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MLB financial analysis by Forbes magazine

Discussion in 'Houston Astros' started by Buck Turgidson, Apr 2, 2002.

  1. Buck Turgidson

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    Forbes (you may have to register-for free-on the site to view the links) did their annual analysis of MLB's finances for last year, and (shockingly!!!) Bud Selig says they're full of you-know-what. He says this, of course, despite the fact that the Forbes analysis was done using the figures provided by MLB to Congress during Bud's testimony.

    http://www.forbes.com/2002/04/01/0401baseball.html

    Here's his ridiculous response:

    http://espn.go.com/mlb/news/2002/0402/1362237.html

    Concerning the 'Stros, I'd like everyone who bashed Drayton in the "McClane won't spend enough to be a champion" thread to take a look at the numbers for Houston:

    http://www.forbes.com/forbes/2002/0415/092add2.html

    Drayton claimed a $4M loss, while Forbes says the club made $6M+. Not exactly the windfall of $$$ that many claimed he was getting. As was stated in that thread, Drayton raised payroll significantly once Astros Field was approved, & posted significant net losses prior to the move to the new stadium.

    Also, how in the world does anyone expect a team like the Astros, who receive $16.2M (a middle of the pack amount) from local broadcast/cable/radio rights, to compete payroll-wise w/ teams that receive almost FOUR TIMES that amount? Until there is meaningful revenue-sharing amongst the MLB franchises, this payroll disparity is only going to get worse.

    My solution:

    1. Full sharing of all local broadcast revenue (but not local gate receipts/concessions)
    2. Soft salary cap of approx. $90M, with payroll tax of 80-100% on amounts over
    3. Hard salary floor of approx $30M
    4. Expand rosters to 26 men
    5. End the ridiculous contraction talk.

    Everyone wins, except the big-market owners, so this will never happen. Also, the Players Assoc. will strike (& kill baseball as a viable pro sport) before they accept any kind of salary cap.
     
  2. kidrock8

    kidrock8 Member

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    I personally don't mind contraction.

    I won't give a fu(k if Minnesota and Montreal are no longer anchors bringing down a sinking ship.

    As for McLane, all you need to know is that he slashed payroll before entering the 2000 season at Enron Field (I won't say Astros Field just to spite Drayton).

    We didn't build Enron so that McLane could slash payroll.
     
  3. giddyup

    giddyup Contributing Member

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    Why don't they pursue Strohs Beer as a sponsor, then when they say "Strohs Field" everyone will be happy!
     
  4. bobrek

    bobrek Politics belong in the D & D

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    Why do you say Minnesota is an anchor? They made money last year and had a good season.
     
  5. mrpaige

    mrpaige Contributing Member

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    I assume because they are a consistent taker in what revenue sharing there is.

    Though their stadium deal is moving again and may actually get done this time, possibly taking them out of the taker category.
     
  6. Buck Turgidson

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    You are wrong, wrong, wrong. You may not like the 'Stros owner, that's your prerogative, but please at least have some factual basis to your argument. The Astros payroll declined, by a whopping $1.6M or so, from approx $55.5M to $53.9M after the '99 season. Remember that the 'Stros payroll doubled from '96 to '99 after the stadium referrendum passed.

    As far as contraction in Minnesota, this was clearly an extortionary plot to get the voters to approve a new stadium, nothing more. Montreal needs to relocate, preferably to D.C. (despite what Angelos thinks, he has no claim to that market).

    Selig's tenure as Commish has been a joke, this article pretty much sums up my feelings:

    March Madness: Has Selig Gone Too Far This Time?

    by Doug Pappas
    www.baseballprospectus.com

    --------------------------------------------------------------------------------

    The second week of March may have marked a permanent change in Commissioner Bud Selig's status. He's no longer simply an incompetent, lying, permanently conflicted embarrassment to an office once held by judges and senators. Unless the owners who hired him wake up in time to stop him, Czar Bud will have become an active threat to their own wallets and a walking advertisement for the repeal of MLB's anti-trust exemption.

