Diamond Baseball Holdings

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 would sell DBH to the equity firm Silver Lake Partners. Only a month after the initial sales, the Major League Baseball Players Association publicly said Endeavor's ownership of professional baseball teams constituted a conflict of interest for those of 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 initially said there was no conflict because DBH is a separate entity, claiming at the time that the MLPBA had agreed with that before the sales. However, Endeavor eventually agreed to sell DBH to Silver Lake [1] - which has significant investments in Endeavor.

The deal closed on September 29, 2022.

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. Three months after the season, on December 3, 2021, Endeavor announced the creation of DBH and the acquisition of nine teams to put under the new structure:[2] 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 Yankees' High-A team; and the San Jose Giants, the San Francisco Giants' Low-A team; and all four of the Atlanta Braves' teams that survived the reorganization - the Triple-A Gwinnett Stripers, the Double-A Mississippi Braves, the High-A Rome Braves, and the Low-A Augusta GreenJackets.

Six of those were at least partially owned by their 2021 parent.

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

While the previous iteration of Minor League Baseball barred any one entity from owning more than one team in the same league, that clearly no longer applied by December 2021: The first nine teams DBH bought included four members of Triple-A East (now the International League} and two in High-A East (now the South Atlantic League). However, possibly in answer to the number of DBH acquisitions, MLB has adopted a different rule for the minors: No one can own more than 24 teams, nor more than nine of the 30 in any given level.

DBH's moves didn't exactly come from ground zero. 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 quickly grew into the league of the world's longest-running and best-known talent group, 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 professional 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 for which it is best known today: Miss Universe and Professional Bull Riders. The next year, it added 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 radically revamp its farm-system concept, 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. MLB countered that better facilities might lead to more profitable operations. Indeed, while the standards probably did cause many of the 1990s franchise moves, they also likely created the wave of new ballparks in the process. Whether cause-and-effect or coincidence, values of farm franchises grew in newer and better facilities. Before that 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 into seven figures.

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 and 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, with each cycle always having the same number of players - in current numbers, 30 MLB franchises and (at the time) 160 farm franchises. What happened when 29 MLB teams each had a chosen team in each minor league level? The 30th parent 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. A decade before, the Boston Red Sox escaped a Los Angeles-market team, the Lancaster JetHawks, by buying the Salem (VA) Avalanche. During this century, in fact, the number of owned-and-operated "affiliations" crept above 20 percent - as MLB teams bought their way out of pairings they didn't like. The Fresno-Washington case was a direct result of such a purchase and probably set the reorg ball in motion: The New York Mets, after two cycles with their Triple-A players in far-off Las Vegas, NV, went upstate and purchased the Syracuse Chiefs. The displaced parent club was none other than the Nationals, who would end up paired with Fresno.

With the new system, that problem can still happen - one of the Miami Marlins' farm teams, for instance, is in Beloit, WI, while several West Coast clubs kept relationships they liked even though they were in the Midwest League - but is vastly less likely. 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 teams. There was a practical exception, when cutting to four levels combined with the upward/downward movement of some of the leagues and teams 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), and the Yankees. The Houston Astros, since the last change in their executive suite, not only adopted this approach but today are the only MLB club that has ownership stakes in all of its farm teams.

However, the norm - until recently more than four out of five - was the independently operated franchise 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. Owning a minor league franchise is one thing and running it properly can be another, when the major league club saps all of the farm team's front office's energy.

In this environment, Endeavour developed the business model it assigned to DBH: providing 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 MLB team's interests. As this is a new concept, time will tell how well it works and whether it will become the industry norm. Not that this question is yet fully answered, as of March 24, 2023, DBH owns or has purchase contracts pending on a total of 16 franchises.

Even with the reorganization reducing the ranks of the minors by a net of 40 clubs, the Endeavor moves alone slashed the O&O figure back to well below 20%. When all currently pending DBH purchases are closed, the number of farm teams owned by their parent will be down to 17 - 14.2% of the new total of 120 farm teams.