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Wednesday, February 26, 2020

Can Cleveland Afford Francisco Lindor?

I think it’s fair to say that the city of Cleveland has an image problem. I don’t know how far back this issue goes, but they’ve been late-night joke fodder for as long as I can remember. I suppose flyover country plus rust belt plus the depiction of the city and baseball team in the movie Major League adds up to a less-than-stellar perception of the city. That attitude often transfers over to the baseball club, particularly in terms of what the team can and cannot do when it comes to spending. This perception is central to the debate about whether the Cleveland baseball club can afford a massive contract extension for Francisco Lindor. However, perception isn’t always reality.

There are two principal arguments against Cleveland offering a big contract to Lindor. The first is that Cleveland is too small of a market with meager revenues, and signing Lindor would push payroll too high. The second is an offshoot of the first: If Cleveland were to sign Lindor to a huge contract, they would have their ability to compete constrained because Lindor would cost too much to keep payroll in line with typical levels. Both arguments are worth exploring.

Last season, Forbes ranked Cleveland 25th among franchises for valuation purposes at $1.15 billion. Twenty-fifth place feels pretty close to 30th, and it’s true that Cleveland’s valuation by Forbes was just $150 million higher than the last-place Marlins. It’s also true that Cleveland is closer to 18th-ranked Arizona Diamondbacks than they are to Miami. Cleveland’s market certainly isn’t the biggest in baseball, but it has close to the same number of households as Denver and is significantly ahead of places like St. Louis, Pittsburgh, Baltimore, San Diego, Cincinnati, Kansas City, and Milwaukee. It’s not just market size and valuation where Cleveland is closer to a middle-of-the-pack team than a cellar-dweller.

When it comes to attendance, Cleveland has been in the bottom third for the past three years, but again, they are closer to the middle of the pack than the bottom. For the 2018 season, Forbes estimated Cleveland’s revenues amounted to $282 million, ranking 17th in the sport. The club’s local television contract isn’t one of the richest, coming in at between $40-50 million under a deal set to expire at the end of 2022, but it isn’t among the worst, either. Plus the team received more than $200 million when they sold the television network in 2012 (when the current television contract was created). Over the last decade, Cleveland has received television money in total that resembles something more like a mid-tier-to-nearly-upper-tier market. Cleveland might “feel” like a small-market team, and their success on the field over the past few decades with mostly homegrown stars and a smartly run front office probably contributes to that feeling, but they aren’t the A’s or Rays or Marlins. They have touted their own growth to the middle and have more in common with the Rockies, Diamondbacks, Padres, and Tigers than they do to the handful of teams with significantly lower revenues.

On the one hand, Cleveland didn’t seem that bad to me the time I visited- on the other hand, it was in the off-season for baseball…..

 

QLE Posted: February 26, 2020 at 01:18 AM | 42 comment(s) Login to Bookmark
  Tags: cleveland, francisco lindor

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   1. Jefferson Manship (Dan Lee) Posted: February 26, 2020 at 10:08 AM (#5926499)
Yes, of course it can. But it won't - that's not how the organization is run.

I'm racking my brain, trying to think of the last star-quality player who re-signed with the Indians when he had a chance to go elsewhere. Travis Hafner maybe? I can't think of anyone since Pronk who was given a market offer and took it, and that was more than a decade ago.
   2. snapper (history's 42nd greatest monster) Posted: February 26, 2020 at 10:15 AM (#5926502)
Yes, of course it can. But it won't - that's not how the organization is run.

Yup, we've had this conversation many times. I case anyone missed it and believes Cle. can't actually afford him, I'll leave this:

In Major League Baseball, 48% of local revenues are subject to revenue sharing and are distributed equally among all 30 teams, with each team receiving 3.3% of the total sum generated. As a result, in 2018, each team received $118 million from this pot. Teams alsoreceive a share of national revenues, which were estimated to be $91 million per team, also in 2018.


https://www.baseball-reference.com/bullpen/Revenue_sharing
   3. Ron J Posted: February 26, 2020 at 10:24 AM (#5926505)
#1 I'd also add that moving Lindor is likely to cost more revenue than is saved in not signing him. That's what usually happens.

