To get to where we are today, we have to go back to when then team owner Richard Jacobs first bought the team back in 1986. The price he paid was about $40 million. Keep that in mind.
At the time the Indians were playing in a stadium, that was outdated and under-maintained even by the standards of the 1980's. Like many of the cookie-cutter stadiums built in the 1960's, Cleveland Municipal Stadium was built with the idea of being a top quality stadium for both football, and baseball, but served neither well. Where the stadium differed from the cookie-cutters of the 1960's, was that Cleveland Municipal Stadium was built during the 1930's, and was badly degrading for years.
At one point during the 1970's the Indians even had a tentative agreement to play nearly half of their games at the Superdome in New Orleans, before the rest of the Major League owners voted it down.
By the late 80's, and into the early 90's white flight had stopped, and once again the downtown sections of major cities were now booming. The city of Cleveland which at one point had been bankrupt in 1978, was now in full bloom by 1986 under the leadership of mayors Dennis Kucinich, and George Voinovich. Although Kucinich was vilified at the time (nearly losing a recall election) his financial efforts would be fully realized years after he left office. The most cited example is his refusal to privatize the Cleveland power company, which probably saved the city hundreds of millions of dollars if not more. Voinovich for his part was very instrumental in getting many big corporations to move back to Cleveland, which ultimately got the downtown section revitalized, although I'm not here to talk about politics, so I'll move on to the next point from here.
Jacobs himself was a real-estate developer, and saw the newly developing downtown district as prime land for a potential new ballpark. What's better yet, he figured he wouldn't even have to pay for it himself. He would propose the deal as a tax referendum, and if the city refused he would simply either a. sell the Indians, or b. move the Indians to a city that would pay for a new stadium.
In 1990, Cuyahoga County approved a 15 year sin tax to allow the construction of Jacobs Field in the downtown district of Cleveland, along with a new arena for the Cleveland Cavaliers who for years had been stuck playing in the middle of nowhere halfway between Akron and Cleveland.
The ballpark would allow the Indians to become more financially competitive without posting a financial loss for Jacobs. The new ballpark was to have plenty of luxury suites which very few teams had at the time, and the luxury suites that did exist were far from the luxury suites of today. With new money coming in, it would allow the Indians to increase their payroll tenfold. The Cleveland Indians would finally be a winning franchise.
In 1993 the final year before the Indians made their move to the new stadium, the Indians team salary stood at $16.7 million. Third lowest in all of baseball. The average salary at the time stood at around $32.3 million. (http://www.baseballchronology.com/Baseball/Years/1993/Payroll.asp)
The very next year, 1994, the Indians team salary exploded to $31.7 million, while the league average stayed roughly the same at $32.5 million. (http://www.baseballchronology.com/Baseball/Years/1994/Payroll.asp)
The previous offseason the Indians signed Eddie Murray, and Dennis Martinez making each of them respectably the two highest paid players on the roster (http://www.baseball-reference.com/teams/CLE/1994-roster.shtml)
By 1995, the Indians team payroll was now one of the highest in baseball at $40.2 million, with the league average remaining nearly the same at $33.1 million. (http://www.baseballchronology.com/Baseball/Years/1995/Payroll.asp) By now the Indians were in their first World Series since 1954, and seen as the toast of the American League.
Their new ballpark Jacobs Field along with Camden Yards was seen as the premier venue in all of baseball, and by now everybody wanted one just like it. It would be very easy as well. Step one would be to talk to various politicians around the city to generate their support for the new ballpark. Step two would be to actually to propose the stadium, or threaten to move if your demands were not met, and step three would be to watch as the taxpayer dollars built the new palace and reep the rewards.
You could even make the claim that the new stadium would have a tremendous economic impact on the city, creating thousands of new jobs, however their are problems with those claims that most people cannot see. Number one is that it's very unclear at best whether or not a stadium actually adds value to an area, with it actually adding no value at worst. As I mentioned before the downtown section of Cleveland was booming years before Jacobs Field got there, yet on countless occasions I've heard Jacobs Field being cited as to one of the reasons for why downtown Cleveland boomed. Number two is these so called thousands of jobs. Most of these are minimum wage jobs such as working security, and serving hot dogs. Sports teams themselves are very small in their operation numbers. Most don't have more then a few hundred people working for them, so the idea that a sports franchise can create thousands of high paying jobs by itself is something I find preposterous. Some of these jobs may also be attributed to construction jobs, but if simply hiring construction workers helped a city economically, then all a city would have to do would be to dig a giant hole everyday, and fill it up, and all of our economic problems would be solved.
I'd be willing to get more into stadium economics if people have any questions about them, but I'd like to cut this section off here as well for the purpose of length. In my opinion the media skews most of these so called findings very much in favor of sports teams, but they are also put together by very smart people, so it's very hard for a normal person maybe even impossible to see through alot of these arguments. It took a person smarter then me to clarify how many of these pro stadium arguments are in fact bogus, and they're very hard to find unless you know what your looking for, but back to the Indians.
