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Friday, February 21, 2020

Stark: How Francisco Lindor reminds us that baseball is broken – The Athletic

Is there anything right with the game? Does this situation really mean the sport is broken?

“Because everybody thinks Cleveland is a small-budget team, you know,” he says, calmly, analytically, thoughtfully. “And it’s just a matter of coming up with the right thing. That’s for my agent and the team to figure out, what’s the right thing. So everyone thinks it’s not going to happen because the Indians have always said, ‘We don’t have the money. We don’t have the money. We don’t have the money.’ So we’ll see.”

He says those words, “We’ll see,” because he can’t peer far enough over the horizon to know exactly how this saga will end. But he is a bright, perceptive man. So the one thing he can see with clarity is the big picture in his sport. And he has no trouble connecting the dots between that big picture and his own uncertain future.

OK then, does he think baseball is broken? If the Indians can’t find a way to sign him to a contract that keeps him in Cleveland and pays him what he is worth, does that say to him that baseball is broken?

“We’re running a bad business then,” he says, “because there’s money. There’s money out there. It’s an ($11-billion) industry.”

Oh, there’s money out there in the industry. That’s true. But what if most of that money doesn’t flow to a place like Cleveland?

“Then there’s something wrong,” he says, almost matter-of-factly. “And you can’t blame the fans.”

Jim Furtado Posted: February 21, 2020 at 09:28 AM | 20 comment(s) Login to Bookmark
  Tags: francisco lindor

Reader Comments and Retorts

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   1. JJ1986 Posted: February 21, 2020 at 10:39 AM (#5925831)
They have an incredibly low payroll and most of the money comes off the books next season. There's no reason they can't give Lindor $35m a year.
   2. Barry`s_Lazy_Boy Posted: February 21, 2020 at 10:46 AM (#5925834)
Cleveland is broken and refuses to spend money on anyone. Why couldn't they offer a reasonable contract to Michael Brantley when they desperately needed a solid OFer?

   3. Steve Parris, Je t'aime Posted: February 21, 2020 at 11:14 AM (#5925845)
Cleveland probably has one too many pro sports teams.
   4. . Posted: February 21, 2020 at 12:51 PM (#5925889)
There's no reason they can't give Lindor $35m a year.


Except there is. If they did, they'd be running a significant operating deficit. Look at the Forbes numbers; we had a thread on this not long ago.

And to maybe anticipate -- if the only retort is that the Forbes numbers aren't accurate because the team is hiding revenues I just know it yadda yadda yadda, it's probably best not to breath-waste although it's a free and open forum (kind of, anyway). As a general observation, it's extremely difficult to have discussions when there's no agreed-upon parameters and sources. If people just want to ideologically insist that the Indians have the money, that's their prerogative -- but it's not really at the end of the day a discussion they're seeking, but something else.

Lest anyone think this is an ideological perspective of some kind, I wasn't able to get to the Brewers "operating loss" thread, but the owner there is almost certainly lying. Forbes has them in the high 60s in both 2018 actual and 2019 projected operating income. There's little chance their payroll and other expenses have gone up enough to come even close to wiping that out. Cleveland's a different story.
   5. Jeff Frances the Mute Posted: February 21, 2020 at 01:02 PM (#5925895)
Cleveland probably has one too many pro sports teams.

It probably isn't a coincidence that they drew 3M+ between 1996-2001 and the Browns didn't exist for a good chunk of that time. They had a new stadium with good teams and exciting stars too, but they definitely benefited from the Browns bailing on Cleveland.
   6. snapper (history's 42nd greatest monster) Posted: February 21, 2020 at 01:04 PM (#5925896)
Except there is. If they did, they'd be running a significant operating deficit. Look at the Forbes numbers; we had a thread on this not long ago.

They get $200M from central sources. Every team does.

Forbes says they have $282M in revenue. That can easily support a $150M payroll and make a ton of money. What are they spending the other $132M on?

On a $150M payroll, you can pay one of the best players in baseball $35M.

   7. Ron J Posted: February 21, 2020 at 01:21 PM (#5925903)
#6 And there's plenty of evidence that most salary dumps end up costing the team money. Players are best thought of as revenue generating assets rather than straight costs.
   8. Adam Starblind Posted: February 21, 2020 at 03:15 PM (#5925929)
Players are best thought of as revenue generating assets rather than straight costs.


Not Bonilla.
   9. caspian88 Posted: February 21, 2020 at 04:19 PM (#5925942)
Bobby Bonilla is a revenue generating asset for newspapers who get to write annual articles about his contract.
   10. Traderdave Posted: February 21, 2020 at 05:26 PM (#5925956)
Cleveland is a football town that happens to have an MLB team.
   11. Traderdave Posted: February 21, 2020 at 05:31 PM (#5925957)
They get $200M from central sources. Every team does.


