Less than $11 Million
by Roberto on Dec 7, 2009 10:17 AM EST
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PrintIt seems that the outbursts by Boras and Henry have pushed the PBC to "open" their books. DK reports that the club made less than $11 million over the last two years. In a pointy-haired boss-like statement, Cooneley said, “"The Pirates utilize every dollar we receive in our effort to build a winning club." The article suggests that Boras was high by about 12% and Henry was displaying cluelessness.
Assume for the moment that this is true. It probably means that there are a lot of clubs with troublesome bottom lines, since quite a few have some silly contracts out there.
This is a FanPost and does not necessarily reflect the views of the managing editor (Charlie) or SB Nation. FanPosts are written by Bucs Dugout readers.
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Most notable to me is seeing the debt number – $100M, with no principle paid the last 2 years. Now, given the inherent value of any MLB team, the org can carry a decent debt load indefinitely – there’s no reason to see that number at 0 – but $100M seems like a lot given that there’s no obvious way for them to make a dent in that anytime soon. Even if their payroll stays depressed the next 2 seasons – let’s say they sign basically no one – they’re looking at having maybe $20-25M available to put towards the debt. But ~$10M of that only covers interest, which means that, if they made it a #1 priority, they could maybe get it to $85M, which is still pretty damn big.
As I say, I don’t think it needs to be zero, but it needs to be low enough that they could add, I dunno, $30M/year for 2-3 years in order to make a real playoff run. And I don’t think they could do that on top of a ~$90M debt.
But maybe I’m thinking about this all wrong.
Winning will help
Winning will increase revenues, and most costs don’t change. So, a successful season (i.e., in contention) would do wonders for the bottom line as more people come and buy stuff.
Viva Clemente!
Well sure
But a winning team will, for the most part, be a more expensive team. Unless they get lucky and contend in ‘11, by the time they’re a winning team (and I mean 85+, not just 82), a lot of these guys will be starting to get expensive, and I imagine will basically absorb the additional revenues they generate. Plus, if I’m understanding the system correctly, they’ll get less revenue sharing when they generate more revenue for themselves, so there’ll be a certain amount of water-treading.
I assume that a ~90 win (but not WS-winning) Pirates team will be able to support a $70-85M payroll on a more or less cash basis. But if they need to get another FA or two on top of that, or if Lastings or Cutch are getting expensive and the team doesn’t want to trade them away just yet, they could well need another $20-30M (remember that $103M is league-average, although I’d be more interested in knowing the median than the mean).
OK, I checked
$80M is right in the middle, with the Jays #15 at $80.5M and the Brewers at #16 with $80.2M.
Hopefully they can win for a year or two with a payroll closer to $60M or $70M, and generate (and store) sufficient revenues to be able to run a couple $90M+ teams out there.
I don't know where he gets $103M for league average.
I calculate $88M as league average and $86M if you remove high (NYY) and low (FLA).
A big splash by the Pirates?
This afternoon’s piece suggests that the PBC might be very well poised to attract a value free agent. The combination of needs plus money to spend could put the team in a very sweet spot. In any event, it seems that NH has played this very well.
Viva Clemente!
Agreed...
Winning will increase attendance, will sell more products and concessions, will allow them to raise ticket prices that have been stagnant for too long, will increase tv viewership which will increase the value of their local contract, and will sell more corporate boxes since customers will want to attend more games. All of the above will help ad revenues since more people will be interested, thus in plain view of ads.
