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Sunday, May 17, 2020

AP: MLB Projects $640k Per Game Loss With No Fans

The New York Yankees alone would have $312 million in local losses when calculating their earnings before interest, taxes, depreciation and amortization. New York’s figure includes about $100 million toward the bonds that financed new Yankee Stadium, money that already has been paid for 2020.

The Los Angeles Dodgers were at $232 million in local losses, followed by the New York Mets at $214 million, Chicago Cubs at $199 million and Boston Red Sox at $188 million.

Detroit would have the lowest negative EBIDTA — an accounting measure used to assess profitability — at $84 million, with Baltimore at $90 million, and Pittsburgh and Tampa Bay at $91 million each. Figures exclude distributions from the central office, which projects to collect $1.34 billion in media revenue.

The figures were calculated by MLB and its clubs, and the frequently skeptical union already has requested a slew of documents from MLB.

MLB said 2019 revenue was 39% local gate and other in-park sources, followed by 25% central revenue, 22% local media, 11% sponsorship and 4% other.

Lowry Seasoning Salt Posted: May 17, 2020 at 05:14 PM | 36 comment(s) Login to Bookmark
  Tags: coronavirus, mlb, mlbpa

Reader Comments and Retorts

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   1. snapper (history's 42nd greatest monster) Posted: May 18, 2020 at 09:49 AM (#5951591)
Making less money than you thought you wouldn't isn't what "loss" means.
   2. Ron J Posted: May 18, 2020 at 09:59 AM (#5951593)
#1 Right. MLB often uses opportunity cost when they talk loss and this is a variation on the theme.
   3. David Nieporent (now, with children) Posted: May 18, 2020 at 10:22 AM (#5951598)
And of course the relevant factor is of course marginal losses, not absolute losses. In other words, things like stadium bonds are irrelevant to this discussion.
   4. Rally Posted: May 18, 2020 at 11:15 AM (#5951634)
OK, this is before depreciation, so that fake-loss tax dodge is not part of the Yankees -312 million.

If the Yankees have zero revenue, and also pay zero to the players, am I supposed to believe they are spending 312 million on the rest of operations? OK - 100 million is the stadium bonds. I would be very interested to see what they spend that 212 million on, but not holding my breath expecting an actual accounting.
   5. Jose Needs an Absurd Ukulele Concert Posted: May 18, 2020 at 11:51 AM (#5951655)
Until MLB owners open up their books to an independent audit MLBPA should tell them to shove their numbers up their ass.
   6. Jack Sommers Posted: May 18, 2020 at 11:53 AM (#5951658)
Interesting to see the Padres stuffed in there at #7 though. I wonder if they start shopping Machado's contract at a discount next year.

   7. Ziggy is done with Dominican discotheques Posted: May 18, 2020 at 12:17 PM (#5951673)
When the owners are sitting around discussing how much money to claim that they're losing, I like to think that the conversation went something like this.
   8. BillWallace Posted: May 18, 2020 at 01:15 PM (#5951695)
Yes the owners are 100% full of ####, but they know that the press will uncritically report their side and the narrative is set with the uncritical public. Every time.
   9. Barry`s_Lazy_Boy Posted: May 18, 2020 at 01:40 PM (#5951701)
No season this year.
   10. Moses Taylor, glorified meat shield Posted: May 18, 2020 at 01:48 PM (#5951703)
Tom Ricketts claimed the Cubs get 70% of their revenue from gate/etc so he said with half a season Cubs would make 15% of their planned revenue. I'll accept they'll make less, but that's complete bullshit.
   11. The Yankee Clapper Posted: May 18, 2020 at 02:14 PM (#5951710)
I find it difficult to believe that the most popular team in the largest TV market will be the big loser if the games are only available on TV & streaming.
   12. RoyalsRetro (AG#1F) Posted: May 18, 2020 at 02:31 PM (#5951718)
MLB headed into the season projecting $9.967 billion in revenue, including $7.548 billion at the local level, according to the presentation.

