Subscribe to Inc. magazine
HOW TO SELL ANYTHING

Diamonds in the Rough

While the Baseball strike lingered, a start-up league thrived. This story tells how and looks at future plans.
Advertisement

The Texas-Louisiana Professional Baseball League hopes to use an old-time formula -- with a few new wrinkles -- to provide 'affordable hometown entertainment.' If it succeeds, it may teach the major leagues a brand-new way to do business

It's a Friday afternoon in Dallas -- coming up on Memorial Day weekend -- and problems are cluttering Doug Theodore's desk.

Theodore is chief operating officer of the Texas-Louisiana Professional Baseball League, a new minor league opening in three cities tonight, and, well, let's see, Charley Kerfeld, manager of the Beaumont Bullfrogs, still doesn't have a proper uniform. Kerfeld was a large man when he was pitching in the big leagues, and he's larger now. His shirt and pants had to be special-ordered. They're not ready yet. Mike Patrick, the Bullfrogs' general manager, is looking for some guidance.

"Have him wear plain white pants and a purple windbreaker," Theodore says to the speakerphone. "And be sure to tell the umpire."

Theodore, 47, wads up the phone message and flicks it, backhanded, at the wastebasket. Ordinarily, he's a pretty good shot. This morning, on the way to the fulfillment house to check on souvenir hats, he blew past the exact-change booth on the Dallas Tollway at 20 miles an hour and put the coin in the basket with no problem. But the hours are catching up with him: you can see it in his eyes. Yesterday's workday lasted until 3:30 this morning. The paper ball rattles in the corner, skips on the rim, and joins the pile on the floor.

"We have six inches of water in the outfield." This is league president Byron Pierce, checking in from Alexandria, La. "We got a 'copter ordered to come in here, but the problem is, half the outfield is dirt, not grass. They could put a hundred bags of Diamond Dry on that damn thing, and it wouldn't make any difference."

"Tell the pitchers to keep the ball down," Theodore suggests. (It's a joke.)

This just in from Cliff Dochterman, general manager of the Amarillo Dillas: no liquor license yet for Madison Memorial Stadium. No liquor license, no beer; no beer, no game. Does Doug have a name at the TABC (that would be the Texas Alcoholic Beverage Commission, in Austin), somebody Cliff can call?

No, but he has a phone number for John Bryant, the Democratic representative from Texas's Fifth District and the commissioner of the Texas-Louisiana League. Bryant, in Beaumont, Tex., for one of the openers, is reachable right now at the midtown Holiday Inn. "He will fix your problem," says Theodore.

Great, but what's a U.S. congressman to the Potter County health inspector? The inspector is due in two hours, says Dochterman, but the electrician needs four hours to finish running a new line to the hot-dog griddle. If the griddle isn't hot, the stadium won't pass. Is there any way to put this guy off for a couple of hours?

"Hold a minute, will you," says Theodore. He calls Judge Art Ware in Potter County.

"Shit," says the judge after he's been briefed. "You're not gonna be ready for the game, are you?"

"Just a little flex in the system is what we're looking for," says Theodore. Then in a stage whisper: "Judge Ware's throwing out the first pitch. He doesn't want to miss that."

The judge gets the message. "Super-duper," says Theodore, and relays the good news to Dochterman. Then, "Anything else?"

"I'm writing checks like it's going out of style."

Don't worry, is Theodore's thrust. "In 48 hours you'll have more money than you'll know what to do with."

The strike that shut down major-league baseball in August -- alienating fans and exposing grave weaknesses in the way the industry behemoths operate -- was, if anything, a boost for the country's 227 minor-league teams. It brought them expanded coverage in big-city dailies and bonus exposure on radio and television, and helped them sell more tickets.