Now there are cash flow issues that can constrain under-funded teams. That was what was really driving the Expo salary dumps. Wasn't that there wasn't enough revenue, but they couldn't have dealt with some big payouts without making arrangements (cash calls or borrowing). The payment cycle doesn't always line up with the revenue cycle.

And yes, not hard to deal with. The Expos for instance simply didn't want to and some ownership groups have other external constraints (like bad past history making it tough to borrow)
   4. Itchy Row Posted: February 26, 2020 at 10:36 AM (#5926510)
I think it’s fair to say that the city of Cleveland has an image problem. I don’t know how far back this issue goes, but they’ve been late-night joke fodder for as long as I can remember.
Everything that goes wrong with the Indians is Arsenio's fault.
   5. Moses Taylor, glorified meat shield Posted: February 26, 2020 at 10:40 AM (#5926511)
It seems like Indians fans already have reason to be upset with current ownership before whatever they don't do with Lindor. Looks like the payroll jumped up ~$30mil after the 2016 pennant season then another $10mil going into 2018, but this year is the 2nd with a big decline and the current payroll is actually less than what it was going into 2016 (16 $96mil, 17 $124mil, 18 $135mil, 19 $120mil, 20 $91mil). That high salary was only 15th in the league, this year they're down to 25th.
   6. CFBF's Overflowing Pathos Posted: February 26, 2020 at 11:15 AM (#5926521)
I spent a summer in Cleveland back in 2006 (interning with MLB.com covering the Indians, actually). I rather liked it, to be honest. But then, no one complains about Cleveland in the summer, and I was staying in a college dorm.
   7. salvomania Posted: February 26, 2020 at 11:41 AM (#5926526)
In Major League Baseball...

So if I'm not too thick to understand that properly, each team received $209 million in 2018 from the combined local + national revenue sharing pots?

If that's true, there's no excuse for any team not to legitimately compete to keep their desirable star players.
   8. snapper (history's 42nd greatest monster) Posted: February 26, 2020 at 11:48 AM (#5926529)
So if I'm not too thick to understand that properly, each team received $209 million in 2018 from the combined local + national revenue sharing pots?

If that's true, there's no excuse for any team not to legitimately compete to keep their desirable star players.


Correct. On top of that, they get 52% of their own local revenue. So, if a team has say $50M in ticket revenue, a $50M TV contract, and $25M in concessions, that's $125M. They pay $60M into the central fund, and keep $65M.

So they net out with the $210M plus the $65M, or $275M. That's why every team can afford a $125-150M payroll, and still make money.
   9. bfan Posted: February 26, 2020 at 12:19 PM (#5926538)
I would love to see someone's take on a zero sum game, 10 team large market; 10 team middle market; and 10 team small market split (zero sum meaning, for example, 10 teams have to be in the bottom 10). You cannot just go by MSA population because many teams share an MSA with another one ( 2 chicago; 2 NYC; 2 LA; 2 SF/Oakland; 2 Baltimore/DC). I think the top 3-5 are pretty clear at the top and the bottom; how you fit the middle 20-24 teams is the challenge.
   10. snapper (history's 42nd greatest monster) Posted: February 26, 2020 at 01:33 PM (#5926561)
I would love to see someone's take on a zero sum game, 10 team large market; 10 team middle market; and 10 team small market split (zero sum meaning, for example, 10 teams have to be in the bottom 10). You cannot just go by MSA population because many teams share an MSA with another one ( 2 chicago; 2 NYC; 2 LA; 2 SF/Oakland; 2 Baltimore/DC). I think the top 3-5 are pretty clear at the top and the bottom; how you fit the middle 20-24 teams is the challenge.

