SBJ/March 22 - 28, 2004/SBJ In Depth
Published March 22, 2004
Among the aging bats, weathered balls and photographs in Steve Greenberg's Allen & Co. office sits a picture of the sports investment banker with former baseball Commissioner Fay Vincent. The two are grinning happily on the field at Candlestick Park in San Francisco.
The image of the two men, snapped when they ran baseball between 1990 and 1992, is dear to Greenberg. He mentions the exiled commissioner frequently and with fondness. The two met in the early 1980s on the board of their tony New York prep school, Hotchkiss. Later, Vincent swayed Greenberg to join Major League Baseball as his right-hand man.
"I only went to work for MLB because it was Fay who asked me," Greenberg reminisced.
Yet, thanks in large part to a bulging Rolodex that includes the names of many of the men who booted his beloved former boss, Greenberg has helped shape media investment banking boutique Allen & Co. into one of the top advisers of sports owners and leagues since his arrival there three years ago.
Bud Selig, Vincent's replacement, hired Greenberg last month to sell the Milwaukee Brewers. Chicago White Sox chief Jerry Reinsdorf, a ringleader in the bitter battle to unseat Vincent, tabbed Greenberg to negotiate his recently announced Chicago sports channel. And Allen & Co. is advising MLB on launching a stand-alone baseball network.
"I got Time Warner to hire Steve to help sell the [Atlanta] Braves," Vincent said, though the company switched gears and kept the team. "I am a director for Time Warner. Steve is also working for Reinsdorf and is working for Selig. What does that tell you?"
Lovingly dubbed "Mr. Perfect" by his two daughters and a former colleague, Greenberg rarely alienates adversaries, a skill honed as an agent, lawyer, media entrepreneur and deputy baseball commissioner. If he were a politician, the pundits would surely say he is coated in Teflon.
"Negotiations with Steve were never adversarial," Reinsdorf said. "He always tried to arrive at a result fair to both sides."
Once during Greenberg's stint as an agent in the 1970s and '80s, utility infielder Greg Pryor spurned a contract he had signed with the White Sox because he wanted an additional $50,000 a season. No small sum in that era, and the contract done, Reinsdorf nonetheless relented, the owner recounted, because the name of Pryor's agent was Greenberg.
Firm not new to sports
It's no insignificant news flash in sports that Allen & Co. has a heightened interest in the sector, as media continues to grow in financial importance and complexity. (See chart detailing Allen & Co. sports history)
The proliferation of sports TV channels (several funded by Allen & Co.) and with teams and leagues routinely shifting media strategies, Allen & Co.'s expertise married to Greenberg's sports gravitas is proving a powerful combination.
The 83-year-old company is a legendary power broker in media and cable, advising many of America's top information and entertainment creators and distributors. The company also invests in media start-ups.
The Allen & Co. annual executive retreat in Sun Valley, Idaho, brings together the business' elite every summer for networking and deal-making.
"It's the largest private air force in the world," Arena Football League Commissioner David Baker — also a client — said jokingly of the corporate jets that descend on Idaho for the gathering.
Business news channel CNBC camps out there annually, and several major business newspapers and sections send reporters to hover near the exclusive meetings, hoping to sniff tidbits of newly hatched transactions.
The commissioners of the big four sports have attended for five years running, a testament to media's growing role in sports. Roughly a dozen team owners are regulars, though most of them, like Comcast chief executive Brian Roberts and Richard Parsons of Time Warner, are there not because of their clubs, but because they run media companies that happen to own sports franchises.
Schneider is on the board of the Buoniconti Fund to Cure Paralysis, through which he met Wayne Huizenga. When Huizenga sold Blockbuster Video and the NHL's Florida Panthers, Allen & Co. advised him.
So it is incorrect to say that Greenberg came to Allen & Co. to create a sports practice. The firm already knew sports, and knew it well, but through a media lens. No one went after sports per se.
At the same time, she continued, "Fundamentally, the sports business comes from the world of entertainment, which is the world we know well. It also comes from, supported by, the kind of individuals who very often do business with this firm."
That being said, Greenberg is a sports guy, and so too are the individuals he knows and does business with. While Allen & Co. historically has dabbled in sports when a customer needed assistance in the sector, with Greenberg onboard the firm now works with sports entities directly.
From 1995 to 2000, Allen & Co. advised on four sports deals (see chart, page 20). Since Greenberg's arrival, Allen & Co. has had its hands in 12 sports deals, including sales, investments and advisory roles, likely with several more unpublicized. Of the dozen, nine are Greenberg's.
In January 2001, as Greenberg set up shop at Allen & Co. (coincidentally located in the same office building Vincent labored out of when he ran Columbia Pictures), he arrived bereft of the Wall Street pedigrees of his new colleagues.
Greenberg built a love for baseball through his father, hall of famer Hank Greenberg (above).
