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Organizational Reports
Written by Devon Teeple and Maury Brown   
Sunday, 03 August 2008 15:38

Astros Organizational ReportThe following is a continuation of our Organizational Reports, filed by Devon Teeple and Maury Brown. As with the prior reports for the Los Angeles Dodgers, San Diego Padres, the Toronto Blue Jays, and the Pittsburgh Pirates, this report delves into the Houston Astros historically, financially, and from a facility perspective. -- Maury Brown

The Astrodome, Enron Field and now Minute Maid Park.

Wherever the Houston Astros seem to play, it is always involving some historical point.

The Astrodome billed as the eight-wonder of the world, by the Astros original owner Judge Roy Hofheinz, the Astrodome was the first professional baseball stadium to have a roof over the playing field. It also had “Skyboxes” which we are so used of in today’s game and a two million dollar scoreboard. The ceiling was covered with these cream-colored panels, but the ball was too difficult to see, so the tiles were painted and thus, the grass died. The Astros to the rescue, this led to an artificial grass being installed in the stadium known as Astroturf. The first game was played in 1966.

Fast-forward to 1996. The Houston Oilers are going to leave town and it’s time for the “Stros” to join the revolution and get a new stadium equally known for its name as well as its style. On May 20 1996, it was recommended that Houston and Harris County spend approximately $625 million to build a new baseball stadium downtown and to redo the Astrodome for football and rodeo. According to Astros owner Drayton McLane Jr. he said a new stadium would bring the team closer to the downtown community and it would bring business owners, bar owners, and restaurants and hotels in excess of $60,000,000 in revenue, which included the following teams, baseball, football and basketball. On November 5, 1996, Harris County voters approved the construction of a ballpark in downtown Houston. The park would cost, upon review $265,000,000, with a retractable roof, natural grass, and encompassed nearly 25 acres of downtown Houston, near the old Union Station. To make itself more accessible to fans, the streets surrounding the stadium are; Texas, Congress, Crawford, and US Highway 59.

It would take nearly three years of construction before the stadium was completed. On April 7, 1999, the Houston based American energy company Enron agreed to pay more than $100,000,000 over the next 30 years to have the stadium named Enron Field. Unfortunately, at the end of 2001 it was revealed that it’s reported financial condition was sustained substantially by institutionalized, systematic, creatively planned accounting fraud, and became the largest corporation in history to declare bankruptcy. On June 5, 2002, the Houston Astros and the Minute Maid Company announced the expansion of their relationship, and created a long-term marketing and community relationship. The agreement included naming rights and thus Enron Field was know known as Minute Maid Park. With the new name change also came some agreements between Houston and Minute Maid which state that the widely popular Minute Maid Squeeze Play attraction at the park continue for the 28 years of the agreements also including the pouring rights for Coca-Cola company, continuous marketing and full commitment by Minute Maid to help sponsor and support the youth baseball programs in the Houston and surrounding areas. The Minute Maid Family of brands is produced and sold by The Coca-Cola Company – The world’s leading marketer of premium fruit juices and drinks. Thanks to this Coca-Cola connection, there is access to an extraordinary system for production, distribution, research, product development and marketing.

To breakdown the Astros and their rise to prominence, it should begin with Houston Astros owner, Robert Drayton McLane Jr. In 2008, McLane will begin his 16th season Chairman and Chief Executive Officer. McLane’s philosophy has remained consistent throughout his tenure; provide the city with a winning team and having a strong and positive influence in the community. Since the purchase of the team in 1993, the Astros rank second in the National League and fifth in the Majors in winning percentage (.534) over 15 seasons from 1993-2007. Since 1998, the Astros have attained an astonishing amount of success, which can compete with the run of the Yankees and the Braves. Since 1998, they have made the post-season in six of those, with Wild Card berths in 2004, and 2005, along with Division Titles in 1997, 1998, 1999, and 2001. Along with all those accolades McLane’s highlight, was 2001 as the Astros were the Organization of the Year by four separate media outlets; TOPPS, SportsTicker, Baseball America and Baseball Weekly.

When Minute Maid Park opened in 2000, the city of Houston did not realize the resurgence that this would have on the team and the city. For the fourth time since its inception in 2000, Minute Maid Park reached the three million fan mark in 2007, making it the second consecutive year in a row, and third time in the last four years.

Drayton McLane, and His Ownership

With McLane being the headstone of this franchise, success has not only been on the playing field but in the boardroom as well. In his 15-year tenure he has served on several MLB committees, including the Executive Committee, Finance Committee, Legislative Affairs, Ownership and Realignment committees, and the MLB Advanced Media committee. Throughout all of this, McLane’s goal was to be a contributing factor in the community. McLane’s first course of action was the Astros in Action Foundation. Its mission statement is as follows; “Through the strength of the National Pastime, we will enhance the quality of life in our community through educational, health, and spiritual endeavors. We support the efforts of non-profit organizations or programs related to: Literacy, Education/ Scholarships, Health Issues, Faith Based Organizations, and Reviving Baseball in the Inner City”. This foundation was introduced publicly on September 16, 2000 at the Jim Rome World Tour Stop #22 at MinuteMaid Park. Over the past few years the organization has raised and donated hundreds of thousands of dollars to causes such as, Tropical Storm Allison and the 9/11 attacks, helping the Enron Employee Transition Fund, and endowing the Houston Astros Adolescent Patient Waiting Area at M.D. Anderson Cancer Hospital. Needless to say, his community outreach does not end there, find below a list of more of the boards and committee’s that Robert Drayton McLane Jr. is a part of;

  • Actively involved with the Cooper Institute for Aerobics Research, Greater Houston Partnership, and the United Way.
  • Serves as Chairman of the Board of Scott & White Hospital
  • immediate past chairman of Baylor University
  • On the board of directors of The Bush School of Government and Public Service at Texas A&M University
  • Provides leadership as an officer of the executive committee of the National Boy Scouts of America.