Are you asking us to rank the markets?
   11. bfan Posted: February 26, 2020 at 02:19 PM (#5926573)
MLB markets ranked (population; large corporate HQs or regional HQ's; proximity to other competing markets and teams; population trends [i.e. growing cities are undercounted in 2018 estimates]). This does not include franchise recognition and media love (I think Boston and the Cubs punch over their size because of espn love and attention)
10 Large market teams:

NYY
Dodgers
Dallas
Houston
Washington Nationals
NY Mets
Toronto
LA Angels
Atlanta
Boston


10 middle

Miami
Phoenix
Cubs
White Sox
Philadelphia
Seattle
Detroit
Minneapolis
Tampa Bay
St. Louis



Bottom 10

Denver
San Diego
Baltimore
SF
Oakland
Pittsburgh
Cincinnati
Kansas City
Cleveland
Milwaukee



   12. JJ1986 Posted: February 26, 2020 at 02:31 PM (#5926576)
I think the Cubs are definitely top-10; you can't just split Chicago in 2. I'd also have San Francisco higher and TB in the bottom tier. Might swap Denver and St. Louis. Not sure how to count Oakland.
   13. bfan Posted: February 26, 2020 at 02:39 PM (#5926579)
I wondered that about the cubs.

I really think SF/Oakland punches above their weight, given size and team saturation.

Tampa Bay is very large and doesn't have pro basketball to compete.
   14. SoSH U at work Posted: February 26, 2020 at 02:42 PM (#5926581)
I think Boston and the Cubs punch over their size because of espn love and attention


Sure. That's the reason. ESPN caused it.

   15. bfan Posted: February 26, 2020 at 02:43 PM (#5926583)
Sure. That's the reason. ESPN caused it.


They may not have caused it. I believe they sustain it.
   16. SoSH U at work Posted: February 26, 2020 at 02:45 PM (#5926584)
They may not have caused it. I believe they sustain it.


It's pretty far down on the list of reasons why Chicago and Boston are major baseball markets.

   17. Karl from NY Posted: February 26, 2020 at 02:54 PM (#5926586)
The Red Sox punch over Boston's size because their market goes way beyond that MSA, it's all of New England except below Hartford.

The Mets punch under NY's size because their split of attention and revenue compared to the Yankees is nowhere near half.
   18. SoSH U at work Posted: February 26, 2020 at 02:57 PM (#5926589)
The Red Sox punch over Boston's size because their market goes way beyond that MSA, it's all of New England except below Hartford.


That's one reason, yes.
   19. Jeff Frances the Mute Posted: February 26, 2020 at 03:01 PM (#5926590)
I would love to see someone's take on a zero sum game, 10 team large market; 10 team middle market; and 10 team small market split (zero sum meaning, for example, 10 teams have to be in the bottom 10). You cannot just go by MSA population because many teams share an MSA with another one ( 2 chicago; 2 NYC; 2 LA; 2 SF/Oakland; 2 Baltimore/DC). I think the top 3-5 are pretty clear at the top and the bottom; how you fit the middle 20-24 teams is the challenge.

It seems to me that you could just use the Forbes team valuation list and get pretty close to a reasonable ranking. Or is this intended to be a thought exercise that assumes a MLB in which all teams are extracting value from their markets at an equal rate per capita?
   20. bfan Posted: February 26, 2020 at 03:08 PM (#5926594)
It seems to me that you could just use the Forbes team valuation list and get pretty close to a reasonable ranking. Or is this intended to be a thought exercise that assumes a MLB in which all teams are extracting value from their markets at an equal rate per capita?


I think it is this. My point is that teams tend to act like they are small or mid-market when they are not; that teams in huge cities have to split those huge cities (admittedly not on a 50/50 basis, but there is some split), so teams in large cities have a perception of being a large market city when maybe they are not (SF and Oakland are an interesting example of that); that people's perceptions of cities lag behind the facts of demographic waves (Dallas and Houston are growing very rapidly, and Atlanta nearly as quickly, but I do not think any of them act like major market teams, while Philadelphia and Chicago are either stagnant or shrinking, but still get the major market feel); that not having to share a city with other pro teams should have some impact on the market (San Diego comes to mind- the NBA playing until June shouldn't impact them, not should the NFL starting up in late August).
   21. caspian88 Posted: February 26, 2020 at 03:29 PM (#5926596)
While San Francisco itself isn't terribly large,having a dominant position in the entire Bay Area save Oakland and maybe Fremont (including the larger San Jose area), plus pretty much all of the northern half of California, Nevada, and Oregon, plus the massive corporate reach of Silicon Valley and SF itself, I don't see how it can rank as a bottom 10 market, especially not behind Miami, Detroit, or Tampa Bay.
   22. Ron J Posted: February 26, 2020 at 03:30 PM (#5926597)
#11 Mike Jones' study is quite old but the methodology (Neilsen numbers for the area and any clearly identifiable sub-markets) is a good one. Worked slightly better the Metropolitan area population numbers when I did my revenue studies.

