Feeding the Monster

by Seth Mnookin

  When the owners of successful baseball clubs like the Red Sox and the Yankees say they’re not making money, the public’s reaction is usually one of disbelief. But it’s true. In 2004, a year in which the Red Sox raised ticket prices, set attendance records, sold more merchandise than any year in their history, and won the World Series, the team lost money.* (The Yankees, under the burden of their bloated payroll, lost around $37 million.) Instead of paring back payroll or cutting down on marketing, Henry, Werner, and Lucchino had looked for ways to generate profit that didn’t have to be shared with other teams. Since 2003, Fenway Park had hosted midsummer rock concerts, and there had been discussions about opening up the park to ice-skating in the winter.† The previous March, New England Sports Ventures—the name of the company Henry and Werner had formed to buy the Red Sox—had launched a wholly owned subsidiary called the Fenway Sports Group for the express purpose of building an asset that diversified the business. What’s more, the money FSG earned that wasn’t related to baseball couldn’t be touched by Major League Baseball.‡

  These restrictions were frustrating, but even dealing with the business challenges they created were invigorating. The Red Sox were imbued with a sense of purpose, and now that they’d won the World Series, they could continue transforming the rest of the organization into a textbook example of how a smart and unified leadership team could make anything happen. “Almost every part of this experience has exceeded my expectations,” Henry says. His partnership with Werner and Lucchino, two men he’d never worked with before buying the team, had proven astoundingly successful. “It’s been a perfect relationship,” he says. “You have three guys who really like each other, and we’re surrounded by people that are just brilliant.” It felt almost too good to be true. “Deals don’t work out that way, you know,” he says. “You put a deal together and hope for the best but it never works out. Well, in this case, it turns out you have three guys who love each other, who work so well together, who have so much fun together. We were the outsiders who came in and won the World Series. It just doesn’t happen like that.”

  Just as rewarding, thought Henry, was how the harmony and effectiveness of his three-way partnership had trickled down through the ranks, creating an organization in which everyone was working together toward common goals. Lucchino’s lieutenants were creative, tireless, smart, and ultra-competitive, and looked to be in Boston for years to come. Mike Dee, who’d first met Lucchino in Baltimore, was running the Fenway Sports Group, while Theo Epstein had transformed the team’s baseball operations department into the envy of the major leagues. In March, Dee had been persuaded to remain in Boston as the chief operating officer of the Red Sox even after the owner of the Los Angeles Dodgers offered to make him the president of the team. And while Epstein’s initial three-year contract would expire at the end of the 2005 season, Henry assumed re-signing him would be a mere formality. Lucchino’s close relationships with his various department heads and executives, from architect Janet Marie Smith to public relations guru Charles Steinberg and Red Sox Foundation head Meg Vaillancourt, gave Henry and Werner the freedom to involve themselves mainly in issues about which they were most passionate. They were confident that the day-to-day operation of the team was in their CEO’s capable hands.

  Only rarely did anything interrupt the idyll, and it was hard to take the interruptions seriously. When Bob Kraft, the owner of the defending Super Bowl champion New England Patriots, warned Henry about the infighting and unhappiness that often follows victory, Henry wasn’t sure this applied to the Red Sox. But after everyone had worked together so brilliantly to achieve the Holy Grail, what could possibly derail the team’s plans?

  *In Boston’s two previous World Series appearances—in 1975 and 1986—the Red Sox played the winningest National League team of the decade. As of the beginning of the 2006 season, the 2004 Cardinals were the winningest National League team of the ’00s.

  *The Red Sox scored in the first inning of every game, and were tied with the Cardinals for a total of only two-and-a-half innings during the 36 innings of World Series play: for two innings of Game 1 and for the first half-inning of Game 2.

  †In 2005, the Chicago White Sox became the fifth team on record never to trail in the World Series when they swept the Houston Astros. The White Sox also finished the postseason with eight straight victories.

  ‡Players didn’t wear numbers when Ruth was with the Red Sox.