Expenses totaled $10.234 billion: $4.366 billion for major league player compensation, $198 million for pensions and benefits, $537 million to sign amateurs, $4.73 billion in local expenses and $403 million for the central office.


So they were already projecting losses BEFORE the pandemic? I call BS.
   13. Fernigal McGunnigle Posted: May 18, 2020 at 02:35 PM (#5951721)
Tom Ricketts claimed the Cubs get 70% of their revenue from gate/etc so he said with half a season Cubs would make 15% of their planned revenue. I'll accept they'll make less, but that's complete bullshit.
Didn't the Cubs pioneer shifting as much revenue away from the baseball team and onto other corporate entities as possible? IOW, it's quite possible that Chicago Cubs make 70% of their revenue on tickets/concessions/whatever. Of course that says nothing about how much money Ricketts Family Holdings, LLC (or whatever its called) pulls in.
   14. Greg Pope Posted: May 18, 2020 at 02:37 PM (#5951722)
Tom Ricketts claimed the Cubs get 70% of their revenue from gate/etc so he said with half a season Cubs would make 15% of their planned revenue. I'll accept they'll make less, but that's complete bullshit.

Yeah, there's no way. The Cubs did start their own network this year. Is it possible that Ricketts is not counting any TV revenue? Take last year's TV revenue from Comcast and just subtract it all without adding in anything for Marquee?
   15. Buck Coats Posted: May 18, 2020 at 02:42 PM (#5951726)
What the heck is the "$4.73 billion in local expenses"?
   16. RoyalsRetro (AG#1F) Posted: May 18, 2020 at 02:46 PM (#5951730)
Rob Mains at BPro picks the presentation apart

Great point here:

MLB is wants to renegotiate with the players because of empty stadiums. They had projected local revenues of $6.08 billion. Of that, $2.3 billion was going to be local media, so they were expecting $3.78 billion of other local revenue, primarily from fans going to games. That $3.78 billion is now projected to fall to $314 million. But the March deal, with prorated salaries, implied a drop to $1.91 billion in the event of an 82-game season, and MLB was OK with that and the other reductions to revenues (and the bottom line). Now they’re saying that empty ballparks are a game-changer. Really? Compared to the Arizona/Florida plan, with fans attending games in spring training facilities, when they were floated? What would local revenues havebeen under those circumstances? Half of what MLB had budgeted for a normal 2020 season in MLB parks? A quarter? Less? How much worse is MLB saying an 82-game stadium played in front of nobody will be compared to games in spring training facilities? A few hundred million?

   17. The Yankee Clapper Posted: May 18, 2020 at 03:05 PM (#5951739)
Expenses totaled $10.234 billion . . .
Keep in mind that those ‘expenses’ likely include a fat CEO salary for the owner, as well as generous compensation for any semi-employable relatives, not to mention potentially picking up some significant personal expenses.
   18. RoyalsRetro (AG#1F) Posted: May 18, 2020 at 03:13 PM (#5951744)

What the heck is the "$4.73 billion in local expenses"?


I am guessing here, but probably non-player personnel, cost of operating the stadium, travel, minor league compensation, basically most of the stuff you pay for that is not MLB payroll.

Oh, and a fat CEO salary for the owner, as well as generous compensation for any semi-employable relatives, not to mention potentially picking up some significant personal expenses.
   19. Moses Taylor, glorified meat shield Posted: May 18, 2020 at 03:36 PM (#5951753)
Yeah, there's no way. The Cubs did start their own network this year. Is it possible that Ricketts is not counting any TV revenue? Take last year's TV revenue from Comcast and just subtract it all without adding in anything for Marquee?

They're definitely not counting TV revenue, among other things, and that's assuming the overall MLB estimates in the quoted excerpt in the intro is right (and I'm sure that's exaggerated). Considering how they'd chosen to completely tie the purse strings shut the last few offseasons, they're absolutely going to use this as an excuse to dump everyone this coming offseason and rebuild again.
   20. Zach Posted: May 18, 2020 at 08:05 PM (#5951850)
From the other thread:

Some back of the envelope math...

