A Proposal To Break Territorial-Rights Logjam Between A's And Giants

Kurt Suzuki of the Oakland Athletics breaks up the double play sliding hard into Bill Hall of the San Francisco Giants in the bottom of the sixth inning during a MLB baseball game at the Oakland-Alameda County Coliseum in Oakland, California. (Photo by Thearon W. Henderson/Getty Images)

The Oakland A's want to move to a new ballpark in San Jose. The San Francisco Giants claim they own the exclusive right to conduct business in San Jose. We have a proposal to resolve the dispute.

Since just before Christmas, there's been a flutter of rumors suggesting that MLB owners are close to making a decision on whether to permit the Oakland Athletics to move to a new, still-unbuilt ballpark in San Jose, about 40 miles to the south. The owners are meeting in Phoenix this week, and although a decision on the A's ballpark is not officially on the agenda, it's possible the topic will be discussed.

We have a proposal to resolve the key dispute.

USA Today's Bob Nightengale tweeted on December 24 that the A's will be granted permission to move to San Jose by February. Four days later, Susan Slusser, the A's beat writer at the San Francisco Chronicle, contradicted Nightengale's information. Slusser reported that neither the A's nor their cross-town rival San Francisco Giants were aware of any such decision and that, according to former Giants general managing partner Peter Magowan, the Giants would fight any such move as a violation of the team's "territorial rights."

Territorial rights.

It sounds like something from the Age of Empires. No, not the video game. The actual Age of Empires, like the Roman Empire and British Empire.

In a way it is.

Territorial rights describes the way Major League Baseball divides the major metropolitan areas of the United States for its 30 franchises. (Well, 29 franchises in the U.S., plus one in Toronto, Canada). According to research done by baseball researcher and writer Doug Pappas in 2002, Major League Baseball amended its rules between 1990 and 1994 to expand the definition of territorial rights to include not just each team's home city, but also the surrounding counties.

All of the two-team territories but one share the same counties: the Yankees and Mets; the White Sox and Cubs; and the Dodgers and Angels. Only the Giants and A's split the counties surrounding their home cities. The A's territory includes Alameda and Contra Costa counties; the Giants' territory includes San Francisco, San Mateo, Santa Cruz, Monterey and Marin counties, "plus Santa Clara County with respect to another major league team." San Jose is in Santa Clara county. To get your bearings, look at this map of California counties.

It is believed that the rule change dividing up the Bay Area counties between the Giants and the A's came about when the Giants made efforts in the early 1990s to build a new stadium in either San Jose or the city of Santa Clara to replace Candlestick Park. Neither team had rights in Santa Clara county. Then-Giants owner Bob Lurie asked then-A's owner Walter Hass to grant those rights to the Giants. Hass, the Commissioner and the other owners agreed.

But the Giants never built a stadium in Santa Clara county, because several voter initiatives to fund such a stadium failed. Instead, Lurie sold the Giants to a Peter Magowan-led group, who in turn privately financed what is now called AT&T Park, in downtown San Francisco. Nevertheless, the MLB rule granting the Giants "Santa Clara County with respect to another major league team" was never amended.

Pappas:

Under rule 1(c), either league can move into a territory belonging to a club in the other league, so long as (3/4 of the affected league's team consent; (b) the two parks are at least five air miles apart unless the two clubs mutually agree otherwise; (c) the newcomer pays the existing club $100,000 plus half of any previous indemnification to invade the territory; and (d) the moves leaves no more than two clubs in the territory. This provision dates to 1960, when it was adopted to establish the terms for the expansion Los Angeles Angels to play in the territory claimed by the Dodgers in 1958.

The $100,000 figure is, obviously, outdated. When the Expos moved from Montreal to Washington, D.C. and became the Nationals, they invaded the Orioles' territory. The O's received $75 million to start a new regional sports network (MASN) and a guaranteed resale price of $365 million.

Which brings us to the A's and the Giants.

Even though the Giants didn't build a stadium in Santa Clara county, they claim to have relied on those territorial rights in financing and building AT&T Park. What does that mean?

In 2009, when the idea of the A's moving to San Jose first surfaced, Giants Senior VP of Communications Staci Slaughter explained: "Obviously, our financing is tied to our sponsorship revenue, our ticket revenue, and we have certain goals we have to hit. And if you have a large share of your sponsors coming from that area, that's a critical part of the equation."

Translation?

The Giants privately financed AT&T Park through debt, corporate sponsorships and charter seat licenses. Charter seat licenses raised $75 million, but that was a one-time fundraising vehicle. Another $50 million came from naming rights with $25 million coming from corporate sponsorships. The original corporate sponsors were a Who's Who of Silicon Valley, which was booming in the late 1990s.

The Giants pay $20 million per year to service the debt, payments which extend through 2017. And they continue to rely on Silicon Valley-based corporate sponsorships to help pay off that debt and defray other budgetary costs -- sponsorships via ads in the ballpark, luxury suites, etc.

How much? We don't know.

What about ticket revenue? The Giants sold more than 3 million tickets during each of the 2010 and 2011 seasons. According to Giants CEO Larry Baer, 3 million tickets sold is the "break even" point for the team. But Baer hasn't explained what that means.

Break even for what? The entire budget? Just player payroll? We don't know.

The Giants claim that Santa Clara and San Mateo counties combined make up "the single largest component of fans and sponsors" and that the Giants' business would be significantly and negatively affected by an A's move to San Jose. Larry Baer said as much during a recent interview on San Francisco public radio station KQED. (Audio file here. Baer's comments start at the 24:10 mark.)

How many fans? How many sponsors? We don't know.

While the answers are unknown, they are knowable. If it's unclear now how much an A's move to San Jose would reduce the Giants' corporate sponsorship and ticket revenue from companies and fans in San Mateo and Santa Clara counties, then MLB owners should put a process in place to find out. And then the orders should require the A's to compensate the Giants for that specific lost revenue through 2017, when the Giants make their last $20 million debt service payment. At this point, a new A's ballpark in San Jose would not likely open until the 2015 season, so the period of time in dispute is limited.

Specifically, the owners should:

  • Grant the A's territorial rights to Santa Clara county; grant the A's and the Giants shared rights to San Mateo, Santa Cruz and Monterey counties; grant the Giants territorial rights to Alameda and Contra Costa counties; and affirm the Giants' territorial rights to San Francisco and Marin counties;
  • Appoint an independent third-party to determine (a) the Giants' current revenue streams derived directly from corporations and fans located in San Mateo and Santa Clara counties; (b) any decrease in the Giants' Santa Clara and San Mateo-based revenue streams in the years leading up to the opening of the A's new ballpark in San Jose; and (c) any (further) decrease in those revenue streams in the time period following the opening of the A's new ballpark up through and including the end of 2017;
  • Direct the A's to pay the Giants 50 percent of Santa Clara and San Mateo-based revenue lost between the date of the owners' vote and the opening of the new ballpark;
  • Direct the A's to pay the Giants 10 percent of the Santa Clara and San Mateo-based revenue lost between the opening of the new ballpark and the end of 2017.

After 2017, each team is on its own.

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