  *Late in the game, the staff at St. Louis’s Busch Stadium opened the main stadium gates to allow hundreds of ticketless Red Sox fans to see the team finally win a championship.

  *The Red Sox’s sell-out streak began on May 15, 2003. At the end of the 2005 season, the Sox had sold out 226 consecutive regular-season games at Fenway, the second-longest streak in Major League Baseball history. By the time spring training began in 2006, the Sox had essentially sold out the entire ’06 season as well. From 1995 to 2001, the Cleveland Indians sold out 455 consecutive games.

  *In 2005, the Yankees paid about $77 million into the revenue-sharing pool, while the Red Sox paid about $51 million. The Devil Rays received $33 million from the revenue-sharing pool and $34.5 million from baseball’s central fund. Their entire payroll was $26.5 million.

  †With Bud Selig doling out money disproportionately from baseball’s central fund, Boston’s marginal tax rate ended up closer to 40 percent. Baseball’s central fund is seeded by revenue that goes to Major League Baseball instead of individual clubs; this money comes from things like national television contracts and apparel sales. Since teams like the Red Sox are more of a television draw and sell more merchandise than less popular teams, the Sox simultaneously contribute more to, and get less from, the central fund. In 2005, $72.7 million from the central fund went into the revenue-sharing pool.

  ‡Economist Andrew Zimbalist estimates that the effect of revenue sharing on teams with low revenues is an implicit marginal tax rate of 47 percent: for every dollar in revenue they generate, those teams will get 47 cents less from Major League Baseball.

  *Situations in which a team’s ownership also owns other entities that do business with the team are known as “related party transactions.” If a team disagrees with the revenue-sharing committee’s decision about the value of such a transaction, the team can eventually appeal to the commissioner. If the team disagrees with the commissioner, the next step is a lawsuit. In 2005, baseball’s revenue-sharing committee was made up of Indians president Paul Dolan, the son of Larry Dolan and the cousin of losing Red Sox bidder Charles Dolan; former Padres president Dick Freeman, who worked for John Moores, with whom Larry Lucchino had parted so acrimoniously; and Mariners president Chuck Armstrong. None of the three teams represented on the revenue-sharing committee owned its own regional sports network, and none was considered a large-market team.

  *This does not mean that Henry, Werner, and the Red Sox’s minority partners failed to make money, because other divisions of the company, such as NESN and non-baseball events at Fenway Park, turned a profit. In Forbes magazine’s 2006 “Business of Baseball” package, the Yankees were listed as losing $50 million and the Red Sox $18.5 million in 2005 before interest, income taxes, and depreciation.

  †While NESN’s deal with the Red Sox is a related party transaction, since a concert at Fenway is not dependent in any way on the team itself, money earned through such events is not subject to revenue sharing.

  ‡The Fenway Sports Group initially focused on finding ways to outsource the Red Sox’s marketing acumen; in early 2005, FSG announced it would handle Boston College’s athletic marketing and media.

  Chapter 36

  Goodbye to No. 45

  NO SOONER HAD THE WORLD SERIES PARADE ENDED than Theo Epstein and the team’s baseball operations crew dove back into their work. Despite his masterful pitching in the playoffs, there was little doubt that Derek Lowe would go elsewhere in 2005; after his erratic performances of the past two years, the Red Sox weren’t even expected to make him a
n offer. Orlando Cabrera, the replacement for Nomar Garciaparra, would likely switch teams as well. (Even on the morning of the parade, Cabrera, a free agent, was telling people he doubted he’d be back in Boston.) And both Pokey Reese and Dave Roberts hoped either to sign with or be traded to teams with which they could land starting jobs.

  That left Pedro Martinez and Jason Varitek as the team’s big free agent question marks. Both were, in their own ways, crucial to the performance and personality of the team. In a clubhouse full of clowns and cutups, no one worked harder than Varitek, who spent hours preparing with the team’s pitchers and had become a true offensive threat. His agent, the notoriously tough Scott Boras, was seeking a five-year, $55 million deal for his client. But Varitek was already 32 years old, and there are very few catchers in the history of the game who have remained productive past that age. By the time he was 33, the legendary Johnny Bench had all but hung up his mask and chest protector and became an infielder. After hitting .300 or above every single year from the time he broke into the league, Mike Piazza began his sorry decline at precisely age 33, slipping from .280 to a woeful .251 in just four seasons.

