Thank you for making my point that many big league clubs have financial concerns that transcend payroll. BTW, Drayton IS the only MLB owner with the most expensive stadium lease in the majors. A big IF. Not too unlike "I'll sail off the edge IF the earth is flat." There is no way that an MLB team will sell for appraised value anymore than you would pay sticker price for a 2002 Nissan Maxima. In the current economy with the current labor problems etc. people are not going to pay anywhere close to $350M for a mid market MLB franchise.
Thats your point?? Well, it proves my point that despite these costs, other teams spend more than the Astros.
Most of the clubs that outspend the Astros are larger market clubs. The mid market clubs that outspend the Astros are heavily debt leveraged (Arizona) or are dumping payroll as fast as they can (Cleveland, Florida). This is not a problem unique to the Astros, even though some people here think it is. If MLB teams weren't losing money why would they risk a lengthy players strike which would result in HUGE losses (no revenue but still have to pay front office/managerial salaries and stadium lease payments)? A little bit of business sense is needed here.
Well, it proves my point that despite these costs, other teams spend more than the Astros. What teams that have similar revenues/expenses to the Astros are spending substantially more? And what kind of financial situation are those teams in? I would assume you don't expect McLane to take bigger losses than all the other owners, so I'm ignoring the teams with substantially higher revenue streams (NYY, NYM, LA, BOS, ATL, CHC).
So are the Giants' owners cheapskates that need to sell their team and get out of the game if they spend $15 million more but take in $17 million more in revenues than the Astros? As for Toronto, even Forbes estimates their operating losses before taxes, interest and depreciation at over $20 million for 2001. And I'm not sure they're the model that should be followed any more than the example of the Rangers. They're spending money to get worse results than the Astros. They appear to be closer to the DBacks example, though because their ownership is a large corporation, they don't have the capitalization problems the DBacks have had. St. Louis is the only real comparison. They have similar revenues to the Astros, and their expenses seem to be, overall, what the Astros have before taxes, depreciation and interest. Of course, the Cards are currently gunning for a new stadium and may well be following the example of one Drayton McLane (and Wayne Huizenga and John Moores and others) who increased his payroll during his attempts to get a new stadium. But hey, maybe Bill DeWitt is the gold standard of midrange owners. Must be why he's earned so many more NL Central Championships and World Series appearances and titles during his ownership when compared to Drayton McLane's ownership over the same time period ('96 to present). I guess the best owner would be the one who spends the highest percentage of revenues as payroll. I wonder who that would be (I don't know. I'm actually asking. I guess I could figure it out, though).
Well, it's not entirely accurate because it's matching revenue numbers from 2001 with payrolls from opening day 2002 (I also listed the current owners even if they weren't the owners last year), but here it is anyway. The ranking from best to worst of the baseball owners as based on the amount spent on payroll as a percentage of overall revenues. Starting with the best: 1. Rogers Communications - Toronto Blue Jays - 84.47% 2. Jerry Colangelo - Arizona Diamondbacks - 80.96% 3. Tom Hicks - Texas Rangers - 78.58% 4. John Henry - Boston Red Sox - 71.29% 5. NewsCorp - Los Angeles Dodgers - 66.33% 6. Giles/Montgomery - Philadelphia Phillies - 61.65% 7. Major League Baseball - Montreal Expos - 61.38% 8. Bill DeWitt - St. Louis Cardinals - 60.24% 9. Walt Disney Corp - Anaheim Angels - 59.92% 10. George Steinbrenner - New York Yankees - 58.57% 11. AOL Time Warner - Atlanta Braves - 58.42% 12. Tribune Co - Chicago Cubs - 57.78% 13. Jerry Reinsdorf - Chicago White Sox - 56.49% 14. Doubleday/Wilpon - New York Mets - 56.00% 15. David Glass - Kansas City Royals - 55.60% 16. Magowan/Burns - San Francisco Giants - 55.14% 17. Carl Pohlad - Minnesota Twins - 53.63% 18. Larry Dolan - Cleveland Indians - 52.61% 19. Jeffrey Loria - Florida Marlin - 51.83% 20. Carl Lindner - Cincinnati Reds - 51.78% 21. Drayton McLane - Houston Astros - 50.76% 22. H. Yamauchi - Seattle Mariners - 48.36% 23. Mike Ilitch - Detroit Tigers - 48.29% 24. Wendy Selig-Prieb - Milwaukee Brewers - 46.56% 25. Peter Angelos - Baltimore Orioles - 45.48% 26. John Moores - San Diego Padres - 45.03% 27. Schott/Hoffman - Oakland A's - 44.09% 28. Jerry McMorris - Colorado Rockies - 44.07% 29. Kevin McClatchy - Pittsburgh Pirates - 39.19% 30. Vince Naimoli - Tampa Bay Devil Rays - 37.37% Well, doing a list this way makes Drayton look much worse - 21st out of 30. Of course, there are all sorts of things wrong with doing an analysis this way, but I put it out there and everyone can make of it what they will. For the record, revenue numbers come from Forbes and payroll numbers come from ESPN.com.
