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The Legitimacy of the Potential Sale of the Yankees

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Could the Steinbrenners extract the highest possible value from the Yankees by selling the team?
Could the Steinbrenners extract the highest possible value from the Yankees by selling the team?

The Internet was abuzz this morning with rumors of Yankees owner Hal Steinbrenner considering selling the team, so much so that I felt I had to address it and postpone my mostly-written story. New York Daily News columnist Bill Madden first reported that because the Los Angeles Dodgers recently fetched over $2 billion in a sale, some people in the Yankees' financial circles were wondering what the Yankees would sell for on the open market. Madden reported that these talks had been ongoing for several weeks now. Although it seems unlikely at first that the Steinbrenner family, which has owned the team for nearly 40 years now, would ever sell the team, it's hard not to think about the possibility. Numerous team officials, from Hal Steinbrenner to COO Lonn Trost, blasted Madden's report, stating that it was a "fabrication" and "pure fiction." But is it?

Would it be so ridiculous for the Yankees to be sold at this current juncture? We live in a world where money talks, and with the Yankees' franchise value at about the highest it's ever been, anything's possible. The Yankees are the premiere franchise of baseball, and they receive tons of revenue beyond their play on the field. The fact that the current Yankees squad has made the playoffs annually since 1995 except for one year certainly adds to their value as well. The post-season brings extra exposure, and the Yankees routinely seem to have the best chance at making it to the Fall Classic of any team. The YES Network brings in even more revenue through their Yankees programming. The whole empire is a cash cow that would be very appealing to many affluent businessmen.

Naturally, the Yankees brass would deny the report--why would it make any sense financially for them to admit that they are considering a sale? That would lose leverage. As long as the Yankees don't admit that they are considering a sale, potential buyers will be forced to pay even more money than normal to simply get the Yankees to contemplate their offer. Think of it in the classic example. If I walk up to you and say that I want to buy your house, you'll probably tell me to hit the road. However, if I (after somehow becoming a millionaire) walk up to you and say "I want your house and I will give you $1.5 million for it," you would be much more inclined to start packing immediately. This perk is what the Yankees gain by not admitting that they are looking for buyers.

The adage has always been "sell high, buy low." The Steinbrenners helped buy the team when it was in the midst of a playoff drought for $8.8 million. Even adjusting for inflation, they would be making a huge profit if the Yankees were to be sold for any price even remotely similar to what the Dodgers sold for. The Yankees would be selling high on the success of the team, the Yankees brand, and the YES Network. For all we know, the Yankees could be on the overall decline. Their best players aren't getting any younger, the farm system has no legitimate offensive prospects above the unpredictable prospect world of low-A Charleston, and the most recent Collective Bargaining Agreement has higher luxury taxes for violations of high payroll. The Steinbrenners still have a ton of money to throw around, but the new CBA limits them like they have never been limited before. What if they struggle to find a way to win without this financial might? The Yankees' constant desire to contend every year forces the team to hesitate before inserting young players into the lineup, and development problems are hard to accept when missing the playoffs counts as a colossal failure. The Yankees don't often get great draft picks, and new limits on international free agent signings could cause them to encounter problems developing players like Robinson Cano. Yankees ownership could be looking toward an unknown future where they don't have as much power in baseball as they previously held. Why wouldn't they at least be vaguely contemplating the idea of a sale? It seems unlikely, but it also probably seemed unlikely that the Jacob Ruppert Estate would sell the Yankees. Ruppert had led the team to its first success, but the estate sold the team in 1945 after Ruppert's death in 1939. Might the George Steinbrenner Estate be considering the same? It's hard to definitively say "no" when someone is offering you billions of dollars. I doubt the team would be sold anytime soon, but a few years down the road? Who knows.