Sizing Up Mark Cuban; Potential Owner Of The Rangers by Maury Brown July 27, 2010 We’re happy to announce that Maury Brown, owner of the Business of Sports Network, will be writing for us here every Tuesday. Please welcome Maury to the crew. Well, this is a fine mess you’ve gotten us into, Tom Hicks. The Texas Rangers, mired in Chapter 11 bankruptcy when Hicks Sports Group defaulted on $525 million in loans, is about ready to go up for auction on Aug 4th. To place this in perspective, the last time this happened (it was also the first time) in MLB was with the Baltimore Orioles in 1993. Then, owner Eli Jacobs, had the club in bankruptcy and Judge Cornelius Blackshear held an auction that eventually came down to a group led by Peter Angelos and one by Jeffrey Loria. Angelos won the auction for $173 million over Loria, which, at the time, caused fans of the team in the courtroom to erupt into applause. We all now know how that has tuned out with Angelos at the helm, which brings us back to the auction of Rangers. Determining whether an owner will be good or bad is always a matter for history to decide. Looking to the past to try and predict the future is, at best, a tenuous endeavor. But, when Mark Cuban is one of those possibly in play to own the Rangers, you can assume he’d be something other than the normally placid owners that make up MLB’s ownership lodge at the moment. Cuban makes everyone stand up and notice. On Monday, Cuban’s lawyer Clifton Jessup told the chief restructuring officer in the Rangers case that by today, the Mavericks owner would make a determination as to whether to continue possibly pursuing the purchase of the club. In other words, much like Cuban in the NBA, you never know what you might get. Cuban is, more or less, trying to land an MLB club through the backdoor with the bankruptcy court more concerned about satisfying creditors than what the league would do if the sale were outside of Chapter 11. He’s not exactly the personality type that fits Bud Selig’s ownership profile; he’s one who has a taste for getting fined by the NBA for comments regarding the quality of referees. His outspoken ways were partially to blame for knocking him down when the Chicago Cubs were up for sale (although funding was more at issue before the sale got into the final bidding phase). His 2002 infamous quote to the Dallas Morning News in which he said, “Ed Rush might have been a great ref, but I wouldn’t hire him to manage a Dairy Queen. His interest is not in the integrity of the game or improving the officiating” landed a then league-record $500,000 fine. To add to David Stern’s heartburn, when Dairy Queen got up in arms about his statement, Cuban apologized and then worked a shift at DQ to show he wasn’t above working there. While a case can be made that controversial owners the likes of Charlie Finley or Ted Turner are ancient history, the fact remains that Selig has the league focused on growing MLB’s business instead of chasing maverick owners around, and has gone after getting the balance of power somewhat back in their court from the MLBPA. When you’re distracted with owners getting in trouble, it’s hard to focus on what’s in front of you. Cuban has a history of being a distraction. Which is why Cuban has most likely married himself up with investor Jeff Beck and partner Dennis Gilbert. Gilbert, along with Roland Hemond and scouts Dave Yoakum of the White Sox and Harry Minor of the Mets, created the Professional Scouts Foundation in January 2003. Having Beck as the lead in a bidding group gives the perception that Cuban wishes to play nice and “help” another group, but it’s hard to imagine Cuban playing the part of “the background guy.” One could speculate that Cuban would simply bide his time, if the group won the auction, and slowly buy out majority ownership stake. But is having Cuban as a majority owner such a bad thing? Would he be the same as he is as an owner in the NBA? It’s hard saying as owning the Mavericks and owning the Texas Rangers is a bit of an apples and oranges comparison. What is known is that since he bought the majority stake in the Dallas Mavericks from Ross Perot, Jr. in 2000 he has made them relevant in a market consumed by all things Dallas Cowboys. In the most recent Forbes NBA valuations, the Mavericks ranked 7th most valuable at $446 million. According to the USA Today NBA salary database, for the 2008-09 season (the most recent available), Cuban’s Mavericks ranked third in overall player payroll at $93,215,017 behind only the Raptors and Knicks. That spending has translated into Forbes showing the Mavericks running at an operating loss of $17.4 million. Playing to win can mean losing at the bottom line, which is bad for investors (and something Bud Selig would prefer not to see), but shows that he’s a passionate owner willing to put his money where his mouth is to field a contender. To place this in baseball perspective, the Rangers are shown to have a 2010 Opening Day payroll of $55,250,544, ranked as 27th out of 30 in the league. The most recent