Pirates financials leaked

[bullox]

Do you see the city of Milwaukee and the state of Wisconsin talking about building Harley a $500m plant?

If Harley was to get a $500M plant that seated ~45000 Milwaukee and Wisconsin residents 81 nights a year, they might talk about it. It's not an apples-apples comparison.

[jeffy]

Well he might not be a liar but he isn't telling the truth. "Budgeted" to can mean lots of things. The Brewers up until last year have been making 8 figure profits and last year they had a seven figure one.

 

"8 figures can mean a lot of things too...any thing from essentially a round off error to obscene profits in the case of the Brewers"

 

Yes, he said there that they "made a little money"...presumably this was because attendance and therefore revenue exceeded expectations. Meanwhile the former owners did book $39 million in profits during the first three years in MP (that means the average was "8 figures"...so why are they drooling?

 

http://www.rodneyfort.com...pense/WIBrewersAudit.pdf

 

Documented facts and concrete numbers would be more meaningful than unsubstantiated assertions...got any?

[endaround]

You're the one who linked to Forbes where it had a $10m profit last year when they weren't going to make any money.

http://images.forbes.com/...sts/33/2010/op337147.gif

[kramnoj]

While this may be true with current revenue and payroll, it would seem obvious to me that without revenue sharing the payroll would obviously be lower.

 

Let's take a look at 2008. In that year, the Pirates received $39M in revenue sharing. Their payroll in 2008 according to Cots was $48M. If I take $39M from $48M, the Pirates couldn't even pay a 25 man roster the minimum salary.

 

The first is that the Brewers under Attanasio have been very profitable.

 

Not sure why this is being pointed out. Has anyone complained here about the Pirates being profitable? I have been complaining that the Pirates owners paid themselves money they wouldn't have had without revenue sharing. The Brewers should aim to be profitable, and the Brewers have certainly put the team's money into payroll and into development.

[endaround]

That was to Jeffscott who said that Attanasio hasn't generated profits. Its more to try to kill bad information that seems to prop up talking about how poor the Brewers are.

[jeffy]

You're the one who linked to Forbes where it had a $10m profit last year when they weren't going to make any money.

http://images.forbes.com/...sts/33/2010/op337147.gif

 

See the footnote (5) operating income defined as "Earnings before interest, taxes, depreciation and amortization." does not equal "profit".

[endaround]

It's pretty much profit. It is usually as close as you can come.

[jeffy]

Well then I guess $10 million is pretty much 0.

 

At the link I gave that had detailed information for 1994-2003, the difference between operating income and net income was $9.9 million in 2003, mostly due to $7.6 million in interest expenses. The team does still have debt and it makes no sense to claim money spent on servicing that debt is "profit".

[MJLiverock]

It's pretty much profit. It is usually as close as you can come.

Actually, no, EBITDA is not pretty much profit and as close as you can come. Especially if the company has a large debt load or tax burden. EBITDA is just a measure of cash flow available to pay the the interest and taxes. Both of which are real cash costs that do impact the profits of a firm. The Forbes article probably used the EBITDA number because it removes a lot of variances unrelated to baseball operation from the figure to provide a better apples to apples comparison for the teams. This is because the tax rates vary from state to state, the amount of debt each team carries varies as does their terms, the depreciation (a non cash charge) varies greatly. EBITDA is also used by bankers a lot to just figure out how much cash flow tthere is to cover the debt financing that the entity could support.

 

 

I know Attanasio has referenced paying down the Brewer's debt levels in the past but I can't find a current amount of debt load the team is carrying. In 2004 the team had around $130 Million. So even at a good rate of say 5% on that debt the interest expense alone would be $6.5MM out of that $12MM of EBITDA or operating income on the 2009 Forbes valuation. Taxes would also bite into that number as well, probably getting them down to pretty much break even as Attanasio as said. Even if they profited $1MM or $2MM that is a terrible profit margin on a $173MM of revenues as claimed in the Forbes report. That profit is easily wiped out or doubled by a swing of less than 70,000 in attendance for the year.

 

Think of how much more money you would have to spend or claim as disposable income if you didn't count income tax or mortgage interest.

[kramnoj]

This may be worthy of its own thread, but it is relevant to the Pirates specifically and all teams that get revenue sharing. There is a piece in the NY Times that argues that the increased revenue sharing hasn't led to more competitive balance, and does more to increase profit for the receiving teams than increase competition: http://www.nytimes.com/20...seball/29score.html?_r=1

 

At the end, the author says that since the program isn't working, MLB would be better off getting rid of revenue sharing.