And it was really, Yankees (gap) and then a bunch of markets fairly close in size.
   23. Jeff Frances the Mute Posted: February 26, 2020 at 04:12 PM (#5926610)
I think it is this. My point is that teams tend to act like they are small or mid-market when they are not; that teams in huge cities have to split those huge cities (admittedly not on a 50/50 basis, but there is some split), so teams in large cities have a perception of being a large market city when maybe they are not (SF and Oakland are an interesting example of that); that people's perceptions of cities lag behind the facts of demographic waves (Dallas and Houston are growing very rapidly, and Atlanta nearly as quickly, but I do not think any of them act like major market teams, while Philadelphia and Chicago are either stagnant or shrinking, but still get the major market feel); that not having to share a city with other pro teams should have some impact on the market (San Diego comes to mind- the NBA playing until June shouldn't impact them, not should the NFL starting up in late August).

The Giants currently punch above their weight because they have a larger piece of their shared market than is typical and they extract more revenue per fan than any other team.
   24. . Posted: February 26, 2020 at 04:20 PM (#5926615)
Without casting any kind of aspersions, Cleveland has a hard time attracting and retaining world-class talent generally; it's unclear why baseball should be an exception to this trend. Which is to say, I know the arguments why Cleveland should effectively be subsidized in baseball but not in any other non-sports industry, but those arguments really aren't ultimately than persuasive.
   25. Walt Davis Posted: February 26, 2020 at 04:21 PM (#5926616)
The Mets punch under NY's size because their split of attention and revenue compared to the Yankees is nowhere near half.

Sure, but NY Metro is 21 M people. The Mets could take 1/3 of that and have a metro area nearly the size of all of Chicago (9 M) to themselves. And of course the Mets market position within NY is largely due to their own incompetence not a lack of market potential. There were times they were the #1 team in the city but they never put together a consistent winner to hold that spot.

From 69-73, the Mets drew about twice as many fans as the Yanks. Even when the Yanks got real good again for 76-78, their attendance was lower than Mets 69-73 ... though about twice Mets 76-78. When the Mets got good again from 76-80, they cracked 3 M and easily topped the Yanks late 70s-early 80s attendances.

That was probably their last chance to at least hold their own with the Yanks on a permanent basis but still from 1999-2008, they were regularly drawing 2.5 M plus, peaking at a whopping 4 M in 2008. They followed that with several losing, cheap seasons though and, other than the WS and following year, couldn't crack 2.5 M. Still the current attendance ratio is closer to a 60/40 split putting the Mets probably 3rd behind Yanks and Dodgers in market potential.

NY was baseball crazy in the late 90s-early 2000s period as the Yanks regularly drew 3.5 to 4 M in the early 2000s before settling back to 3-3.5 M in the 2010s.
   26. . Posted: February 26, 2020 at 04:28 PM (#5926618)
I don't get any sense and haven't since I got to NYC permanently in 2001 that the Mets do anything close to the Wall Street business the Yankees do. Maybe they did in the Strawberry/Gooden heyday in the 80s, but in the 21st century, not close.
   27. Walt Davis Posted: February 26, 2020 at 04:29 PM (#5926619)
On the central/shared revenue, once I'd learned how huge it's gotten (it used to be like $50 M), I now regularly note that the central/shared revenue is a bit higher than the "competitive balance" tax threshold. So if you want to spend your own money on players, you'll be taxed on it. It practically is the NFL/NBA now where it's now all about equally-shared "national" revenue. The Yanks can still outspend Cleveland any time they want of course but they'll pay a price if they outspend by a lot ... and the current revenue structure might well mean that Cleveland can compete as easily as the Nats.
   28. snapper (history's 42nd greatest monster) Posted: February 26, 2020 at 04:34 PM (#5926623)
From 69-73, the Mets drew about twice as many fans as the Yanks. Even when the Yanks got real good again for 76-78, their attendance was lower than Mets 69-73 ... though about twice Mets 76-78. When the Mets got good again from 76-80, they cracked 3 M and easily topped the Yanks late 70s-early 80s attendances.