  Martinez, meanwhile, had cemented his stature as one of the most dominant pitchers in the history of baseball. What he’d accomplished during the previous seven years with the Red Sox was astounding. His record since arriving in Boston was 117-37, good for a .760 winning percentage; the best career winning percentage since the beginning of the twentieth century for a pitcher with at least 100 decisions was .717. Despite numerous stints on the disabled list, he had amassed 1,683 strikeouts, for an average of 240 a season. His aggregate earned run average in Boston was 2.52, which would have been good enough to lead the American League every year since 1998. (He won the American League’s ERA title in 1999, 2000, 2002, and 2003 with ERAs of 2.07, 1.74, 2.26, and 2.22, respectively.) The pitcher to whom he was most often compared was the incomparable Dodger great, Sandy Koufax.* He was the most popular Latino athlete in the history of Boston, and one of the most beloved and recognizable people in New England.

  To be sure, he did have his downsides. Manager Terry Francona had been clashing with Martinez since Opening Day, when the pitcher took off from the ballpark before the end of a game he had started. The next day, Martinez and Francona had a fierce argument, and as the season wore on, Francona grew increasingly frustrated with Martinez’s ceaseless desire for special treatment.

  That in itself wouldn’t have meant much one way or another. In modern-day baseball, the wishes of a superstar almost always trump those of a manager, and Lucchino saw Francona’s insistence on treating all of the team’s players equally as unrealistic, even foolish. “Pedro is a unique talent,” Lucchino says. “When you’re dealing with superstars, they’re different than the rest of us, and you’ve got to treat them accordingly.”

  More than Martinez’s petulance, there were also questions about his durability. While there had been times during 2004 when he’d performed extremely well, he’d also had extended periods of mediocre play. In September, Martinez was 2-4 with a 4.95 ERA, and gave up a hit per inning. As the season wore on, he looked increasingly like a pitcher who would need to be coddled for the rest of his career. In 2004, he had a 4.77 ERA while working on four days’, or normal, rest, and a 2.98 ERA with five or more days’ rest. And for the sixth season in a row, he’d thrown fewer than 220 innings; over that time span, Martinez averaged just 192 innings per year.

  Perhaps most worrisome was the fact that Martinez’s arm slot* was considerably lower than it had been in years past, which led to a decrease in velocity—Martinez’s fastball now topped out in the low 90s, markedly lower than its peak of over 95 miles per hour—and raised questions about the strength of his shoulder. Was Martinez not throwing all out in order to ensure he’d be healthy when the time came to sign a contract at the end of the year? Or was he masking an injury?

  To Martinez, all these issues were inconsequential. The great and proud pitcher didn’t look at the arc of his career and see the risks a club would incur by laying out tens of millions of dollars for him, nor did he see his performance in 2004 as indicative of a once-elite player beginning his inevitable decline. He’d watched as the team he’d led for the past seven years had gone out and wooed an older, less successful pitcher, and then watched as that pitcher had supplanted him as the team’s ace. Now it was time for the Red Sox to show him the love. Martinez and his agent, Fernando Cuza, argued that, at 33, Martinez was younger than many of the game’s other highly paid hurlers, and should be paid accordingly. After all, Curt Schilling was five years older than Martinez, Randy Johnson eight, and Roger Clemens nine, and all three men had contracts that would pay them more than $14 million in 2005. What neither Martinez nor Cuza acknowledged was that Schilling, Johnson, and Clemens were all at least five inches taller and 30 pounds heavier than the slight Martinez, and that none had experienced the kind of shoulder problems that had plagued him.

