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Wednesday, August 29, 2012

Rany on the Royals: Money Comes In. Excuses Go Out.

Maybe now the Royals can pursue high priced free agents like Jeff Francouer.

Earlier today, it was announced that ESPN had signed a new eight-year rights contract with Major League Baseball. The contract gives ESPN the same things they already had – the rights to broadcast Sunday Night Baseball, games on Mondays and Wednesdays and occasional special days – but it gives MLB a lot more of what they were already getting. ESPN will be paying MLB $700 million a year, twice what they paid ($350 million a year) in the current contract, which expires at the end of next season. Do the math, and that’s nearly $12 million per team in extra cash per year.

And that’s just for ESPN’s current contract, which doesn’t even include any playoff games (though I believe the new contract includes one of the Coin Flip Games between the two wild-card teams). The contracts for Fox and TBS are also up for negotiation, and NBC Sports is desperate to make a splash to add some actual game content to the fledgling network. Add it up, and there’s good reason to think that in 2014, every team in baseball will be earning $30 million a year above and beyond what they’re already making – just from their national TV contract. This is margin-free cash – same product, same expenses, vastly increased revenue….

Frankly, I’m being charitable by saying the Royals can afford an $80 million payroll. If they could afford a payroll between $70 and $75 million in 2009 and 2010 without losing money – and if they had lost money, trust me, we’d have heard about it – their breakeven number by 2014 has to be at least $90 million, and probably around $100 million. Remember, not only are the Royals’ share of national revenues going up by somewhere around $30 million, but their player development costs have dropped by almost $10 million. That’s not their fault – that’s a provision of the new CBA, which limited the Royals to around $9 million in amateur spending this year ($6.1 million in the draft, $2.9 million in international signings). Last year, the Royals spent close to $19 million - $14 million on four players alone (Bubba Starling, Bryan Brickhouse, Elier Hernandez, and Adalberto Mondesi).

RoyalsRetro (AG#1F) Posted: August 29, 2012 at 02:23 PM | 12 comment(s) Login to Bookmark
  Tags: cheap owners, david glass, espn, media, revenue sharing, royals

Reader Comments and Retorts

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Statements posted here are those of our readers and do not represent the BaseballThinkFactory. Names are provided by the poster and are not verified. We ask that posters follow our submission policy. Please report any inappropriate comments.

   1. JE (Jason Epstein) Posted: August 29, 2012 at 04:48 PM (#4221635)
Test.

EDIT: Hmmm, is anyone having difficulty posting a comment at AG's other submission, Sherman's A-Rod column?
   2. Walt Davis Posted: August 29, 2012 at 05:32 PM (#4221689)
Of course if everybody's revenue is going up $30 M then everybody has up to another $30 M to spend on payroll and this doesn't necessarily help the Royals' competitive standing. I suppose with the cap limiting the Yanks and Sox, at least temporarily, it moves the Royals substantially closer to them but not necessarily any closer to the White Sox and Tigers.
   3. snapper (history's 42nd greatest monster) Posted: August 29, 2012 at 05:49 PM (#4221709)
Of course if everybody's revenue is going up $30 M then everybody has up to another $30 M to spend on payroll and this doesn't necessarily help the Royals' competitive standing.

I would think there's a declining marginal value of extra payroll. After all there are only so many roster and lineup spots, and so many FAs available. e.g. you can't sign really good players to be on the bench, they won't do it.

The value of going from $70M to $100M in payroll is probably much higher than going from $170M to $200M, or $200M to $230M, even with the luxury tax.
   4. Walt Davis Posted: August 29, 2012 at 05:52 PM (#4221714)
EDIT: Hmmm, is anyone having difficulty posting a comment at AG's other submission, Sherman's A-Rod column?

I am and it's really annoying because I want to post this joke! So I'll do it here ...

How about ... Greece to the Dodgers? Sure the economy is on the rocks and they've already got Tommy LaSorda playing the position of ancient Meditteranean country but the EU is desperate to unload the underperforming Hellenic former star so the Dodgers wouldn't have to give up much. Jon Heyman reports that Greece has already passed through waivers so there's nothing holding up the deal from that end. Sure, the Dodgers would be taking a risk as Greece's wOBL is currently at 1.239 but they are only three years removed from posting a 139 GDP+.
   5. Olaf Posted: August 29, 2012 at 07:46 PM (#4221788)
Would love to give you the rim shot you so clearly desire, but I had to go take a leak before you got around to finishing the joke...
   6. The Yankee Clapper Posted: August 29, 2012 at 08:46 PM (#4221819)
With the $$$ from ESPN, FOX & TBS, Extra Innings, MLB.TV, Internet Radio, local TV & radio, merchandise & licensing, stadium advertising and naming rights, most of the low-budget teams must be making money before they sell a single ticket. Pretty good deal.
   7. JE (Jason Epstein) Posted: August 29, 2012 at 09:25 PM (#4221842)
I am and it's really annoying because I want to post this joke! So I'll do it here ...