    Give Selig credit for planning his coup. Last November 27, just days after announcing that under his leadership MLB had purportedly lost $519 million in 2001, Selig called a meeting for the sole purpose of giving himself a raise and a three-year contract extension. He forced out MLB President Paul Beeston, widely seen as a moderate on labor issues, replacing Beeston with his own personal lawyer. Selig also broadened the owners' traditional gag rule on labor issues, enforceable through fines of up to $1 million per incident, to bar clubs from discussing labor matters with one another.

    Think about that for a minute. In a multi-billion-dollar industry whose largest investors include Disney, News Corp., AOL Time Warner, and the Tribune Company, a car dealer from Milwaukee not only dictates labor policy, but forbids his employers from discussing the wisdom of his chosen course among themselves. The Iraqi Parliament has more freedom.

    Now, with two mind-boggling decisions, Selig has made clear just how much he intends to abuse his absolute authority.

    One of these decisions is tucked into the details of the owners' revenue-sharing proposal. In 2001, 20% revenue sharing resulted in the transfer of $166 million from high-revenue to low-revenue clubs. The owners now want 50% revenue sharing, which they say would transfer $253 million, based on 2001 revenue numbers. That doesn't add up: if 20% of revenues is $166 million, 50% should equal $415 million. Some of the difference may be attributable to a change in the revenue-sharing formula which would give proportionately more to medium-revenue clubs, but for most of it, there's a more ominous explanation.

    As this article on MLB.com explains, the owners' formula would withhold $100 million of revenue-sharing receipts from the normal distribution. This money would be deposited in what the article describes as "a $100 million discretionary fund at Commissioner Bud Selig's disposal."

    That's right: a $100 million slush fund for Selig to use as he pleases. To put this number in perspective, it represents 3.5% of MLB's total locally-generated revenue in 2001. It's more than the world champion Diamondbacks' local revenue from the regular season; as much as the Astros generated in their new To Be Renamed stadium; and more than the total revenues of 11 clubs. All for Bud to share with his supporters and withhold from anyone who stands in his way. Can teams like the Yankees, Mets, Dodgers, Mariners, and Rangers really be stupid enough to let this happen?

    Incredibly, this wasn't even Selig's most outrageous act of the week. That came when he announced that he planned to enforce MLB's long-ignored 40% debt-to-value limit as of June, using arbitrary, economically illiterate definitions of "debt" and "value" that will permanently cripple at least two clubs and damage a dozen more for years to come.

    Selig arbitrarily decreed that all clubs will be valued at twice their 2001 revenue, less the amount of their revenue sharing payments. As Joe Sheehan has previously noted, recent franchise sales suggest that this estimate is far too low. As ESPN's Jayson Stark observed, subtracting the revenue-sharing payments means that the highest-revenue clubs will be "valued" at much less than twice their value. Clubs have the right to appeal this arbitrary valuation, but only to an appraiser selected by Commissioner Selig.

    On the other side of the equation, a club's debt clearly includes money borrowed by the owner to finance his purchase of the club or to cover operating losses. It also includes the present value of deferred payments in a player's contract, a special problem for the Arizona Diamondbacks. For services rendered from 1999 through 2002, the Snakes will owe Jay Bell, Steve Finley, Randy Johnson, Todd Stottlemyre, and Matt Williams alone more than $70 million in deferred payments, plus interest--money which will have to be paid after they retire, in addition to the salaries due everyone then on the team. These categories of debt aren't controversial.

    But Selig has expanded the definition of "debt" to include the present value of all long-term contracts. For example, when Alex Rodriguez signed with the Rangers before the 2001 season, the present value of his contract was about $165 million. Under Bud's New Math, the final eight years of the contract are retroactively treated as a "debt" of more than $130 million. Because Selig's formula values the Rangers at about $261 million, A-Rod's contract alone puts the Rangers in violation of the 40% rule, and there's not a damned thing the club can do about it. Even releasing Rodriguez outright wouldn't help, since his contract is guaranteed and no one else could risk assuming that much "debt."