His father, with legendary showman Bill Veeck, owned the Cleveland Indians, and later the Chicago White Sox. He excelled in the stock market and married a Gimbel department store heiress, so young Steve and his siblings enjoyed a comfortable upbringing.
Greenberg lasted four years in minor league baseball after graduating from Yale in 1970. Unlike his father, he never got past Triple A, a shortcoming he described as one of his harshest disappointments.
He majored in English at Yale, where Bart Giamatti, the future baseball commissioner, taught his favorite class, a seminar on the English poet Edmund Spenser. (It was Giamatti, an attendee at many of Greenberg's college baseball games, who in 1989 wrote to the hall of famer's son to invite him to join MLB. Days after Greenberg opened the correspondence, Giamatti suddenly died.)
In 1974 Greenberg entered UCLA Law School. His sophomore year coincided with the dawn of baseball free agency. His old minor league teammates, including ex-roommate and future National League batting champion Bill Madlock, barraged him for advice. Unplanned, Greenberg's life as an agent had commenced.
In 1981 Greenberg negotiated baseball's first incentive clause, earning Madlock another $600,000 over six years because the player kept his weight below a designated level.
After graduating from UCLA in 1977, Greenberg joined Los Angeles-based Manatt, Phelps, Rothenberg & Tunney, where his nascent agent business accelerated. The firm would give rise to several other top sports executives, including Alan Rothenberg, co-founder of Major League Soccer, and Arn Tellem.
"Whatever time I had [then], I hung outside Steve's office," recounted Tellem, today a successful agent whose clients include Kobe Bryant and Jason Giambi. In 1978 Tellem was a sports-obsessed Manatt Phelps intern who regularly cajoled Greenberg to hire him. "I think he viewed me as a Woody Allen-type character."
Greenberg did hire the young Tellem, and the two proved a powerful combination, traveling the country, signing ballplayers and cashing in on the early days of baseball's salary explosion. Often, so hurried and haggard on the road, Greenberg would slip and call Tellem "honey" and "Myrna," forgetting momentarily he was not with his wife, Tellem recalled slyly.
Tellem coined the "Mr. Perfect" tag with Greenberg's daughters, Jennifer and Melanie, as homage to a man they viewed as endowed with few imperfections. Tellem also envied his partner's prodigious appetite that nonetheless left him slim and swift of foot. Greenberg often left the younger University of Michigan graduate in the dust when they jogged together.
The successful pair split in 1988 after Tellem started his own agency. Soon afterward Greenberg joined MLB, returning to New York City, where he's spent most of his life. There he toiled on businesses from broadcast contracts to the investigation into New York Yankees owner George Steinbrenner's ties to a convicted felon, which led to what would be the owner's temporary ban from baseball.
When the Vincent saga closed, interim commissioner Selig invited Greenberg to stay with the league, but not as commissioner.
Greenberg stood by former Major League Baseball Commissioner Fay Vincent (above).
The bitterness over Vincent's treatment, intertwined with the prospect of a strike — which indeed arrived the next season — persuaded Greenberg to leave the game he loved for the first time in his life. Not even an invitation to run the team of his friend, New York Mets owner Fred Wilpon, swayed Hank Greenberg's son.
Upon leaving baseball, Greenberg stunned many who knew him and joined a young entertainment whiz named Brian Bedol. Bedol wanted to use the model of Nickelodeon's successful "Nick at Night," which broadcasts classic TV shows, and try it with sports.
Bedol and Greenberg, drawn to the concept in part as way of bringing back to life his father's accomplishments, created Classic Sports, a sports channel that would air historic games.
Tellem said he was surprised to see Greenberg playing the role of entrepreneur. "I always saw Steve as the corporate, institutional player," he said.
A fastidiously organized person whose dinner parties would spill into the kitchen so he could clean dishes, Greenberg nonetheless proved adept at the life of an on-the-go entrepreneur.
He traveled the country again, this time wooing cable operators instead of players. He would study the dots on maps for hours, calculating the most expeditious way to travel between cities for meetings. A nut for directions, Greenberg often arrived armed with three to four sets of instructions, Bedol recalled.
"On his birthday [in 1995], I got him a GPS," Bedol said laughing, "long before anyone had even heard of one."
Allen & Co. was the first investor in Classic Sports. Herbert Allen, the investment bank's president, knew Vincent and had played tennis with Greenberg's father. He heard good things about the former deputy commissioner, and Allen always said he invested in people, not ideas.
Classic Sports was a hit from the start. ESPN paid Greenberg and Bedol $180 million in 1997 for the channel, a fat profit for the duo and for Allen & Co.
A year after joining Allen & Co., Greenberg, along with Peretsman and several other managing directors, started an internal working group of about 13 people to forge improved communications.
