Sunday, September 12, 1999
Reds move into post-Schott era
New owners will face some new challenges
BY JOHN ERARDI
The Cincinnati Enquirer
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Carl Lindner will replace Marge Schott as controlling partner.
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A new Reds ownership group, led by businessman Carl Lindner, will be approved by Major League Baseball club owners Thursday in Cooperstown, N.Y., MLB officials said. That's when the real work begins for the Lindner group.
The team they will own is a very different one — with a whole different set of chal lenges — than the one they agreed to buy for $67 million last April.
That was the price for 5.5 of Marge Schott's 6.5 shares.
The exact details of the ownership package that MLB will be approving — who will own how many shares, what will be the legal structure of the ownership, and what roles key Reds partners William Reik and George Strike will have — apparently will not be made public before Thursday's announcement.
“Obviously it's exciting and we're thrilled with the performance of the team,” said Mr. Reik, a Wall Street investor who, along with Mr. Strike, is among the key Reds owners behind Mr. Lindner.
“And that has to be credited to (Reds general manager) Jim Bowden and his staff in player development and acquisition. If you look at our $34 million payroll, and stack it up against the rest of the league, Jim and his crew have done a remarkable job.”
What Mr. Reik didn't say, Reds radio announcer Marty Brennaman did: Because the 1999 Reds got a lot better a lot quicker than anybody — including the new owners — antici pated, the fans are going to expect the new owners to keep much of the team together for 2000.
And how do the new owners keep this team together?
“Money,” Mr. Brennaman said.
“And which would have cost more money?” he asked. “Taking over a hopeless situation and pouring money into the farm system in preparation for 2003 (when the Reds' new ballpark is scheduled to open) or having a core of good young players, guys like Sean Casey and Mike Cameron and Pokey Reese, who you want to be able to keep together and take into the new ballpark?”
Mr. Brennaman knows the answer to that question, and so do most Reds fans who know anything about baseball economics. The big-league payroll is a money-eating monster. It would have been much less expensive for the new owners if this team hadn't gotten good so quick.
This young Reds team has peaked early, before the owners will be able to get a big return on their investment by taking a good team into a revenue-rich ballpark that is three years away.
And it's not as though the Reds farm system is in good shape. It will need an infusion of capital, too. There's some good talent at Single A, and some talent in Double A that could be in the major leagues just before the new stadium opens. But there's virtually no help at Triple A, Mr. Brennaman said.
Although Reds history shows that the on-the-field performance of this year's team will translate into a big bump next season in ticket sales, group sales and other pre-sales, there is only so much of a bump one can get in Cinergy Field — compared to a new park.
There are only so many people willing to go to Cinergy Field.
And there are only so many hot dogs and trinkets you can sell people once they are there.
At Cinergy Field, the Reds don't get as big a cut of the revenues as they will get in the new park.
There will be pressure on the Reds' new ownership group, pressure that is not like the challenge they face in their regular businesses, to keep customers happy and shareholders in dividends. Reds fans have always viewed the Reds franchise as a public trust, whether these same fans are buying tickets and eating hot dogs.
As for the fans who do buy the tickets and eat the hot dogs, they are going to want to see some action from the Reds owners during the offseason that indicates a good-faith intention to capitalize on a remarkable season by providing another outstanding team in 2000.
If the fans don't see such action, the franchise will not be able to regain the 3,000 season tickets they lost between the players' strike of August 1994 and this season, when season tickets numbered under 16,000.
Will the new owners act accordingly?
Nobody knows.
“I think the fans' perception is very positive about this team as it enters into a new era of ownership with a core of players that is young and extremely talented,” Mr. Brennaman said.
Mr. Reik said the new Reds ownership won't get involved in day-to-day decision-making. That will be the job of Reds managing executive John Allen, who makes the business decisions, and Reds general manager Jim Bowden, who runs the baseball end.
But, as with any sports franchise, the owners give the daily operators a budget and they have to meet it.
Whether circumstances warrant stretching the budget — such as this year, when big-salary stars Greg Vaughn and Juan Guzman were acquired even though the bottom line didn't justify it — it is up to the owners to decide whether to authorize such a stretch.