    Even worse, this rule penalizes clubs with the foresight to lock up their young players through their arbitration years. The A's, who in August 2000 signed Tim Hudson to a contract running through the 2004 season, just exercised his option for 2005. The $13.25 million Hudson will earn from 2003-05 is probably half of what he'd command from a series of one-year contracts, so the signing is a bargain for Oakland...yet it represents almost 25% of the Athletics' $60 million of allowable "debt." Only someone fundamentally ignorant of baseball economics could devise a scheme that uses an arbitrary debt ceiling as a weapon to force teams to pay young players more money.

    ESPN estimates that, based on Forbes' valuations for the 2001 season, a dozen teams will violate the 40% rule. This list includes Selig's own Brewers, as well as the Yankees. The Yankees make the list because while the Selig Plan treats salaries for future seasons as "debt," it ignores the future revenues available to pay those salaries. Although the Yankees are virtually guaranteed revenues of $200 million/year in perpetuity, they can't commit this money in advance without running afoul of Czar Bud's ludicrous formula. If bankers followed Selignomics, the market for home mortgages would evaporate overnight.

    What will happen to these dozen clubs whose owners woke up one day to discover that they were in violation of Selig's brand new interpretation of a long-ignored rule? This MLB.com article nonchalantly explains:

    "Sanctions against teams in violation of the 60-40 rule after the June deadline will include fines, withholding of national TV revenue and even the possibility, albeit extremely remote, of placement into trusteeship."
    On what planet? In the unlikely event that the Players Association can't persuade an arbitrator to block this rule, wouldn't you like to be a fly on the wall when Selig tells George Steinbrenner, Tom Hicks or Peter Angelos that he's cutting off their TV money or threatening to place their club into receivership? ("But...but that's anatomically impossible, Peter!")

    Even that reaction will be mild compared to the response of Mike Ilitch, Peter Magowan, and elected officials across America: Selig's formula counts stadium debt against the 40% limit. Ilitch of the Tigers and Magowan of the Giants, who borrowed nine-figure sums to build their new parks, can't possibly comply with the rule.

    That lesson won't be lost in other cities, where owners demanding new stadia will soon be explaining that while they'd love to help pay for their facilities, Commissioner Selig won't let them. Coming in the wake of the Minnesota Twins' argument that holding them to the terms of the Metrodome lease they renewed six weeks before the contraction announcement "derides the free market system, blasts the fundamental policies of free enterprise and private ownership, and assures this court that government knows best," it's apparent that MLB really does consider itself above the law: the only business entitled to millions of dollars in public subsidies with no obligation in return.

    Since the last out of the 2001 World Series, Major League Baseball has sustained a non-stop series of self-inflicted wounds. Commissioner Selig has antagonized the entire state of Minnesota, insulted the intelligence of a roomful of Congressmen, rigged the sale of the Boston Red Sox, and brazenly ignored decades-old rules against cross-ownership and conflicts of interest. But those abuses benefited his employers, the owners. Last week he may finally have gone too far.

    If the owners allow Selig's interpretation of the 40% debt limit to stand, as of June he will have the unfettered power to ruin half the franchises in Major League Baseball--franchises that until last week had no reason to suspect they were doing anything wrong. If they allow $100 million of revenue sharing money to be diverted into Selig's slush fund, the owners may as well sign over operating control of all 30 clubs to the man whose idea of marketing is to whine how "most of our clubs have no chance to win," and who ran his own club into near-bankruptcy.

    Bud Selig is a cancer on Major League Baseball. So long as he remains commissioner, MLB will grow sicker and sicker.
     
  7. deepellumrocket

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    Exactly. This post by kidrock8 was the last straw that landed him on my ignore list. He should be proud. He's the first recipient of this honor on the Clutchcity.net board.
     
