“
Ways Of Doing Things” is pleased to follow-up its inaugural post on the chief financial predators of Sports USA with a reprint of
Business Week’s June, 1992 examination of the owner of the Chicago White Sox and Chicago Bulls, Jerry Reinsdorf. Some things have changed during the 14 years since David Greising’s “The Toughest #&?!%* in Sports” first appeared. And some things haven’t. These days, for example, Jerry Reinsdorf wields his greatest clout within the domain of Sports USA as the Chairman of Major League Baseball’s Relocation Committee—a Committee that Ralph Nader once accused of employing “merciless bullying” tactics against the District of Columbia, in its effort to extort yet another “corporate welfare stadium deal,” this time for the Washington Nationals. “No longer surprised by your level of avarice,” the
Nader-League of Fans letter continued, “we must express amazement at your unrelenting arrogance.” With Jerry Reinsdorf clutching the reins of the Relocation Committee, MLB has turned into nothing more than “corporate freeloaders on the taxpayers”—a practice Reinsdorf pioneered at the New Comiskey Park (now renamed U.S. Cellular $$$$$) back in 1988. What never changes, of course, is the rule of avarice over Sports USA. Enough said.
Enjoy.
Lester Munson, “
Ways Of Doing Things,”
National Sports Daily, December 4, 1990
David Greising, “
The Toughest #&?!%* in Sports,”
Business Week, June 15, 1992
Ralph Nader and Shawn McCarthy,
Open Letter to Allan H. Selig and Jerry Reinsdorf, December 17, 2004
The Toughest #&?!%* in Sports
In just over a decade, Jerry Reinsdorf has become a major power in two major leagues
David Greising, Business Week
June 15, 1992
WHERE REINSDORF WIELDS HIS CLOUT
Along with owning the Chicago White Sox, Jerry Reinsdorf sits on Major League councils that make decisions affecting every owner, player, and fan. Here's his portfolio of committee assignments
OWNERSHIP COMMITTEE: Reinsdorf is closely involved in the talks over Nintendo's proposed acquisition of the Seattle Mariners. Favors local ownership but doesn't rule out a nonvoting stake for Nintendo's U.S. unit
PLAYER RELATIONS COMMITTEE: As a member of the group that sets the owners' labor policy, Reinsdorf is pushing ''revenue participation,'' modeled on the NBA's salary-cap formula. And Reinsdorf promoted the hiring of Richard Ravitch as the owners' chief negotiator
SEARCH COMMITTEE FOR NEW AMERICAN LEAGUE PRESIDENT: When American League President Bobby Brown steps down after the 1993 season, Reinsdorf and five other owners will recommend a replacement
EXECUTIVE COUNCIL: The council's owners have a big say in league policy. During Reinsdorf's tenure, the council clashed often with the commissioner
When it came time to talk peace with the NBA, Chicago Bulls owner Jerry M. Reinsdorf had just the spot: his box at Comiskey Park, home to his other pro franchise, the Chicago White Sox. There, in mid-May, Reinsdorf and National Basketball Assn. Commissioner David J. Stern discussed their court battle over Bulls broadcasts on superstation WGN-TV. But Reinsdorf couldn't keep his mind off the game. Charlie Hough, Chicago's 44-year-old knuckleballer, after retiring the first two batters, walked five in a row. ''My God,'' said Reinsdorf, as the fifth batter to win a free pass trotted to first. ''That knuckleball has a mind of its own.''
'ON A ROLL.' So does Jerry Reinsdorf. In just over a decade, Reinsdorf has become a major power in two major leagues. He has turned the White Sox and the Bulls into a couple of the best franchises in the industry. He has fought and bested his fellow NBA owners in court over superstation broadcasts that have given the Bulls a national following. He has built a new Comiskey Park, squeezing fat concessions from local government. He has instituted a pay system at the White Sox that helps keep his baseball players' salaries in the park. He is building a new Chicago Stadium with Japanese financing. He may be maneuvering to replace the commissioner of Major League Baseball. And with his Bulls defending their NBA title against the Portland Trail Blazers, Reinsdorf isn't bragging when he draws on a thick Davidoff cigar and says: ''I'm on a roll.''
Challenging the rules of the old-boy clubs that run big-time sports hasn't made Reinsdorf many friends, but it may have made him something else: the sports owner of the future. He is an executive whose only business is sports, not a sport who is an executive in some other business.
