Endeavor/Diamond Baseball Holdings

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The entertainment conglomerate Endeavor, through its specifically created subsidiary Diamond Baseball Holdings, jumped from nowhere in the world of professional baseball to the largest operator of Minor League teams at the end of 2021. Starting with nine teams and soon adding a tenth, the firm not only came from nowhere but almost immediately reached twice the number of teams any other owner has.

However, on August 9, 2022, Endeavor announced it will sell DBH to the equity firm Silver Lake Partners. Soon after the initial sale, the Major League Baseball Players Association said Endeavor's ownership of professional baseball teams constituted a conflict of interest for its agents who represent professional baseball players. The MLPBA threatened to decertify Endeavor agents, which would effectively prevent them from representing professional baseball players. Endeavor at first said there is no conflict because DBH is a separate entity, but eventually agreed to sell to Silver Lake [1] - which has significant investments in Endeavor.

As of the start of the 2021 season, David G. Elmore's Elmore Sports Group owned five teams in the just-reorganized Professional Development League. On December 3, 2021, Endeavor announced the creation of DBH and the acquisition of nine teams to put under the new structure.[2]

Five were purchased: the Iowa Cubs, the Chicago Cubs' Triple-A team; the Memphis Redbirds, the St. Louis Cardinals' Triple-A team; the Scranton/Wilkes-Barre RailRiders, the New York Yankees' Triple-A team; the Hudson Valley Renegades, the New York Yankees' High-A team; and the San Jose Giants, the San Francisco Giants' Low-A team.

Three of those were either wholly or partially owned by their 2021 parent.

Meanwhile, with wording that suggests something other than an outright purchase, Endeavor said "DBH will also operate all four affiliates of the 2021 World Champion Atlanta Braves": the Gwinnett Stripers, Triple-A; the Mississippi Braves, Double-A; the Rome Braves, High-A; and the Augusta GreenJackets, Low-A.

Of those, only the Jackets were not owned by the Braves.

The announcement said Endeavor was talking to other clubs, and a December 14th statement brought a tenth: the Oklahoma City Dodgers, another fully owned-and-operated franchise. Thus, Endeavor went from zero to twice the previous leader in the space of 11 days.

The moves didn't exactly come from ground zero, though. The first use of Endeavor as a brand related to this corporate entity was in 1995, when four talent agents left the ICM Partners agency and founded their own, Endeavor Talent Agency. Spectator sports may or may not have been on ETA's radar at the time, but the field is certainly a form of entertainment.

The company grew quickly enough to get into the league of the world's longest-running and probably best-known talent agency, the William Morris Agency. WMA's client list included Charlie Chaplin, Marilyn Monroe, and Elvis Presley. ETA and WMA, which was founded in 1898, merged in 2009 to become the world's largest talent agency, WME. Just five years later, WME got its foot into the door of sports by acquiring IMG. That firm, founded in 1960 with golf legend Arnold Palmer as its first client, essentially created sports marketing as it operates today. From golf, IMG had moved into tennis - creating the Pepsi Grand Slam in 1976.

In 2015, now called Endeavor, the agency acquired two of the properties it is best known for operating: Miss Universe and Professional Bull Riders. The next year, it would add mixed martial arts to its portfolio by acquiring the Ultimate Fighting Championship. It remains more than a sports talent agency, though: its 6,000 clients include not only athletes but also TV and film entertainers, writers, and major retail brands.

The move into professional baseball, first reported in October 2021, followed by a year the breaking of news that Major League Baseball would revamp its farm-system concept radically and without regard to what its longtime partner Minor League Baseball thought of the idea: a situation that seems both logical and foreseeable.

The partnership between Major and Minor clubs, always somewhat testy, had clearly deteriorated - and not just recently. In 1990, MLB forced ballpark standards into that year's Professional Baseball Agreement, the contract that governed the relationship between baseball's showcase and up-and-coming levels. Minors operators opposed standards as cutting into their profits, but while the standards probably did cause many franchise moves in the 1990s they also likely created the wave of new ballparks. Not only that, in newer and better facilities, values of farm franchises grew. Before the wave, many minor league clubs could be had for six figures; in 2014, the then Low-A Dayton Dragons were sold for a reported $40 million. Even in the short-season circuits, New York-Pennsylvania League club values had gone well above $1 million.

Yet friction continued, largely grounded in the partnering process. Most farm teams were then, as now, owned and operated by a corporate or municipal entity working in partnership with the parent club. The tension of that process was the stability MLB wanted versus the independence - read: freedom of movement - the farm franchise operators wanted. The governing concept - the Player Development Contract, or PDC - aimed to keep the relationships orderly but sometimes threw unwilling pairs together. PDCs could be signed for two or four years, and at the end of each cycle there were the same - in current numbers, 30 MLB franchises and (now) 120 farm franchises. What happened when 29 MLB teams each had a chosen team in each minor league level? The 30th was "paired" with the left-over farm team. The 2018 cycle ended with opposite coasts paired: the Fresno Grizzlies as the top farm club of the Washington Nationals, the latest in a line of such egregious pairings.

That was probably the impetus of the reorganization, but it was only the most glaring example - and it had an effect. During this century, the number of owned-and-operated "affiliations" crept above 20% - as MLB teams bought their way out of pairings they didn't like. Fallout from one of the last examples probably set the reorg ball in motion: The New York Mets, after two cycles with their Triple-A players in Las Vegas, NV, went upstate and purchased the Syracuse Chiefs. The displaced parent club was none other than the Washington Nationals, who would end up paired with Fresno.

With the new system, that problem no longer exists. PDCs were two- to four years; the new version - officially a Player Development License - is for 10. There is, however, an opt-out - to allow dumping a team whose stadium isn't up to new, even higher standards than were added in 1990. During the reorganization process, MLB teams had the right to keep their existing team. There was a practical exception, when except cutting to four levels combined with the upward/downward movement of some of the leagues left a parent with more than one farm team in the same level. Even then, the parent had first choice on both until the selection was actually made.

The reorganization ended with MLB teams "inviting" the farm teams they chose to accept a PDL. The 30 teams issued 120 such invitations, and not a single one was turned down. Clearly, the parents' power level is, if not absolute, much higher than it was.

A few MLB clubs have long preferred to own their farm teams - the Braves, the Cardinals (who started the farm concept under Branch Rickey), the Yankees, and - since the last change in the executive suite, the Houston Astros. However, the norm - until recently more than four out of five - was the independently operated team in affiliation with the parent. While some may still want to own their farm teams, it did seem likely that many that were bought just to block landing too many miles away or in a substandard stadium might go on the block. And owning a minor league franchise is one thing, running it properly is another, when the major league club saps all of the front office's energy. Thus Endeavour developed its business model, in effect promising to provide sound administration of their minor league holdings to major league clubs, either through outright ownership, or the sort of leasing arrangement hinted at with the Braves, while protecting the major league team's interests. As this is a new concept, time will tell how well it works and whether it will become the industry norm.

Even with the reorganization reducing the ranks of the minors by a net of 40 clubs, the Endeavor moves alone knocked the O&O figure back below 20%. The number is now 21, which is 17.5% of the new total of 120 farm teams.