Cards Go Back to the Future, Rickey Style

"The Mahatma"

The St. Louis Cardinals' intent to purchase Triple-A Memphis harkens a look back at baseball pioneer and former club GM Branch Rickey, the architect of the farm system.

Tuesday's news that the St. Louis Cardinals, the Memphis Redbirds Baseball Foundation and Blues City Baseball signed a non-binding letter of intent to begin the process for the Cardinals to acquire the Triple-A Pacific Coast League franchise from the non-profit Foundation was not a surprise.

As I had listened to the executives from all three camps speak at last week's announcement of a four-year extension of the Cardinals Player Development Contract with Memphis, there clearly seemed unfinished business in the area of finances. That subject may have been off-limits last Thursday, but confidence of the parties apparently grew enough in the interim that they decided to go public this week.

The Memphis Business Journal estimates it may take months for the details to be worked out, with the transition from the non-profit foundation to the for-profit Cardinals being one of the more challenging issues.

Another area that is unclear at this time is the ownership of AutoZone Park, which carries a substantial debt load. The park cost a reported $46 million to build in 2000, financed via a $72 million tax-exempt bond deal. For that reason, the Memphis Commercial-Appeal speculates the ballpark will be excluded from the purchase.

On the field last week at Busch Stadium, I had a long discussion with a member of the Memphis contingent about the pros and cons of a purchase from the perspective of the Cardinals.

Probably, part of the motivation is control, but primarily it is most likely driven by the bottom line. It is important to remember that in every situation, one the major expenditures of running a minor league club is covered by the parent organization, the costs of the players and coaching staff.

When I asked Cardinals general manager John Mozeliak the club's motivation in pursuing the purchase, he used caution as well as some good old marketing terminology, "branding".

"There is a lot yet to do, but from a business perspective, it is a nice way to continue to grow our brand due to the regional attractiveness," explained the GM.

There's gold in that there club!

As we discussed last month on our message board, Forbes recently ran a report on the top 20 minor league franchises in terms of value. Of 160 teams, Memphis ranked second.

Forbes estimated the value of the Redbirds at $26.1 million, with $13.4 million in 2007 revenues and $6.9 million in operating income. That looks pretty good considering owner Dean Jernigan purchased the expansion club in 1997 for approximately $7.5 million.

Also worthy of noting is that one of the few clubs making the Forbes list not at the Triple-A level was none other than the Springfield Cardinals at number 18, valued at $16.8 million. The Double-A Texas League franchise is already owned by the major league organization though they are a tenant at Hammons Field.

Growing the current Cardinals minor league ownership portfolio

In fact, even excluding the three developmental clubs at the bottom rungs of the minor league chain that are organization-owned by default, the Cardinals also hold title to three of their six higher-level affiliates today. They include Springfield, Palm Beach of the Florida State League and Johnson City of the Appalachian League. (The excluded leagues are Gulf Coast, Venezuelan Summer and Dominican Summer.)

In addition to Memphis, the other two St. Louis affiliates with independent ownership are Quad Cities of the Midwest League and Batavia of the New York-Penn League. The Cardinals' agreement with the former was extended four years this past spring, signaling confidence in aggressive new ownership. Results at the turnstile were positive for the Class-A River Bandits this season as they drew over 207,000 in attendance for the first time in a dozen years.

Earlier this month, the Batavia agreement was extended only two years, though the ownership situation there is far more stabile than it was just 12 months ago. The Rochester Red Wings, the Triple-A affiliate of the Minnesota Twins, assumed operational management of the Short-Season Class-A Muckdogs prior to this past season and have committed to two more years of the same.

After flat attendance in 2008, perhaps the first league championship for Batavia in 45 years delivered this season will energize the local fans. On a side note, Dave Wellenzohn, the club's third general manager in three years, stepped aside last week. The Red Wings are expected to name the new front-office staff soon, according to The Batavian.

Farm system ownership isn't new

Baseball historians know the history of the farm system, a concept turned into a competitive advantage by a Cardinals executive from another era looking for a way for his mid-market franchise to compete with the deep-pocketed owners in the big cities who were stockpiling all the best players.

Of course, I am talking about one of only a handful of executives enshrined in the National Baseball Hall of Fame, the Mahatma, Branch Rickey. In 1917, he left the Browns for the Cardinals and set about to execute his vision of a vast minor league system.

Aligning with the affiliates was crucial since under the system in place at that time, local ownership had no reason to nurture players optioned to the minors. In fact, those on option were often being overworked, receiving little support.