The $100M question is how should the Pirates proceed from the position of failure they have occupied for the better part of 20 years…slow, sustainable (read inexpensive) team building; radical high spending on Free Agents to force the team into contention sooner rather than later; or some blend of the two. I would feel comfortable with a split of 75/25 building-to-free agent acquisition since 100% of the latter feels too complacent and patient given the magnitude of their failure, but I can understand the prudency of such an approach.
by wietersforpresident on Dec 7, 2009 12:57 PM EST up reply actions
I think that their strategy will depend a lot on how 2011 goes. As the team/system is constructed, 2011 should be a good but not great year, and 2012 could be a breakout, but isn’t a lock to be one (the pitching for that team will all be guys who are unproven at this point). If 2011 is an 82 win team, then I think they continue to build slowly – there would be no reason to think they could FA their way to 95 wins in 2012. If 2011 is a 90 win team, then I think they look to add no more than 1 player (possibly a mid-level piece, not a stud) to put them over the top and make 95 wins in 2012 a very good likelihood. But if 2011 is an 85 win team, it will be very tempting to, as you say, force the team into contention for 2012 by spending, I dunno, $25M on 2 FAs. That would still only mean a payroll of ~$65M for 2012, but set to shoot up from there.
But I have no idea if they’d really do that – not because I’m Nutting Hostage, but because that would be a big departure and a big risk – if your $15M ace SP hurts his elbow in May, you’ve pissed away a lot of money for a team that’s basically not ready yet. There’s always an injury risk in sports, of course, but one way to manage that risk is by not putting all your eggs in one basket.
From my analysis of other teams
It seems as if it takes about 5 years of competitive play for attendance to rise 10K per game once a losing team is playing .500. That’s what happened to the Brewers, and also what happened to the Pirates in the late 80s. The payroll has to be projected from the previous year’s revenue, estimated solid season ticket base, etc. In addition, any free agents would have to be hole filling league average players, not impact players. It’s very rare for a small market team to acquire impact free agents regardless of whether they have a contending team and high attendance or not.
If you look at the Pirates’ history of attendance over the past 17 years, however, you see a broad range, and several up-and-down swings. The reasons were (with 1 exception) external to the play on the field (new stadium, All-Star games, etc.), but my point is that there’s no reason to think that the immediate increase wouldn’t be significant and fast. Your point about increase beyond the point where the team reaches .500 may well be correct, but I’d be shocked if a Pirates team that won 82 in 2011 and played .525+ ball all year in 2012 didn’t draw ~25k/game in 2012. Whether it would take until 2016 to sell the place out on a regular basis, I have no idea.
I’d note that the mid-80s teams were drawing 10k/game fewer in a larger metro area and with much, much more recent success and much, much less competition from good teams in the city – PNC Park really changes the calculus, because people want to go there regardless of the product on the field. If you actually provide a good team….
Good Point about FAs
Your analysis from PBC Blog still stands – there’s no particular reason to believe that the Pirates can actually go out and buy 6 wins with $26M – they’ll more likely overpay (3 wins for $20M) or get lucky (3 wins for $8M).
That said, does your analysis include Gil Meche? He seems to be a complete break with the trends you identify – 9.4 WAR for $19M in his first 2 seasons as a Royal, and 11 WAR for $30M including this year (in which he was mediocre then hurt, but still 1.5 WAR). In fact, using FanGraphs’ calculation of value, his contract is a good one if he provides only 1.5 more wins in the next 2 years. He’s an outlier, to be sure, but a pretty big one.
One thing I'll note
Pittsburgh fans have been very responsive to good play by the Pirates. Last summer i was arguing with (I think) Vlad about increased attendance, and he was saying that attendance generally lags success, but when I looked at ‘97, I saw that attendance spiked – iirc, that year had the best attendance between ’93 and ’00 (when the closing of 3 Rivers gave a boost). More anecdotally, we’ve seen incidents like the massive walkup for Karsten’s first start after the near-perfect game and for other games that would be significant to fans but not to the public at large. I think that, as soon as the Bucs start playing well, they’ll see an immediate boost towards 25k/game, with a big jump in season ticket sales the following year (plus they’ll finally be able to hike ticket prices). So that part of it should be a pretty virtuous circle.
Plus, if Pedro arrives as advertised, I think you’ll see the team make more in jersey sales than they ever have for a player (because that market has gotten so much bigger than it was when Barry was here). Not a big number relative to overall expenses, but enough to fill a few gaps.