In 1996 the money still kept pouring in, with the Indians now sporting a payroll of $47.7 million with the league average still remaining nearly the same at $33.7 million. (http://www.baseballchronology.com/Baseball/Years/1996/Payroll.asp)
In 1997 the Indians made their second World Series in three years with a payroll of $58.9 million, however as more and more teams were getting new ballparks, and being promised new stadiums the league payroll was beginning to increase and was now at $40 million. (http://www.baseballchronology.com/Baseball/Years/1997/Payroll.asp)
In 1998, the Indians kept their salary roughly the same at $56.8 million, but the league average increase once again to $42.3 million. (http://www.baseballchronology.com/Baseball/Years/1998/Payroll.asp) It must be noted however that these figures are skewed due to the two new expansion teams in Arizona and Tampa Bay. Removing them from the equation brings the average salary up to $43.1 million.
By 1999, the Indians salary was now well over $73 million, yet the average salary was up to $48.8 million. That year according to Forbes magazine the Indians were estimated at being valued at $359 million. (http://www.sportsbusinessdaily.com/article/24735) That's nearly a 900% increase in total net worth from when Richard Jacobs first bought the team in 1986 for $40 million. By comparison inflation had been around four percent in that time span, meaning the Indians should have been expected to be worth around $70 million under normal circumstances. Needless to say that if you could have found a way to invest $100,000 in a pro sports team during the mid-80's, you would probably be a millionaire by now.
In 2000, Larry Dolan bought the team from Richard Jacobs for around $320 million. At the time of the sale the Indians were estimated by Forbes as being the third most valuable team in baseball at $364 million.
Well what has happened since then? Well in 2001 the Indians had a payroll of $92 million. The league average $64.5 million. (http://www.baseballchronology.com/Baseball/Years/2001/Payroll.asp) By now the new ballpark explosion was on, and the one advantage the Indians had held all of these years was coming to an end.
Just two years late the Indians payroll plummeted to $48.8 million with the league average now at $70.4 million. How did the Indians do financially? Well they flat lined essentially. Today Forbes magazine values the team at around $400 million dollars. About a 10% increase but when compared to the rest of baseball it's essentially a net zero gain.
So what does this mean? Well it could be alot of things. Is the Dolan family mismanaging the Indians as they have done with the Rangers, and Knicks? The answer is probably. Does this mean baseball needs a salary cap in order to allow team like the Indians to compete on a year to year basis? Again the answer is probably. Imagine what the NBA would be like if the Hornets were to come out and say they couldn't afford to keep Chris Paul. Or if the Kings weren't able to put together those great teams of the late 90's into the new millennium. I'm sure the NBA landscape would look very different from now.
The biggest question is, and the point of this entire article is whether or not the Dolan family is really losing money from owning the Indians. The answer I would say is right now, yes, but since overall since buying the team, the Dolan family hasn't lost money. They bought the team for $320, yet if they were to sell the team today, it's safe to say they would probably get around $400 million. That's still an $80 million ROI, and that's not taken into account the years if any where they did make a profit.
It's virtually impossible to gauge how much money somebody actually makes from owning a team because they don't have to publish an annual report. Also it's very easy to turn a gain into an apparent loss. The Yankees have claimed for years they lose about $30 to $40 million a year, yet their value keeps going up every year. If the Yankees were guaranteed to lose money every year, they would be worth nothing.
So are the Dolan's really losing money right now? I'll say this, if they really thought they weren't going to get any money from owning the Indians they would sell the team tomorrow.
The one guy though who made out like a bandit in both reputation, and financially was Richard Jacobs. Most Indian and most baseball fans for that matter view Richard Jacobs as a model owner. A guy willing to spend whatever it took to bring a winner to a small market. But was he really? If that's true then why did the Indians have one of the lowest payrolls in baseball nearly every year until they moved into Jacobs Field? Same guy owning the team. Did he suddenly decide in 1994 he was going to lay it all out on the line for the city of Cleveland to build a winner despite of their small market?
The only reason Richard Jacobs built up the Indians in the first place was because for every dollar he spent on a player, he knew he was going to get back at least ten. The Indians were ahead of their time in the way they brought in money from luxury suites. Very few had access to that type of money and those who did (the Orioles, Rangers, and Rockies) all had similar results both with the gate receipts and their on field success, but perhaps none more so then the Indians. The second Richard Jacobs realized the one advantage the Indians had over everybody was over, he decided to sell the team while they were at their financial peak, and reputation wise he was at his peak. If he owned the Indians for much longer, I think people would have figured out what was going on, and I don't think he would be viewed the same way he is today. What's more is I think he knew this as well. Richard Jacobs was a very smart man. He wouldn't have the type of money he had if he wasn't. He knew when to get out, and get out is exactly what he did when he was still on top.
My opinion of Richard Jacobs was that he was a smart owner, but he wasn't some philanthropic owner trying to bring a championship to Cleveland at the expense of his own financial worth. He was simply spending money as long as it paid to do so, like any other owner in his situation would have done.
Is James Dolan a bad owner, probably, and if people want to criticize him for mishandling the Indians since buying them feel free to do so. I'm not going to stop you. But I hope this article raised a few more points then simply whether or not James Dolan is to blame for the Indians supposed financial woes.
There are much bigger issues concerning sport business that is often ignored by the media, and I hope this article can bring some of these issues to light.