CLEVELAND, Ohio – As the Tribe opens the second half of the baseball season, the franchise expects to have a new name in time for the 2022 season.
The Indians also are hopeful to have a new lease agreement in place well before the current agreement expires at the end of the 2023 season.
The Tribe’s current payroll is $49 million, second-lowest in the majors. It will go up next year, but I’m not sure how much. This was a season of “bottoming out” in terms of payroll.
Those are some of the things I found after talking to various MLB sources. But the new news is how the Tribe’s ownership structure is set between owner Paul Dolan and former team minority owner John Sherman. It had been reported in various places that Sherman owns 25 to 30% of the Tribe (in escrow) after he bought the Kansas City Royals in 2019. Here’s the real deal:
1. Sherman bought 15% of the franchise in 2016.
2. Sherman later bought another 10%, raising his holdings to 25%.
3. When Sherman bought the Royals, Dolan bought back 10%.
4. Sherman has the remaining 15% in the Tribe in an escrow account. At some point, he has to sell it. Dolan can buy it back or someone else.
5. Dolan and Sherman were extremely close. It’s a safe guess the party buying Sherman’s 15% would be someone acceptable to Dolan.
6. Obviously, having Sherman helped the Tribe’s financial situation. But it’s incorrect to view him as having bankrolled the team.
The Tribe has declined to comment on these topics, but I feel very good about the information.
THE JOHN SHERMAN SITUATION
For several years, Dolan had been looking for a minority owner. He found Sherman in 2016. In the spring of 2017, I interviewed Sherman about how he had joined forces with Dolan. The Indians had hired Allen & Company to help them find a minority investor. It was Allen’s Steve Greenberg (son of Hall of Famer Hank) who put Sherman and Dolan together.
Sherman said for more than a year they “dated.” They had in-person meetings. They talked on the phone. They exchanged emails. Finally, they agreed to become partners.
Sherman is a billionaire who made money in natural gas and took two companies public. Before he joined forces with Dolan, he tried to buy his hometown Kansas City Royals. But the franchise wasn’t for sale. Sherman was on the road to becoming the majority owner of the Tribe with Dolan remaining as a minority owner. If that had happened, they would have continued to work together.
But after the 2019 season, the Royals went on the market. Sherman bought them for $1 billion.
Remember, Dolan bought back 10% of Sherman’s stake in the franchise when he left. Not sure how much that cost, but it was substantial.
And in 2020, COVID-19 hit. Baseball played only 60 games without fans in the stands. Teams were flooded with red ink. Like most teams, the Tribe runs a lot of debt to cover expenses. But the combination of Sherman’s departure and the COVID season led to some serious 2021 payroll cutting for the Tribe.
THE BIG PICTURE
This is a critical time for the franchise, as the Tribe faces challenges and struggles in four areas. All of them are away from the field, all directly impact the on-field future of the team.
At the end of the 2020 season, Indians president Chris Antonetti said this:
“The reality of the finances in baseball for 2020 was the industry lost billions of dollars. And as a team, we lost tens of millions of dollars, more than we expected. So that puts us in a really difficult financial position that will take us years to recover from. It’s a real cash loss and we had to borrow a lot of money to be able to fund it.”
That is the situation. How the Tribe navigates these four challenges will determine how the franchise performs on the field and from a business standpoint in the next 10 years:
1. The name change, which is a very sore subject for many fans.
2. A new lease for Progressive Field and added renovations.
3. Finding a minority owner who blends into the team culture where ownership and the front office have worked together so well.
4. Increasing the payroll.
THE NAME CHANGE
The team knows a significant part of the fan base is still upset with the dumping of Chief Wahoo and then the Indians name.
Nothing has changed in terms of their decision to not have any names with Native American influence such as Tribe. They want a name that won’t offend most people. That’s why I believe it will end up being something such as Guardians, Rockers or Blues – but those are pure guesses.
My sources say the team is determined to have a new name for the 2022 season. They know this is a storm cloud hanging over the franchise. They know regardless of what they select, some fans won’t be happy.
As expected, they found it much harder to settle on a new name than to decide to move away from the old one. Whatever name is picked, they will try to market it as a fresh start for the franchise. They hope a new lease deal and long-term commitment to Cleveland will be in place.
The team will then be moving out of the grim 2020-21 days of COVID-19 with a new name and a ballpark set to receive more upgrades.
THE LEASE AND PROGRESSIVE FIELD
The Indians were never planning to move. They never mentioned it in any discussions about the lease. The Dolan family has deep Cleveland roots. But they want a better deal on the lease and help with stadium renovations.
The Indians have been working on a 15-year extension of the lease that expires after the 2023 season with Cuyahoga County. Ohio Governor Mike DeWine is pushing hard for an agreement to be reached. City and Cuyahoga County officials are open to a new deal.