It was me...
…and attendance DOES lag winning. There may be a small in-season bounce if they have a competitive year, but the team won’t make real money from increased performance until the following season, when it comes time to sell luxury boxes and season packages.
attendance DOES lag winning
Which is why attendance was higher in 1997 than in 1998.
But you’re right that revenues from attendance lag due to season tickets (as I mentioned) and luxoboxes. But my point is that you see an immediate and significant jump in revenues as soon as you contend (in Pittsburgh, at least). If they jump attendance to ~25K, that represents about $3.5M for a half-season*, exclusive of concessions. Not a huge number, but not chump change for a team with a $40M payroll. And I’m pretty sure that concession revenues are in the same ballpark.
- IOW, saying that they play 40 games at 20k and 40 games at 25k, which would actually be a smaller jump than they saw in 1997 – I just wanted to get an order of magnitude number
Also, if they’re in a position to contend, they could shift some of their overall expenses from things like the Dominican Academy, rehabbing Bradenton, etc. to major league payroll.
Good point
Presumably they could find ~$10M from somewhere in the org to cover a payroll jump independent of the issues I mention above.
Don't take FC's statement too seriously.
There are lots and lots and lots of ways to hide revenue from a bottom-line number such as the one he provided. Which is why you need to open the books – to find out whether the team sold the rights to collect parking revenue to “The Pittsburgh Pirates Parking Lot Maintenance Company” for $5, or whether there are seventeen members of the Nutting family working for the team, with each earning $3M per year.
Let's assume...
…that they are making more than $5.5M in profit per year. Let’s even assume it is more like $25M per year and that they could dump all of that into payroll. That puts them at a ceiling of $75M at the current revenue level, which is more like league average. How much would that improve our odds of winning year to year over where we are currently? Personally, I would like to find out, but am glad that Littlefield was not accorded this particular luxury. Think of the waste that would have filled a roster with that payroll!
by wietersforpresident on Dec 7, 2009 1:20 PM EST up reply actions
Actually, the 2001 payroll was about league average.
Revenue across the league has gone up substantially since that time, so even though it looks on paper that the Pirates had about the same payroll then as now, they really don’t. The Pirates have kept proportionally the same level of payroll since they dropped payroll to $32M after the A-Ram sell off. Before that, the Pirates had a much higher level of payroll than they do now. My guess is they expected to keep bringing in people to the new PNC Park at the 30K per game level and when that didn’t happen because the teams were bad despite being expensive, they began losing money by the bushel.
Also...
The reason the Pirates could keep their payroll level the same throughout that time despite flat local revenues was the increased money coming from MLB in the form of revenue sharing, national media and licensing deals.
This to me is an indicator that the Pirates have indeed been using that money to fund payroll.
great point vlad
i found it especially interesting that FC stated that dividends haven’t been paid to anyone in the ownership group?!?!?! That statement is implied to make the reader think that successful business men are risking millions of their own money for a well noted poorly performing team, to one day hopefully turn the ship around and be profitable. Sounds a little risky to me. I can believe that the ownership group isn’t recieving dividends, but it’s not reasonable to believe they’re not getting some pretty nice perks, such as all inclusive trips monthly to the Dominican to check on the “progress” of the new facility.. Not judging those guys, I wish I were as successful as them so that I could enjoy those benefits. But the goal of all privately owned companies is to have the lowest taxable income, which is done by incorporating as many personal expenses through the company. Not hating…..Just saying
Yes and No
The payoff with major league teams (any sport) generally comes at sale time, not from ongoing profit-taking. Not that profit-taking of some sort isn’t surely going on, but ballclubs are not unlike stocks – you don’t hold stock for the dividends but for the capital gains (note that the truth of that statement ebbs and flows, but it’s become increasingly common for companies to pay relatively nominal dividends while maintaining a high value on the basis of… ever-increasing future value). Point being, if Nutting sells the Pirates in 10 years for $100M (real dollars) more than he paid for it, then he did just fine, regardless of how much income he took from it each year.
