Mets' Winning Mojo Helps Team Flex Post-Madoff Financial Muscle

By Ben Klayman

(Reuters) -- Fans of the New York Mets had bemoaned the negative impact of the Bernie Madoff financial scandal on the Major League Baseball team's payroll until Thursday night's series-clinching victory over the Los Angeles Dodgers.

With believers now dreaming of the team's first World Series appearance since 2000, the Mets have enjoyed a similar boost off the field with higher attendance and TV ratings. That leads analysts and bankers to believe the club could be at the start of a virtuous cycle, where winning begets higher revenue and even more winning for years to come.

Fresh off advancing to the National League Championship Series against the Chicago Cubs - another rising team with a compelling hard-luck history - the Mets have combined low-cost, young talent with the amenities of a relatively new home park, Citi Field, which opened in 2009.

The best-of-seven Mets-Cubs series begins on Saturday.

"The stadium, combined with aggressive marketing, combined with youth/hope are a great triple play," said Rick Horrow, sports lecturer at Harvard Law School.

That optimism seemed far away when owners Fred Wilpon and Saul Katz were caught up in Madoff's Ponzi scheme, which was uncovered in late 2008 and cost investors $17 billion in principal. While Wilpon denied it, analysts and bankers said the scandal certainly led to the team's lower payrolls.

The Mets in 2009 had the second-highest payroll in baseball at $142.2 million, but that fell to 21st last year at $84 million, according to Baseball Prospectus. This year it has risen to $101.3 million, which still ranks as 21st.

In 2010, the trustee in charge of recovering money for Madoff victims filed a $1 billion lawsuit against Wilpon, Katz and more than 100 other defendants, claiming they turned a blind eye to the fraud; a charge they denied. The figure was later limited to $386 million by a federal judge.

Wilpon and Katz settled that lawsuit in 2012 by agreeing to give up their claims to all but $16 million of the $178 million they lost in the Madoff fraud, though it is unlikely they will recover any funds.

In addition, the settlement calls for Wilpon and Katz to pay as much as $29 million over the next two years to help repay other Madoff customers who lost money in the scheme.

But the team and its finances are now on an upward trajectory.

“We were trending upward before the start of the season,” Mets chief revenue officer Lou DePaoli said, citing ticket sales and sponsorship deals. “Both have accelerated, particularly over the past two months ... and we are already in the process of working to grow all these elements for 2016.”

YOUTH-DRIVEN REBOUND

The Mets have racked up wins on the field relying on young, inexpensive star pitchers like Jacob deGrom and Noah Syndergaard, which allowed the team to also add Cuban slugger Yoenis Cespedes in July.

This week's playoff run glued some of the biggest names on Wall Street and finance to their TVs, laptops or smartphones for Thursday night's clinching divisional series win against the Dodgers.

Devin Wenig, CEO of eBay Inc, attended last weekend’s games in Los Angeles. "As a displaced New Yorker, I have carried my love of the Mets to Silicon Valley," he told Reuters. "There is a sense of renewal for a franchise long overdue for its moment in the spotlight."

Mohamed El-Erian, the chief economic adviser for financial services company Allianz SE and self-described "long-suffering fan," posted a congratulatory tweet. "@Mets-@Cubs!! Should be a great #NLCS. Congratulations #Mets, and #LetsGoMets!"

The team's winning this year has helped boost attendance and TV ratings, which translates to higher revenue, pushing the value of the franchise higher. Forbes magazine valued the team at $1.35 billion in March, the seventh-highest valuation in the sport and up 69 percent from the year before. Only three other teams had higher estimated growth.

Mets attendance totaled 2,569,753 people this season, an increase of 18 percent from last year. However, that still lags the more than 3.1 million the team drew in Citi Field's first year in 2009 and analysts said there is no excuse for a New York team not to draw at least 3 million fans.

"When you have teams like the Mets ... that have struggled for a few years, when the team starts to perform well it is really heartening for our business to see the fans flock back," MLB Commissioner Rob Manfred told Reuters.

REVENUE SWEET SPOT

While ticket prices at Citi Field rank only 18th in the 30-team league at an average of $25 apiece according to Team Marketing Report, there is risk with raising prices too fast and then having a possibly mediocre 2016, said Robert Tilliss, chief executive of sports banker Inner Circle Sports.

"You've generated a little bit more revenue in that case, but now you've agitated your fan base. It's definitely a delicate balance," he said.

One element in the team's favor is a wealthy fan base that has been waiting for a winner to return, which suggests huge upside for team revenue.

"It's kind of like cicadas," said Marc Ganis, president of consulting firm Sportscorp Ltd. "They stay dormant under the ground, but my goodness when they come out seven years later, they come out in force and are as loud as can be."

That is reflected in higher merchandise sales - almost double last year's levels compared with industry average growth of 5-6 percent.

Mets viewer ratings also spiked 68 percent this year on SportsNet New York, the regional sports TV network the team partly owns, and that translates to higher ad rates, analysts and bankers said. It was the most-watched season since 2010.

Meanwhile, Madoff, 77, the man blamed by many for the Mets' years of losing, is serving his 150-year prison term after pleading guilty in 2009 to masterminding the scheme. Listed under the register number 61727-054, he is not set to be released until Nov. 14, 2139, according to the Federal Bureau of Prisons website.

Madoff could not be reached for comment from the Federal Correctional Complex in Butner, North Carolina, where he is being held. But there is plenty of reason for him, along with Mets fans everywhere, to have hopes for better days ahead for the team.

(Reporting by Ben Klayman in Detroit; Additional reporting by Jennifer Ablan, Joseph Ax and Larry Fine in New York and Steve Ginsburg in Washington; Editing by Edward Tobin and Matthew Lewis)