Emmis Communications Corp. CEO Jeff Smulyan ended up black and blue the last time he owned a baseball team. This time around, he's taking blows even before he finds out whether he gets the team.
Smulyan wants both Emmis shareholders and residents of the Washington, D.C., region to be excited about his group's bid to buy the Washington Nationals from Major League Baseball for at least $450 million.
But already leading an anti-Smulyan charge is Washington Post columnist Thomas Boswell, who wrote late last month that "if Jeff Smulyan is awarded the Nationals, despite multiple qualified Washington ownership groups, it may be a disastrous decision for baseball, Washington and the Nationals."
He terms Smulyan's record in Seattle, where he owned the Mariners from 1989 to 1992, "unflattering." If Smulyan prevails over seven other bidders, Boswell wrote, it might be due to "old-boy-network string-pulling," referring to the Indianapolis executive's friendship with baseball insiders.
Smulyan, 58, Emmis' controlling shareholder, is rolling with the punches. In recent weeks, he's been giving his ownership group more local flavor-enlisting, for instance, Radio One CEO Alfred Liggins III and former Federal C o m m u n i c a t i o n s Commission Chairman Richard Wiley.
And in an interview with IBJ, he said he's not wading into a Seattle-like mess. That was a small-market team piling up steep losses-too steep for his ownership group to withstand.
In contrast, the Nationals "are very, very profitable," Smulyan said. "If you are in a big market, a vibrant media market, everything is in your favor."
So far, however, Wall Street isn't sharing his excitement. Analysts reacted skeptically to his announcement late last month that Emmis would invest about $100 million toward the Nationals bid.
Smulyan unveiled the investment during a quarterly conference call, describing the opportunity as "extremely attractive" for Emmis. The way it's structured, he said, Emmis won't be on the hook for whatever debt the group takes on.
Yet analysts say it seems like an odd fit for Emmis, which this year began exiting the TV business to narrow its focus to radio. So far, the company has agreed to sell 13 stations, raising $940 million, and it still has three stations to sell.
In a report headlined "In the door and out the window," research firm Gimme Credit wrote that the Nationals bid "muddies the water and leaves both stockholders and bondholders confused about the company's direction."
Bear Stearns analyst Victor Miller was more pointed. "Baseball investment strikes out," he said in a report. "This kind of deal proves why control stock is not shareholder-friendly."
He said Emmis should either pass on the Nationals investment or issue a $5-per-share special dividend. Doing so, he said, would provide Smulyan more than $26 million he could use toward a personal investment in the team.
Under the latter scenario, "he can play ball, and the shareholders can buy a lot of tickets to watch the Nationals!" Miller wrote in his report.
Smulyan told IBJ he could have financed his Nationals bid without turning to Emmis "but our people felt this was a decision that made sense for the company."
He said he doesn't mind the skeptics, noting that some of his best business decisions defied conventional wisdom and "went against the grain." Among them: launching the nation's first all-sports radio station, on an AM frequency in New York City, 18 years ago.
Glutton for punishment?
In a 2001 interview with The Seattle Times, Smulyan called his tenure as Mariners owner "the one blight in my career." He suggested his success with Emmis in the 1980s had gone to his head and led him to overreach.
"Everything we had done had turned to gold," he said in the interview. "The broadcast company had been incredible. We were the turnaround experts of the world."
At first, Seattle liked Smulyan. He was more fun and a better marketer than the tightfisted previous owner. But then Smulyan began to plead for more corporate support and to complain of heavy losses. That fueled rumors he was scheming to move the team to Tampa Bay, which had just built a stadium.
Meanwhile, the country had slid into recession, putting strain on Emmis and the Smulyan group that owned the Mariners. Seeking relief, Smulyan sold the team for $100 million three years after he bought it.
"I think it was probably good for my career," Smulyan said of those stormy days. Emmis "was jolted, and I was jolted. Nobody likes to be a pariah, but it's probably good to be a pariah for a while."
He'll need that thick skin if his Nationals bid prevails. This time, it might not be just locals lobbing attacks, but analysts on Wall Street as well.