Why did the Houston Astros sell all its minor league teams!?

Why did the Houston Astros sell all its minor league teams!?

Hi David, this is Adam from Long Island. Quick question on the recent sale of from the Houston Astros of the Sugarland Space Cowboys, Corpus Christie Hooks, Fatville Woodpeckers to Diamond Baseball Holdings. From your perspective as a former team president, does this sale primarily function as a liquidity play like cashing out the ballparks and minor league business to unlock value, pay down debt, or improve the owner’s balance sheet while handing off ongoing operating risk to DBH? How much cost and overhead does this remove from Houston’s P&L? And does that freed up flexibility meaningfully impact their ability or willingness to increase major league payroll or is that still governed more by other constraints like competitive balance tax internal budgeting? Finally, do you see this kind of sale as asset recycling or more of a signal of long-term recalibration for the of the organization’s strategic priorities? Thank you very much and I’ll hang up and listen. I love what you ended there with. Is it asset recycling or long-term recalibration? Any business when they they look at their balance sheet and they’re looking at what drags their balance sheet, they’re looking at what buttresses their balance sheet. When you’re a major league team, there was a time when major league teams did not own any of their minor league teams except their single A team, which operated out of their spring training facility. Then there was a time when teams said, “Wait a minute, let’s buy our AAA team because then we don’t have to hear from the AAA owner about how badly they want more players and how badly they want to win. Let’s buy our double A team because that’s where our best prospects are. And if we own the team, then we can control everything. We don’t have to fight about the weight room. We don’t have to fight about the clubhouse. We don’t have to fight about the system. The fact is that major league teams have been running their minor league team operations forever. Not their business operations, their baseball operations. Minor league teams are profitable and worth money for the sole reason that the biggest expense about owning a baseball team is the cost of your players. And minor league team owners do not pay for their players. the major league team that’s affiliated with the minor league team. The major league team pays for the players. That’s why it’s so important for minor league teams to be affiliated with the major league team. That’s why there was such a there were so many lawsuits and so many problems when Major League Baseball cut the number of affiliations per major league club. And there were a bunch of owners of minor league teams that used to be able to live under the bosom of a major league team. They were now fighting on their own in an independent league, having to pay their players out of their own operations, which is not sustainable. Strange, right, that you could have a baseball team and have it not make money on an operating basis. Weird. So, everything es and flows. And when it was really cool to own all your minor league teams, you had a bunch of rich major league owners who started buying up all of their minor league teams, putting them all together. And then they realized something interesting. It didn’t make sense that the money that they were spending to own their minor league teams would be better used for their major league quote unquote operations. the pain in the neck that existed with owning minor league teams and dealing with bobblehead days and stadium issues and dealing with all of the problems of owning a minor league team. There was just no bandwidth for major league teams to do it. So now it has gone the other way where major league teams are selling off their minor league teams. Jim Crane had the perfect statement after this deal. He said, “Diamond Baseball Holdings is the perfect partner for the Astros. Diamond Baseball Holding, they own many minor league teams. That’s what they do. That’s their gig.” Jim Crane now doesn’t have to worry for one second. Jim Crane gets to say to you, “Not only do they have a successful track record of investing in communities and minor league baseball, they also are committed to best-in-class local fan experience.” Give me a small break. When a team owns a minor league team, they could hire people who were bestin-class for local fan experience. They could invest in the community, but major league teams don’t want to do it. They don’t want to allocate the money. And they know that Major League Baseball has their back because the rules have recently changed. This is when you have to pay attention to things that happen that seem on their own to not be significant, but they’re all part of a bigger plan. When Major League Baseball decided they were going to take over minor league baseball, which they have, when Major League Baseball implemented rules that minor league teams had to have certain standards, they had to have certain standards in the clubhouse, certain standards of travel, of food, certain standards of care for the players. That was done with an eye toward teams selling the minor league teams they owned because buyers who were coming in would have to operate under the rules. Big league owners are always going to do best-in-class for their players because that’s all they care about is their players. But if you can have someone else doing it and not you, that would be preferable. So Major League Baseball changes the way minor league teams have to operate. And then you know coming in I’m going to have to spend this money to make sure we keep up our weight room to make sure that we’re feeding the players right to make sure we’re traveling right best hotels etc etc. None of this should be a surprise to you. Jim Crane doing that it does not change anything about the Astros payroll. It doesn’t change anything about the Astros operating their team. It just means that they get it’s like you know what Diamond Baseball Holdings is? They are Advil. They provide a way for big league teams to get rid of their headache. That really is all they are.

#baseball #houstonastros #MLB

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