There is an old joke in sports finance circles. What’s the easiest way to become a millionaire? Answer: Have a billionaire buy a sports team.
The joke went out of style as sports became more profitable thanks to gushers of media money and better labor deals, but the losses are back thanks to the pandemic all but eliminating attendance. And now Steve Cohen, with a $14.6 billion fortune, bought the red ink-stained New York Mets.
Many Mets fans are rejoicing at the end of the Wilpon ownership era, a fallow period of 18 years and only three playoff appearances, and the emergence of new boss Cohen, now the wealthiest owner in MLB by nearly a factor of three. Cohen closed on the purchase Friday.
So rich is the hedge fund titan that some owners led by Chicago White Sox owner Jerry Reinsdorf opposed the purchase, sources and reports said, worried in part Cohen would join other high-spending teams like LA Dodgers and New York Yankees. And the New York tabloids are already full of stories speculating of bidding wars between the Yankees and Mets, elating the Queens franchise’s fanbase after years of sometimes parsimonious spending (the Wilpons were victims of Bernie Madoff).
But will Cohen be a free spender? And if so, does he become the aforementioned joke’s punchline? There are some powerful economic reasons for him to take a more measured approach, though as a lifetime fan of the team he may spend anyway.
“Part of the problem is that they are in New York, and they got an 800-pound gorilla to compete with,” said a finance source familiar with the Mets balance sheet, referring to the rival Yankees. “Now, Stevie’s got more money than the other owners. But the Yankees revenues are twice what the Mets revenues are. You can either deficit spend until he gets tired of it. Or you can slowly try to rebuild a team like the Ricketts did” when they bought the Chicago Cubs.
“But to do that, you got to be willing to do what the Ricketts did, which is have 100-loss seasons in a row,” which happened because of investment in the farm system and not free agency, the source said. “When they were doing that they were getting killed in the media. Killed. And is he willing to do that? … But, you know, it’s the smart thing to do. The smart thing to do is to sit the fans down and explain to them that, ‘Over the long run, we want this to be a very competitive team. And it takes time, we don’t do it in a year.’ But good luck telling that to Mets fans. And the expectations that everybody has are very, very high.”
Pre-pandemic the team lost more than $50 million annually, and the Wilpons could offset that with profit from their share in SNY. But Cohen does not have a stake in SNY as part of the purchase. Given the uncertainty of attendance next year with COVID-19, he could be looking at massive losses far exceeding $50 million, especially if he hikes payroll.
Even with a normal attendance paradigm, the team’s stadium, Citi Field, has never been a great draw, and not just because the Mets have struggled on the field. “To the north of the building, you have a bay, to the south Flushing Meadows Park, to the east junkyards and then Flushing, and then to the west, working-class neighborhoods,” the finance source said. “It’s hard to get to and if you look at Yankee Stadium, and where it is, three of the four wealthiest counties in the New York metropolitan area have easy access to it.”
The point is that it’s tough to sell out Citi Field regularly. A great team might help, but to get there quickly requires free-agent spending that likely leads to more losses.
But Cohen might be willing to suffer those losses. He already Friday, two hours after closing on the team, fired much of the front office, eating those contracts. In one way he must consider himself ahead of the game. Originally he was to buy the team for $2.6 billion last winter, but that deal fell apart over when the Wilpons would cede control. Then the pandemic hit, spiking losses, and the Wilpons ultimately sold to Cohen anyway but for $2.475 billion. So he paid over $100 million less and avoided likely a similar amount in losses for the 2020 season.
And he is already proving himself to be more of a fan-friendly owner than the press-shy Wilpons. On Twitter, on Sunday in his first tweet in more than two years, he wrote, “I would love to hear your ideas to make YOUR Mets experience better.” And then later that day, “I anticipate closing the deal in the next 10 days and then it’s off and running.” On the day the deal closed, he tweeted that too.
And his wife, Alexandra Cohen, who owns a piece of the team, has been even more active tweeting Mets information, posting or retweeting seven items Friday.
Steve Cohen is already one of the world’s wealthiest people, clocking in at No. 132 on the Forbes real-time billionaires list. But now unlike most of the names ahead of him, he will become a household name — the privilege, or burden, of owning a sports team.
“Google him before and ‘hedge fund’ or ‘SEC investigation’ might come up,” said another finance source familiar with the Mets sale, referring to the Securities and Exchange Commission fining his fund $1.8 billion in 2013 for insider trading. “Now it will come up first as ‘Mets owner.’”