The Mets effectively inherited two fan bases, that both hated the Yankees. That wasn't going to last.

But they should certainly be able to keep up with the Cubs, Red Sox etc. As you say, 1/3 of the NY Metro is a huge market.
   29. bfan Posted: February 26, 2020 at 04:36 PM (#5926625)
Without casting any kind of aspersions, Cleveland has a hard time attracting and retaining world-class talent generally; it's unclear why baseball should be an exception to this trend. Which is to say, I know the arguments why Cleveland should effectively be subsidized in baseball but not in any other non-sports industry, but those arguments really aren't ultimately than persuasive.


What is interesting to me about Cleveland is that it is, on the chart I am looking at, the 2nd smallest MSA (ahead of only Milwaukee), but has the Browns and Cavaliers in town to compete with, for ticket sales and the like. It is also surrounded on the southeast by Pittsburgh; the southwest by Cincinnati, and the northwest by Detroit, none of which are THAT far away. They should be "very small market", if you look at their total potential fanbase size, competition and opportunities.

So, looking back at the title to this thread, the answer should be "No, they cannot.", if for no other reason than every other team ought to be able to pay him a lot more than Cleveland can, because nearly every other team has more resources to draw upon.
   30. Karl from NY Posted: February 26, 2020 at 04:43 PM (#5926629)
The Mets effectively inherited two fan bases, that both hated the Yankees. That wasn't going to last.

Agreed. The Mets fans in the 80s were the sons of Giants/Dodgers fans from the 50s. That didn't survive to the grandkids of boomers, everyone I know in that age range is Yankees.
   31. . Posted: February 26, 2020 at 04:44 PM (#5926630)
So, looking back at the title to this thread, the answer should be "No, they cannot.", if for no other reason than every other team ought to be able to pay him a lot more than Cleveland can, because nearly every other team has more resources to draw upon.


Yep. The only way they can is through subsidies from their competitors -- the kind that wouldn't be available in any other industry and wouldn't be available even if they were a European soccer club. And that isn't even taking into account the public subsidies they get.

If all the Indians had was local TV, gate receipts, their own merchandising, and their share of national TV, and actually had to pay full freight on their stadium debt, they probably couldn't afford a payroll of $50M, much less paying one guy $35-$40. It's a massively subsidized business. Lindor not getting effectively subsidized to the degree he wants by Cleveland isn't remotely anything to lose sleep over.
   32. SoSH U at work Posted: February 26, 2020 at 04:46 PM (#5926633)
What is interesting to me about Cleveland is that it is, on the chart I am looking at, the 2nd smallest MSA (ahead of only Milwaukee),


But only looking at the MSA gets you to the place where San Francisco is a bottom tier market. If you look at the CSA, which includes San Jose (surely relevant to San Francisco's baseball market potential), then San Francisco is a lot bigger (jumping to fifth). And Cleveland improves there as well, moving up to 17th.
   33. bfan Posted: February 26, 2020 at 04:50 PM (#5926636)
Yep. The only way they can is through subsidies from their competitors -- the kind that wouldn't be available in any other industry and wouldn't be available even if they were a European soccer club. And that isn't even taking into account the public subsidies they get.


If they were a European soccer club, they would have been relegated, and another city with greater resources, such as Charlotte, would have an MLB franchise.

That really is a nice efficient way for the market to take care of franchises and cities which are not keeping the pace. Europeans may be socialist in their core ideology, but their sports leagues are about as capitalist as you can be.
   34. bfan Posted: February 26, 2020 at 04:55 PM (#5926638)
But only looking at the MSA gets you to the place where San Francisco is a bottom tier market. If you look at the CSA, which includes San Jose (surely relevant to San Francisco's baseball market potential), then San Francisco is a lot bigger (jumping to fifth). And Cleveland improves there as well, moving up to 17th.