But neither that strike nor the four that preceded it were the cause of the growing popularity of the minor leagues. In fact, both the major-league squabbling and the minor-league boom are products of the same root cause: the fundamental change over the past two decades in the business of major-league baseball. Television rights, free agency, and talk of salary caps and revenue sharing have all created a very different marketplace for the major leagues. It's a change that has turned off many of the big-league game's primary customers -- the fans who come out to the ballpark, still the greatest single source of revenues for most teams -- and has sent them in search of alternatives.

Minor-league attendance has been building without interruption, in and out of strikes, for the past decade -- from 17 million in 1984 to 32 million this past summer. Along the way, franchise values have risen stunningly. As recently as 15 years ago, some minor-league teams could be had for little more than a willingness to take on existing debt. Today prices range from $500,000 for a short-season rookie club to more than $10 million for a top class-AAA franchise.

Major-league baseball has been eyeing those developments with growing interest. The latest player-development contract, the document that governs relations between big-league clubs and their minor-league affiliates, was signed in 1991. In it, the majors took the first steps toward turning a research-and-development expense into a new source of revenues. They won a 5% cut of the minors' ticket sales, folded minor-league merchandisers into major-league baseball's group licensing operation, and set strict new standards for facilities that have meant higher operating costs for minor-league owners. "The minors caved in completely because no one was willing to say, 'We'll take a walk," says Miles Wolff, part owner of North Carolina's Burlington Indians and an opposition ringleader.

Not then, no, but two years later, in 1993, Wolff joined a small group of rebel owners who founded the Northern League, an independent minor league with no formal ties to the rest of organized baseball. Going solo meant giving up the main benefit of affiliation: free uniformed labor, scouted, signed, and paid for by the parent clubs. That was OK because what they gained by going independent more than made up the difference: all revenues, plus the freedom to do business as they saw fit, without the parent clubs breathing down their necks. "Having them pay the salaries is nice," says Wolff, "but you don't control the product."

The Northern League was an immediate hit (five of six clubs made money the first year) and nowhere more so than in Minnesota, where the St. Paul Saints attracted sellout crowds to a new, fan-friendly outdoor stadium, only a few miles from the Minneapolis Metrodome, where the big-league Twins play.

The success of the Northern League helped convince the Texas-Louisiana League organizers -- who had once sought major-league affiliation -- that independence was the way to go. The concept is not as radical as it seems. Fifty years ago, before there were such things as farm systems in baseball, all minor-league teams were independent. It's a throwback, really, not an innovation. But the Texas-Louisiana League, in a move that underscores major-league baseball's loosening grip on its dominion, has gone one step further: consolidating operations under a single corporate heading, Texas Professional Baseball Inc., and launching eight wholly owned subsidiaries (read: ball clubs) in cities from Amarillo, Tex., to Mobile, Ala.

* * *

Bringhurst Field in Alexandria, La., home of the Aces, is filled to capacity -- standing-room only. The field is . . . playable. The 'copters did what they could, with help from a contingent of convicts in Day-Glo orange jumpsuits, pressed into service at the last minute by the sheriff of Rapides Parish. Otherwise, the place looks ready: fresh purple paint throughout; a double row of fence ads stretching from foul pole to foul pole across the outfield (60 of them, potentially worth $2,500 apiece); above the fence in left field, a new $50,000 electronic scoreboard; and beyond, a lovely backdrop of pines fading to a black Louisiana night.

The corporation had wanted to call a Louisiana team the Mud Bugs (another way of saying crawdads, but you probably already knew that). Theodore thought it was cute; he liked the logo possibilities. But the fans in Alexandria had their own idea. When Theodore flew in from Dallas to announce the awarding of the franchise, he was greeted by a 40-by-40-foot banner that read, "Welcome Back Aces." That was fine with Theodore; the Aces were the last pro team to play in Alexandria. (Something similar happened in Corpus Christi, where the locals vetoed Crabbers -- too wimpy -- in favor of Barracudas.) Part of what put Theodore in a cooperative mood was the kindness and generosity shown the corporation by the Alexandria city fathers. "You talk about small-town southern politics and the way it works?" says Theodore. "That's a city that works." The officials had gone on record authorizing $175,000 in stadium improvements but somehow found a way -- by pulling tractors from this job and pavers from that -- to spend $450,000.