Rickey began by establishing gentleman's agreements with local club ownership that entitled him to later purchase their most promising players. When some of those owners were tempted instead to sell their players to the highest bidder, in effect ignoring the agreement with the Cardinals, Rickey took action.

Starting in 1919, he convinced Cardinals owner Sam Breadon (right) to begin to purchase minority and later majority interest in their affiliates to avert being double-crossed. In 1921, major league clubs were allowed for the first time to purchase minor league clubs outright and the Cardinals were at the forefront of the movement.

By the start of World War II, the Cardinals' empire had grown to 32 minor league clubs, of which at least 15 were 100% owned by the organization. Amazingly, there were 20 Class D leagues in the US in 1940 and the Cardinals had a team in every one of them.

The Cardinals used their system to not only fill their own player pipeline, but also accumulated an estimated two million dollars between 1922 and 1942 by selling their excess players to other organizations.

As an aside, one of Rickey's early hires as club treasurer in 1925 was 23-year-old Bill DeWitt, Sr. who would later purchase the St. Louis Browns and work in the game for almost 60 years. His son and grandson currently lead the Cardinals.

Minor league ownership by MLB clubs is relatively rare today

During the post-war years, the number of minor leagues peaked at 59 in 1949. By 1963, only 15 leagues remained. As the number of leagues declined dramatically, so did major league ownership of their affiliates.

Back to the here and now, in remarks to the Memphis Business Journal this week, Redbirds President Dave Chase implied that organizational ownership of minor league franchises is common today.

His exact quote: "The Red Sox have done it, the Yankees are doing it and the Atlanta Braves have been the kings of it, owning all of their minor league franchises."

A long-time veteran of Baseball America before joining the Redbirds, Chase surely knows minor league ball. Yet, I didn't think many of the 160 clubs today are fully owned by their MLB parents.

Turns out my gut feeling was right. The current count is 24* of 160 or just 15%.

(* To determine this, I looked at the Player Development Contracts currently in place across Minor League Baseball. Where there is full organizational ownership, PDCs are not required. In some cases, the MLB club may hold a partial stake in a team, but for this exercise, only fully-owned franchises are distinguished.)

Chase was correct that the Braves are leaders in franchise ownership, but they actually only control four of their five clubs, the exception being the Myrtle Beach Pelicans of the A-Advanced Carolina League. The Yankees own just two of their affiliates. Until their purchase of the Salem franchise in the Carolina League last winter, the Red Sox owned a grand total of none. I imagine the press accounts of the Salem purchase may have attracted Chase's attention at the time.

The table below shows the organizations that own the most minor league affiliates.

# Org .
Organization Owned
Atlanta 4  of 5
St. Louis 3  of 6
New York Mets 3  of 6
New York Yankees 2  of 5
Tampa Bay 2  of 6
Ten clubs (one each) 10
Total 24

Assuming the Memphis purchase is completed, the Cardinals will join the Braves at the top of the list with four organization-owned clubs.

The table that follows shows the total number of teams by league broken out between those independently-owned and organization-owned. On the far right are the names of the various owning organizations.

Triple-A # Tms. Ind. Org. Organization Owners
International  14 13 1 Atlanta
Pacific Coast 16 16 0* *St. Louis (intent)
Double-A
Eastern 12 12 0
Southern 10 9 1 Atlanta
Texas 8 7 1 St.Louis
A-Advanced
California 10 10 0
Carolina 8 7 1 Boston
Florida State 12 3 9 Phi, Tor, Fla, Det, StL,
TB, NYM, NYY, Cin
A
Midwest 14 14 0
So. Atlantic 16 15 1 Atlanta
Short-Season A
New York-Penn 14 12 2 NYM, NYY
Northwest 8 8 0
SS-Rookie
Pioneer 8 8 0
Appalachian 10 2 8 Bal, CWS, Atl, Min,
Hou, StL, NYM, TB
Total 160 136 24
85% 15%

Looking at the Florida State League, nine of the 12 clubs are organization-owned. That is easy to understand, given the facilities are already under team control, serving as their Spring Training bases.

Putting the FSL aside, the percentage of organization-owned franchises would drop to just 10.1% (15 of 148). Further, of the 60 Double and Triple-A teams at the top of the minor league pyramid, the only ones that are not independently owned are those of the Braves and Cardinals.

If that is a trend, the Cardinals are on the leading edge of what would be a return to their roots.

Looking down from baseball heaven, The Mahatma has to be pleased with his old club's actions.



Brian Walton can be reached via email at brwalton@earthlink.net

© 2008 stlcardinals.scout.com. All rights reserved. This material may not be published, rewritten or redistributed.

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