A minor miracle

ColoradoBIZ:
Dec. 2005

Tyler Tysdal showed a knack for working the business side of baseball early in life. As a teenager in North Platte, Neb., he hired neighborhood pals to tear through packages of bulk-order baseball cards, separating out marquee players. Normal kids of the era might have swapped the occasional Dale Murphy for a good-condition Mike Schmidt and called it a “trade.” Tysdal marked up the price for a 1984 George Brett, peddled it to a fan in Kansas City by mail-order, and called it “regional arbitrage.” When he was 14, he cleared $14,000. “Put myself through college,” Tysdal says.

No surprise, then, that Tysdal is back in the baseball business in a big way. As the president of Denver-based National Sports Services, Tysdal is leading an investment renaissance in the once-neglected professional sport of minor league baseball.

He may be onto something. Turns out that while you and I were overpaying for tickets, hot dogs and beer at Coors Field, the real action was going on in places like El Paso, Texas, and Asheville, N.C., where a new wave of owners and more sophisticated management practices are introducing an unfamiliar element to minor-league baseball: profit.

Yes, sports fans, behind all the goofy stunts and romanticized luster of minor league ball is a real business. Revenues have nearly doubled over the last 10 years to nearly $500 million across both independent and Major League Baseball-affiliated leagues. Nearly 100 new ballparks have been built since 1990. And some minor-league franchises are now valued as high as $20 million (although $5 million is a more typical number). With fan support growing and salaries in some leagues capped at a slim $120,000 per team, it’s possible to produce a solid operating profit even with ticket prices and sponsorship rates that are a fraction of what prevails in the big leagues, says Allen Fears, the former Denver Broncos chief financial officer who now holds the same title at NSS.

That’s certainly the hope of Tysdal and his partners at NSS, which operates as a sort of central casting agency for team owners. NSS supplies investment capital, marketing and sales help, facilities construction oversight and just about anything else an owner might need. The resources NSS provides makes for a far different outlook than in the old days, when independent team owners had to scrounge for everything from uniforms to somebody who could print up tickets.

“That’s really the idea behind it. Not only are they doing this for their own teams, but they offer all this expertise to owners who have been adrift for a long time,” says Rick Hanson, the founder of the Denver graphic design firm The Hanson Group, which produces logos and brand identity work for NSS and its teams.

Among NSS’s latest investments is a new team that will play its home games in Aurora, where NSS is overseeing the construction of a new 5,500-seat ballpark at Signature Park, just south of the Buckley Air Force Base. Owned by NSS in partnership with Newmont Mining Corp. finance executive Donald Karras, the park promises to serve up four general-admission tickets for around $20 when it takes the field in 2007. Karras, a switch-hitting shortstop during his youth in Sioux Falls, S.D., says he was smitten by the chance own a chunk of a local minor-league baseball enterprise, both because of his fondness for the game, and because he thinks it’s a worthy investment. “Minor league baseball is the best entertainment value in America,” Karras says.

The yet-unnamed team likely will be part of either the Central Baseball League or the Northern Baseball League, depending on how ongoing negotiations wind up. Both are independent leagues, meaning their teams aren’t affiliated with Major League Baseball franchises (and meaning their owners can set up shop in just about any market they choose).

NSS and Karras hope to double-down their local investment with a companion park in Jefferson County that would house a second metro-area team and offer up some scale economics in the form of shared ticket sales and overhead. The teams themselves will be composed of young athletes with solid baseball skills, a few of whom may catch they eye of MLB-affiliated farm clubs. (Los Angeles Dodgers outfielder J.D. Drew is a notable indy-league protégé.)  Most will make about $1,000 a month playing ball.  

But the action on the field isn’t the only thing NSS is banking on to draw crowds. Minor-league teams increasingly are relying on what NSS calls “non-baseball ancillary entertainment” to lure more families and fans to the ballpark. From themed stunts like “’70s night” to mini-golf courses embedded into parks, the new-era minor-league team owner must behave like a modern-day Billy Rose: equal parts huckster and promoter.

“It’s like you’re going to a picnic,” says Fears, “and a baseball game breaks out.”

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