The Impact of Tal Smith

Another key asset that the Houston Astros have in their deck is President of Baseball Operations, Tal Smith (read The Biz of Baseball interview with Tal Smith). Not only is Tal Smith one of the most revered baseball men in recent memory, according to Bill Conlin of the Philadelphia Daily news, he is “the King of the SABR-rattlers”. Tal Smith has been involved in baseball and baseball numbers since his days at Duke and keeping major league fielding stats and all the minor league fielding stats for Sporting News. Smith moved his way up the baseball ranks achieving the role of General Manager of the Houston Astros culminating in a National League Championship Series berth in 1980 against the eventual World Series Champion; Philadelphia Phillies. Unfortunately, in a move that shocked baseball world, John McMullen fired Smith as his general manager. Despite his success, Smith formed his own company as owner and operator of Tal Smith Enterprises, “a firm which has provided consulting services to 26 of the 30 Major League clubs. The most recognized functions have been in the preparation and presentation of salary arbitration cases (where Tal's firm has handled over 900 filings and tried over 150 cases), operational reviews, the financial appraisal of franchises and testimony as an expert witness in sports-related litigation. Tal also served as the sole arbitrator in two disputes involving Major League Baseball where the Commissioner was recused”.

Since returning to the club in 1994 as President, Smith has been an immense help to the Astros owner. Not only being a vital piece of the puzzle when it comes to the salary negotiations, Smith was heavily involved with the many stages of development of Minute Maid Park. The design and angles of stadium are unique and were designed with the assistance from Smith. If you look at Center Field, it has a hill "Tal's Hill", a ten degree incline, which was a tribute to his creativity and contribution to the MinuteMaid Park project. Tal’s Hill was designed with the purpose of having a feel of the baseball stadiums from the past, an element was taken from Crosley Field and the flagpole which is in play, is a design from Yankee stadium before it was redone in the mid 70’s. He also had a role similar to that, with stadium development in the early 1960’s when he became assistant to the president of the Houston Sports Association, acting primarily as a liaison for HSA and its' president, Judge Roy Hofheinz, during the construction of the Astrodome, a project which changed the face of stadiums and the city of Houston forever. For a more in-depth and detailed view of Tal Smith and his accomplishments find a link to Maury Brown’s interview with Smith from May 16, 2005 here.

The Addition of Ed Wade

The last piece of the Houston Astros puzzle, which is their plan to lead the team to further success, is current General Manager, Ed Wade. Wade became the 11th General Manager is Astros history on September 20 2007. In Wade, the Astros hired an executive who has been involved in every aspect of the game; from media relations to scouting, to General Manager. His recent experience includes being a professional scout for the San Diego Padres and before that serving as General Manager of the Philadelphia Phillies from 1998-2005 after serving as the club’s Assistant General Manager. Based upon his 31 years of experience, Wade was selected over several candidates who are currently serving as Assistant GM’s; Bob Watson, Jim Beattie, and Dan Evans, but the Astros wanted someone who had General Manager experience; Wade, won out.

As mentioned above, Wade has over 31 years of baseball experience, which began in 1997 as an intern in Phillies PR department. In 1981, Wade left Houston to become the public relations director for the Pittsburgh Pirates where he stayed for 5 years. In 1986, he returned to the Houston area where worked as an associate for Tal Smith Enterprises, and as discussed earlier, the firm provided consulting services to 26 of the MLB clubs.

Forbes Valuations for the Astros

Forbes Valuations for the Houston Astros
Year
Rank
* Value ($ mil)
One-Year
Value
Change (%)
Op Income
2008
12th
463
5
20.4
2007
11th
442
6
18.4
2006
10th
416
17
30.2
2005
11th
357
12
9.6
2004
9th
320
10
-1.9
2003
11th
327
-3
-0.8
2002
11th
337
6
4.1

In terms of value, the Astros may be the model of consistency. Never flashy (the highest they have ranked since 2002 is 9th), the club has ranked no worst than 12th since moving into Enron/Minute Maid Park, and has pulled operating income (a measure of profit) in the tens of millions over the last three years (2008 - $20.4 million, 2007 - $18.4 million, 2006 - $30.2 million).

Even with the club sitting 13 games out of first in the NL Central, Houston currently ranks 11th in league attendance at an average of 36,246. Yet again, attendance is a matter of consistency posting 10th in 2007 (37,288), 8th in 2006 (37,318), 10th in 2005 (34,530), 7th in 2004 (38,121), 12th in 2003 (30,299), and 14th in 2002 (31,078).

Conclusions

The Astros never seem to rock to the boat. Drayton McLane and Tal Smith keep a tight ship in terms of the percentage of player payroll to revenues, have fielded teams that have been competitive in recent years winning the Division in 1997, 1998, 1999, 2001, Wild Card in 2004, and the National League Championship in 2005. That has kept fans interested in coming our year after year, if not at stupendous levels, at least at levels that keep the engine humming.

Minute Maid Park, with its quirky additions (Tal’s Hill, flagpole in play, and a train), is a consistent draw. The Astros draw as should be expected for the market, which coupled with the moderate payroll, keeps the club competitive, and for ownership, profitable.

The jury is still out on Ed Wade. His most notable moment this season seems to be the altercation with Shawn Chacon – a moment that seems to be historical in nature. With the team sitting in 4th, there are good chances that the “winning ways” may be in the rear view mirror for a bit in Houston leaving one to wonder what next year might hold.

 

 
 
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