Forbes rankings for MLB has the Rangers as the 12th most valuable club in MLB at $451 million, up 11 percent from last year. So, if Cuban is willing to open up his wallet to help make the Mavericks win, so, he too, will do the same for the Rangers, right? Not so fast. One of Cuban’s biggest assets with the Mavericks is American Airline Center, of which he currently owns 50 percent. The facility has been a cash cow in terms of non-NBA related revenues, and that has placed American Airlines Center’s value of somewhere in the mid-$200 millions for Cuban. Those revenues have helped drive pouring money back into the Mavericks. While winning this year has seen sellout games during the recent homestand against the Angels, the Rangers rank 15th in attendance at an average paid attendance of 28,326. The Ballpark at Arlington is not part of the auction process, and indeed, the lease transfer for the ballpark is up in the air as JPMorgan Chase has filed a lawsuit claiming the Rangers fraudulently transferred the lease during the bankruptcy process. If Cuban were to win the auction for the Rangers, chances are that he will not be the “next Steinbrenner” and would likely run player payroll above where it is now, but nowhere near the top of MLB’s player payroll ranking. Cuban also has interest in other sports endeavors investing in the fledgling United Football League in 2010. The investment was done to get his foot in the door with HDNet, of which Cuban is Chairman. HDNet will broadcast ten regular season games for the UFL this year. According to the SportsBusiness Journal, the UFL lost roughly $30 million in its debut year, $6 million more than the league’s founders projected. Cuban could possibly look to swing some kind of broadcast deal for the Rangers for HDNet, although it’s uncertain how that would cannibalize the current deal with FOX Sports Southwest where ratings have been robust. Still, it’s a possible consideration for Cuban to try and eek out more revenues through the Rangers to his main business holding, HDNet. But, the real question becomes, does Cuban get in through the backdoor by outbidding the group led by Chuck Greenberg and Nolan Ryan? The league has backed the Greenberg/Ryan group pretty much from the beginning as they see transitioning as a smooth ride, whike a Beck/Cuban group would be riddled with question marks. At the center of those questions is Nolan Ryan. Ryan, a fan and league favorite, has been sitting in the position of president with the Rangers during this whole debacle. It’s unclear whether Ryan would want to be in a group with Beck and Cuban, or whether Ryan would be fired to get Dennis Gilbert in the picture. Which adds to MLB’s claims that the Greenberg/Ryan group would be a better transitional fit for the Rangers, who are sitting pretty atop the AL West and charging toward the playoffs, a promised land they haven’t been in in over a decade. Clearly, Ryan has his Hall of Fame pitching background to stand on, but he also owns the Corpus Christi Hooks, which play in the Class AA Texas League, and the Round Rock Express, a Class AAA team in the Pacific Coast League. Chuck Greenberg, whom Ryan sought out when the Rangers came up for sale, helped work out the bankruptcy sale of the Pittsburgh Penguins to Mario Lemieux. He’s also owned the Double-A Eastern League’s Altoona Curve and been president and managing partner of the Myrtle Beach Pelicans, which has seen recent attendance records. The two are portrayed as a symbiotic pairing with Ryan knowing a lot about baseball matters and has a good understanding of business, while Greenberg understands running baseball clubs with a solid business background. So, there’s a case to be made that Cuban isn’t good for any group looking to gain access to the Rangers, as MLB might not approve any ownership group he’s in. But here’s the thing: having Cuban in the auction mix is actually good for the process. Judge Michael Lynn, who is overseeing the bankruptcy case, has said that even if the Greenberg/Ryan group were to win at auction, he might overrule if he determines that there wasn’t a fair process in the sale. Cuban would assist in making the process “fair” by adding capital into the mix, and likely helping push the Beck group into a competitive position. In a backwards sense, Cuban would then help Greenberg/Ryan, if they have the muster to be competitive. Winning out over other competitive bidders would blunt talks that the process was unfair, and Lynn would then easily be able to approve a Greenberg/Ryan sale, if, as mentioned, the group is in it to win, and by all accounts, they are. In the end, what Mark Cuban brings is a series of question marks. He’s questionable to MLB. He might, or might not, be a good MLB owner for fans. He might, or might not, stay out of trouble with the league. What is known is this: Cuban, or just about any other owner, for that matter, would be better than Tom Hicks, arguably the most hated man in baseball at the moment. At least fans, who either love or hate Cuban, can find middle ground in that.