Fair enough. I think Cleveland jumps 6 MLB cities instead of 1 in the MSA list, but still is a bottom 10 market in that list; is still surrounded by other MLB cities and still carries 3 pro franchises. They may not suffer hideously, in comparison to the other markets, but they are way down there.
   35. snapper (history's 42nd greatest monster) Posted: February 26, 2020 at 04:57 PM (#5926639)
Yep. The only way they can is through subsidies from their competitors

And they get those subsidies, so they can.

The hypothetical free-market Indians can't afford Lindor, the real cartelized Indians can.
   36. SoSH U at work Posted: February 26, 2020 at 04:59 PM (#5926641)
Fair enough. I think Cleveland jumps 6 MLB cities instead of 1 in the MSA list, but still is a bottom 10 market in that list; is still surrounded by other MLB cities and still carries 3 pro franchises. They may not suffer hideously, in comparison to the other markets, but they are way down there.


No, Cleveland is a bottom market anyway you slice it. But looking at the somewhat more relevant CSA also shows that Charlotte isn't an improvement (at least right now).

   37. . Posted: February 26, 2020 at 04:59 PM (#5926642)
The hypothetical free-market Indians can't afford Lindor, the real cartelized Indians can.


Yep, and I don't make it a point to lose sleep over cartelized businesses, their trials, their tribulations, their machinations, etc. "Cartelized" understates it, too; they're not just cartelized, they're wards of the public. That's what they are. They couldn't really compete in a free market any more than a Polish steel factory, ca. 1971, could. Lindor and the people who produce Cleveland baseball games are effectively fighting over the proceeds of a government contract or grant. Who gives a #### who wins?
   38. caspian88 Posted: February 26, 2020 at 05:06 PM (#5926645)
Cleveland fans?
   39. bfan Posted: February 26, 2020 at 05:08 PM (#5926646)
Ignoring the luxury tax for a moment, which seems like a small number in the grand scheme of things, the shared revenue component of the gross revenues modulates the differences in resources that teams have, but it doesn't eliminate it-correct? If the Indians and Yankees each have $200 million in shared revenue, and the Yankees otherwise pull in $500 million and the Indians $200 million, then the percentage difference between the Yankees and the Indians in over-all revenues is reduced, but the raw number difference stays the same.
   40. snapper (history's 42nd greatest monster) Posted: February 26, 2020 at 05:11 PM (#5926648)
Ignoring the luxury tax for a moment, which seems like a small number in the grand scheme of things, the shared revenue component of the gross revenues modulates the differences in resources that teams have, but it doesn't eliminate it-correct? If the Indians and Yankees each have $200 million in shared revenue, and the Yankees otherwise pull in $500 million and the Indians $200 million, then the percentage difference between the Yankees and the Indians in over-all revenues is reduced, but the raw number difference stays the same.

Well, if local revenues were $500M for the Yankees and $100 for the Indians, then the Yankees lose $250M and get back $200M, so they end up at $450M. The Indians lose $50M and gain $200M, and end up at $250M. The gap is cut in half, from $400M to $200M.
   41. . Posted: February 26, 2020 at 05:28 PM (#5926660)
The Indians' real revenues, giving them their 1/30 share of the national TV contracts, is somewhere like 150-170. Mom and pop territory. No CEO of a $170M business in the real world would ever pay herself anything close to the $35M or so that Lindor will command and the idea that a single, entirely replaceable, employee would garner 20% of the revenues -- not income, revenues -- of a mom and pop business is pretty much preposterous on its face. Lindor's salary would be 50% of the team's entire yearly gate.
   42. snapper (history's 42nd greatest monster) Posted: February 26, 2020 at 05:59 PM (#5926665)
The Indians' real revenues, giving them their 1/30 share of the national TV contracts, is somewhere like 150-170. Mom and pop territory. No CEO of a $170M business in the real world would ever pay herself anything close to the $35M or so that Lindor will command and the idea that a single, entirely replaceable, employee would garner 20% of the revenues -- not income, revenues -- of a mom and pop business is pretty much preposterous on its face. Lindor's salary would be 50% of the team's entire yearly gate.

You said you didn't care about the Indians?

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