Sunday, February 06, 2000

Griffey payoff is in the Cards


St. Louis hit jackpot with McGwire; Reds can prosper, too

BY CLIFF PEALE
The Cincinnati Enquirer

[mcgwire]
The Cardinals hit the jackpot when Mark McGwire broke the single-season home run record.
(AP photo)
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        In talks that have baseball fans and executives buzzing, the Reds are trying to negotiate a blockbuster trade for native son and Seattle Mariners superstar Ken Griffey Jr.

        Three seasons ago, the St. Louis Cardinals - a team very close to the Reds in market size, payroll, attendance and ballpark - pulled off a similarly huge deal by acquiring Mark McGwire, who has since become baseball's single-season home run king.

        In St. Louis, the price of acquiring a superstar paid off, said Bill DeWitt Jr., who heads a group of Cincinnati business executives that controls Cardinals ownership.

        "Mark has more than earned his salary," he said. "You have to say he's worth it, not only for drawing people, but because of what he does for the image of the St. Louis Cardinals," DeWitt said. "You can't really put a value on what he brings to the franchise."

        But that's exactly what the Reds are trying to do with Griffey, perhaps the most luminous of all of baseball's stars.

        With a budget of little more than $40 million this year, the Reds appear determined to stay within budget while finding a way to acquire Griffey, who is to make $8.5 million this season.

        Keeping him long-term will be an even more expensive prospect: possibly $18 million to $20 million a year - nearly half of the Reds' entire budget this season.

HOW THEY DID IT
  If Cincinnati lands Ken Griffey Jr., Reds executives will be looking for creative ways to pay his $8.5 million salary in 2000 and a new contract that could approach $20 million annually.
  Here are some of the ways the St. Louis Cardinals financed the acquisition and long-term signing of slugger Mark McGwire:
  • Ticket sales: The Cardinals sold about 600,000 more tickets than the year before during McGwire's first full season.
  • Radio and television revenue: The team extended its contracts with Fox Sports Net-Midwest since McGwire signed. The result: more money for the team.
  • Creative contract: To assume the unexpected high costs of McGwire's salary, his four-year contract was negotiated with higher payments in the last two years. The deal averages about $9 million per year, but McGwire will earn about $11 million this year.
ATTENDANCE BUMP
  When Mark McGwire signed a three-year contract with the St. Louis Cardinals in the final days of the 1997 season, it took less than a year for the team's attendance to take off.
  The Cardinals added 600,000 ticket sales in 1998, driven by the season-long race between McGwire and Sammy Sosa of the Chicago Cubs to break Roger Maris' single-season home run record.
  Attendance topped that in 1999, when more than 3.2 million fans poured through the turnstiles despite a mediocre 75-86 record.
  • 1996: 2.6 million *
  • 1997: 2.6 million
  • 1998: 3.19 million
  • 1999: 3.22 million **
  * Cardinals won their division, but lost in the National League playoffs.
  ** Franchise record, despite a 75-86 record.
        Griffey, 30, rocked the sports world in early November by requesting a trade from the Mariners, his employers for his entire professional career, to be closer to his family in Orlando, Fla.

        Even an eight-year, $140 million contract offer by Seattle did not sway Griffey.

        As a “10-and-5” player who has spent at least 10 years in the major leagues, the last five with his current club, Griffey has the right to refuse any trade. In mid-December, he rejected a trade offer from the New York Mets.

        The 1987 Moeller High School graduate who reached the majors with Seattle in 1989 says he will agree only to be traded to his hometown Cincinnati Reds, where his father, Ken Griffey, is bench coach for manager Jack McKeon.

        The Mariners have little negotiating room with their superstar. If they allow him to play out the 2000 season and become a free agent when his contract ends, they will not get a player in return.

        John Allen, chief operating officer of the Reds, would not elaborate Saturday on the Reds' deliberations in a potential Griffey trade.

        “Ultimately you have to win,” he said. “What happened last year here in Cincinnati showed that. If you don't get the attendance, the chances are that you're not going to have the ability to enhance (such areas as marketing and TV deals).”

        Any team, Allen added, dealing for a star player would have to consider ticket sales, marketing opportunities and other players' salaries before making such a deal.

        DeWitt, whose father owned the Reds from 1961-66, would not comment specifically about Griffey being traded to the Reds. Instead, he emphasized that each franchise must make its own decisions regarding superstar players.

        “Every franchise is different. You've got a certain budget you live within. ... It's hard for me to say in bottom-line terms, but relative to what we pay Mark and what he's done for the Cardinals, it's been a wonderful thing.”