  8. Aggie 99

    Aggie 99 Member

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    Did any one ever think that one reason Bud might be so insistant that Minn. be retracted is because retraction might increase the TV/Radio market for his old Brewers team.
     
  9. Buck Turgidson

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    It's 340 miles from Minneapolis to Milwaukee; he wouldn't get any extra money from them because it's too far for local broadcasts to reach. I'd think that a team owned by Bud Selig would be the LEAST favorite team of any baseball fan in Minnesota if their team got contracted.
     
  10. Dreamshake

    Dreamshake Contributing Member

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    340 miles isn't crap when your the only game in town. Don't give me that. I especially love how accordng to Forbes the Milwaukee Brewers where the single most profitable team in all of baseball. HMMMM, wonder how that happened, its not like Seligs family is still running the Brewers. OOOOPS thats right, they are. Or at least pretending to do so for Bud Selig.

    Personally, I hope to dear God that Selig ends up ruining baseball, by causing strain on all the clubs as that last article points out. Its the owners of Baseball who got themselves in this mess anyhow. Firing their legit Comminsoner and hiring one of their own to "Run" baseball. Come on, no one believed its legitimacy then, and no one does now.

    And crap on Drayton McClane. Yeah his payroll double and all, but thats only because of two primary reasons.

    1. The Stro's payroll to begin with was terrible.
    2. The Contracts of Biggio, and Bagwell almost single handidly double the Stro's payroll. Then you trow in some terrible deals like the Lima (I hated it to begin with) deal and even the Shane Reynolds deal.

    Drayton can go to hell. This team in successive years lost more talent than the Yankees put on the field. Maybe the reason the Stro's are stuck not advancing is because every year we lose essential keys to the team. Think about whats left this team the last 4-5 years.
     
  11. Buck Turgidson

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    I'm not gonna go through this again. Your argument is tired & has little basis in reality. Maybe you'd like him to sell the team back to McMullen, or maybe we can go back to the good ol' days when Ford Motor Credit Co. ran the team. Give me a freakin' break.

    http://bbs.clutchcity.net/showthread.php?s=&threadid=31013
     
  12. Buck Turgidson

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    Let me re-phrase this:

    The Astros receive $$$ from the local radio broadcasts in cities throughout Texas. So, theoretically, yes, this would increase the broadcast market for the Brewers. But, do you really think anyone in Minnesota would suddenly become fans of the team who's owner just took their home team away?
     
  13. bobrek

    bobrek Politics belong in the D & D

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    Buck

    I agree. I think the allegiance of the fans of the Twins would switch to the Cubs, Cardinals and/or Royals (for those interested in close proximity), certainly NOT the Brewers.
     
  14. Major

    Major Member

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    Drayton can go to hell. This team in successive years lost more talent than the Yankees put on the field. Maybe the reason the Stro's are stuck not advancing is because every year we lose essential keys to the team. Think about whats left this team the last 4-5 years.


    Yes, you're exactly right. We only can fund teams that win 95-100 games. But that extra 60 million would really teach us how to win 3 postseason games. :rolleyes:

    Maybe we should be asking why other teams require so much more money to win exactly 0 more games?
     
  15. bobrek

    bobrek Politics belong in the D & D

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    O.K. Let's look at who the Astros have 'lost' over the last 4-5 years (big name free agents):

    1. Kile
    2. R Johnson
    3. Alou
    4. Castilla
    5. Astacio

    I don't include Hampton on this list, because he was traded for a very good young pitcher (one of the top set up men in the major leagues) in Dotel and a CF (Cedeno) who allowed them to trade for a gold glove catcher (Ausmus). In addition, the trading of Hampton allowed the Astros to dump Derek Bell.

    Keep in mind that MacLane ponied up a lot of prorated dollars to take on the contracts of Astacio and Johnson. It was very risky to sign Astacio, especially with so many young pitchers ready to start. Johnson, simply wanted to pitch in Arizona. It would have taken a ridiculously large amount of money to sign him. In other words, if the Astros matched the D'backs offer, he still would have gone to Arizona.

