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Sunday, February 16, 2014

Royals’ ‘break-even’ claim is plausible, but front office can still do more

I think the man that ruthlessly cut costs at Wal-Mart and over his first decade of ownership of the Royals deserves the benefit of the doubt.

The first thing to talk about here is the new national television contracts that kick in this season. You hear a lot about this $25 million figure. That’s the number being thrown around locally and nationally — we’ve used it here — as the per-team increase from last year to this year. But some phone calls around baseball show the number to be misleading.

Most relevantly, there is no $25 million-per-team jump in revenues from 2013 to 2014. That figure (which doesn’t account for a share that MLB takes) comes from the average of the new contract compared to the average of the old contract. But the old deal increased every year, just like the new deal is scheduled to. The highest total of the old contract was last year, and the lowest total of the new contract is this year, so the raw increase from last year to this year is thought to be more like $5 million to $10 million, before MLB takes its share….

“Ninety million is a very big number for a franchise like the Royals,” Badenhausen says. “They’re spending money. They’re out of their days of the $30 million payroll. If you told Royals fans four years ago they’d be closing in on a $100 million payroll, I think they would’ve taken it.”...

Glass may very well lose money this year, but an owner more focused on taking advantage of this opportunity and less on a potential one-year loss would be willing to extend further beyond break-even. Then again, an owner solely focused on profit would keep the payroll below that break-even point.

Glass is operating, in other words, like a C student.


RoyalsRetro (AG#1F) Posted: February 16, 2014 at 12:28 PM | 6 comment(s) Login to Bookmark
  Tags: david glass, new tv contract, royals

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   1. puck Posted: February 16, 2014 at 04:36 PM (#4657773)
This sounds a lot like the Rockies' story. Plus the Rockies added they needed to use some of the tv money to pay down MLB loans, and some of it to build a RF party deck.
   2. ptodd Posted: February 17, 2014 at 01:46 AM (#4657900)
Taking into account revenue sharing the Raoyals seem to be spending about 31.7% of their own revenue on payroll (from bloomberg and Cotts), at least last year. That's well below the MLB average of 47%. This year they have increased payroll less than 10 million, or about the amount of the new national TV money. So they look to still be around 35%
   3. JE (Jason) Posted: February 17, 2014 at 09:30 AM (#4657942)
To paraphrase Henny Youngman, spend it on what?

Trying to extend James Shields is one thing, throwing money and years at Jason Vargas (hello, Paul Maholm!) is quite another.
   4. You Know Nothing JT Snow (YR) Posted: February 17, 2014 at 09:47 AM (#4657954)
To paraphrase Henny Youngman, spend it on what?

I have my suspicions.
   5. Topher Posted: February 17, 2014 at 12:20 PM (#4658040)
@2 I'm honestly asking ... Does the 31.7% compared to 47% mean all that much? I would assume that non-player spending by the Royals is mostly on par with other teams. Maybe the Dodgers spend a bit more at the Ritz-Carlton compared to the Royals staying at the Hilton. But in general I would think that most of the administrative costs are pretty similar. And since the Royals' revenues are smaller than most teams, they would have to devote a larger share to the "fixed costs" of running a team.

(That isn't to say I buy into the article's belief that there is a possibility that Glass loses money this season.)
   6. Bitter Mouse, Space Tyrant Posted: February 17, 2014 at 01:04 PM (#4658057)
There is no chance any MLB team is really losing money (ignoring various accounting BS). To think otherwise is silly. In fact I wonder when it was the last team actually lost money was.

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