Say total revenues are $10B, with player salaries $5B, fixed nonlabor expenses of $4.5B, and $0.5B (5%) profit.

Tickets / concessions are ~40% of revenue, so call it $4B, with $6B from broadcasts.

Send tickets to 0 and cut broadcasts in half to get $3B in revenue. Cut salaries in half to get $2.5B and add to fixed nonlabor expenses to get $7B. $7B - $3B = $4B loss.

Send tickets and broadcasts to zero, and salaries to zero as well. Loss now equals fixed nonlabor expenses, for a $4.5B loss.

Which is more or less what Manfred is saying.
   21. BillWallace Posted: May 18, 2020 at 09:41 PM (#5951871)
Which is more or less what Manfred is saying.


This may be true but:

1) This still presents running games as positive value for the owners, as the two moving variables are broadcast$ which is greater than player salary$.
2) This takes at face value that $10B is the total revenue, which is almost certainly not true.
3) those nonlabor expenses are certainly not all fixed. A big portion of that are gameday costs and other wage labor that is variable with games played. This would change the calculation on whether it's better for the owners to play vs not-play, but it does change the bottom line in both scenarios.
   22. RoyalsRetro (AG#1F) Posted: May 18, 2020 at 10:18 PM (#5951883)
Also:

(1) They are adding post-season games this year, which will add additional revenues.
(2) They are allowed to sell local streaming rights this year for the first time, which will add revenues (particularly with a more captive audience)
(3) They still own a 15 percent stake in BAMTech (which is used for Disney Plus)
(4) They likely won't have minor league costs this year
   23. Walt Davis Posted: May 19, 2020 at 01:13 AM (#5951903)
Didn't the Cubs pioneer shifting as much revenue away from the baseball team and onto other corporate entities as possible?

Yes, probably and ... well, leave it there. Back in the Trib days, they of course owned both the Cubs and WGN. In the early part of that era, the Cubs didn't need to share their cable TV revenue so I suppose the Trib put that revenue wherever suited them. Then MLB and other teams started griping that the Cubs, Braves, etc. were stealing viewers without sharing any cable revenue so MLB started requiring that. WGN held out arguing that they only charged local advertising rates -- which presumably was true for Empire Carpets but if they were charging Bud, Union 76 and whichever car company only Chicago-area rates, they were fools. (It's quite possible Trib financial management was full of fools but let's give them the benefit of the doubt.) Anyway, the Trib/Cubs/WGN didn't win that argument at which point it behooved the Trib to hide money on the WGN side. If memory serves, at one point WGN was paying more for something like 40 White Sox games a year than they were for all of the non-network/RSN Cubs games (musta been about 60-80).
   24. Walt Davis Posted: May 19, 2020 at 01:20 AM (#5951905)
$403 million for the central office

Now that's the one that gets me. If we are to believe MLB, an average MLB team generates revenue of about $350 M and spends $350-400 ... so the league office costs as much to run as an average MLB team when said average MLB team is spending $150 M on player salaries? Just how many people work in the league office and what are the normal schlubs paid? Teams are paying $13.5 M annually to run the league office? That's Craig Kimbrel money! It's probably half the Marlins' payroll.
   25. Lowry Seasoning Salt Posted: May 19, 2020 at 01:31 AM (#5951906)
$403 million for the central office


Now that's the one that gets me. If we are to believe MLB, an average MLB team generates revenue of about $350 M and spends $350-400 ... so the league office costs as much to run as an average MLB team when said average MLB team is spending $150 M on player salaries? Just how many people work in the league office and what are the normal schlubs paid? Teams are paying $13.5 M annually to run the league office? That's Craig Kimbrel money! It's probably half the Marlins' payroll.


The only thing I can conjure is that figure includes the $15-ish million per team that goes toward player pensions (as in, the money is coming form the teams but goes to the central office which then gets to count it as an expense).

Edit: Re-read, and that's not the case.
   26. RoyalsRetro (AG#1F) Posted: May 19, 2020 at 10:23 AM (#5951956)
Clubs are over-leveraged.