Reinsdorf won't win any popularity contests -- but then he doesn't want to. He just wants to win. And he does, on the court, on the diamond, and in the counting-house. Last year, the Bulls' revenues grew at least 25%, to $ 34.3 million, and profits jumped at least 14%, to $ 10.9 million, according to court papers. The White Sox, which in 1991 drew 2.93 million fans to the new Comiskey Park, netted some $ 18 million. Says New York Yankees principal owner George M. Steinbrenner: ''Jerry Reinsdorf is running two of the best teams in professional sports. He's taken them from nowhere to the top or near the top.''
The 56-year-old Reinsdorf himself came out of nowhere. The Brooklyn-born son of a peddler of used sewing machines, Reinsdorf went to work as an Internal Revenue Service lawyer in 1960 after graduating from Northwestern law school. His first case: a tax delinquency by Bill Veeck, then owner of the White Sox. Reinsdorf left the IRS in 1964 to go into private practice. When several clients asked about tax shelters, he suggested real estate partnerships put together by a former Northwestern classmate, Neil G. Bluhm. At the time, Bluhm was founding what would become JMB Realty Corp., today one of the world's largest real estate firms.
BIG BUCKS. While still working full-time as a lawyer, Reinsdorf sold JMB partnerships. In 1973, he and JMB co-founder Robert A. Judelson formed Balcor Co., which raised more than $ 650 million to plow into buildings under construction.
The syndications made him wealthy -- he's worth some $ 60 million today -- and Reinsdorf decided to put his fortune to work in sports. In 1981, when Veeck put the White Sox up for sale, Reinsdorf assembled an investor group that paid $ 19 million for the team.
Soon after buying the Sox, Reinsdorf snagged catcher Carlton Fisk from the Boston Red Sox and slugger Greg Luzinski from the Philadelphia Phillies. He tripled the promotional budget to $ 300,000 and boosted the number of scouts from 12 to 20.
The rebuilding paid off quickly. By 1983, the Sox were in the American League playoffs, the first Chicago baseball team to appear in postseason play since 1959. As in '59, the Sox lost. But they could be playing again this October. Behind the slugging of first baseman Frank Thomas, the team is a power in the tough AL Western Div.
'DUMB' MOVE. One franchise turnaround wasn't enough for Reinsdorf, though. The Bulls, which had just drafted a University of North Carolina junior named Michael Jordan, were drawing only 6,365 fans per game to the 17,339-seat Chicago Stadium in 1985 when Reinsdorf bought control of the team. He syndicated the deal, which valued the team at $ 16 million, among 28 limited partners. That ''was the dumbest thing I ever did,'' says Reinsdorf. The Bulls' market value is now estimated at around $ 120 million.
Unlike the Sox, the Bulls under Reinsdorf have one league championship on their trophy shelf and are vying for a second. But getting there was tough. Working within the constraints of the NBA's salary cap, which limits a club's payroll to 53% of its revenues, Reinsdorf assembled a team around Jordan while rebuilding the front office. One measure of success: The Bulls, which did not even have a season-ticket program when Reinsdorf took over, today have an 8,000-person waiting list with maybe 15 openings per year.
Financial coups -- and controversy -- are nothing new to Reinsdorf. In 1982, he sold Balcor for $ 104 million to what is now called Shearson Lehman Brothers, the investment banking and brokerage arm of American Express Co. In 1988, staggered by tax-law changes that erased many of the tax advantages of real estate investment, Balcor's $ 5.5 billion real estate portfolio was in serious trouble, forcing AmEx to write off more than $ 200 million. Today, Balcor is the defendant in a $ 3 billion class action alleging that it fraudulently promised unrealistic returns and understated the risks of real estate investment. Reinsdorf, who is not a defendant in the suit, says it has no merit.
The Balcor sale left Reinsdorf free to run his athletic teams. And he's no absentee owner. ''I don't think that the people who own teams in either sport are involved enough in the day-to-day operations,'' he says. He's especially hard on baseball owners. ''Baseball is a poorly run business,'' he says.Clearly, Reinsdorf didn't charm his way to the top in baseball. Instead, his power rests on three key credentials: He built the new Comiskey Park; his team plays in the No. 3 TV market; and as a two-team owner, he can speak with authority on issues ranging from broadcasting to international marketing. ''Jerry is clearly the most powerful owner,'' says Donald Fehr, executive director of the Major League Baseball Players Assn. ''He thinks, he plans, he pays attention to detail. He pleads, he cajoles, he urges, he threatens. He's able to do almost anything he wants.''
Reinsdorf has become so powerful that some baseball executives believe he's cultivating a rivalry with baseball commissioner Fay Vincent. The rumors flew this year when, at Reinsdorf's urging, Major League Baseball hired former New York City transit chief Richard Ravitch as the league's labor negotiator -- at a higher salary than Vincent's. ''Paying Ravitch more than Vincent was a slap at Fay,'' said one National League general manager.
