Pirates insider: Advice for Nutting: Sometimes a loss can actually be a win
Jay Lustig was not the first minority owner to sell his stake in the Pirates after Bob Nutting assumed control of the franchise in January 2007. What makes Lustig unique is he was willing to talk about why he got out.
Lustig told Trib Total Media's Jeff Oliver last week that he ran out of patience with the way Nutting runs the club.
“Bob is too rational a businessman to ever spend more money to build a winner,” Lustig said, adding that he often urged Nutting to sell the team to someone with deeper pockets.
In an email to Oliver, Nutting said he appreciated Lustig's involvement with the ownership group and “looks forward to seeing him at many games this season.”
The email didn't say whether anyone asked Lustig to buy a 10-game ticket plan so he's guaranteed good seats for SkyBlast.
I'm curious about what Nutting thinks about Lustig tabbing him “a rational owner in an irrational business,” but Nutting never responded to my request for an interview.
So I instead talked to former Texas Rangers owner Chuck Greenberg, a Pittsburgh native who once offered to buy the Pirates from Nutting. Greenberg disagrees with the notion that you have to put rational business practices on hold in order to compete.
“There are many different types of rational business purchases and practices,” Greenberg said. “In some cases, you operate a business primarily to maximize (profits). That doesn't fit the profile of most major league sports franchises. But it's also rational to purchase and operate a business whose value you expect to grow substantially over time. Certainly that has been true with all Major League Baseball franchises.”
Lustig, like many Pirates fans, believes baseball's economic playing field is too uneven for the Pirates to be competitive without a larger payroll. Greenberg doesn't buy it.
“There's no business with a completely level playing field,” Greenberg said. “(But) the days when any franchise was revenue-challenged are long over. There is so much revenue in baseball, not just at the local level but also national revenues that sustain every franchise as well as enormous amounts of revenue sharing.
“Every franchise has the ability to compete without losing money. It's just that some franchises have to be a little bit smarter, a little bit more savvy and a little bit luckier to maximize their opportunity. But that's true in most industries.”
After the 2009 season, I asked Nutting if he would consider adding a major investor — someone such as Mark Cuban. Nutting's answer was succinct: “We have sufficient resources.”
The Pirates began the 2009 season with a $54 million payroll. On Opening Day this year, the amount was $79.6 million, which ranks 20th among the 30 MLB clubs, although the Pirates are responsible for only $66.05 million.
“We're heading into this season with the highest payroll in the history of the franchise,” Nutting said in February during spring training. “We need to be better and outcompete other people. It's always going to be a challenge. When you talk about other teams and payroll, we will never use total dollars as our sole gauge or as an excuse.”
Nutting's plan is simple: Maintain a modest payroll, develop core players internally, and use the free-agent and trade markets to acquire prospects and complementary pieces.
“The way Nutting does it makes sense from a baseball and a business perspective — provided their plan for the baseball side of it is solid,” said John Clark, director of the sports management program at Robert Morris University.
The students in Clark's classes were born in the 1980s and have grown up knowing the Pirates only as losers.
“They'll echo the talk-radio lines about, ‘Nutting just won't spend money,' ” Clark said. “I turn the tables on them and ask, ‘If you're the owner — of a baseball team, a laundromat or whatever — what are you trying to do? Make money.' Nutting does that, so in that regard he's successful.”
Perhaps. But as Greenberg pointed out, taking a loss sometimes can be a perfectly rational thing for a franchise to do, too.
“Because of the growth in franchise values, some owners have been willing to lose money on an operating basis because they know the increase in franchise value well exceeds the deficit,” Greenberg said. “In certain cases, an owner may believe that underwriting a reasonable deficit actually accelerates the growth of the franchise's value because the additional spending improves the product on the field, revenues off the field and the strength of the overall brand. That's not irrational.”
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