Maybe you're right
and Nutting could afford to buy and hold because of his revenue from other sources, and a belief that the long term model the Pirates have implemented will make them a more valuable team, but I doubt that all the other stockholders would be on board with this. There’s too much uncertainty in the economy, especially the sports industry, to bank millions that the industry hasn’t already peaked profitablility wise.
It just doesn’t make sense. It’s like putting millions into a CD account where your money is locked away, and can’t see or use it for x amount of years, you had better be pretty damn sure the worst case scenario is that you at least get your initial investment back. I’m just having a hard time believing that a smart wealthy business man would take that risk.
Worst Case
I think the worst case scenario is breaking even – are there any major league teams that have sold for less than their most recent purchase price? Even the Marlins Huizenga-Henry-Loria musical chairs saw no loss in value, and the team is valued at 175% that amount 8 years later despite no stadium deal, terrible attendance, etc.
if it were that safe of a bet
everybody with money would be throwing their hat in to the arena. However theres been more signs of a reversal in profit trends the past 2 years than the past 2 decades. Heck even the Yanks are cutting payroll. I just think the economy is way too volatile to risk a large portion of ones wealth. While I’m sure Nutting/ownership team would love to turn the ship around and be labeled as the guys who finally did it, i just don’t believe ownership isn’t collecting a penny.
A rule of thumb for investors is if you’re not making a round10% Return On Investment annually, you’re doing something wrong
Well it’s plainly not a rock-solid investment: there are huge upfront costs, and it takes a lot of involvement (granted, being George Steinbrenner’s silent partner is a famously silent role), and, as I said, most of the payoff comes at the back end. In other words, it’s not a good investment for everyone, even if it pays well (the recent turbulence is irrelevant to the present discussion, because Nutting took over before the crash began – it wasn’t part of his calculus).
One thing I’ll say – and this is speculative – is that Nutting’s been part of the ownership team for a long time. He knows exactly what it’s like to own a bad team that sends a nice dividend check every year. It wouldn’t surprise me in the least if he is making the calculation to forego profits for the next few years with the goal of turning the team around, because he’s already experienced the alternative. But that’s a theory, not my ruling assumption.
Not sure whether this is still legal or not...
…but as of maybe 20 years ago, you could depreciate your player assets just like a car, and take everything you were paying out in salary as a tax write-off. It only covered the first seven years of your ownership window, but if that’s still in line with modern tax law, it’s a good chunk of change.
Player assets are still depreciable
This is not terribly relevant for the PBC, but it affects the valuation of free agents by all clubs.
Viva Clemente!
You probably know
the Pirates have no parking revenue nor do they control any lots around the stadium. If the sort of blatant thing you are suggesting was happening, it should be seen by the MLB and MLBPA auditors.
Why would MLB care?
As long as everything’s on the books, it’s not MLB’s business how much teams get for their broadcast rights or their parking or concessions.
But that’s the reason teams fight like hell to keep their books private. They all do this kind of stuff to one degree or another, and have been doing it for years. Bill Veeck wrote about it in some detail in both of his baseball books, if you don’t just feel like taking my word for it…
As I understand it
the MLB revenue sharing plan comprises all local revenues. It affects what other teams pay and what other teams receive if you are screwing with your books. I would guess the MLBPA or other MLB teams would cry foul and challenge what the Pirates are saying if it wasn’t true.
For example, Coonelly said recently that the Brewers have $50M more in revenue than the Pirates do, and the difference between the Pirates’ payroll and Brewers’ payroll is less than $50M.
He was obviously cleared to speak about that specific situation by the Brewers and Selig. If that were not really true, why would they allow him to mention that and not refute it, considering I’m sure the fans in Milwaukee would also like to see the Brewers spend as much as possible on payroll as well?
But it is "really true".
