Last Thursday there was an interesting debate on MSNBC on the future of the Chicago Cubs. The Cubs are currently owned by The Tribune, a large newspaper publishing company that is trying to figure out its future. Newspapers have had a very tough time recently with subscriptions falling off a cliff as more and more people shift to alternative new media news sources. In today’s world the newspaper is old news.
The debate centered around the aspect of creating future performance… both for The Tribune and for the Cubs. The Tribune is considering going private to avoid the quarter-by-quarter short-term mindset of Wall Street.
At the same time The Tribune is investing heavily in Cubs payroll to get top name players, such as the recent $136 million deal to acquire Alfonso Soriano. That was the fifth most expensive deal in Major League Baseball history. The fact that they made this move mystified several analysts as on the surface it looked like a focus on a long term strategy… to finally end the 98 year World Series drought. The Tribune CEO Dennis FitzSimons calls the Cubs a "programming asset." Although they claim that the Cubs aren’t for sale, that terminology doesn’t really sound like a long-term commitment. In reality they are probably looking at spinning off a higher-value franchise to new owners, without having paid a penny of the new player deals.
We’ve written before about the trend of taking public companies private in order to better focus on long-term growth. Private companies do have substantially more flexibility without the reporting and regulatory hassles, but in return they give up the ability to easily access large pools of capital that can jumpstart growth. Some public companies with significant clout can truly focus long-term and almost ignore the quarterly Wall Street focus. Danaher does a good job at it, and an increasing number of companies are telling the Street that they will no longer be providing future earnings guidance. A long-term perspective is required for a successful lean manufacturing transformation.
To be successful sports teams must focus on the long term. It takes time to build a cohesive high-quality team. Time and often substantial investment. Almost by definition this runs counter to the desires or predelictions of public companies. Some sports recognize this, and NFL football franchise rules are specifically designed to make public ownership, whether truly by the public or by a publicly-traded company, very difficult. European soccer is also starting to recognize the problems with having shares of teams traded on large stock exchanges.
Major League Baseball franchise owners still include several publicly-traded companies, from The Tribune to AOL Time Warner and Disney and even Nintendo. Unless they can successfully battle the traditional short-term focus of their analysts, they will have difficulty building and sustaining long-term team success.