    Alou is a great hitter. There is no denying that. His defense leaves a lot to be desired and he has been injury prone. I suspect if the Astros had a guarantee that Alou would be able to play 130+ games a year, they would have signed him. Taht being said, Ward has very professionally paid his dures. It's his time now.

    The only question mark I have is that they did not seem to pursue Castilla at all, because he probably would not have cost too much. That being said, the organization felt Ensberg or Truby was ready to take over.

    Also, as I have posted before the Astros have the top organization in baseball. They also have the best presence in Venezuela. THAT TAKES MONEY!

    Personally, I'd rather see a playoff caliber team of home-grown players than a mish mash of free agents. A lack of money HAS NOT prevented the Astros from winning a playoff game. It has been the lack of hitting in the playoffs.

    Think about it, the Astros have one of the most potent offensive outfields in the major leagues (3 26 year olds who have grown up with them). Their young pitchers are the envy of every organization in baseball with the possible exception of the A's. They have 2 potential Hall of famers in the infield as well as 2 highly regarded rookies. They have a gold glove catcher as well as a very good hitting backup.

    What more do you want?
     
  16. Buck Turgidson

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    D@mmit bobrek, I've warned you about gettin' all "factual" and "objective" & sh*t.

    Don't confuse the poor boys.
     
  17. Dreamshake

    Dreamshake Contributing Member

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    Major...if you consider 4 straight whitewashings in the playoffs as succesful then more power too you. Who cares how many wins you have Regular season. If you cant win one playoff series in 4 years, then obviously theres a problem. Instead of asking teams why 60 million more didnt get them any more wins, why not ask the Yanks why 60 million more won them what 4 titles in 5 tries, or why it got the D backs a title last year, or why it got the Braves in so many world series. Terrible terrible argument.

    I tire of the McLane apologists. Try to counter my points that counter yours. The only reason the Stro's payroll went up significantly was due to Bagwell, and Biggios big deals. That and the pathetically low amount it was at to begin with.

    Ausmus was an Astro to begin with. I believe traded to Detroit, so there is no victory in trading someone away and then using someone else to trade back for him.

    Lets not forget some other Astros that fell by the way side.

    Ricky Guitty (yeah he wasnt spectacular, but he was worlds ahead of Russ Johnson who was used for his ack ack smaller price tag. How successful)

    Carl Everett- Yes he was a head case in Boston, but he was solidly for a year, maybe two, the Astro's best all around player.

    Hampton- Hampy was my favorite. Hated seeing him go. I tend to believe he was so willing to leave only after the team put up big bucks to Lima (who from day one I said was the far worse of the two to give any money to).

    Astacio pitched well for the limited time he was with us. Never got a chance to prove anything.

    Alou- To me this was just dumb. No one here can tell me that D Ward is going to put up anywhere close to Alou numbers all the way down the line, and I love D Ward. Maybe only in the power department, but his outfielding will cost us. Alou's D wasn't terrible. Only after his injury was it terrible. Makes sense. Last year for most of the year he had the highest rated fielding percentage for his position. He saved two game winning home runs, which would of put us below the Cards for the year.


    Those are All star players. Not pretenders. Who all were let go only for one reason. Money. Bullsh*t that Alou was getting up there (His seasons were getting better and better up till last year) in age. Everett was let go for his potential big deal coming up.


    And Buck...talk about your sh*tty, severly onesided skewed view of this matter.. Just because the stro's used to have bad management, isnt a "factual" or "objective" reason to not expect him to do more for the team. Guess the Warriors should just suck forever because any new owner could just argue "Hey, at least Im not ------" Im mad at McLane for promising the people more, once the stadium would be buildt. Then that immediate season he capped the team with a 60 million limit. Ummmm doesnt take a rocket scientist to subtract Biggio, Bagwell, Lima's, and Reynold's deals and see what was left to assemble that 95-100 win team that got its ass handed to them 4 straight times in the playoffs.