What is definition of "central sources?"

When the Tribe was a public company for a few years in the late 90's/early '00s I owned 100 shares. I recall from the annual report (or 10K, etc) that about 2/3 of the top line came from local sources. Attendance was the largest but also concessions, merch, etc. . Has the national media revenue grown THAT much to be 2/3 of the top line now?
   12. Walt Davis Posted: February 21, 2020 at 06:23 PM (#5925959)
From the b-r bullpen page:

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 also receive a share of national revenues, which were estimated to be $91 million per team, also in 2018.

So that was $209 in 2018. Then you get extra revenue sharing for the "small market" teams -- I'm not sure how that's defined these days and whether Cle qualifies ... or does it not exist anymore, replaced by the 48% thing? I'm also not sure what goes into "local revenues" -- just tix, tix & concessions, local TV rights?? -- but for 2018 Forbes puts Cleveland at $69 M in tix revenue so they get to keep $35 M of that. Then add half to all of the local TV and concessions revenue ... as Snapper notes, Forbes put the total revenues at $282.

It surprised me too how much central revenue has exploded in the last few years. It seems nuts to me that the CBT threshold would be anywhere near the central revenue payouts. Every team could run a threshold payroll while keeping 52% of their local revenues to cover all the other costs while looking forward to the day when they can cash in the capital gains of the franchise values.

EDIT: Upshot is there is no such thing as a "poor" team anymore, not even Tampa.

EDIT2: Meaning that what is currently broken in MLB is the desire to win rather than rake in guaranteed profits all at the expense of player salaries. Add in the apparent shift to younger, cheaper players, replacing SP innings with cheap AAA shuttle innings and things are even more stacked against the players. Raising the CBT to, say, $300 M won't necessarily solve the desire problem but it will at least allow players to get a more fair share of the pie and the teams that do want to compete to really do so (while leaving the cheapskates even deeper in the dust).
   13. Lowry Seasoning Salt Posted: February 21, 2020 at 10:51 PM (#5925974)
From another angle, here are some numbers from a larger-revenue team, the Mets:

The team, on the other hand, now has the eighth highest payroll in baseball, according to Spotrac, which tracks player contracts in major sports. The Mets lost more than $50 million last season, according to people familiar with the team’s finances, largely because of declining attendance and about $50 million in annual payments on bonds used to finance the construction of Citi Field. The family is able to temper its losses in part with the money it makes from the television network, giving the Wilpons the flexibility to allow a potential deal to sell the team to collapse.

...

Begun in 2006 during a cable television boom, SNY has done everything the Wilpons hoped it would. The network had profits of roughly $150 million last year....


Source: Yes, the Mets Are Still for Sale. No, the Owners Don’t Have to Sell Them.

Snapper likes to make the argument he's got above all the time. Maybe he's correct, but it's always a half-baked argument because he never shows much work on the expense side of the ledger. So, to the broader issue, if the Mets can make up for their on-field losses with SNY, what's a Cleveland or Tampa or Minnesota or Kansas City to do? I don't want to suggest owners as businesspeople can't be financially conniving, but it's nowhere near as straightforward as Snapper and others make it out.
   14. greenback slays lewks Posted: February 21, 2020 at 11:22 PM (#5925975)
The Mets lost more than $50 million last season, according to people familiar with the team’s finances, largely because of declining attendance and about $50 million in annual payments on bonds used to finance the construction of Citi Field. The family is able to temper its losses in part with the money it makes from the television network...

Shifting revenue from the baseball team to an affiliated entity is one of the oldest accounting tricks.

For that matter, you don't incur an accounting loss in any reasonable accounting system when you pay principal on a debt. And if the Mets are paying $50 million in interest on their bonds, then this is a good time to re-finance.
   15. Walt Davis Posted: February 22, 2020 at 12:33 AM (#5925976)
The Mets lost more than $50 million last season, according to people familiar with the team’s finances, largely because of declining attendance

Mets' attendance went up 200,000 last year. You'd think the NY Times might have the resources to check such a claim, at least to let these sources familiar with finance but not attendance figures to say "I mean ticket revenues were down despite the 200,000 (about 9%) increase in attendance."

Possibly these folks are referring to 2018 when attendance was down 200,000 from 2017 ... but then Forbes puts them at $30 M in operating income for 2018 and that's after stadium debt obligations. The Mets also have a value of $2.3 B so even if they did somehow lose $50 M in 2019, I'm pretty confident they've made that back in franchise valuation growth already -- that would be just a 2% growth while Forbes says the value increased 10% for 2018-19 and 11% annualized.