Just because there’s more than one way to structure something on the books doesn’t mean that choosing one option over another gives you an untrue answer. If the Pirates were to sell their broadcast rights to themselves via a cutout company for a below-market rate, I’m sure they’d still share every dollar of those funds they were paying themselves to stay within the letter of the law.
You’re acting as though separate franchises have a fiduciary duty to MLB to maximize all local revenue streams, and to the best of my knowledge, that isn’t the case.
I don't understand what the problem is with believing that the Brewers have $50M more from atendance.
The Brewers plainly do have a lot more paying customers and they also have a higher average ticket price. To believe that Coonelly could come out with a false number without catching hell from the Brewers and Selig, who in turn defended him shortly after that, is just venturing into fantasy land.
All of these hypothetical situations you are proposing are simply preposterous when compared to the obviously more likely answer that Coonelly was telling the truth.
The Brewers’ attendance was almost a million and a half more than the Pirates’, and the Pirates inflated theirs with a lot of giveaways and other promotions. If the average ticket price is $25, that’s about $37M more just in ticket revenue. Throw in overpriced hot dogs, and add in the fact that the Brewers get parking revenue and the Pirates don’t, and you’re easily over $50M.
by WTM on Dec 7, 2009 8:53 PM EST up reply actions
Well put
For example, the former owner of the Philadelphia Eagles hid profits by paying himself, I think, $16 million a year. Dk’s article didn’t say whether BN was paying himself, for example. It didn’t say who else in the ownership group was getting paid.
I tend to be more skeptical than most people on here about BN. But I suspect the truth is likely near the middle. It’s not the FC, believe me it’s true without opening the books. And it’s certainly not the Boras truth.
Actually, I’m surprised the Pirates haven’t refinanced their debt. It sounds like they are paying 7 percent. That seems high based on the economy. The article answered questions. But it also raised some.
Yes, I saw that
That was very interesting from DK. I’d still like to see the books. There are millions of ways to hide payments to owners and relatives. But DK did provide more clarification.
Oh, and I had the same though about their debt. Although, at the beginning of this year, I don’t think the Pirates could have found anybody to refinance $100M. But you’d think they could by now – the debt is big enough that even a few points equals real money.
And as I said, I think the collateral is pretty solid….
Another thing ...
I’m surprised it’s an interest-only loan. I would think you could do much better than what the Pirates have. Also, the team is worth much more than $100 million.
Interest Only
Actually, the reason for a not-great interest rate (I’m gauging from the articles that it’s in the 5-6% range, the low end of which is actually fine, but the high end of which is a bit much) may be that they have flexibility to add more debt or to make interest-only payments. Just as a home equity LOC is a point or so higher than a comparable fixed-term, fixed-principle loan.
Funny...
how Jayson Stark’s numbers (from conclusion #2) are almost EXACTLY the numbers Dejan gave this morning.
http://sports.espn.go.com/mlb/columns/story?columnist=stark_jayson&page=rumblings091119
Yet…he supposedly didn’t know what he was talking about.
He doesn't
Because he keeps talking about payroll (and sometimes mentioning player development) as if running a ML team consisted of nothing more than writing checks to players. DK cites $50-60M for general expenses, a number that doesn’t come from the Pirates, but from his own reporting. So if you take the $80M that Stark cites, subtract $50M, you’re left with… $17M less than the Pirates spent on payroll in 2009. Stop the presses.
Which is to say that comparing payroll with revenue sharing income is utterly meaningless, but enticing, because they’re big numbers, one of which most fans are already familiar with.
I'd suggest you read ALL of Dejan's article and Stark's.
Stark didn’t put exact numbers on the general expenses…but DK mentioned the minor league payroll is included in his “general expenses”. It’s very easy to come up with numbers that can show that the Pirates turned a profit.
If I would not have accidentally cancelled a post…I’d do it right here. Unfortunately…my internet access is somewhat limited until tomorrow night.
