By Jake Mantin
In December of 2021, Endeavor – a multimedia corporation with expertise in media, sports, and talent representation[1] – created Diamond Baseball Holdings (DBH) in a move to purchase the following nine (9) Minor League Baseball teams:
- Iowa Cubs
- Memphis Redbirds
- Scranton/Wilkes Barre RailRiders
- Hudson Valley Renegades
- San Jose Giants
- Gwinette Stripers
- Mississippi Braves
- Rome Braves
- Augusta GreenJackets.[2]
This acquisition move, dubbed the “most significant financial development since MLB restructured MiLB in 2019,”[3] was part of a broader plan aimed at owning forty (40) or more MiLB teams.[4] This move appears to be part of Endeavor’s broader investments in the sporting space. Notably, Endeavor has acquired Ultimate Fighting Championship (UFC)[5] and Professional Bull Riders (PBR).[6]
Endeavor’s move to acquire MiLB teams stirred controversy, however, due to the company’s ownership of media and athlete talent agencies.[7] Over the past few years, Endeavor’s agency branch – WME – has secured substantial MLB player representation contacts. [8] Perhaps most notable was WME agent Jon Rosen’s signing of Carlos Correa,[9] “who is predicted to secure the largest contract in a free-agent class [and] has already scored one $325 million deal.”[10]
In response to Endeavor’s purchasing moves through DBH, the Major League Baseball Players Association (MLBPA) sent a warning to WME Sports’ player representatives stating that “they risk losing their certification as agents unless they divest themselves from the company.”[11] The MLBPA has found issue with the acquisitions, as they believe this puts the certified WME agents in a conflict-of-interest position – a violation of the MLBPA’s agent regulations.[12] In §5(B)(12) of the MLBPA REGULATIONS GOVERNING PLAYER AGENTS (the “Regulations”), it states that “[n]o Player Agent, Expert Agent Advisor or Applicant shall engage in any conduct which, in the MLBPA’s reasonable judgment, may create an actual or potential conflict of interest with the effective representation of players, or the appearance of such a conflict.”[13] Further, under §5(B)(12)(a) of the Regulations, “[a]cquiring, holding or seeking to acquire or hold, either directly or indirectly, any ownership or financial interest in any Major League, Minor League or other professional baseball club. . . unless previously authorized in writing by the MLBPA to do so” is a violation of the §5(B)(12).[14]
Endeavor’s business plan is not unique in the industry, though. There are other sports agencies that have “divisions that represent players and other divisions that do business with MLB clubs or MLB itself.”[15] Similar to the structure of these other organizations, Endeavor’s DBH is “believed to be a separate and segregated company from WME Sports.”[16] This segregation of Endeavor’s companies is one method of ensuring WME’s agents are not put into a conflict-of-interest position.
At this point, though, it is anyone’s guess how the MLBPA will resolve this issue, as some believe that the union’s disciplinary decisions are selectively enforced.[17] In any case, WME’s union-certified agents would surely appeal any discipline proposed by the MLBPA.[18] Regardless of the outcome, the determination of the MLBPA will likely impact the manner with which large agencies seek to deal with players, teams, and investments in the professional baseball space.
[1] Expertise, Endeavor, https://www.endeavorco.com/expertise/ (last visited Feb. 7, 2022).
[2] Endeavor creates Diamond Baseball Holdings, plans to acquire 9 MiLB teams, The Athletic (Dec. 8, 2021, 8:18 AM), https://theathletic.com/news/endeavor-creates-diamond-baseball-holdings-plans-to-acquire-9-milb-teams/IbV9vLVdonPo/ [hereinafter Endeavor creates DBH].
[3] Id.
[4] Id.
[5] Our Story, Endeavor, https://www.endeavorco.com/story/ (last visited Feb. 7, 2022).
[6] Brian Steinberg, Endeavor Takes Swing at Baseball by Purchasing Nine Minor-League Teams, Variety (Dec. 8, 2021, 9:09 AM), https://variety.com/2021/tv/news/endeavor-baseball-minor-league-1235129167/
[7] Endeavor creates DBH, supra note 2.
[8] Anthony Franco, MLBPA Takes Issue With Endeavor’s Purchase Of Minor League Affiliates, MLB Trade Rumors (Jan. 13, 2022, 9:47 AM), https://www.mlbtraderumors.com/2022/01/mlbpa-takes-issue-with-endeavors-purchase-of-minor-league-affiliates.html
[9] Id.
[10] Owen Poindexter, MLBPA Pressures Endeavor Agents to Divest from Company, Front Office Sports (Jan. 12, 2022), https://frontofficesports.com/mlbpa-pressures-endeavor-agents-to-divest-from-company/
[11] MLBPA takes stand with agency that bought minor league teams, The Athletic (Dec. 8, 2021, 8:18 AM), https://theathletic.com/3067753/2022/01/12/mlbpa-takes-stand-with-player-agency-that-bought-minor-league-teams/ [hereinafter MLBPA Takes Stand]
[12] Liz Mullen, MLBPA raises conflict-of-interest issue with WME, Sports Litigation Alert (Jan. 13, 2022), https://www.sportsbusinessjournal.com/en/Daily/Morning-Buzz/2022/01/13/MLBPA-Endeavor
[13] MLBPA REGULATIONS GOVERNING PLAYER AGENTS (Dec. 4, 2019), §5 (B)(12), http://reg.mlbpaagent.org/Documents/AgentForms/Agent%20Regulations.pdf
[14] Id. at § 5(B)(12)(a).
[15] MLBPA raises conflict-of-interest issue with WME, supra note 12.
[16] Id.
[17] MLBPA Takes Stand, supra note 11.
[18] MLBPA raises conflict-of-interest issue with WME, supra note 12.