  By the end of the 2004 playoffs, the Red Sox’s on-and-off negotiations with Martinez were almost at the two-year mark. In the spring of 2003, the two sides had begun discussing an extension to Martinez’s contract. Since his club option in 2004 was worth $17.5 million, Martinez took the position at the time that any movement down from that figure would be a major concession on his part. In addition to having the Red Sox pick up his option year, Martinez wanted a three-year deal worth about $15 million per year. When this was turned down, he told the press they’d be “shocked” if they knew how little he was willing to play for. He then refused to take a team physical until after the team exercised his ’04 option, thereby asking the team to guarantee him the most money ever paid to a pitcher before they knew whether he was healthy.

  Now Martinez wanted a contract that, at minimum, would pay him as much as Schilling was scheduled to make. Instead, the Red Sox offered Martinez a two-year deal worth $25.5 million with a $13 million option for 2007 and various performance bonuses. This was very similar to the initial deal the Red Sox had agreed to with Schilling: a contract worth $12.5 million a year, with a $13 million club option. But Schilling’s base salary for the remaining years of his contract was increased by $2 million per year and his option year became guaranteed with Boston’s World Series win. Martinez wanted a deal in which his base equaled what Schilling was set to make after this increase. “If they don’t get me,” he said after his victory in St. Louis, “it’s probably because they didn’t try hard enough. My heart is with Boston.”

  By early November, Martinez had begun wooing the New York Yankees, an unusual move for a player—generally, the pursuit is in the opposite direction. Martinez asked Cuza to set up a meeting with Yankees owner George Steinbrenner at Steinbrenner’s Tampa home base. Martinez also arranged to eat dinner with Alex Rodriguez.

  The Yankees weren’t the only baseball team in New York Martinez was trying to interest in his services. Astoundingly, he’d begun reaching out to the New York Mets before the World Series had even concluded. Before the second game of the Series, with Curt Schilling preparing to pitch against the Cardinals,* Martinez had run into Jay Horwitz, the longtime New York Mets director of public relations, outside of the Red Sox clubhouse. “Say hello to Omar,” Martinez told Horwitz, referring to Omar Minaya, who’d been named the Mets general manager less than a month earlier. Later that night, Martinez repeated his greeting. “When you’re [about to be] a free agent, that’s a pretty clear coded message: ‘Hey, keep me in mind,’ ” Minaya said later. “The timing of it tells me, this isn’t Pedro being polite; this guy’s interested.”

  By the end of November, it was clear Steinbrenner and the Yankees were going to pass on Martinez’s services. The Mets, meanwhile, were conflicted. The team’s statistics guru told Minaya that Martinez wasn’t a smart long-term investment; he was already exhibiting an increasing walk rate and a declining strikeout rate. The better option, Minaya was told, would be free agent Matt Clement. But Minaya, eager to make his mark on his new team, decided to m
ake a run at his fellow Dominican. By the end of November, the bidding for Martinez was essentially limited to the Mets and the Red Sox. Minaya put the Mets in the lead by offering Martinez a guaranteed three-year deal for $38 million with an option for a fourth year.

  The Red Sox’s own internal debate was similar to the Mets’, except the Red Sox had even more specific medical data about Martinez’s rotator cuff. To varying degrees, the people in the team’s baseball operations office, from Theo Epstein to Bill James to assistant general manager Josh Byrnes, didn’t think it was wise to guarantee Martinez more than two years. His shoulder was too questionable, his decline too suggestive of what was to come. Ownership and top management were more conflicted—Larry Lucchino, for one, wanted to do whatever the team could to bring Martinez back. “I was Pedro’s biggest supporter,” says Lucchino.

  On December 8, Henry and Lucchino flew down to the Dominican Republic and met Martinez under a tent on an airport tarmac. Once there, the two executives made their pitch. Martinez, they said, should be with the Red Sox for the rest of his career. He’d go down as the best pitcher in the history of the club. He had a comfortable situation with his teammates and a fan base that already embraced him, quirks and all. The Red Sox, they said, might even be willing to go to three guaranteed years, but wanted a provision that allowed for some relief should Martinez seriously injure his shoulder.