The question, Mr. Brennaman said, is whether the owners will do it again next year, given that the fans didn't respond overwhelmingly at the gate this season to a team that has performed like a champion and is still very much in the postseason picture.
A case could be made for signing both Messrs. Guzman and Vaughn to take a shot at the World Championship next year. If by the end of July the Reds aren't in the race, the team could trade Messrs. Vaughn and Guzman — and whomever else — for young prospects.
Trading away veterans is how Mr. Bowden acquired such fine young talent as Sean Casey, Danny Graves, Dmitri Young, Dennis Reyes and, indirectly, Mike Cameron.
“I really don't think there is anybody (outside the ownership group) who has any idea about what type of approach they're going to take,” Mr. Brennaman said. “That's the single biggest unknown. How big a player will they (the new ownership) be in procuring on-the-field talent that has the ability individually and collectively to compete for championships?”
The paid observers and the radio talk-show callers have framed the issue as follows: “Whom do the Reds sign — Guzman or Vaughn?”
In her heyday, Mrs. Schott, the outgoing Reds president and chief executive, would have re-signed both.
But there's no guarantee the Reds' new ownership will re-sign either.
And what if the budget they demand of Messrs. Allen and Bowden necessitates that even more players be traded in order to meet it?
For all of the controversy she engendered, Mrs. Schott spent freely on the major-league payroll for the first 12 years of her 15-year reign, which began in December 1984.
“She never shied away from spending what was necessary to put a (high-quality) team on the field, whether it made economic (sense) or not,” Mr. Brennaman said. “She did it up until the last couple of years. It's the biggest single thing she did.
“It was a period in which, at times, the perception around the country of Cincinnati was not very good (because of the things Mrs. Schott said and did). But she gave Cincinnati a World Championship (in 1990) and a postseason (in 1995), and that goes back to putting a team on the field that can be competitive.”
Mrs. Schott will continue to be a Reds part-owner after Thursday's sale. She will retain one of her shares. Besides Messrs. Lindner, Reik and Strike, the other Reds owners will be Louise Nippert and Gannett Co. Inc., parent company of The Enquirer.
It isn't known what the breakdown of shares will be. It is believed Mrs. Nippert's share will increase, but her representative, Carter Randolph, wasn't available for comment. Tom Chapel, lead counsel for Gannett, said the company's percentage would increase “modestly.”
Mrs. Schott could not be reached for comment.
Two Reds insiders, who asked that their names not be used, said Mrs. Schott will not be allowed to retain her office inside the Reds complex. Although one of the perks she was granted in the sale to Messrs. Lindner, Reik and Strike was to have an office at Cinergy Field, it was subject to Baseball's approval, which was not granted.
In that same deal, Mrs. Schott was assured of keeping her luxury box and 21 blue-level seats at Cinergy Field.
Mr. Brennaman said the uncertainty about the near-term financial approach of the Reds' new ownership doesn't overly concern him.
“All of these men — Lindner, Reik and Strike — are successful in the fields in which they've chosen to walk,” Mr. Brennaman said. “I can't believe they'd willingly and knowingly undertake this ownership and run it in any less of a manner than the businesses in which they've been so eminently successful.”
Mr. Bowden said he will continue to work within the parameters he is given. Mr. Bowden said the Reds leadership — first with Mrs. Schott and then with Mr. Allen — always has allowed the baseball people to make the player development and acquisition decisions. He said he knows that won't change with Thursday's approval of the new owners.
“There have been times when the parameters have changed, such as in the Vaughn and Guzman deals, that took us beyond the budget,” Mr. Bowden said. “It was something (the new) ownership supported. Although we haven't seen the return in attendance this year, I believe we'll see it in an increase in season-ticket sales and other revenues in 2000 and beyond.”
The irony of 1999 is not lost on Mr. Bowden.
“You (i.e., baseball people) wanted this team in 2003, but you've got it now,” he said. “You are playing with the big boys, with Atlanta, the Mets and Houston. You are right with 'em.”
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