There is still the issue of the Astros having the most expensive faccilities expense of any team in the majors. How much as a % of revenue I do not know. But it could explain some of the difference.
Yeah, though looking at Forbes numbers, the Cards and Astros really do have about the same revenues and costs. Forbes has the Cards revenue at $123 million last year vs. the Astros $125 million. Forbes has the Cards with a loss around $5 million and the Astros with a operating profit at about $5 million. If there was a disparity in payrolls between the two clubs of about $10 million that would put the team's revenues and operating expenses at about the same level (and facilities costs are included in the operating expenses). So if DeWitt can and does spend $10 million more on payroll, then presumably so could McLane (factoring out such issues as debt/interest payments that Drayton makes that DeWitt does not. DeWitt has far less debt in his team. But those aren't operating expenses, and are phantom losses if you ask me). But then again, how much of that is simply bucking for a new ballyard in St. Louis? Drayton raised player payroll both to help get the new ballpark deal done and afterwards to reflect the coming new revenue structure once the ballpark was underway. Is DeWitt putting a higher payroll team on the field to help sway the ballpark debate? Is he raising payroll in anticipation of higher revenue streams a new stadium will bring once it opens? I can't answer those questions.
If McLane has a $5M profit and the Cards a $5M loss, McLane upping the payroll $10M would put him at a $5M loss. Interest expense is not a phantom loss. It is a real economic loss recognized by the Financial Accounting Standards Board (FASB). In fact the interest must be paid in real dollars. If you owned a company with a net loss after depreciation, interest, etc. you wouldn't go out and up your payroll...why should Drayton?
It's a phantom loss in that it's unneeded debt. Drayton likely carries such high debt because he makes a higher rate of return on his money than it costs him in interest. Sure, it's a legal loss and paid with real cash, but it's an expense he chooses to make because he believed he'd come out ahead on the spread. And I might operate a business at a $5 million loss, especially if that only represented .4% of my net worth or about 1.5% of the company's value. But the subject of the Cardinals being a mid-revenue team and spending more on payroll was brought-up earlier. I was simply making the point that the Cards may well be a good comparison to the Astros because of their apparently similar revenue and cost structure. But I did point out that we don't know why DeWitt is spending more or whether that even makes him a better owner (certainly his team has not done any better than the Astros in winning division titles or World Series titles). DeWitt may well be spending for the ballpark knowing that the increased revenues from that new ballpark will make up for his losses now. In a new ballpark, he may not increase payroll at all, or at least not by as large an amount as to make a 1:1 increase vs. the increase in revenues. I think Drayton is a good owner. The fact that he wants to spend within the means of the team is not something that should be frowned upon, in my opinion. I was just stating some information to help give a clearer picture of all the numbers and situations we're dealing with both in response to you (your assertion that facilities costs weren't part of the table, which is true. Non-player payroll expenses were not included) and to others (the challenge that some mid-revenue teams spent more on payroll than the Astros). But I wasn't making a judgment call saying he should spend more. I was just making the comparison.
I understand your point and was trying to add to the analysis. I did not mean to come off as argumentative. What I think is interesting here is that the MLBPA is ready to make concessions after realizing that the financial problems that teams are facing is REAL. Yet there are some here who refuse to acknowledge that fact.
refman.. yes that is what i was wondering... i have no idea if there is any chance of getting what they say it's worth.... but i'd think if he does sale the team he'd at least come out with a profit .. not a loss...
What I think is interesting here is that the MLBPA is ready to make concessions after realizing that the financial problems that teams are facing is REAL. What have you heard on this? The most recent quotes I've heard from the MLBPA is that they won't accept a cap or luxury tax, and they are willing to up revenue sharing from 20% to 22.5% (owners want 50%). As far as I know, those are the three most effective ways to acheive competitive balance and the MLBPA won't budge on any of the three. Revenue sharing, oddly enough, doesn't even directly impact the players. All it is is a shift of money from one owner to another. The players argue that if NYY had to give more money away, they wouldn't spend as much. They seem to ignore that the team that is getting the money can then spend it and create more potential bidders for any given player. I say do tons of revenue sharing combined with a salary floor.
Different kind of profit and loss, though (capital gain vs. operating profit/loss). I mean, I could go out and buy a Porsche tomorrow (increase my spending) and tell myself that when I sell my house down the road, I'll come out ahead. But I don't think that's a responsible way of approaching my personal finances.
By the way, for anyone interested, here is a good summary of the MLB vs. MLBPA labor dispute, the issues, and where the parties stand: http://sportsillustrated.cnn.com/baseball/2002/special/owners_players/
They have. Pursuant to the collective bargaining agreement, the owners have turned over their financial information to the players union. I was watching SportsCenter over the weekend and interestingly enough they were interviewing various player reps. A few of them actually said that the players understand the problems and that they are prepared to make concessions.
I was watching SportsCenter over the weekend and interestingly enough they were interviewing various player reps. A few of them actually said that the players understand the problems and that they are prepared to make concessions. I hope you're right. The players -- especially the older ones like Glavine and Shilling -- and the player reps seem to have more common sense then the union itself. I hope the common-sense people prevail.
