Winning at any Cost

How the Diamondbacks used huge debts to level the playing field of pro baseball.

In the Diamondbacks' first season, it appeared that fan support in Phoenix would track Colorado's. The Diamondbacks received more than 40,000 season ticket applications before the team's first game and sold an impressive 36,000 season tickets for its inaugural season.

"It was phenomenal," Colangelo says.

With season ticket sales leading the charge, the Diamondbacks drew more than 3.6 million fans their first year and generated $105 million in revenue. A modest $32.4 million payroll allowed the team to show a $21.1 million operating profit its first season.

Huge cost overruns to build the ballpark saddled the Diamondbacks with more than $127 million in debt.
Huge cost overruns to build the ballpark saddled the Diamondbacks with more than $127 million in debt.

So far, so good.

But then Colangelo made a crucial mistake at the end of the team's first regular season when he raised ticket prices during fan appreciation week.

The team had just completed its first season, finishing last in the National League Western Division, and was already raising prices 12 percent. The price hike came a year after an unpopular sales tax that generated $238 million for the ballpark construction had expired. The ticket price increase was widely perceived as greedy.

Season ticket renewals for the 1999 season plummeted.

Colangelo then made a crucial decision that has had a profound impact on the field and on the balance sheet.

Rather than adjust his business plan to the reality of lower attendance and try to work things out over time with modestly paid, homegrown players, Colangelo opted for expensive, big-name stars.

"The only conclusion I could come to was to protect the major investment that already has been made, we are going to have to compete sooner rather than later," he says. "That's when I embarked on trying to win now."

Colangelo abandoned his five-year business plan after only one year.

"I was concerned about a continual [attendance] erosion, and that was putting a major substantial investment in jeopardy," he says. "I have always maintained I have fiduciary responsibility to my partners. So I concluded that by becoming competitive, we could get some of that back. I really felt that way."

Colangelo pulled out the checkbook and signed a stable of big-name players prior to the 1999 season, more than doubling the team's payroll from the year before to $68.5 million. And that didn't include tens of millions of dollars in deferred salaries.

Colangelo's new strategy worked wonders -- at least on the field.

The team won 100 games and clinched the Western Division.

"We had the biggest turnaround in the history of major league baseball," Colangelo says.

But going from last place in 1998 to first place the next year and earning a trip to the playoffs failed to impress Arizona fans.

Attendance for the 1999 season fell to 3.2 million, an 11 percent decline from the first season.

Even worse, the team lost $15.8 million.

Colangelo's new business plan resulted in a $37 million erosion in net operating income in just one year. And now, he was locked in through 2002. It was too late to make any significant salary adjustments, because most of the players had been signed to four-year contracts.

Having won the division, the Diamondbacks hoped that season ticket sales would increase for the 2000 season. Instead, they fell slightly.

Once again, Colangelo's theory that a winning team packed with highly paid stars would increase attendance at Bank One Ballpark was being seriously challenged.

The 2000 season started off strong, but the team faded in the second half and finished well out of contention for the playoffs. Attendance slipped again, dipping to 2.9 million.

Now Colangelo was faced with the worst of both worlds -- a highly paid, poorly performing team and declining attendance. The team reportedly lost $24 million in 2000, according to reports in the Arizona Republic, which is one of the team's limited partners.

Colangelo fired manager Buck Showalter and hired former catcher and baseball broadcaster Bob Brenly to run the team. He also restructured more than 10 player contracts, demanding they defer $30 million of their salaries.

The deferments allowed Colangelo to buy even more talent.

This time he added several more highly paid players, including Schilling in the middle of the 2000 season and Mark Grace and Reggie Sanders prior to the start of the 2001 campaign.

The personnel additions proved crucial as the Diamondbacks won their second Western Division title and are now pressing the Yankees to the wall in the World Series.

"In two of the three years of a four-year plan, we have had extraordinary success and are on the cusp . . . of winning it all," Colangelo says.

But will winning it all translate into a financially stable franchise?

"I don't think anyone knows," Colangelo says.

There is no doubt the World Series will have an immediate positive financial impact on the team.

"Participating in the World Series and depending how far we go, four, five, six or seven games, there will be a net impact to our bottom line somewhere between $10 million and $16 million," Colangelo says.

But what is far more important to the franchise's long-term financial health is whether Arizona fans will return to the ballpark in numbers similar to the first season -- and keep coming in the years after that.

Already, there are indications that season ticket sales may finally rebound from their steady decline from 36,000 in 1998 to 21,000 this past season.

The team quickly sold 1,100 season tickets last week by linking season tickets to the sale of a limited number of World Series tickets. Fans desperate for Series tickets coughed up $750 deposits for the season tickets, generating a quick $1 million.

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