Carl Westcott, chairman of the Texas-Louisiana League, is here for the opener. He flew in this afternoon from Dallas in his own jet, along with his wife, Jimmy, and two other couples. Before the plane left the Million Air terminal, Westcott passed out red-and-black Aces hats to everyone on board. "Sports is the ultimate contest in life," he pronounced. By then the jet was airborne, high above the west-Texas piney woods. His guests sipped cocktails (Westcott drank a Miller Lite; the brand is a league sponsor to the tune of $400,000) and snacked on cookies decorated like baseballs. "Other than business, what else is there?"

The game itself, however, fails to hold Westcott's attention. While Jimmy and her friends cheer from front-row seats behind home plate, Carl prowls the area beneath the grandstand, stooping to pick up garbage, counting customers at the concession stand, wondering out loud why there isn't one line for food and another for drinks. Wouldn't the lines move faster? "I'm torn between the game and the action back here," he says.

Westcott, 54, never aspired to own a baseball team, much less a whole league. As a kid he never had much time for sports. He grew up in Vicksburg, Miss., quit school after eighth grade, joined the army ("to escape from Mississippi"), and, when he was 19, started selling cars. He made his first millions in the car business (he still owns a dealership in Atlanta) and multiplied them by buying and selling television stations. Then in the late 1980s he began producing targeted educational programs (for car dealers, teachers, police officers) and beaming them via satellite to subscribers. That company, Westcott Communications, went public in 1989; today his net worth exceeds $100 million. "My idea of havin' fun is makin' money," he likes to tell friends. "Hell, I work 40 hours in my sleep."

What attracted Westcott to baseball in the first place was neither love of the game nor purely business considerations. It was a chance to do a favor for an old friend, Congressman Bryant. Westcott has long been as generous as the law allows to Bryant, contributing the maximum $2,000 per campaign. But when Bryant, a member of the House Subcommittee on Telecommunications and Finance, came to Westcott in 1991 and told him he was thinking of buying a minor-league baseball team, Westcott was glad to help.

"I gave John $50,000," says Westcott, "which was the initial capital into the deal. I said, 'Look, I don't want any papers, John. Just take the $50,000, write me a letter, tell me you got it, and we'll go from there. You get this deal put together, gimme my money back.' I got enough businesses. I was not out looking for another business. I wanted to help John chase his dream, but if he got it, I wanted my money back."

Bryant had a partner, Byron Pierce. They had met 17 years ago in an adult Sunday-school class at White Rock Methodist Church in Dallas and have been close friends ever since. They have children the same ages and are both baseball fans, but other than that -- despite Pierce's claim that "everything kinda matched" in their lives -- it's hard to imagine a more unlikely pair. Bryant, first elected to Congress in 1982, is well known to C-SPAN junkies for the way he slides his reading glasses down on his nose and drills witnesses with his gaze, and is headed, he hopes, for the governor's mansion. Pierce is a scattershot entrepreneur (paging devices, Christmas trees) and devoted amateur baseball coach who played left field on the Texas high school state championship baseball team in 1965. "Byron Pierce is a wonderful guy," says Westcott. "Baseball lover, sweetheart guy, this big around." Westcott holds his arms wide. "Everybody loves him.'

At first, all Bryant and Pierce wanted was to find a team and move it to northeast Texas. That proved unrealistic, given the limited supply of teams for sale and the high cost -- at least $3 million -- for the kind of class-AA franchise they had in mind. But while considering where to put a team if they got one, they were struck by the number of cities in the region that were not served by minor-league baseball. "We saw a team in every city of any size on the East Coast, in the Midwest, and on the West Coast," says Bryant. "The only place with hardly any teams was Texas."

