San Francisco Chronicle - (Sunday)
Giants poised to open pocketbook
Revenue could explode when the San Francisco becomes the lone Bay Area team
The Bay Area baseball teams will be at the opposite ends of the spending spectrum this winter, and very well could bookend the proceedings if the San Francisco Giants come away with the most valuable free agent to come around since the team signed Barry Bonds 30 years ago.
Shohei Ohtani will set records for overall contract value with a deal that likely will be worth $500 million or more, and the Giants are considered a viable option, not the least because they have the financial means to land the Japanese superstar. Among other things, the team didn’t wind up spending $360 million on either Aaron Judge or Carlos Correa last year, and their projected outlay for next year is middle of the pack, in the midrange with about a $150 million payroll based on the current roster.
Then there is the news that the Oakland Athletics will be moving to Las Vegas, barring some sort of major switcheroo — always possible, given that franchise’s recent fumbling business operations. That means as soon as 2025, the Giants could enjoy the highest-income unshared market in the country.
“Obviously it puts them in a great position to leverage this,” said Jeremy Jordan, dean of the Falk College of Sport and Human Dynamics at Syracuse University. “It will be interesting to see how the new media rights deals will work out given that they own all the product in the market.”
San Francisco’s deal with NBC Sports Bay Area goes through 2032, but given the precarious state of regional sports networks, there is always the possibility the next deal might not be quite as lucrative. The Giants’ 25-year deal prevented them from hitting it big at the same time Los Angeles did in 2014, but being the only team in the market certainly won’t hurt.
Next year, the Giants’ Mission Rock development is scheduled to open its second residential building, and Visa moved its international headquarters to Mission Rock last year — cue jokes about the Giants’ increased credit limit.
Giants managing partner Greg Johnson told the Chronicle in August that the club’s plan is to break even, but given the earning power of Mission Rock and the prospect of having the entirety of Northern California for a market, the franchise’s value will continue to skyrocket. If that’s a factor
in the team’s finances, and it should be, San Francisco should be able to sign Ohtani and a major starter such as Yoshinobu Yamamoto or Blake Snell without a care.
Another team with a surprisingly midrange payroll projection going into the Winter Meetings will be among the Ohtani suitors: The Dodgers are around the $150 million mark, too. An L.A. team flush with cash might be a dangerous thing for the rest of the NL West.
How much might the luxury tax impact the Giants’ offseason approach? Any team that lands Ohtani is unlikely to be overly concerned with passing that threshold. And if Ohtani isn’t inked, the Giants have plenty of room for spending; the luxury tax kicks in at $237 million for 2024. Adding another $50 million or so to the projected payroll could plug a lot of holes. Ohtani might make that much on his own.
Ohtani is likely to make more per season than the A’s entire payroll. Gone are the days when former GM Billy Beane might swoop in and surprise everyone
with a big trade or a savvy signing; though the team still has one of the best front offices in the sport, ownership has curtailed spending. Oakland is more likely to deal away two of its three most expensive players, starter Paul Blackburn and outfielder Seth Brown, shrinking its projected payroll to $35 million or so.
By the end of the winter, the Giants have the potential to spend double Oakland’s entire payroll, while it’s hard to imagine the A’s spending more than $8 million to $12 million total on free agents.
The Bay Area, with approximately 7.76 million residents, will not be the largest unshared market in terms of population. Dallas-Fort Worth and the greater Houston area are both in the 8 million range, and the Philadelphia, Atlanta and Phoenix metro areas also are larger. Five unshared TV markets — Philadelphia, Dallas, Houston, Atlanta and Boston — are larger, according to Nielsen, and the Giants’ estimated $70 million per year TV deal isn’t as large as, say, that of the Dodgers, which brings in $334 million per year.
Where do the Giants have the
edge? The highest-income metro areas in the country, according to the Department of Commerce, are, No. 1, San Jose-SunnyvaleSanta Clara, No. 2 BridgeportStamford-Norwalk, Conn., and No. 3, San Francisco-OaklandBerkeley.
So the Giants won’t have just one of the top three high-income areas, they will have two. Connecticut has no big-league team and is split between Yankees fans and Red Sox fans. According to U.S. News & World Report, seven of the top 10 wealthiest cities in the nation are in the Bay Area.
This is one of the many reasons MLB’s decision to allow the A’s to abandon Oakland is such a headscratcher — half as many games will be played in the wealthiest region in the county. And the Giants will rake in even more in sponsorships and merchandise.
“The team’s valuation is going to be driven in part by the media rights the Giants will be able to garner, and given that they’ll have a larger market share, you would think that their media rights have the potential to increase,” Jordan said. “Sponsorships should also increase for companies that are
looking to leverage sport as a way to promote their brand. Given that they will be the sole baseball player in the market, that should increase.”
Breaking even, however loosely defined, should mean one of the sport’s heftiest payrolls.
“Payroll comes down to an ownership decision,” Jordan said. “It should mean, obviously, if the franchise increases in value and the revenue increases in terms of media and corporate sponsorships that should translate to increased payroll.”
The A’s leaving won’t necessarily guarantee that Oracle Park goes back to regular sellouts, though.
“I don’t know if you automatically transfer A’s fans to Giants fans,” Jordan said. “What drives attendance is performance to some degree. And if the correlation is, ‘We now have more money to bring in better players and that’s going to result in a better product on the field,’ then that’s likely to increase attendance.”