Real Sports may strike out
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Dear Mr. Berko:
Can you please help my 13-year-old son, Danny, and me? He was told that he could buy shares in major league baseball players — not shares in major league teams, but shares in the individual players who play for various teams. The father of a best friend told Danny that he was going to buy shares of several baseball players for $20 a share. And you can understand how important this would be to my son, who is a baseball nut. Unfortunately his friend’s father, who is a nurse, was recently posted to Afghanistan and can’t be reached. I’ve asked several people who I thought would know about these things, including a stockbroker in our church, but nobody knows anything about this. I wrote to the Chicago Cubs baseball people, but they have ignored my letter. Is this a hoax, or is it real? I promised Danny that I would write to you for help. He would like to invest $160 of money he saved from doing odd jobs for neighbors and would like to buy two shares of each of his favorite baseball players. He would like to be the first in his school to own baseball player shares.
C.S., Aurora, Ill.
Dear C.S.:
I must tell you that I’m not a baseball fan. I can’t personally reconcile paying Sammy Sosa $125 million to bat a ball in $350 million stadiums funded with public money, then paying someone with a master’s degree $40,000 a year to teach our kids in a crowded, run-down school building funded from the same public trough. Perhaps there’s something wrong with my value system.
Meanwhile, I wrote Allan Huber “Bud” Selig, the commissioner of Major League Baseball, and have not received a response, either. However, I got an answer from my 12-year-old grandson who, like your son, seems to be a repository for all things concerning baseball. When he told me that he owns six shares of Real Sports Invest, you could have knocked me over with a fender.
Randall “Randy” Newsom? Who’s he? Well, Randall Newsom is a minor league pitcher in the Cleveland Indians’ farm system, a right-hander who throws a mean sidearm pitch. He’s 26, born in Cincinnati, graduated from Tufts University, and at this young age, he may be a better entrepreneur than a pitcher. Randall had one of those “Eureka” moments, formed a corporation called Real Sports Investment LLC and began selling shares at $20.
The concept of Real Sports is quite innovative. A whole lot of minor league players earn $10,000 to $15,000 a year and have families to support. Therefore many of these aspiring lads have to take jobs when the season is over to pay bills, to purchase medical insurance, to make loan payments on their cars, to afford special training, to improve their skills and to pay for nutritionists, exercise programs, etc., that prepare them for the majors. So Randall came up with a way for players to leverage their upside earning potential and improve their cash flow until they make the big leagues.
Real Sports contracts with athletes and gives them cash up front in exchange for a promise to pay a small percentage (0.2 percent or 0.3 percent or 0.4 percent) of their lifetime earnings as a major league player. It could be a good deal. If Randall signs up 300 players, and 100 of these minor league long shots make it to the majors, Real Sports could be in cash and clover.
This year the average salary of a major league baseball player is $3.3 million, so 100 average players paying 0.3 percent would earn Real Sports just about $1 million. Ten years ago the average salary was $1.4 million, and these salaries continue to rise, which is a fine inflation hedge. Then Real Sports also gets 0.3 percent of the player’s endorsements, speaking engagements, commercial advertisements, tournament appearances, etc., and pretty soon you’re talking about big bucks.
There are players like Barry Bonds, whose career salary so far totals $188 million, Alex Rodriguez at $170 million, Randy Johnson at $152 million, Greg Maddux, Manny Ramirez and Gary Sheffield at $143 million, plus dozens of players whose earnings exceed $100 million who are still playing. These numbers do not include bonuses, clinics, product endorsements, advertising, etc. So Newsom’s Real Sports may have a good thing going.
But Real Sports has been put on hold. Major League Baseball and the Major League Baseball Players Association don’t like the idea (probably because they didn’t think of it first) and have asked Newsom to cease and desist. And the Securities and Exchange Commission decided that Real Sports is a bona fide stock offering and must register a prospectus and all with the SEC. So far it hasn’t, so shares in Real Sports are no longer available.
I’m sorry to disappoint Danny, but that’s life in the big leagues, the fast lane and corporate America.
Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@comcast.net.
© Copley News Service
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