That got them thinking in grander terms, about starting their own league. "We saw pretty quickly there was no reason not to be playing minor-league ball in the region," says Bryant. Later he talked "at some length" with friends in major-league baseball about what a new affiliated league might offer them. "They smiled on the proposal," he says. But the National Association of Professional Baseball Leagues, the minors' industry group, did not.

"The minor-league teams were all making money hand over fist," explains Bryant, "and major-league baseball was providing those teams with players for free. Our proposal was that we would pay part or all of the cost of the players, providing the majors with something they otherwise couldn't get -- and then we'd have big-league affiliation and be up and running. But the other minor-league teams went bananas because they have a sweet deal. They claimed that their agreement made them the exclusive player-development arm of major-league baseball. Now, the agreement doesn't say anything like that. But that kind of a dispute has to be resolved by the commissioner of baseball, and there wasn't one in August of 1992."

Fortunately, Bryant and Pierce had other options. First, they decided to forgo affiliation in favor of independence, an idea they borrowed from the Northern League. That made possible a second, more radical innovation -- one league, one owner -- for which there was no precedent in baseball and only one in professional sports, in the Central Hockey League.

The more they "studied what succeeded and what did not in the starting of leagues," says Bryant, the more the idea of central ownership made sense. "People can't afford to do business with you unless they know all about the owners in every town. That's because the league is only as strong as its weakest link. If you get a weak team in one town and it doesn't show up to play, the league is finished. Besides, you can't guarantee any other way that you'll have uniform quality. I'm talking about the appearance of the product, the sales operation, what it means to go to a game in your league. It's got to be the same in every town. Anything else, I think, would have simply been unmanageable."

Bryant and Pierce took the new plan back to Westcott. "I thought, 'Boy, that's neat," Westcott says.

* * *

Early on, Westcott kicked in another $50,000. Once the league began to take shape, he invested $500,000 more, with help from minority investors. By opening day, the league's total capitalization had run to $900,000: the original $600,000, plus $300,000 in subordinated debt that would convert to equity if not repaid at the end of the season. Pending that conversion, Westcott and his coinvestors owned 40% of the league, and Bryant and Pierce -- neither of whom had put up a dime -- owned 60%. Westcott, however, insisted that he control all the voting stock. That gave him the right to name his own chief operating officer. Enter Doug Theodore, a former building contractor who was running a community organization for the prevention of substance abuse. Theodore's previous baseball experience amounted to his tenure as Little League commissioner for the Highland Park school district, which adjoins the tony Dallas suburb where the Westcotts and the Theodores are neighbors. Theodore was the first to run the numbers and develop the advantages of single ownership.

Theodore succinctly articulates a customer-focused mission statement for the Texas-Louisiana League that major-league baseball seems not to comprehend. "It's a business," says Theodore, "but you don't want to convey that to the clients, who, of course, are the fans. You want to hold on to the mystique that has to do with something larger, something greater, something with more traditional roots than a business. That's really important because we're a single-owner league, so it's easy for people in our local communities to misperceive us as a big-city corporate organization setting up storefront baseball operations in small towns. That's just not it at all. On the other hand, with the sponsors you're trying to enlist, it's absolutely a business, and with them you want to emphasize the other side of the coin."

To its customers, the Texas-Louisiana League stresses value ($20 entertains a family of four, with change back), regional identity (understood partly in terms of "culinary diversity": hot dogs, yes, but barbecue, Tex-Mex, and Cajun, too), and nostalgia. "We want to bring back minor-league ball the way it was in the 1930s and 1940s," says Theodore. "Hometown entertainment, a family show."

Revenues come from three categories, each representing roughly one-third of the total: tickets; ballpark sales, meaning souvenirs and concessions (the league controls its own concessions at every ballpark, a costly capital investment but one that promises much higher profit margins); and advertising, meaning ads in programs and scorecards, fence signs, promotional deals (the sponsorship from Miller Lite), and radio ads (from the league's own broadcasts in each city). The projections are based on an average leaguewide attendance of 2,000 fans per game.