    Another even more rediculous argument.
     
    #17 Dreamshake, Apr 3, 2002
    Last edited: Apr 3, 2002
  18. bobrek

    bobrek Politics belong in the D & D

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    Guttierez - Oh yeah. The Astros should have kept him. Check out his playoff series for the Astros in 1999 (last year with team). He was 0 for whatever. Their SS production has not been diminished because Gutirrez left.

    Everett is a head case. That is certainly taken into consideration. Again, a crummy playoff performance. Again, The astros OF has not diminished without him.

    Astacio pitched around 4-5 games for the Astros before injuring himself. It would have been a huge risk for them to sign an injured player. Also, who would he have replaced as a starter? Mlicki is the obvious choicce but the Astros are stuck with his contract through this year. He is making close to what Lima made.

    I already made my Hampton point.

    I already made my Alou point, By the way Alou has 0 At bats in the 1st two Cubs games. Why is that? Oh, that's right, he's hurt - AGAIN. It's early, but there has been a trend with him the last few years.

    You mention that these were all-stars. Perhaps I've been sleeping too long, but when did Astacio and Gutierrez make the all-star team?
     
  19. Puedlfor

    Puedlfor Contributing Member

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    Alou was only average the scond half of last year.

    Daryl Ward is playing like a beast so far this year, showing considerably improved plate discipline and power.

    Well . . . The first Ausmus trade got us Ward and Lima, the second one got rid of Meluskey and Holt. Those were good trades.

    For some reason, I'm not too sad about losing a mediocre shortstop with an inflated sense of his own worth.

    Everett has been a headcase everywhere he's been, except Houston, because he knew he had to be on his best behavior. Once ha got his big deal, he went back to being a frickin' pscycho - and Hidalgo and Lance are better.

    Hampton wouldn't talk contract, rather than lose him for nothing, they went and got something for him.

    Astacio also hurt his arm because of bad mechanics, I don't know what bizarro world your from, but you do not hive big money to a pitcher with bad mechanics.

    Old, oft-injured, bad defensively, replaceable, and wants 9 mill a year. Yes, lets bring him back.

    The Astros have a budget, they choose to spend serious money on scouting and development rather than a few extra million to spend on free agents, thats why the entirety of the team is home-grown talent - thats why they have the best farm system in the majors, thats why they have such great young pitchers. But hey, lets scrap all that to bring back Ricky Guttierrez

    BTW - as I'm writing this, Brad Ausmus hit a three run homer. Go Astros.
     
    #19 Puedlfor, Apr 3, 2002
    Last edited: Apr 3, 2002
  20. Major

    Major Member

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    I tire of the McLane apologists. Try to counter my points that counter yours.

    YOU HAVE NO POINT. You're somehow saying the team wins in the regular season but loses in the playoffs because of McLane. What would you have done if you were him? I assume you would have signed these guys?

    Lets not forget some other Astros that fell by the way side.

    Ricky Guitty (yeah he wasnt spectacular, but he was worlds ahead of Russ Johnson who was used for his ack ack smaller price tag. How successful)

    Carl Everett- Yes he was a head case in Boston, but he was solidly for a year, maybe two, the Astro's best all around player.

    Hampton- Hampy was my favorite. Hated seeing him go. I tend to believe he was so willing to leave only after the team put up big bucks to Lima (who from day one I said was the far worse of the two to give any money to).

    Astacio pitched well for the limited time he was with us. Never got a chance to prove anything.

    Alou- To me this was just dumb.


    Yeah, we definitely should have re-signed all these guys. I mean, they were with us for a combined 12 playoffs series and helped us win soooo many of them. By the way, Alou, Everett, and Guti all batted somewhere under 0.200 in the playoffs as Astros. Hampton was like 0-3.

    If you were the GM/owner, the only difference in our team would be that we'd lose more games (since we'd never discover guys like Berkman), we'd still have the same sucky postseason results, and ticket prices would skyrocket to cover the higher expenses. Brilliant plan.
     

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