California Sports Lawyer® Founder and Managing Attorney Jeremy M. Evans column about the growth and influence of Diamond Baseball Holdings (DBH) (formerly owned by Endeavor) in Minor League Baseball (MiLB).
You can read the full column below. (Past columns can be found, here).
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Diamond Baseball Holdings (DBH) owns and operates over 40 Minor League Baseball (MiLB) teams in the United States and Canada. DBH was established by Endeavor (i.e., William Morris Endeavor (WME)) in 2021 and is owned by Silver Lake. Silver Lake, also known by its full name, Silver Lake Technology Management, LLC, is an American global private equity firm focused on technology and technology-enabled investments. Endeavor Group Holdings, Inc. (formerly William Morris Endeavor and WME-IMG) is an American holding company for talent and media agencies based in Beverly Hills, California. Endeavor is majority owner of World Wrestling Entertainment (WWE) and the Ultimate Fighting Championship (UFC) through TKO Group. Endeavor also has significant investments in collegiate athletics through Endeavor-Learfield IMG.
In 2022, Endeavor divested of its ownership in DBH because of calls of conflict of interest in representing talent and owning sports franchises. Similar calls were made when Endeavor invested in entertainment and sports production businesses that led the Hollywood labor unions to sign agreements requiring a 20% maximum on production ownership to keep a balance between talent and management. Endeavor benefits financially, but it cannot make management decisions.
DBH has also secured several naming rights deals for its regional sports networks (RSN) and stadiums. These deals were meant to invest in minor league baseball, but also insert a boost of confidence in RSNs. DBH is clearly the power player second only to Major League Baseball (MLB) and professional sports franchises in terms of valuation and authority.
MLB has made some significant changes since 2020 to allow for investment in MiLB to make more financial sense. For example, the introduction of name, image, and likeness (NIL) into college sports combined with MLB’s reduction of draft rounds from 40 to 20 and the reduction of 160 to 120 MiLB teams with more centralized control through MLB and the parent teams has now made investment easier and more valuable (i.e., exclusivity and consolidation has driven up the price). Moreover, high school baseball players now have fewer MiLB options with added upside to college sports allowing the brightest stars to get drafted and play in the minor leagues should they choose to avoid college.
DBH’s ascension highlights two important business principles. First, success is sometimes limited by institutional rules. This is proven by Endeavor having to divest of DBH when it became too successful in the talent and team ownership business or between labor and management. Second, DBH confronted a floundering market and saw an opportunity to achieve change and financial gain. This is proven by DBH investing in MiLB as a collective (i.e., owning multiple teams). MiLB is one of the few leagues that the parent team (or major league club) does not exercise complete control or ownership, but signs Player Development Licenses (PDL) with the MiLB club. MiLB is also one of the few sports investments where an owner can own multiple teams in the same league. It will be interesting to watch how MiLB values rise, or fall, and the sale price of teams compared to previous valuations. It would be quite easy to predict a major windfall.
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About Jeremy M. Evans:
Jeremy M. Evans is the Chief Entrepreneur Officer, Founder & Managing Attorney at California Sports Lawyer®, representing entertainment, media, and sports clients in contractual, intellectual property, and dealmaking matters. Evans is an award-winning attorney and industry leader based in Los Angeles and Newport Beach, California. He can be reached at Jeremy@CSLlegal.com. www.CSLlegal.com.
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