million as the cost of the team, a low-ball price if there ever was one at a time when Forbes estimates the New York Yankees are worth $1.306 billion. Forbes values Hicks' Dallas Stars hockey team at $273 million, and the Texas Rangers at $412 million.
As long as cities long for a professional franchise, owners of teams in leagues that are closed to expansion can use the threat of relocation to bolster their clubs' value. However, if attendance and advertising revenue drop this summer as baseball is predicting man front-offices will have to either cut loose high-priced veterans or dip into the owner's mitt. Already, aging stars like Frank Thomas and Pedro Martinez have been left in dry dock.
In an era where the average Joe bitches about $30 million CEO compensation packages, the $20 million baseball player may become a memory. And if the owners continue to bleed money in their day jobs, the players may end up going back to spending their own off-seasons selling cars. . . . Oh, wait, that won't work now either, will it?