I did
My point is that there are three 8 figure numbers at play (ML payroll, operating expenses, and pre-attendance income), but Starks only talks about two. It’s a foolish way to talk about it and to think about it. If DK is even in the ballpark about non-payroll expenses (and it would be pretty damning of his reportage if he’s not), then the majority of the pre-attendance income is spoken for before the first bench player is paid. But Stark and the rest are harping on the ~$80M vs. payroll numbers, as if they were the only two that counted. It gives not just an incomplete, but a misleading picture.
It wouldn’t surprise me in the least if the Pirates turned some profit, but not enough to make me care, and not enough that the tax-paying teams should be crying, either (after all, isn’t the idea to keep the low-income clubs healthy? What kind of a healthy organization can’t turn a profit?). It’s not as if the amount of profit the Pirates (may have) made is the difference between 62 wins and 90.
My point is that there are three 8 figure numbers at play (ML payroll, operating expenses, and pre-attendance income), but Starks only talks about two. It’s a foolish way to talk about it and to think about it.
Yeah, but it’s more sensational to talk about how they have their payroll all paid before they even sell a ticket. Misleading, devoid of analytical meaning, but eye-catching.
And the Pirates ACKNOWLEDGE that they’re profitable. They’ve been doing so for years, even before McClatchy left. But I guess it’s easier to rip them if you pretend they’re claiming to lose money, then point out how the numbers show they’re making a profit.
by WTM on Dec 7, 2009 9:06 PM EST up reply actions
Maybe Stark was Dejan’s source, in which case Dejan’s article does nothing to corroborate Stark’s numbers.
And even though Stark sort of pays lip service to the fact that teams have far more expenses than just major league payroll, he returns over and over to the meaningless theme that some teams have their payroll covered by revenue sharing, etc., before they even sell a ticket. Aside from being a stupid point that Stark throws in solely out of sensationalism, it’s not even literally true. They don’t get all that central fund revenue at the beginning of the year.
Stark’s “solution” is mind-numbingly stupid. To begin with, he states that the Yankees’ luxury tax helps “finance everybody else’s baseball teams.” That’s not correct. NONE of the luxury tax goes to any team. It goes to a fund for pension rights and development efforts, like inner-city baseball.
Aside from that, his solution is based on the false assumption that some teams are not putting their revenue sharing money toward the on-field product. If that’s true, why has the union—which has the right to see all teams’ financial statements and to conduct an audit to determine whether teams are complying with the CBA mandate to use r.s. money to improve major league performance—never filed a grievance or complaint of any kind on this issue? The obvious answer is that they know they’d have no case. Stark is trying to solve a problem for which there’s no evidence to show its existence.
Stark’s idea of a minimum $60M payroll is also profoundly stupid. If you just look at the figures Coonelly, Stark and Dejan have produced—which generally don’t differ all that much—and apply all that to the Marlins’ situation, with their horrible lease and terrible attendance starting in 2006, it’s clear they’d suffer some very substantial losses if forced to fund a payroll that large. There are clearly cases where teams just can’t afford a $60M payroll. A plan that would be a disaster in the more extreme cases is a bad plan.
Another stupid aspect of Stark’s plan is that it probably wouldn’t affect anybody’s behavior at all. If a team believes it can only afford a $50M payroll and the tax is, say, 30% of the shortfall, they’re just going to reduce the payroll to roughly $46M or whatever so they can pay the tax and still meet their budgetary goals. Stark’s plan would serve only as a gratuitous punishment for teams that failed to meet his arbitrary payroll minimum, without giving them any motivation to stop this bad behavior that he assumes, without evidence, is occurring.
by WTM on Dec 7, 2009 8:48 PM EST up reply actions
Free Agents
As much as I would like the Pirates to be contenders to sign someone like CC Sabathia, I think we are probably going to act more like the Brewers…trade a few prospects for 1/2 of a season in an expiring contract year if it lines up with a Pirate contender, and then watch him go the next year. Given the failure rate of prospects, I can see that approach working like it has for the Penguins in the past.
If only we can get to contention…
by wietersforpresident on Dec 7, 2009 1:28 PM EST reply actions
In the end, regardless of the exact figures...
There is plenty of evidence to say the Pirates spend proportionally equal or more than other teams on MLB payroll.
Just a cursory examination of attendance, market share and payroll gives you a pretty clear answer. These are all absolutely verifiable numbers and using logic they can be extrapolated to tell you whether the Pirates are way off base or are spending what other teams spend proportionally.
The Pirates are #26 in market size and #29 in attendance. The Pirates claim to be #27 in revenue. In 2009 they were #28 in payroll.
Can someone tell me how any of that points to them cheaping out on payroll? Either way, if they could spend a bit more, it’s certainly not much.
The revenue sharing angle is a red herring
Revenue sharing is a narrowing factor on revenue disparity. It can never vault the Pirates over the Royals, for example, on the revenue totem pole. Only if the Pirates were clearly much higher on the revenue totem pole and lower on the payroll totem pole would there be any logical reason to cry foul.
Mark
I’m not saying you are wrong. I’d just say that I think the current CBA has a problem. Essentially, all the low-revenue teams, Pirates included, are bought off.
They know it’s nearly impossible to compete. As a result, why not take the profit?
I think an alternative explanation could be that the bottom teams as a whole are profiting. I’m not saying the Pirates are unique at all. In fact, under the current CBA, I’d do exactly what the Pirates are doing.
But without the books being reviewed independently, there is no way to know.
Your theory falls down in that
It is the low revenue teams that are most competitive that are profiting the most. The Pirates and the Royals are supposedly the least profitable according to Forbes. The Marlins, Rays and Twins are making way more money according to Forbes.
So the theory of “they know they can’t compete so they are just taking the profit” doesn’t hold any water.
Small market teams must act in a different way than the large market teams do. Previously, the Pirates were not making decisions that would provide them with excellent players. The Rays, Marlins, Cardinals and Twins did. They have all competed and done pretty well for themselves.
That said...
I would like to see greater revenue sharing, a team placed in Brooklyn to compete directly in the AL East against the Yankees, and a special fund to help smaller markets keep their marquis home-grown players.
Mark
I think you miss my point. I think the CBA largely just buys off a few of the small market teams. The effects of revenue sharing are much more complex for the middle and larger markets.
Essentially, I’m just repeating what others have said. The Pirates and Royals of the world can’t compete financially and just take revenue sharing, keep the payroll low and make a profit.
The Royals spent big on some contracts and now are trying to ditch them because they know that the mid-range guys they signed can’t make them compete.
There’s no doubt when you are at the bottom of the totem pole, you care more about it than those in the middle who won’t be affected as much. However, I would guess that any team who isn’t the Yankees would be interested in a way to bring the Yankees payroll down closer to where the pack is.
The very small market teams can’t compete on price, true. But they can compete by using other methods which will build their talent value. The sad thing about that is that it destroys some of the identity of teams if the Cardinals can’t keep a Pujols or the Twins a Mauer.
There’s a lot of truth to that, but the alternative is probably contraction. One thing these numbers are making clear is that, without extensive revenue sharing, the lower revenue teams aren’t viable. And that includes profits. Nobody would own these teams if they couldn’t make money.
by WTM on Dec 8, 2009 6:16 PM EST up reply actions
CBA
I actually think that a CBA based on hockey makes a lot of sense. Have a salary range. Obviously, it would be a tough fight with the union. You have to be prepared to shut the league down for a year or use replacement players.
But you cannot continue to have the income disparities and a healthy league. It’s not good for baseball when a team loses 17 straight years. Revenue was only one factor for it. But obviously, the small market teams lose more than the Yankees, have a small window, and a small margin of error in player evaluation.
Second, baseball needs a real international draft. Not one where agents manipulate who goes where.
Third, I think baseball would be served by using revenue sharing so small market teams could use league funds to have transition and franchise players as in the NFL.
I think it’s best for baseball when the Pirates, for example, can keep a player like Stargell or Parker.
But the current system, in my opinion, is terrible. Obviously, it would be war with the union. But at some point, you need to come up with a CBA that works for everyone.
Well...if the Mayans are right...
the last major league baseball we will ever see will be somewhere around Halloween 2011…or before…if there is a lockout. Because I fully expect the owners and players to not agree on a new CBA…unless all 30 owners are saying there are no monetary problems in baseball…and right now they are saying the exact opposite.
If Forbes’ estimates are anywhere close, the teams collectively have well over $3 BILLION in debt to service. There isn’t going to be any lockout any time soon.
by WTM on Dec 7, 2009 9:49 PM EST up reply actions
I agree
That I doubt the owners have the stomach for a fight. I really wish the small market teams would act more collectively.
That being said, you can’t keep using debt as a reason not to push for change. In fact, I’d argue that it is the reason to push for change. If you don’t you are going to end up like GM.
I agree with your 3 points
And also add that another team placed in New York (in Brooklyn) that would compete directly with the Yankees in the AL East would both increase overall revenue and also thin out the New York dollar and high dollar free agents to minimize the huge advantage of the Yankees.
by MarkInDallas on Dec 7, 2009 10:03 PM EST up reply actions
Exactly right...
which is why another NY team won’t happen. The Yankees and Mets just won’t permit it.
Ha.
I am SO glad I don’t give a rat’s arse about any of this.
.
Free your ass and your mind will follow.
DK's part two
Again, I’d still like to see the books. But DK says that BN did not take a salary. He also says that money wasn’t diverted to affiliated businesses.
If that’s the case, how can the Pirates realistically have a budget of $60 million? How can they ever compete long term?
Build a cheap young team that competes and raises attendance – just like Nutting said. It’s been done many times in the last decade. The Brewers have $50M more than the Pirates due to their higher attendance according to Coonelly.
Right
The Brewers are a bit of a cautionary tale, as it appears that their window is already closing with nothing but 1 playoff series to show for it, but it’s certainly possible for the Pirates or the Royals to make a go of it for a few years.
What I wouldn't do
Is go for the rent a player card that the Brewers played with Sabathia. They gave up some prospects that could replace some of their offensive production if Fielder leaves. I think if don’t develop a #1 starter of your own, you have no chance to win a WS.
What a depressing thought.
Probably correct, though. Although maybe you could win by developing a pair of #2s, especially since you could then buy a 2/3 pitcher without going crazy.
Mark and JRoth
It’s hard. I’m not sure a small-market team can ever keep a strong pitching staff together for a few years. I suspect you do have to overpay to get a #1 and #2 through trade. Then you lose them in free agency.
I hope I’m wrong. But how do you keep Pedro and Cutch and anything resembling a supporting team under $60 million. I just don’t see how you do it.
The only way to do it is get a Longoria-style contract done. You have to use the insecurity and minimal salary of pre-arbitration years as leverage to both spread out and lower the dollars long term. Also, extending the service time and at the same time avoiding Super Two status.
As far as keeping the same staff together, probably not. But you have to have a lot of good pitching prospects in the minors ready to take the reigns. On the Pirates, the #5 starter is always going to be a tryout position. The #4 starter should never be someone in arbitration making the most money on the staff.
Zach Duke, for example, is likely to be the #4 starter in 2010. For the Pirates, there’s no reason to try to extend your #4 starter past arbitration. You need to have cheaper alternatives who can use that spot to learn to become a #1 or #2.
Mark
I’d argue that it’s easier said than done. The Marlins, for example, run a smooth operation.
They have a two-year window. Then they blow it up.
I’d suggest that the Pirates might never win another World Series under the current CBA.
Finally, I’m not sure I buy FC’s statistics on the Brewers revenues.
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