The joke went out of style as sports became more profitable thanks to gushers of media money and better labor deals, but the losses are back thanks to the pandemic all but eliminating attendance. And now Steve Cohen, with a $14.6 billion fortune, bought the red ink-stained New York Mets.
Many Mets fans are rejoicing at the end of the Wilpon ownership era, a fallow period of 18 years and only three playoff appearances, and the emergence of new boss Cohen, now the wealthiest owner in MLB by nearly a factor of three. Cohen closed on the purchase Friday.
So rich is the hedge fund titan that some owners led by Chicago White Sox owner Jerry Reinsdorf opposed the purchase, sources and reports said, worried in part Cohen would join other high-spending teams like LA Dodgers and New York Yankees. And the New York tabloids are already full of stories speculating of bidding wars between the Yankees and Mets, elating the Queens franchise’s fanbase after years of sometimes parsimonious spending (the Wilpons were victims of Bernie Madoff).
But will Cohen be a free spender? And if so, does he become the aforementioned joke’s punchline? There are some powerful economic reasons for him to take a more measured approach, though as a lifetime fan of the team he may spend anyway.
“Part of the problem is that they are in New York, and they got an 800-pound gorilla to compete with,” said a finance source familiar with the Mets balance sheet, referring to the rival Yankees. “Now, Stevie’s got more money than the other owners. But the Yankees revenues are twice what the Mets revenues are. You can either deficit spend until he gets tired of it. Or you can slowly try to rebuild a team like the Ricketts did” when they bought the Chicago Cubs.
“But to do that, you got to be willing to do what the Ricketts did, which is have 100-loss seasons in a row,” which happened because of investment in the farm system and not free agency, the source said. “When they were doing that they were getting killed in the media. Killed. And is he willing to do that? … But, you know, it’s the smart thing to do. The smart thing to do is to sit the fans down and explain to them that, ‘Over the long run, we want this to be a very competitive team. And it takes time, we don’t do it in a year.’ But good luck telling that to Mets fans. And the expectations that everybody has are very, very high.”
Pre-pandemic the team lost more than $50 million annually, and the Wilpons could offset that with profit from their share in SNY. But Cohen does not have a stake in SNY as part of the purchase. Given the uncertainty of attendance next year with COVID-19, he could be looking at massive losses far exceeding $50 million, especially if he hikes payroll.
Even with a normal attendance paradigm, the team’s stadium, Citi Field, has never been a great draw, and not just because the Mets have struggled on the field. “To the north of the building, you have a bay, to the south Flushing Meadows Park, to the east junkyards and then Flushing, and then to the west, working-class neighborhoods,” the finance source said. “It’s hard to get to and if you look at Yankee Stadium, and where it is, three of the four wealthiest counties in the New York metropolitan area have easy access to it.”
The point is that it’s tough to sell out Citi Field regularly. A great team might help, but to get there quickly requires free-agent spending that likely leads to more losses.
But Cohen might be willing to suffer those losses. He already Friday, two hours after closing on the team, fired much of the front office, eating those contracts. In one way he must consider himself ahead of the game. Originally he was to buy the team for $2.6 billion last winter, but that deal fell apart over when the Wilpons would cede control. Then the pandemic hit, spiking losses, and the Wilpons ultimately sold to Cohen anyway but for $2.475 billion. So he paid over $100 million less and avoided likely a similar amount in losses for the 2020 season.
And he is already proving himself to be more of a fan-friendly owner than the press-shy Wilpons. On Twitter, on Sunday in his first tweet in more than two years, he wrote, “I would love to hear your ideas to make YOUR Mets experience better.” And then later that day, “I anticipate closing the deal in the next 10 days and then it’s off and running.” On the day the deal closed, he tweeted that too.
And his wife, Alexandra Cohen, who owns a piece of the team, has been even more active tweeting Mets information, posting or retweeting seven items Friday.
Steve Cohen is already one of the world’s wealthiest people, clocking in at No. 132 on the Forbes real-time billionaires list. But now unlike most of the names ahead of him, he will become a household name — the privilege, or burden, of owning a sports team.
“Google him before and ‘hedge fund’ or ‘SEC investigation’ might come up,” said another finance source familiar with the Mets sale, referring to the Securities and Exchange Commission fining his fund $1.8 billion in 2013 for insider trading. “Now it will come up first as ‘Mets owner.’”