How about ... Greece to the Dodgers? Sure the economy is on the rocks and they've already got Tommy LaSorda playing the position of ancient Meditteranean country but the EU is desperate to unload the underperforming Hellenic former star so the Dodgers wouldn't have to give up much. Jon Heyman reports that Greece has already passed through waivers so there's nothing holding up the deal from that end. Sure, the Dodgers would be taking a risk as Greece's wOBL is currently at 1.239 but they are only three years removed from posting a 139 GDP+.

I like it!
   8. McCoy Posted: August 29, 2012 at 10:08 PM (#4221870)
+30 million just from ESPN also makes the payroll tax sting less.
   9. Walt Davis Posted: August 29, 2012 at 10:56 PM (#4221899)
The value of going from $70M to $100M in payroll is probably much higher than going from $170M to $200M, or $200M to $230M, even with the luxury tax.

Yeah, but those at the top are Yanks and Red Sox. How much does it help the Royals if this also means that the White Sox move from $100 to $130 and the Tigers from $120 to $150. A rising tide lifts all boats and that still leaves the Royals below the water line.

Anyway, I'm sure there is a bigger marginal effect at lower payroll levels but it is likely a marginal effect. The Royals were a $70 M payroll in a world where the median was about $85 and the average about $100 (quick guesstimate). Now they'll be a $90-100 M payroll in a world where the median will be about $105-110 and average about $120. It helps but it's not going to be life-changing.

As I put this together with some of our recent discussions about how the Red Sox have nobody to spend the money on because all the good young'uns are tied up, often on pretty friendly terms ... it seems like the agents/players may have really misplayed this. The superstars who would be driving up salaries in response to all this extra revenue are already locked up for the next 4 years or so. It should be great news for Swisher but McCutchen's deal looks positively obscene now. The profits for the owners are about to go through the roof I think and rather little of this extra revenue is going to the players.

Would love to give you the rim shot you so clearly desire, but I had to go take a leak before you got around to finishing the joke...

Dude, my entire life is a joke that's been running for 50 years. If you've got no attention span, I just ain't your kinda comic.
   10. snapper (history's 42nd greatest monster) Posted: August 29, 2012 at 11:04 PM (#4221906)
Yeah, but those at the top are Yanks and Red Sox. How much does it help the Royals if this also means that the White Sox move from $100 to $130 and the Tigers from $120 to $150. A rising tide lifts all boats and that still leaves the Royals below the water line.

It still should help the Royals more. The first thing you spend money on when you get a decent payroll is looking up you pre-arb/arb stars at a discount. That is an incredibly good use of money. The White Sox and Tigers already make that expenditure.
   11. Petunia inquires about ponies Posted: August 30, 2012 at 12:44 AM (#4221975)
How much does it help the Royals if this also means that the White Sox move from $100 to $130 and the Tigers from $120 to $150. A rising tide lifts all boats and that still leaves the Royals below the water line.

All true but what's forgotten in the discussion here so far, and what I think Rany is railing against, is that that whole discussion is academic, because in all likelihood the Royals are not going to raise their payroll to $100m. Hence 'money comes in, excuses go out'.
   12. Walt Davis Posted: August 30, 2012 at 01:55 AM (#4221996)
It still should help the Royals more.

Yeah, probably. But I'm saying the extra $30 M helps the Royals by $30 M while it only helps the Tigers by $20-25 M ... doesn't close the gap very much. It's not like the Royals go up by $30 M and everybody else stays the same. I'm just saying this $30 M does not make the Royals _substantially_ more competitive than they were because everybody has $30 M more. So as long as he gives me my cut, Glass might as well pocket it.

The first thing you spend money on when you get a decent payroll is looking up you pre-arb/arb stars at a discount. That is an incredibly good use of money. The White Sox and Tigers already make that expenditure.

This is a good point but the Royals have already done this -- Gordon, Perez, Butler, Escobar are already tied up. They might want to add Moose Tacos and a couple of young relievers to that list, probably want to wait on Hosmer. But these guys are generally so young (and so cheap) that they won't be costing anything for another 2-3 years so there aren't any young'uns for them to spend this $30 M on until then.

And, as it turns out, in this particular case the Tigers are perfectly positioned to use their money as you describe -- Avila, Jackson and Fister (and Boesch) are first-time arb-eligible this year and haven't been bought out yet. Even if they don't buy them out -- including all their arb-eligibiles, the Tigers have $45 M coming off the books. My guesstimate is that this $30 M should pretty much ocver their arb-eligible bill for next year, giving the Tigers the full $45 M to play with in the FA market.

The White Sox almost never have good young players so they haven't really done this. :-) I kid, a couple of the pitchers are entering their more expensive buyout years. Their main (and only) target now is Sale but he's 2 years away from arb so even if they buy him out, none of the $30 M will really be going to him anytime soon.

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