Vincent wouldn't comment on his relationship with Reinsdorf, but the Sox owner denies any friction because of the Ravitch hiring. As for the supposed feud with Vincent: ''I haven't said anything bad about Fay Vincent publicly, and I won't,'' Reinsdorf says. ''I like him personally.''
Reinsdorf is exerting commissioner-caliber clout in baseball's biggest current controversy. As a member of baseball's ownership committee, Reinsdorf has a large say in the debate over the Nintendo-led bid to buy the Seattle Mariners for $ 125 million. Reinsdorf won't discuss his position, but sources close to him say he won't back the deal unless a U. S. investor controls the team's voting shares.
Reinsdorf's pay-for-performance concept is also causing an uproar. Here's how it works: If his young players agree to forgo salary arbitration, available after three years of service, he'll give them long-term, incentive-laden contracts. But players who refuse -- and haven't accumulated the six years of big-league service needed to file for free agency -- are paid little more than the league minimum. Union head Fehr vows a fight over pay-for-performance when the game's labor contract comes up for renewal after the end of the 1993 season.
Fehr and others who oppose him should keep in mind that hardball has been very very good to Reinsdorf. After the owner complained about old Comiskey Park and threatened to move the White Sox, then-Illinois Governor James R. Thompson forced through a package of incentives to keep the team in Chicago. The state floated bonds to build a new stadium and let Reinsdorf keep all parking and concession revenues, as well as the $ 5 million per year from 89 skyboxes at the new Comiskey.
Premium seating is also the key to Reinsdorf's next construction project: a new hockey and basketball arena that will replace Chicago Stadium when it opens in 1994. The new arena will cost $ 240 million and feature 216 skyboxes. Revenues from the luxury boxes -- all but 11 of which are already leased -- have secured a $ 140 million, 25-year loan from a syndicate led by Japan's Fuji Bank Ltd.
If Reinsdorf has his way, the new stadium will be a studio for Bulls broadcasts on superstation WGN for years to come, a thought that rankles the rest of the NBA owners and Commissioner Stern. ''Jerry disapproved of superstation broadcasts until he moved his games to WGN,'' complains Stern. Indeed, as a baseball owner, Reinsdorf in 1988 scuttled the attempt of Gaylord Broadcasting chief Ed Gaylord to buy the Texas Rangers. ''It's bad for baseball to have owners who can benefit another business by losing money in baseball,'' Reinsdorf explains, referring to the low broadcast fees that station owners pay their captive teams -- while paying top dollar for marquee players.
NO PAIN. The distaste for superstations evaporated when Reinsdorf got the chance to put the Bulls and White Sox on WGN, which reaches 35 million viewers across America. But the Bulls' 55 regular-season WGN broadcasts compete with the NBA's national broadcasts on NBC Inc. and Turner Network Television. What's more, the Air Jordan show on WGN also competes directly with some local telecasts by lesser franchises. Reinsdorf claims that he's not interested in WGN's national reach. ''I just want to be on WGN in Chicago,'' he says.
The WGN dispute came to a head in October, 1990, when Reinsdorf sued the league, claiming it didn't have the authority to force him off WGN. So far, he has won in court, although the NBA is appealing. But his victory has already cost him and his fellow owners big bucks. Financial data in the Bulls' suit tipped off the NBA players' association that the owners may have lowballed the revenues on which players' salaries are based. Last December, the players formally charged that the Bulls and other teams understated such items as revenues from foreign broadcasts.
The NBA in January quietly agreed to a $ 60 million settlement with the players, but some owners are still steamed. Reinsdorf, says Jerry J. Colangelo, owner of the Phoenix Suns, ''doesn't have very many friends in the NBA.''
Reinsdorf is unrepentant about his suit's role in boosting league labor costs. ''Don't yell at me because I was the vehicle for this being exposed,'' he bristles. ''If you're doing something wrong, you deserve to be caught.''
That may sound a bit strange, since it was the Bulls that got caught. But with Reinsdorf, contradictions are part of the package: He may object to the Japanese buying the Mariners, but he's happy to let Fuji Bank finance his new basketball arena. He nixes a bid for a baseball club by a superstation owner but fights fiercely to allow a superstation to beam his Bulls games all over America.
One last contradiction: As an owner, Reinsdorf is all business. But as a fan, he is just as rabid as any hurl-the-beer-can-at-the-tube type. When the Bulls go on the road, Reinsdorf usually stays at home and watches the games on TV. His wife, Martyl, tends to leave him alone. ''I'm not much fun to be with during the game,'' he explains. If you don't believe him, just ask David Stern.
