Elmhurst College: Jerry Reinsdorf Talks about the Business of Sports

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Jerry Reinsdorf Talks about the Business of Sports

He has had successful careers in accounting, law and real estate. But Jerry Reinsdorf says none has been as interesting and intriguing as owning a baseball team.

“As a business, a baseball team is really a horrible economic investment,” Reinsdorf said during a recent appearance at Elmhurst College. “During my 32 years in the game, if I were to add up the years that we made money and lost money, it comes out to about zero. But I got into baseball because I love the game.”

Reinsdorf, the majority owner of the Chicago White Sox and the Chicago Bulls, spoke to an audience of about 450 at Hammerschmidt Memorial Chapel on September 20. His talk, “The Economics of Sports and of the Real World,” was part of Elmhurst’s Democracy Forum lecture series.

As a team owner for the past three decades, Reinsdorf has been credited with improving labor policy and advancing equal-opportunity initiatives in professional sports. He also presided over the construction of two major sports facilities: U.S. Cellular Field and the United Center. But local fans perhaps know Reinsdorf best for his role in bringing Chicago six World Championships in basketball and a World Series Championship in baseball.

Reinsdorf, who said his first love has always been baseball, grew up in New York and was a fan of the Brooklyn Dodgers. At Elmhurst, he mostly talked about his ownership of the White Sox—and his words served as a tutorial on the joys and heartaches of running a baseball team.

“The business of baseball is different from any normal business,” Reinsdorf said.

It begins with the players, a team of 25 millionaires who ask for more money with each contract, Reinsdorf said.

“We pay 25 guys to play catch,” he joked. “Any incremental revenue increase goes to the players. We’re basically croupiers. We take in the money from people who buy the tickets and push it out to the players.”

And unlike any other free market enterprise, the 30 Major League Baseball team owners need one another for success, Reinsdorf said. So while the New York Yankees may be the league’s most profitable team, it also relies on the continued viability of small-market teams like Kansas City, Reinsdorf said.

“In normal business, you want to crush the competitor. You want them to go out of business, if possible. In baseball, you want them to stay in business,” Reinsdorf said.

Thus, it was Reinsdorf who coaxed baseball owners toward revenue sharing, negotiating national television deals and splitting profits from selling licensed items like caps and jerseys. But such a relationship can also be costly, he said.

“Because of salary arbitration, I have to pay what the Yankees pay for a player,” Reinsdorf said. “So when it really comes down to it, I’m at the mercy of my dumbest competitors. Should my competitors overpay some players, I have to overpay.”

Then there is the matter of dealing with the Major League Players Association.

“Every other union I know of, the purpose of the union is to negotiate wages. But in baseball, every player has an agent. They’re really an association of independent contractors. The union negotiates benefits and working conditions, but salaries are negotiated separately,” Reinsdorf said.

Reinsdorf also talked about the delicate issue of public relations. No other business leader is as closely watched, and second guessed, as a baseball owner, Reinsdorf said.

“Usually in business, the highest-paid person is the CEO, and he also is the most highly respected. In baseball, your customers worship your employees and they hate you,” Reinsdorf laughed.

“In a normal business, if you want to fire the foreman, you do it and nobody says anything. Not in baseball. If you fire a manager, the public demands to know why. And if they don’t like it, they send you hate mail,” Reinsdorf added.

But one thing a sports team can do that many businesses can’t is bring people joy. Reinsdorf said he saw that joy in 2005 when fans lined the streets for a ticker-tape parade for the White Sox World Series team. He saw it when Michael Jordan led the Bulls to six NBA championships in the 1990s.

Reinsdorf also sees joy in the many charitable efforts he’s organized and funded—from building the James Jordan Boys & Girls Club and constructing inner-city baseball diamonds to organizing groups of players and volunteers to visit hospitals, paint schools or build playgrounds.

“Essentially, teams give back to the community,” Reinsdorf said. “The best part of being a team owner is the opportunity to bring happiness. In a normal business, you can’t do that.”

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