Ten billion dollars.
Supposedly that’s what Yankees Global Enterprises, the consortium that controls the New York Yankees, Legends Hospitality, owns a controlling interest in the YES Network and partial stakes in New York City FC and AC Milan, is worth. That valuation was an agreed-upon sum as YGE received a $2.5 billion cash injection from Apollo Global Management, a private equity fund that stepped in last week to help the Yankees refinance their debt, as well as purchase an as-yet undisclosed equity share in the Enterprise.
MLB hates when companies own stakes in their teams. They hate that Liberty owns the Braves and Rogers owns the Blue Jays, for a number of reasons. Having to publicly report earnings, massaged though they may be, undermines the greatest trick the league ever pulled — publicizing player salaries while privatizing the return owners enjoy. Companies have shareholders that demand the arrow only ever go up and to the right, where individual owners can be assuaged with the prestige and status that comes with owning one of 30 very shiny toys.
True to this form, league rules mandate that PE firms cannot own more than 15 percent of a club, which if Evan Drellich’s reporting on that $10 billion valuation is true — and Evan’s very good at this stuff — gives us a pretty clear breakdown of the maximum financing vs. equity split. Private equity, in its most vampiric form, is a big part of the reason your life might suck. Fast food used to be cheap, quick, with dubious quality. Now Roark, Inspire and 3G have made it pricey and slow, while maintaining dubious quality. The inheritance you expect from your parents will instead likely be burned away in assisted living and end-of-life care, an industry so dominated by PE that it burps revolvers. Sears was so big it had the naming rights to the tallest building in the richest nation on earth, now it’s a footnote in an accounting textbook.
These are the worst case scenarios, orchestrated by the worst people to exist in the history of capitalism. I am cautiously optimistic that this will not happen, to the same degree, to the New York Yankees. Part of that optimism comes from the arrogance of the folks who still run the team — there’s far more value in calling it Yankee Stadium than Amazon Field, simply because of the legacy other people helped build before Hal received the keys to the kingdom.
Still, the entry of Apollo signals a change that has been coming around for a while, but is here all the same. The business of baseball has always been about making money. To us, Babe Ruth is the greatest player to ever step on a field because of 714, because of 14 WAR seasons, because of the called shot. To the business of baseball, Ruth is the greatest because nobody, past or present, sold as many tickets just with his name. To us, Jackie Robinson is a hero because of the moral courage, determination, and grace he showed in breaking baseball’s segregation. To the business of baseball, Jackie is a hero because he unlocked a brand new customer base — see AM Glimmitz’s excellent The Metropolitans.
You used to have to be good, or at least be interesting, to make money in baseball. You used to have to sell tickets and ad space on the back of your actual accomplishments. Even rights fees from regional TV deals, the lifeblood of baseball, was at least a little dependent on Winning Baseball Games. Revenue sharing socialized all of that, the rich subsidizing the poor and allowing the poor to continue to drag themselves along the bottom, which I’m pretty sure I was told is against the ethos of American capitalism. Anyway.
Private equity doesn’t particularly care about the quality of your product at time of buy-in. Private equity cares whether there is something that can be cut away, or something that can be fertilized, in order to recognize an outsized return with a very quick turnaround. PE found its legs in distressed assets, companies that did have fat or inefficiencies or, yknow, pensions. Strip away that fat, those inefficiencies, those employees, temporarily boost profit, and spin off the now-crippled asset is the name of the game. It won’t work with the Yankees and that MLB rule still holds, but one wonders about the actual distressed assets in the league — what this mindset could do to the Pirates, the Rockies, the Angels.
That the New York Yankees seemingly no longer have to worry about being good, about having a Babe Ruth or a Jackie Robinson, that they can sign a document that injects $2.5 billion into various numbered accounts and solves a debt issue that otherwise might have made them think about how to grow the business and increase quality, is that canary keeled over when the worker returns. PE will reach into your wallet at every opportunity, your diet, your parents, your mechanic. It has now come for your leisure.