They will continue to work out details, but the main parties all want the same thing – keeping the Indians here.
It’s hard to believe for some, but Progressive Field is 27 years old. It’s the ninth-oldest ballpark in the majors. Two MLB ballparks built after Jacobs have since been abandoned as their teams moved into new stadiums – Atlanta and Texas.
ABOUT THE UPGRADES
Progressive Field underwent major changes between 2015-17 with The Corner added in right field along with the Left Field District. It has made the park more intimate and fan friendly.
The renovation cost about $40 million, all paid with private money. Former Tribe president Mark Shapiro and current team president of business Brian Barren worked out a deal with Delaware North Concessions. In exchange for cash up front to help pay for some of the stadium renovations, Delaware North received a better deal in terms of its concession contract with the Tribe.
Delaware North was open to the idea because the stadium changes led to more room for concession stands. That would help their bottom line.
But what Progressive Field now needs are upgrades in the clubhouse, team offices and the basic foundation infrastructure. A new concession deal won’t help that. This has to come from a combination of money from public sources and the Indians. That is what they are working on when it comes to the lease: Who pays for what.
THE OWNERSHIP SITUATION
The Indians are in a minority when it comes to family ownership of an MLB franchise. Most are part of corporations or the property of outrageously wealthy individuals.
The Dolan family bought the team from Dick Jacobs in 1999 for $323 million. That was the highest price ever paid for an MLB franchise up to that point. The L.A. Dodgers had been purchased for $311 million, which was the most expensive franchise until Cleveland was sold.
This is their 22nd year owning the Tribe, the longest tenure of any ownership group since the team was formed in 1900. They paid a premium price. The new owners were not cash-rich after the purchase. Now, the Tribe is worth more than $1 billion. But owners make the big profits when they sell. Exact financial numbers are not available because the team is a private corporation.
But it’s obvious the Dolans don’t play in the same financial league as many of MLB’s newer owners. Nonetheless, under this ownership the Tribe has had eight consecutive winning seasons and five trips to the playoffs. That fact often is lost in the discussion of dollars.
ABOUT A MINORITY OWNER
Dolan is again shopping for a minority owner – or perhaps more than one. Most teams have several owners, known as a group or syndicate. Sherman had several Kansas City people in a group to buy the Royals.
Dolan has no interest in selling the Tribe. A key is finding a minority owner who can develop a comfort level not only with Dolan, but also the front office. When Antonetti, GM Mike Chernoff and manager Terry Francona dealt with Sherman, they had the same feeling as when working with Dolan.
These owners allowed the baseball people to do their jobs. They didn’t react emotionally when things were rough. They were patient, not looking for reasons to fire people.
“As far as what our situation is financially, I care more about tackling challenges with people I respect and care about,” said Francona in December. “That’s what brought me to Cleveland to begin with.”
The new minority owner or owners have to fit into that culture.
A SMALL MARKET?
“Fans in Cleveland don’t want to hear this, but the Indians are a small-market team,” said an executive from a MLB franchise. “In football or basketball, it wouldn’t matter. But it does in baseball. About 70% of your revenue is locally generated from attendance, media rights and corporate sponsorships.”
Cleveland is the No. 19 media market overall. It’s the smallest with teams in the NFL, NBA and MLB.
“It’s a tough situation for them,” said the executive. “There’s no salary cap. There is a lot of competition for corporate dollars with the Browns and Cavs. Nor is it a growing city in terms of a young population.”
The Tribe isn’t close to that 70% local revenue figure from attendance, media deals and corporate contracts. I was told it’s probably in the 55% range.
Cities such as St. Louis (Cardinals, NHL Blues), Cincinnati (Reds, NFL Bengals), Baltimore (Orioles, NFL Ravens) and Kansas City (Royals, NFL Chiefs) are smaller MLB markets, but they have only two major league sports franchises. The Padres are the only game in town in San Diego.
That’s a major advantage for them compared to Cleveland.
THE PAYROLL WILL GO UP
Don’t expect a big increase in 2022, but the team should at least move forward. Between COVID-19 and the other economic factors, ownership and the front office decided to make deep cuts. Their $49 million payroll was the lowest for the Tribe since 2005. It also was the second-lowest in baseball, trailing the Pirates’ $46 million, according to Cots Contracts.
One reason they made massive cuts was a belief the team could still contend for a playoff spot with MLB’s youngest roster – which could set up a modest budget increase the following year. The Tribe will probably still be in the bottom 30% of baseball. But the worst should be over. How much spending will increase is unclear, but it will.
“The Indians are amazing when you look at the front office, Tito (Francona) and what they do with what they have in that market,” said a rival MLB executive. “They are in the top three in terms of how they are run. They are really good at what they do.”
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