Coming off a season of record revenues, the league forecast a grim economic picture even before the pandemic struck, initially projecting a net cash loss of $95 million in 2020. Another section of the document says team debt will increase from $5.2 billion in 2019 to $7.3 billion, stating, “the inability of most clubs to comply with the debt service rule shows the magnitude of the financial distress caused by the crisis.”
Ken Rosenthal
   27. Moses Taylor, glorified meat shield Posted: May 19, 2020 at 11:18 AM (#5951980)
That's one of those things that isn't a real problem unless it benefits the owners to be a real problem.
   28. Rally Posted: May 19, 2020 at 02:02 PM (#5952015)
Is this debt that is used by ownership groups to purchase the teams? I suppose all the private equity groups that buy into teams are using other peoples money - it's what they do.

Or is this some weird definition of debt - like calling the value of all future player contracts debt? I know MLB has made rules up about that before.
   29. RoyalsRetro (AG#1F) Posted: May 19, 2020 at 02:08 PM (#5952020)
I believe it is debt to purchase the club and debt for stadium improvements/builds.
   30. RoyalsRetro (AG#1F) Posted: May 19, 2020 at 02:17 PM (#5952024)
@JonHeyman

MLB hasn’t yet made new offer to players but has painted bleak economic picture for season w/o fans at games. MLB has suggested hypothetically they’d lose $1.5B plus (1.5-2B) even if 82 games were played for free (no player pay). That’s not happening but union is skeptical of #s


How????
   31. base ball chick Posted: May 19, 2020 at 02:53 PM (#5952034)
the owners have been lying and lying for so freaking long about losing money that nothing they say about money is believeable. what is that old line said by one bytchy female about another bytchy female - every word she says is a lie including "and" and "the"
   32. Walt Davis Posted: May 19, 2020 at 06:48 PM (#5952126)
#26/28: Isn't that just the old, rather arbitrary, debt/EBITDA ratio that MLB created to keep team payrolls in line. They've always enforced that sporadically, generally only pulling it out when they decide to cry poor.

But sure, almost every business in the world has huge revenue drops right now ... that's the sort of thing that setting revenue records almost every year for 20 years is supposed to protect you against. Even if owners aren't going to make a profit this year (awaiting evidence), that's no reason for players not to get their fare share. Owners profited mightily in the past, now it's time for them to eat some short-term losses if necessary.
   33. jmurph Posted: May 20, 2020 at 09:31 AM (#5952230)
How????

See snapper's comment, #1. And then if someone could explain this to all the credulous, sycophantic financial reporters, the world would be a better place.
   34. Ron J Posted: May 20, 2020 at 09:47 AM (#5952233)
#31 Although I am certain that cries of financial woe go back to under the table payments to "amateurs" before Cincy became openly professional, here's the earliest I can find on the record:

Professional baseball is on the wane. Salaries must come down or the interest of the public must be increased in some way. If one or the other does not happen, bankruptcy stares every team in the face.

Albert Spalding, 1881
   35. Swoboda is freedom Posted: May 20, 2020 at 09:49 AM (#5952235)
MLB central costs must include the MLB network.

Have the also considered that if they don't have a baseball season, it hurt their future. No season and people get used to not watching it.
   36. Ziggy is done with Dominican discotheques Posted: May 20, 2020 at 11:35 AM (#5952270)
But I think that I'm confused about a fundamental point here. The players have contracts. There's a clause in those contracts that allows the commish to suspend them if something like a global pandemic necessitates cancelling the season. But if they're talking about playing without fans, then they're talking about playing, which means that they're talking about not cancelling the season, that is, not invoking the emergency clause. And if the commish isn't invoking the emergency clause, then the players are due everything that they're promised in their contracts. That might mean teams losing money, but that's the risk that you take when you sign a contract. Is what's going on that Manfred is threatening to continue to invoke the emergency provision in the contracts unless the players agree to a salary cut? If so, then it sure sounds like the emergency situation no longer necessitates cancelling the season, and that this is the sort of thing that the players should sue over.

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