Major Groups Grab More Minor League Teams

By Josh Leventhal
December 22, 2006

Fortunately for him, Marv Goldklang's first foray into minor league baseball wasn't a sign of things to come.

In 1982, Goldklang invested a modest sum to become a minority owner in the New York-Penn League's Utica Blue Sox--and lost it all.

Now he is chairman of a group that has invested millions to own four minor league franchises--with management consulting relationships with two others--and is a major player in minor league baseball's quickly changing landscape. In the midst of the most successful period in the history of minor league baseball, the Goldklang Group represents a growing trend, as bigger corporations continue to collect more franchises.

Ownership groups like Mandalay Baseball Properties, Ripken Baseball and Ryan-Sanders Baseball also continue to add teams to their portfolio--in both affiliated and independent minor league baseball. According to Minor League Baseball, 19 ownership groups currently own multiple franchises. Between them, the groups own 54 of the 150 available minor league franchises, and they own many of the flagship franchises around the minors, from Round Rock and Corpus Christi (Ryan-Sanders) to Frisco and Dayton (Mandalay).

"When we started in the 1980s, we were the relatively rare exception to the rule--which was independently owned franchises and community-owned franchises," said Goldklang, whose group owns the Charleston RiverDogs (South Atlantic), Fort Myers Miracle (Florida State), Hudson Valley Renegades (New York-Penn) and St. Paul Saints (independent American Association). "Now when we sit around the table at league meetings, the majority of teams are represented by individuals that are part of multiple-ownership groups."

Minor league baseball continues to go through an unprecedented renaissance, and in 2006 set an attendance record for the third consecutive season by drawing more than 41 million fans. But it's not clear how the continuing boom will affect individual owners in the long run, as larger ownership groups continue to swing for the fences.

Greater resources and financial backing allow ownership groups to turn profits by presenting the ideals that have made minor league baseball a hit over the years--cozy ballparks and creative promotions--but on a much grander scale.

The Dayton Dragons, Mandalay's flagship franchise in the Midwest League and one of the most successful teams in the minors, have an 18-person game day staff. At its annual mascot training sessions--how many minor league franchises have ever had anything like that?--Mandalay brings in the iconic Phillie Phanatic to teach employees the joys of entertaining spectators. Instead of lining the outfield walls of their ballparks in Dayton and Frisco with traditional billboards, Mandalay displays advertisements on massive LED screens.

"Our whole approach is that the entertainment has to be fresh and we have to reinvest in the franchises to keep the people coming back," said Mandalay Baseball Properties president Howard Nuchow, who served as an executive with the NBA's New Jersey Nets for seven years before leaving to join the company created by former Sony executives Peter Guber and Paul Schaeffer, along with businessmen Hank and Ken Stickney. "It's all about entertaining fans."

Mandalay has turned entertaining into an art form. The group purchased the Rockford Reds in 1999 and moved the team to Dayton the following season after identifying the city as a promising market without professional baseball. Their forecasts proved accurate: Dayton has sold out every game for seven straight seasons and has a 5,000-person waiting list for tickets. Frisco, a Texas League franchise that moved from Shreveport in 2003, drew 580,480 fans in 2006--ninth-best among domestic minor league teams.

Mandalay owns five franchises and has management contracts with two others, after recent partnerships with Staten Island in the New York-Penn League and Scranton/Wilkes-Barre in the International League. Both of those franchises are Yankees affiliates, so Mandalay is providing perks for season-ticket holders that include priority purchase opportunities for Yankees regular season and playoff games. After introducing Scranton as the Yankees' new Triple-A affiliate in October, Nuchow said the team sold more tickets in a day than Dayton did in six weeks after announcing its launch.

"The definition of success is different to a lot of people and ownership groups," Nuchow said. "We like to sell out every seat to every single game. When we are short of that we feel terrible about ourselves. We haven't accomplished it, but that is definitely what we work toward."

As successful as Mandalay has been at filling ballparks, the group has targeted real-estate development around stadiums as a way to expand its business even further. In Dayton, Mandalay has a $230 million development in the works around Fifth Third Field that would include a 300,000-square foot Ballpark Village with entertainment, retail, offices and housing.

Nuchow said Mandalay has identified two more locations where they hope to bring new franchises and develop similar real estate projects--adding that they have no intentions to relocate any of their current teams.

Good For The Game?

Nearly everyone in minor league baseball agrees that the sport is experiencing a boom in popularity and profitability. But there is less consensus about how conglomerates will contribute to the long-term health of the industry.

"One of the implications from our perspectives, and I'm not certain if it is a good thing or not a good thing for the industry as a whole, is that you may see more decisions being financially driven rather than by baseball considerations," Goldklang said. "Decisions such as to where to position a franchise or to keep a franchise. You may have situations where you have passive investors who are more interested in return on investment than being part of a baseball group.

"When we first got involved in the game, if a franchise was financially viable, no matter where it was, you rarely saw anybody try and move it."

Nuchow contends that Mandalay makes its decisions based around fan interest, and that an influx of experienced investors will only create a better ballpark experience. And in an age when teams sell for $10 million or more, it's harder to find individual investors who can buy a team.

"As prices rise, you're going to get bigger businesses involved," Nuchow said. "Minor league baseball is an amazing brand, and I don't care if you are a one-person operator or a big business, it's all about fans and how you take care of them. We give out free programs at every single game because our fans appreciate it. The fact that we give it away because we have resources to do it, I don't think it is disrespectful to the brand, I think it enhances it. We take the brand very seriously."

George Spelius, president of the Midwest League since 1986 and former president of one of the league's smaller, community-owned franchises in Beloit, has seen things from both perspectives. In his early days in the league, the MWL was dominated by operations like Beloit's. But in recent years franchises like Dayton have become the norm, drawing as many fans as many franchises in Double-A and Triple-A.

But Spelius said he sees little drawback in the involvement of large ownership groups, even if they replace some individual owners.

"As far as conglomerates, by no means do I feel they have had a hindrance on minor league baseball," he said. "They have pretty good cash flows and have helped out communities and put up youth facilities . . . They have made these stadiums much more fan friendly because they are new facilities or renovated facilities.

"The smaller owner doesn't have that cash flow or doesn't want to go into debt. There are good people that have owned these teams for a long time and wanted to get out. They were there when baseball needed them, and now these new teams have come in and enhanced minor league baseball."