        The numbers that both McGwire and the Cardinals have piled up since he joined St. Louis are startling.

        The franchise paid him $2 million for the last two months of the 1997 season. Before the season ended, McGwire signed a three-year contract, with an option for a fourth year, averaging slightly more than $9 million per year.

        The contract also gave McGwire $1 for every ticket sold past 2.75 million fans. He soon cashed in on that incentive.

        The Cardinals drew 2.6 million fans in 1997, the same as the year before. But in 1998, as McGwire and the Chicago Cubs' Sammy Sosa captivated the nation with their pursuit of the single-season home-run record, the team saw 3.19 million customers enter Busch Stadium turnstiles.

        Last year, even with a team that won only 75 games, the Cardinals drew 3.22 million fans, a record for one of baseball's most storied franchises.

        And this year, ticket sales are running 100,000 ahead of the same time last year, DeWitt said.

        Cardinals officials would not provide specific revenue numbers. But the increase of 600,000 visitors at the 81 home games from 1997 to 1998 produced about $5.5 million in new revenue, counting both tickets and added revenue from concessions, team President Mark Lamping said.

        The St. Louis Business Journal estimated in 1997 that the Cardinals get about $3 from each customer in concession sales. The rest goes to the concession operator.

        Primarily because of the popularity produced by McGwire, the Cardinals hiked ticket prices 15 percent for the 1998 season and then increased them again in 1999. The average ticket price last year was $16.28, the Business Journal said.

        Another boost came from TV. Within the last two years, the franchise extended its local cable-television contract.

        DeWitt would not reveal specifics, but David Pokorny, a spokesman at the Fox Sports Net-Midwest network, which televises Cardinals games, said McGwire's presence has been felt. Interest in his home-run bashing prowess led to bigger ratings and higher advertising rates, and helped support bigger rights fees.

        Ratings on Cardinals telecasts went from 4.7 in 1997 to 7.0 during the record-breaking season in 1998 to 6.4 last year. The rating represents the percentage of all homes in the area tuned in to the game.

        That increase makes it easier to sell ads, Pokorny said.

        “Everybody wants to renew, and they have to pay a higher rate because the ratings went up,” he said. “No one wants to leave Cardinal baseball after a season like that.”

        Pokorny said television-rights fees paid to baseball teams have increased during the past several years, although he would not detail the Cardinal contract.

        “The numbers consistently go up, because people industrywide have seen greater value in sports as a television product,” he said. “The expansion of the Cardinals' fan base because of McGwire just gives us more stability.”

        With the increased demand, the Cardinals have been able to market the team in different ways. For example, in early 1998, the franchise announced a partnership with a local retailer to open two Cardinals Clubhouse stores at local malls.

        The Cardinals receive a percentage of the revenue from those stores, but take little of the financial risk.

        McGwire's economic impact has extended past the Cardinals into area hotels, stores and restaurants.

        The St. Louis Regional Commerce and Growth Association estimated in 1998 that the extra fans interested in McGwire and the home-run chase added at least $50 million to the team's impact on the local economy, making the total annual impact about $325 million.

        DeWitt said the team did not sign McGwire thinking the extra revenue would justify his salary during the first year. The first baseman helped by back-loading his deal — reducing salary in the early years and increasing in the later years — to allow the Cardinals more flexibility.

        For example, the first baseman will make about $11 million this year, the Cardinals said.

        The team has used the extra revenue from ticket sales, concessions and the back-loading of McGwire's contract to sign more players in an attempt to win a National League pennant, DeWitt said.

        “Mark tried to facilitate a signing that would enable us to go out and get other players,” the Cardinals' owner said. “His interest is in playing on a winning team.”

        The team posted a $52 million payroll in 1999, but the acquisition of several pitchers will increase that to $60 million this year, a spokesman said.

        Last spring, Forbes magazine estimated the value of the Cardinal franchise at $205 million, with operating income in 1998 of $1.6 million. DeWitt said those numbers were not completely accurate.

        But there is little doubt that the Cardinals are in better financial shape than the Reds. Forbes put a $163 million value on the Cincinnati franchise, with 1998 operating income of $600,000.

        The Cardinals' value comes not only from bottom-line indicators such as attendance, media deals and sponsorships, but from national recognition that only a superstar player can bring, DeWitt said.

        “There's no question he's the signature player,” he said of McGwire. “He'll be a Hall of Famer. He broke the home-run record. He really will be the symbol of the Cardinals for many years to come.”

       



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