Further revenues are expected from direct-mail sales of souvenirs, which started quickly: $23,000 from the first $5,000 ad in Baseball Weekly. "That could become a bigger piece than some of us ever dreamed," says Theodore, who mentions the experience of the Rancho Cucamonga Quakes in California. Their first year in business, they sold $570,000 worth of merchandise at their stadium but came away with a small fraction of that because they're part of major-league baseball's group plan, which pools revenues from the sale of licensed merchandise. "Nothing is drained away from any of our teams," says Theodore. "We'll sell a hat and make nine bucks on it. An affiliated team might get 35¢ a year later."

Theodore forecasted leaguewide revenues of about $6 million; that's about what 8 class-AA affiliated franchises in markets of 150,000 each might expect. Expenses, on the other hand, would be much lower. That's despite the added cost of players' salaries, capped at $20,000 a month per team.

"Our teams aren't nearly as top-heavy as traditional minor-league teams. Typically, they have an owner, a management staff, and an accounting staff, whereas we share most of those functions on a leaguewide basis. Then there are nonpersonnel economies of scale that we're able to realize -- for example, purchasing equipment and souvenirs, booking promotional acts, even things like transportation. Finally, we have the best leases in baseball. They're turnkey operations with an average cost of $40,000 per team per year, and they can include not just use of the facility but utilities, cleanup, field maintenance, and security. That's because we're bringing baseball back to a region that's rich in tradition and starved to have it back."

Westcott didn't get into the deal to make money, but he has since become a believer. "My entrepreneurial feelings tell me there's a hunger in America for family activities that are relatively inexpensive and that are good forms of enjoyment," he says. "There aren't a lot of things that the whole family can enjoy for 20 bucks. You think about it. It costs more to go to a movie and get popcorn and a Coke than it does to go to a minor-league game."

Westcott likes the risk-and-reward curve. "If the league really works," he says, "then the numbers go off the charts. We own all the teams, and we could make a projection that any one of those teams will be worth $1 million to $2 million. That's doable." That would put Westcott in an enviable position with several options: sell off franchises one by one, sell the whole league in one piece, or sit tight and make money on operations.

Is there a nightmare scenario? "I've asked myself that question and run that trail many times," says Theodore. "It gets back basically to one assumption: How many people are going to come? If nobody cares, then nobody'll come."

"Fifty in ones, 10 in quarters, OK? Go git 'em."

This is Amarillo general manager Cliff Dochterman talking, very loud and very fast. He's carrying a walkie-talkie that he stores in his armpit whenever he needs both hands free to make a withdrawal from the cooler full of federal notes hanging from his shoulder. He'd be dripping sweat globs even if it were not 90 degrees.

"You were working hard last night upstairs," he says, peering at the vendor. "What's your name?"

"Paul, sir," the kid mumbles.

"Well, good luck!"

Paul lumbers off with his cash and his Cokes. Dochterman dumps the cooler in his office and heads for the portal to the stands.

Above, the west-Texas sky is blue, very blue. The clouds zooming through it are thick and white and tumbly, like Texas-size clumps of cotton stuffing. Down on the field there's a game in progress, the Dillas against the Tejanos, the Tejanos losing large after riding up to Amarillo from San Antonio for nine hours on the bus. Dochterman is pleased that the home team is winning, of course, but his focus is elsewhere. On attendance, for example: 5,200 tonight, another excellent crowd after last night's opener, and all paid. Dochterman has a thing about giving tickets away.

"That just erodes your price integrity," he says with conviction, launching into a pithy lesson on sticking to your core business. "What have we got? We've got tickets to sell. Screw that up and you're in real trouble. Those people that just believe, 'Well, we'll get 'em in, and we'll sell them all these concessions' -- you know what? The customers sit back and laugh at them, they really do. We aren't gonna give them a reason to laugh at us, except for when we dive into a vat of Jello or we blow up the dynamite lady. Yes, sir?"