Sitting around a table with Schneider, they described it as akin to bringing under one roof different medical practitioners. Peretsman is an orthopedist, the ex-poetry student Greenberg explained by way of analogy, while he is a psychiatrist. Schneider quickly quipped, "And I am on the couch."
The interchange is remarkable in a sense. The knock against Allen & Co. is that the managing directors work alone in their own silos, so to speak, not sharing information.
The company encourages its executives to invest in their own deals and take a cut of the action, essentially making each of them independent businesses with a strong incentive to keep as large a slice of the pie as possible.
Momentos from Greenberg’s career in sports business and the accomplishments of his famous father line the investment banker’s office in New York.
Rogers, whose contact at the firm is Schneider, had never before heard Greenberg's name, let alone his background or what he did. While Rogers was caught by surprise about Greenberg, he quickly praised Allen & Co. for doing more than just brokering deals by putting its money where its advice is.
Competitors of the firm are less kind, warning that hiring Allen & Co. can mean you get the expertise of only one banker. They say a sports club must insist Greenberg is involved to ensure the most complete advice, pointing to the recent sale of the Los Angeles Dodgers as evidence.
Stan Shuman, a 44-year Allen & Co. veteran who advised Viacom in 1995 on the $1 billion sale of Madison Square Garden, took two years to sell the Dodgers. The buyer, Frank McCourt, borrowed every penny in a transaction ripped in some circles as too highly leveraged.
With one of the best baseball minds down the hall from him, Shuman did not bring Greenberg into the deal, though he did occasionally offer advice.
"It was a very complex and difficult transaction for what is an outstanding baseball franchise," said Shuman, who is on the board of directors of Dodgers ex-parent News Corp. "At the end of the day, we ended up with an excellent buyer at a very good price for the seller."
The transaction closed earlier this year.
Not surprisingly, Greenberg and Peretsman are quick to dismiss the "silo" criticism. Greenberg described Shuman as one of the best in the business, and argued there are many ways to manage a client.
"Candidly, Nancy and I are by nature inclusive people. We like being around people, we like having colleagues to kick ideas around with," Greenberg said. "And one of the benefits to me of being at a place like this is being able to share the collective wisdom you find."
That wisdom is why so many media outfits, and now teams and leagues, come to Allen & Co., even though there are at least half a dozen firms that specialize in sports.
"They are one of my top" rivals, conceded Sal Galatioto, who runs Lehman Bros.' sports practice, which has five executives focused exclusively on the business.
It must have been particularly galling for people who live, breathe and eat sports every day when the New Jersey Nets chose someone like Peretsman to structure YankeeNets. She openly detests sports, complaining that as a teenager her dates and father would quiz each other on baseball trivia. She says jokingly that she was tricked into working on YankeeNets before realizing it was about sports.
"There is clearly some familiarity that is required with the basic economics of these businesses, the basic fact pattern, the basic sense of values," she said. "A lot of that information is publicly available. ... People who deal with us are perfectly happy, and I think this is what frustrates people who have specialized sports practices.
"You could have all the sports knowledge in the world, but if you weren't getting solid, good, thoughtful transactions done through your negotiating skills, your mediation skills, your credibility, then at the end it would not be that worthwhile," Peretsman said.
The pending divorce of the Nets and Yankees came sooner than anticipated, she said, but the point of the marriage was to create the regional sports network YES. Mission accomplished, she said.
Greenberg plus Allen & Co.
When Herbert Allen asked Greenberg to join Allen & Co. three years ago, the invitation came out of the blue. After selling Classic Sports to ESPN, Bedol and Greenberg created Fusient Media Ventures. Fusient morphed into College Sports Television, which Allen & Co. again backed and Bedol today runs with a new partner.
The entrepreneurial fire that still burned in Bedol merely flickered in Greenberg, so when Allen approached him, he was ready for the next chapter in his life.
Despite his background, Greenberg wasn’t brought into Allen & Co.’s effort to sell the Dodgers.
Allen's instincts were dead on. The day Greenberg walked in the door, his hip pocket protruded with a deal. When Mets owner Wilpon heard Allen & Co. had hired Greenberg, he immediately retained the new investment banker to represent him in his buyout of Nelson Doubleday's 50 percent interest in the club. Otherwise, Wilpon added, he would have chosen someone else. Today Greenberg advises Wilpon on media strategy, studying what to do with the Mets' TV rights.
Business has been particularly good recently. Baseball is clearly Greenberg's sweet spot, so it wouldn't hurt if he could expand business into a league like the NFL, the pre-eminent sports media play. But Greenberg does advise the Arena Football League and represents both Tellem and his company, SFX Sports.
His old pal and confidant Vincent insisted Greenberg should be the next baseball commissioner when Selig's term expires the year after next, because he is the only man with amiable ties to both management and labor.
Chuckling at the suggestion, Greenberg said he is not pursuing the position.
"Working for Herbert Allen is about as good as it gets," he said. "I don't intend to stray, as long as he will have me."