The Forbes numbers were $160 M in player expenses (I'm guessing MLB only) and $340 M in revenues after stadium debt obligations. So to have been $50 M in the red, they managed to spend $230 M on .... I'm gonna guess Jeff Wilpon is slightly overpaid.
   16. bfan Posted: February 22, 2020 at 08:47 AM (#5925985)
The Mets also have a value of $2.3 B so even if they did somehow lose $50 M in 2019, I'm pretty confident they've made that back in franchise valuation growth already


If my salary was cut in half from last year but the value of my house went up...I still have less cash to spend. I suppose I could borrow against the increased value of my house in that instance, but there are friction costs (transaction costs and fees) associated with that move, so at least one logical alternative, in this scenario, is to spend a little less to reflect the diminished cash situation.
   17. Fernigal McGunnigle Posted: February 22, 2020 at 09:43 AM (#5925989)
The Mets lost more than $50 million last season... The family is able to temper its losses in part with the money it makes from the television network, giving the Wilpons the flexibility to allow a potential deal to sell the team to collapse.
The Mets in 2018 got $80 million from the cable network, which doesn't seem to be counted in the $50 million loss. So it's not a real loss.
   18. snapper (history's 42nd greatest monster) Posted: February 22, 2020 at 11:05 AM (#5925995)

Shifting revenue from the baseball team to an affiliated entity is one of the oldest accounting tricks.

For that matter, you don't incur an accounting loss in any reasonable accounting system when you pay principal on a debt. And if the Mets are paying $50 million in interest on their bonds, then this is a good time to re-finance.


Correct on all counts.

The Forbes numbers were $160 M in player expenses (I'm guessing MLB only) and $340 M in revenues after stadium debt obligations. So to have been $50 M in the red, they managed to spend $230 M on .... I'm gonna guess Jeff Wilpon is slightly overpaid.

Right. It's completely implausible. There's not an extra $100M to spend things on in a baseball team once the players are paid. Never mind $230M worth of thing to spend on.
   19. Walt Davis Posted: February 22, 2020 at 04:50 PM (#5926030)
On official TV revenue, fangraphs had an article with estimated 2018 revenues. (For some reason the Mets are missing in the graphs, you have to go down to the table.) The Mets signed a 25 year deal (with a network they have a 65% stake in) back in 2006 that fangraphs suggested was worth $46 M in 2018.

2006 was a long time ago of course. But, per that table, the White Sox signed in 2004 and got $51 M. The Nats and O's are a mess but they signed in 2006 and got $46 M. The Giants deal goes back to 2008 and they got $51 M; the Tigers back to 2009 and they got $54 M. Most comparable, the Cubs go back to 2004 and they got $65 M and the Red Sox to 2006 and $80 M. Those gaps aren't massive but it looks like the Mets left at least $10 (Tigers) to $20 (Cubs) to even $30 (Red Sox) on the table. Note the Red Sox have a 80% stake; the O's 82%.

#16: Sure. But life is different when you're holding onto multi-billion dollar assets. It would also be different if they were losing $50 M every year but thre's no evidence of that. (And that's leaving aside accounting tricks, salaries paid themselves, revenue from the cable network, etc.)

You also might want to adjust for the magnitude of these things. $50 M is 2% of $2.3 B. So that's like you making $40,000 a year while owning a $1.5 M home and having a couple of Lamborghinis in the driveway. If your salary is cut to $20 K then indeed you might have some cash flow problems and need to sell off one of the Lamborghinis. And sure, eventually you might have to sell the house itself -- that's nearly 40 years of your $40,000 salary.

And did I fail to mention your stock portfolio, the other houses you own and your other "non-Mets" assets? My bad.

Probably the better regular person analogy is that when the market crashes, your 401(k) loses 5% of its value. That sucks but you hope/expect it will start growing again but, sure, maybe you cut expenses to put more money into your retirement until you are back where you were.

That analogy falls over too because what we're really talking about here is that you own and are CEO of a multi-million dollar business. You, with the approval of your board, pay yourself a hefty $500 K salary as CEO. Sales fall, the businesses revenues stagnate, you're gonna lose $50 K this year ... but a consultant assures you that your business that was valued at $5 M last year could be sold for $5.5 M right now. That $50 K has to be covered somehow but you could give yourself a 10% pay cut or lay off a worker making $50 K or take out a small loan at very low interest or sell some or all of the company. It's nice to have options.
   20. Ron J Posted: February 23, 2020 at 05:00 PM (#5926109)
#13 we're really not guessing on th3 expenses front. You can start with Zimbalist and work through the various disclosures that have been available since.

The reality is that major league baseball is a relatively uncomplicated business.

Forbes is quite experienced in making estimates about businesses in general and professional sports specifically.

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