"How can I get an autograph signed?" a fan wants to know.

"I'll tell you what. At the end of the game, go down to the far end of the concourse. The players go by there, and they'll usually do autographs. Starting the next game, we'll have a couple players every night before the game."

Not only that, but next time that fan comes back the big bull (sponsored by a local restaurant) should be in place above the wall in center field. "The head will move, the legs will kick, the tail will move, and it'll moo whenever we hit a homer," says Dochterman. "It's really cool. And we got this 'I bet you won't do it' radio contest every Wednesday. I bet you won't cover yourself with honey and frosted flakes, stand in a bowl of milk, and sing the Dillas fight song to get tickets to a game."

Fans are leaving now. The Dillas have won again. "Guys, we're glad you came!" says Dochterman, shaking a stranger's hand.

"Be back next time?"

* * *

Evidently.

More than 11,000 fans paid to watch the Dillas' two-game series with the San Antonio Tejanos. Assuming, conservatively, that the average fan spent $7 at the ballpark on tickets, souvenirs, and concessions, the Dillas took in more than enough cash that first weekend to cover player payroll for the entire season. It was an auspicious start, both for the Dillas, who were to become the league's best draw (3,000-plus each game) and for the Texas-Louisiana League itself. By Labor Day, when the season ended, total attendance for all eight clubs had surpassed 650,000, in line with projections.

There were disappointments, however. San Antonio, where the league went up against the Missions, an established minor-league affiliate of the Los Angeles Dodgers, was a major flop. The Missions, playing in a new ballpark, set an attendance record for their league; the Tejanos averaged only 566 fans and will be moved next year. The Texas-Louisiana League's experience in San Antonio suggests it may be unrealistic to hope to compete for fans head-to-head against established minor-league teams. It may mean, too, that major-league affiliation confers a significant built-in value and that Westcott's projected franchise values are unrealistic.

Overall, though, in its first season the new league came close to breaking even on total sales of close to $4.5 million. There were no big surprises on the expenses side, but revenues lagged. The biggest disappointment was advertising -- specifically, fence ads: $800,000 projected, $90,000 actual. "That will come," says Westcott, now that the league is established. Capital requirements proved greater than anticipated. He and his partners ended up pumping in an additional $800,000 by season's end, mostly for unanticipated stadium improvements. Perhaps $1 million more by opening day 1995 may be needed, Westcott now believes. If so, that would lift the league's start-up costs above $2.5 million.

But Westcott and his coinvestors -- who, with the end-of-season debt to equity conversion, now own 80% of the league -- are undaunted. They'll add four new teams next year (including one in Springfield, Mo.), and they're still aiming for 24 teams in three leagues (A, AA, and AAA equivalents) by 1998. And beyond that?

"We might have a Plan B that we haven't unfolded yet," says Westcott. "There's nothing written in the Bible that says there have to be just 28 teams in the major leagues." He grins. "Now you're going from John Bryant's dream to Carl Westcott's dream."


BOX SCORE

The projected income statement for an average team in the first year of the Texas-Louisiana League

Revenues

Advertising $154,000

Fence signs

Program ads

Radio spots

Tickets $300,000

Concessions/souvenirs $163,000

Total revenues $617,000

Expenses

Team expenses $221,000

Salaries

Transportation

Uniforms and equipment

Stadium expenses $55,000

Rental

Maintenance

Insurance

Depreciation

Game-day expenses $49,000

(mostly personnel)

Umpires

Ushers

Ticket takers

Concessionaires

Security

Mascots

Public-address announcers

Radio broadcasters

General and administrative expenses $177,000

General manager and full-time staff

Accounting, advertising, and marketing personnel

Office rent

Printing, postage, supplies, etc.

Prorated share of league office personnel

Total expenses $502,000

Net Income $115,000

Last updated: Nov 1, 1994




Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Livestream events | Comments
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: