CNN/MONEY: MLB hiding money

Old School · 12-22-2001, 01:30 AM

Here's an long but interesting article from CNN Money.

NEW YORK (CNN/Money) - Commissioner Bud Selig testified last month before Congress that Major League Baseball had operating losses of more than $300 million in 2001, but he heads into negotiations with the players union bolstered by hundreds of millions of dollars tucked away in a little-known central fund.

The fund, which never shows up in baseball's recent financial reports, could give Selig a way to keep owners united in the coming battle with the union, giving him resources to help financially struggling teams make debt payments should owners lock out the players, whose contract ended last month. But the fund raises yet more questions about the validity of the league's cries of financial distress.

The nest egg comes from national revenue, such as television contracts and merchandising rights fees, collected by the league but not paid out to its 30 teams.

The league's own public figures show that since the end of the 1994-95 players' strike, total national revenue has come to $3.6 billion. National revenue payments to the clubs have come to $2.5 billion.

Most of the $1.1 billion difference pays operating costs such as umpire salaries and payments to the players' pension funds. But according to numbers the MLB provided me, there is about $53.3 million left over in the most recent season, or more than the payroll of 11 of the league's teams.

And that $53.3 million is on top of what was in the fund coming into the season. While baseball officials won't disclose the exact amount of money in the fund, it appears there was about $44 million retained by the fund in 2000, and somewhere north of $200 million since 1995. Rob Manfred, MLB's executive vice president of labor relations, confirmed to me this week that the fund is in the nine-figure range.

"The central fund holds a tremendous amount of cash," he said "It can be $200 million to $300 million at any point. It's not $800 million."

One former baseball executive has told me that if baseball does move ahead with contraction, the initial payments to the owners being bought out would come from resources of the general fund, not from each of the remaining 28 teams. The costs of buying out franchises are likely to rise to more than $100 million per team, although some payments could be deferred.

But hardly anyone following the business of baseball expects contraction in 2002. The more immediate need could come if MLB and the players union find themselves in yet another work stoppage.

Baseball's arcane accounting process actually means that the money being held in the fund counts as part of the "losses" reported by 25 of the sports' 30 franchises.

The spreadsheet released by Selig at the hearing shows the teams splitting all of the $720 million in national revenue in 2001, or about $24.4 million each for most of the teams, rather than revenue sharing payments they actually received, which averaged $17.8 million. But the $53.3 million difference that stayed in the central fund in 2001 is actually counted as part of the $1.6 billion that baseball identifies as a cost described as "national and other local operating expense."

This isn't the only example of baseball's game of Find The Money. Hundreds of millions in expansion fees paid by the Tampa Bay Devil Rays and Arizona Diamondbacks, who started play in 1998, don't even show up in the seven years of financial data that were included in a recent "blue ribbon panel" report on the economics of the game.

Baseball has some financial problems, true enough. But the way the owners and Selig bury their numbers weakens their case by leaving questions unanswered that do not need to be unanswered.

A couple of weeks ago, for instance, I questioned the fact that the Atlanta Braves listed less than $20 million in local broadcast revenue, even though the team has a television contract with cable station WTBS, which carries their games across the country.

Since the Braves and WTBS are both owned by AOL Time Warner Inc. (AOL: Research, Estimates), (as is CNN/Money), I raised the issue of whether the Braves were being paid less than market rate, thus making the team's losses seem worse than they are. But I couldn't get anyone from baseball to answer my questions.

Once my column was published, MLB's Manfred finally explained to me that most of the money from WTBS is classified as national broadcast revenue, which is split among 30 teams, rather than local revenue retained by the Braves.

Getting even that partial view of baseball's financial picture confirmed was like pulling teeth. Meanwhile MLB has gone to court to stop the state of Florida from getting copies of studies it has done on the game's finances, and it has threatened to sue the players' association if it discloses financial data that owners had to provide under the current labor agreement.

Baseball officials need to realize they're not doing themselves any favors blocking access to their numbers like Ivan Rodriguez guards home plate.

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rockHEAD · 12-22-2001, 03:55 PM

very interesting.

hmmm... and it's all legal?

rH

MadMax · 12-22-2001, 04:16 PM

this isn't a surprise to anyone, but i think it's important that the media hammer MLB on "hiding" money....particularly given the fact that the public is funding most of their stadiums.

gr8-1 · 12-22-2001, 04:17 PM

Please let this be true.

cmrockfan · 12-22-2001, 04:20 PM

Without a salary cap to give a small market team a chance for the championship, MLB sucks. Who cares about the rest of this nonsense?

Yankee fans.
Braves fans.
Dodger fans.
and the rest of the big money owners....

Houston does not have a chance, and someday Astro fans will realize that supporting the Astros is like betting on a three legged dog at the track.

MadMax · 12-22-2001, 04:27 PM

cmrockfan -- why would we realize that?? houston does not have a chance?? are you kidding?

we've won our division 4 times in the last 5 years....our pitching has certainly been good enough to advance us through the playoffs...our big money position players simply haven't gotten it done. i wouldn't call that "not having a chance!" we rolled the dice in the playoffs and got beat...but the astros record since 1997 is among the very best in baseball..

the mariners payroll was no higher than the 'stros....the a's payroll was no higher than the 'stros.

when was the last time the dodgers made the playoffs? how about the orioles??

teams with money have a far better chance, but that's not the end of the story. The Astros have performed far better than many teams that spend a helluva lot more jack than they do.

DVauthrin · 12-22-2001, 04:34 PM

yep madmax,

i think the astros are really being overlooked again this yr

imho, the cards are a threat and the mets maybe, but i really don't see st. louis as world's better

i mean the one adv they have is pujols at 3b, but we neutralize that with bagwell over martinez at 1b

sp i think is equal and both teams have a strong bullpen, with solid managers

i think it could very well be a cards-astros NLCS

castilla is no loss really, his obp .308 last yr and .330 for his career

and while alou is good i dont pay him 9 mil per at age 35 esp when we have ward and lane for free

MadMax · 12-22-2001, 04:37 PM

dvauthrin - i have to say i disagree with that...i do think the cardinals, on paper, are a better team. having said that, i'll take our starting rotation over almost any other in the NL...that may just be enough. totally agreed with you on alou.

but even if the astros don't win the division this year...clearly they've shown they can be very competitive without a payroll that exceeds $100 million. they're not the only team who does that, either.

DVauthrin · 12-22-2001, 04:50 PM

well i was just going position by position really madmax

1b bagwell v martinez-edge houston
2b biggio v vina-edge houston, but not as much as you would think
ss-renteria vs lugo-edge cards(this is their other big adv which i forgot)
3b-pujols v ensberg edge cards
lf-ward vs bonilla or saturria edge houston
cf-edmonds vs. berkman-wash-lance could win this though
rf-hidalgo vs drew-wash

sp oswalt,miller,reynolds,hernandez,mlicki/redding vs morris,kile,williams,bud smith,benes-tie depends on the 5 spot whom wins

rp kline, veres, isringhausen vs brocail,dotel,wagner-tie slight edge houston on talent

and bench robinson,polanco,saturria/bonilla,cairo vs merced, vizcaino,hunter(also could have everett, lane later in the yr) maybe slight edge cards

so all in all i think it will be a close match and it depends on the strength of the advantages, but i expect both teams to make the playoffs

MadMax · 12-22-2001, 04:55 PM

i hope you're right...i just wish they would have tried to pursue a legit leadoff hitter/speedy outfielder...one other than Brian Hunter!

DVauthrin · 12-22-2001, 05:02 PM

i wanted johnny damon all along madmax, and his final price wasnt bad-i think biggio is a better number 2 hitter

and i left off catcher ausmus-marrero astros win slightly, plus add zaun to our bench-the catcher spot could be a tie though

Manny Ramirez · 12-22-2001, 05:47 PM

Quote:

Originally posted by DVauthrin
i wanted johnny damon all along madmax, and his final price wasnt bad-i think biggio is a better number 2 hitter

Your loss is happily my, DEANBCURTIS, and Nomar's gain.

I read in the Boston Globe today that Damon purposely took less money to sign with the Red Sox because he wanted to play on an East Coast team so he could be closer to his wife.

Therefore, it didn't matter how much teams like Oakland or Houston or whoever offered him, he was dead set on going to the Red Sox.

And we, the Red Sox nation, are glad to have him.

People can say what they want about Duquette, but to his credit, he is doing a good job of turning the roster around, despite the fact that he doesn't know if he will still have a job before too long.

Here is a look at the Red Sox line-up:

Johnny Damon, CF
Trot Nixon, RF
Nomar Garciaparra, SS
Manny Ramirez, LF
Tony Clark, 1B
Jason Varitek, C
Brian Daubach, DH
Shea Hillenbrand, 3B
Pokey Reese or Jose Offerman, 2B

Rotation:
1) Pedro Martinez
2) John Burkett
3) Dustin Hermanson
4) Derek Lowe
5) Frank Castillo or Casey Fossum or Darren Oliver

Closer:
Ugeth (sp-?) Urbina

Unfortunately, in signing Damon, the team decided not to offer Pokey a contract, but they still hope that they can sign him. Keeping my fingers crossed on that one.

Adding Damon and potentially Reese gives the Red Sox speed at the top of their line-up and some base-stealing threats. Also, if Pokey does sign, it improves their middle infield defense tremendously. Clark will give Manny some protection in the line-up & he was a great signing considering he was a waiver pick-up.

Despite losing Nomo, the rotation looks better with the additions of Burkett and Hermanson. Also, don't forget that Derek Lowe was impressive in his stint as a starter near the end of last season. He has great stuff and just needs to build up his stamina and arm to go 6 to 7 innings.

Oh...and getting rid of "Jurassic" Carl is huge, too. It's a classic case of getting better by subtraction instead of addition.

DVauthrin · 12-22-2001, 07:02 PM

manny,

I'm an astros fan, and damon fit our needs to a T

I think you have a good team but its not that great, you better hope joe kerrigan works magic on your makeshift staff

and also how pathetic is your 3b-hillenbrand, clark is highly overrated, and 2b i have no clue what happened with reese, and daubach i guess is a decent dh

for 100 plus mill, i could assemble a better cast of talent, although it is better than a yr ago the yanks outrumped you

I mean that rotation for 100 mil, i think thats a big problem-hillenbrand, 2b and your dh are lesser issues

Manny Ramirez · 12-22-2001, 09:35 PM

DV,

I agree with you on most of your points, but there's a couple of things that you have to realize:

1) Last year, the Red Sox had a lot of older veterans near the end of their "expensive" contracts like Dante Bichette, Mike Lansing, Troy O'Leary, and Jose Offerman. All of those guys are gone except for Offerman, who they would love to jettison, but will probably find no takers.

2) The Red Sox rotation had 2 rookies in it last year in Paxton Crawford and Tomo Ohka (at the beginning) & later had to rely on oft-injured veterans like Bret Saberhagen, David Cone, and Frank Castillo. Only Castillo remains & he will struggle to make the rotation, IMO. Yes, Burkett is old at 37, but I think that you aren't giving Hermanson or Lowe any credit. Also, a healthy Pedro goes a long way in making the Red Sox rotation better than it was last season.

3) The team no longer has Carl Everett. Hell, if losing Everett was the only change the team made this off-season, then I would still say it was a successful off-season.

Now, there are still some issues & they include these:

1) The fate of Joe Kerrigan and Dan Duquette - I think that Kerrigan is a great pitching coach but probably in over his head as a Manager. As for Duquette, I have been screaming for his head for some time now. It's obvious that he is trying to save his job, but spending 200 million in the last 2 seasons and not making the playoffs is something that he will not have an answer for. The Sox were so close after '99 and now we are looking at a team that had the potential to be a rebuilding job, but fortunately, it doesn't look like that. In reading some articles about the new owners, it seems that DD will not be retained.

2) 3B and DH - They are not great in Hillenbrand and Daubach but they don't have to be...they are role players - every team has them and these are the Red Sox's role guys. Personally, I think that Chris Stynes is a better 3B than Hillenbrand, but like Pokey Reese, CS was not offered a contract, but the team still hopes to re-sign him (but at a lesser salary - same deal with Pokey). It would be nice to get a 30 HR guy to play DH but realistically, Daubach is a cheap alternative and he is capable of hitting 20 to 25 HRs and driving in 80 runs plus he can spell Tony Clark at 1B.

3) 2B - This will be the most critical position, IMO, if the team cannot sign Pokey and Chris Stynes. Offerman doesn't have it anymore and has been injury-prone (but then everyone on the Sox has been that). If they can sign Pokey, the Sox will have one of the best middle infields in the majors, if not, it is one more year of Offerman (but there is a light at the end of that tunnel). The problem is that Offerman makes like 6.5 million and nobody is willing to take that salary on or at least take it on without dumping some on Boston in return.

4) Bullpen - For some insane reason, I have been reading that they want to get rid of Urbina which I think would be stupid. Maybe they are afraid he will get hurt, but I have been reading that they are interested in Jeff Shaw. So far, nothing has happened here, but this will bear watching. They really need a set-up man, especially with Lowe going to the rotation and Rod Beck pretty much with a shot arm. They are supposedly interested in Mike Williams, but who knows there. With the injuries that they sustained last season, it is important to have an effective bullpen.

5) Injuries - This, IMO, is the biggest thing to worry about. Nomar, Varitek, and Pedro are all coming back from season-ending injuries. It will be interesting to see how they bounce back. Also, it seems that hamstring problems are going to plague my namesake for the rest of his career. If the Sox can get through the season with minimal injuries, then I think they have the talent to stay with the Yankees.

Remember, their chief competition in the wild-card race in Oakland and Cleveland got significantly weaker due to the losses in Giambi and Damon in Oakland and the impending departure of Juan Gonzalez and Roberto Alomar in Cleveland.

Stay healthy and figure out what to do with the exisiting GM and Manager, and this is a team that is right back in the thick of things when it comes to the playoffs.

Is it a perfect team? Far from it, but it is a good enough team to return to the postseason, IMO. Whether it is good enough to win the AL East from the Yankees remains to be seen.

DVauthrin · 12-22-2001, 10:11 PM

manny,

hermanson is a decent 4th or 5th starter not number 2, burkett is 37 and is going to a hitters league and lowe could be solid but im not sold yet

if i had to predict postseason today

yankees,whitesox,mariners,a's-pitching will carry them to it

you need a longterm fix, these are short term moves and the only one i really like is damon

gr8-1 · 12-23-2001, 03:41 AM

Manny, gentlemans bet. I'd be willing to bet that the Redsox will not win the nl east. I think they may be able to make the playoffs, but I don't think they will.

DVauthrin · 12-23-2001, 04:20 AM

who are your playoff picks gr8-1?

Manny Ramirez · 12-23-2001, 09:26 AM

Quote:

Originally posted by gr8-1
Manny, gentlemans bet. I'd be willing to bet that the Redsox will not win the nl east. I think they may be able to make the playoffs, but I don't think they will.

I'd be willing to bet that the Red Sox wouldn't win the NL East either, gr8-1.

Just playing with you....actually, I have never said that the new-look Red Sox will win the AL East over the Yankees, but they still have the talent to win the wildcard.

DV - I still don't see how you think that Oakland is not going to drop off with the losses of Giambi and Damon.

Anyway, my picks for the playoffs (going on what happened in the meetings so far):

AL East - Yankees
AL Central - White Sox
AL West - Mariners
AL Wild Card - Red Sox

NL East - Mets
NL Central - Cardinals
NL West - Diamondbacks
NL Wild Card - Astros

Of course these picks are preliminary & subject to change once we get to Spring Training.

gr8-1 · 12-23-2001, 12:03 PM

Manny, lol. A bit drunk when I posted. Dvaurthin, I'm gonna wait a bit more till I pick the winners.....

DVauthrin · 12-23-2001, 12:59 PM

manny,

i never said oakland's record will be the same, but i don't like your pitching staff, oakland has an awesome front 3 and ramos their 4th is another future stud-he dominated minor league ball last yr

also damon isnt much of a loss the way he played last year for them and i expect billy beane to find more of what he needs before the season because imho he's the best GM in baseball

I think tejada/chavez/dye/long pick up the offensive slack somewhat and their big 3 carries them to the postseason with help from ramos and lidle

It will be much closer than last yr, but the gap was very wide and until boston's pitching is more than pedro and a makeshift 2-5, you'll be hardpressed to win anything major