U.S. Industry Could Learn From the Mets

October once again, and a baseball fan’s thoughts turn happily to the American and National league playoffs, which begin Tuesday, and the World Series to follow. But thoughts of fans who follow business as well as baseball can’t help but be drawn this year to the upcoming sale of the New York Mets.

The Mets’ value is put loosely at $75 million to $80 million in preliminary appraisals made for the team’s purchase by a group of investors led by Nelson Doubleday Jr., the team’s current chairman as well as head of Doubleday & Co., the family publishing firm that bought the Mets in 1980 for $21 million. Businessman Doubleday, 53, is selling the publishing house to a West German firm for $500 million but acquiring the ballclub for a price to be determined by independent appraisal. If the team does fetch $75 million, it would indicate that the Mets’ value has appreciated 250% in six years--a solid rate of 23.6% a year compounded.

Is baseball a quick way to make big money? Not at all. Doubleday and the baseball men he hired earned that return by taking a last-place loser and patiently building it into the powerful aggregation that ran away with the National League’s Eastern Division in the season just ending. How they did it could stand as a lesson for all U.S. business.

Demographics of Market

But an appraiser’s explanation of how a team is valued may chill a true fan’s heart. “You start out with the market, its demographics and how much competition there is for the customer’s disposable dollar,” says Michael Megna, who handles sports for American Appraisal Associates, the nation’s largest valuating company.

Markets differ. Teams in large markets such as New York, Los Angeles, Chicago, Detroit (where the Tigers sold for $53 million in 1983), Boston (which has all of New England) Philadelphia and the San Francisco Bay Area would have a higher value than those in other markets. Houston would be included among the elect, but the city’s ailing economy has hurt the Astros’ hypothetical value.

Television and radio possibilities rank second on appraisers’ checklists--and there are big differences. Each league’s teams share equally in a cut from baseball’s $181-million-a-year take from national television (NBC’s game of the week, ABC Monday night baseball, the All-Star and playoff games and the World Series), but local TV is another matter. According to Broadcasting Magazine, the New York Yankees this year will make $15.5 million from local television and radio, while the Kansas City Royals will get $2 million. The Philadelphia Phillies will make $9 million, the San Diego Padres $2.8 million.

Minority Partner

Appraisers look for sources of additional revenue, such as skyboxes and hot dog concessions, to produce a picture of a baseball team that only an accountant could love.

The true fan may be annoyed by talk of baseball economics. But the true fan, it turns out, is something like a minority partner in the business of baseball. “Sports fans are 25% of those who attend the games,” says Megna, who has been retained for an appraisal in the Mets case. “The other 75% are social animals who go because it’s fashionable or it’s business entertainment.” While fans support a team in all seasons, the 75% are impatient for a winner and unrealistic in their estimates of how long it takes to build one.

That is why some owners, like Las Vegas impresarios booking the latest hot acts, try to win fast by signing free agent ballplayers. Gene Autry has been doing that for years with the California Angels and may finally have a pennant winner this year. But free agency can be a negative for appraisers because it can disrupt fan support and make consistency in attendance suspect. Teams like the Boston Red Sox, who fill the park in the lean years and the fat, would tend to have a higher appraised value than, say, the Houston Astros, whose attendance has swung from 2.3 million in 1980--their previous divisional victory year--to 1.6 million this season and 1.1 million last.

The attendance champions, and probably the most valuable franchise in baseball, are the Los Angeles Dodgers. Led by owner Peter O’Malley, the Los Angeles ballclub relies on its farm system to develop young talent and is almost always a playoff contender. When he bought the Mets, Nelson Doubleday copied the formula, building the farm system and gradually improving the team. Now the Mets, who drew more than 3 million fans this year, look like contenders for many seasons to come.

Even George Steinbrenner, the impresario owner of the New York Yankees, seems to be looking over his shoulder at the Mets’ success and shifting his tactics toward developing rather than buying ballplayers.

The moral for American business is obvious: If it relied on developing its people rather than trying for quick fixes through financial gimmicks and oddball acquisitions, it might start winning again one of these seasons.