 

Now, I don't know if I agree with that, but it is something to think about.

 

There has been an alternative proposal that has been talked about over at bbtf.org that I like. Rather than a team getting revenue sharing dollars when they aren't improving the team, MLB could help subsidize retaining players for teams. One idea is that teams aren't guaranteed any revenue sharing beyond the splitting of gates, but if a team retains one of their players, MLB has a fund that would pay 50% of the contract.

 

There would have to be lots of rules to go with it, and it's more fun for discussion than a realistic plan. One of the questions would be how to define players that would qualify for this. Is it limited to players that are drafted by the team? What if a player is drafted and developed by one team but then is traded to another team and spends all of his time with one team in the majors. The fans of that team would be tied to that player, even though he wasn't homegrown. So maybe you come up with a rule that a player has to have most of his major league time with one team to qualify.

 

I could go on more, but I'm heading out.

[TwinsBrewersWorldSeries]

Interesting Idea Kram-

 

Essentially, this would allow teams to retain their premium players. A team can franchise one of their own players per season.

 

Requirements:

No subsidy for any team below 50% of the league average payroll (for example, league average 100m payroll, no subsidy if team payroll is below $50 million)

League subsidy of up to $10 million per year on contract. Subsidy is up 50% per year of the contract. Maximum of 3 subsidies per team at and given time.

 

Team with $50 million payroll = 10% subsidy on contract

Team with $55 million payroll = 20% subsidy on contract

Team with $60 million payroll = 30% subsidy on contract

Team with $65 million payroll = 40% subsidy on contract

Team with $70 million payroll = 50% subsidy on contract

 

$10 million dollar penalty for teams below $50 million payroll. Penalty increases by $1 million every time this is violated. Teams get one exception per decade without penalty (for rebuilding)

Luxury Tax for any team that is above 150% of the league average payroll. Penalty is $1 for every dollar over

 

 

Think about it. If we could have resigned Prince AND Sabathia for $25m per.... we'd pay $15m per, league would pay $10m per.

[RightFieldCoder]

CC was not our player. We would not have gotten subsidized for him.

[logan82]

A NY paper wants to do away with revenue sharing. Go figure. Without revenue sharing we have a $40-50m payroll, maybe. Revenue sharing may not be doing enough to provide competitive balance but overall it is helping at least a little. I wish people would quit pulling out Florida and saying that revenue sharing isn't working. Who outside of Florida does not seem to be at least trying to improve their team?

[kramnoj]

The piece is written by JC Bradbury, an economics professor and a Braves fan.

 

Without revenue sharing we have a $40-50m payroll, maybe.

 

I don't think the Brewers are getting $30M in revenue sharing. In 2008, the Pirates got $39M in revenue sharing, and their total revenue was almost $146M. The Rangers in 2009 reported $167M in revenue and paid out $5M in revenue sharing. The Brewers estimated revenue in 2009 from Forbes was $171M. So, I'm not sure the Brewers are actually getting significant revenue sharing.

 

Who outside of Florida does not seem to be at least trying to improve their team?

 

As discussed in this thread, the previous ownership of the Pirates wasn't really doing anything to improve the team, and paid themselves money they would not have had if not for revenue sharing. For other teams, we would need to know who is getting the revenue sharing and how much they are getting to answer that. I can guess that the A's have been getting money and not spending it, and that is why there is speculation that the Sheets signing was done in response to the MLBPA questioning how the As were using their share.

[snyttri]

Five teams have seemed to regularly take profits while being subsidized, including some of the most profitable, according to this December '09 article in Biz of Baseball. A's, Rays, Marlins, Pirates and Royals.

http://bizofbaseball.com/...editorials&Itemid=39

[logan82]

kramnoj wrote:

Without revenue sharing we have a $40-50m payroll, maybe.

 

I don't think the Brewers are getting $30M in revenue sharing. In 2008, the Pirates got $39M in revenue sharing, and their total revenue was almost $146M. The Rangers in 2009 reported $167M in revenue and paid out $5M in revenue sharing. The Brewers estimated revenue in 2009 from Forbes was $171M. So, I'm not sure the Brewers are actually getting significant revenue sharing.

Attanasio was quick to note that the Brewers' payroll wouldn't be in the

same ballpark, so to speak, without the revenue-sharing plan initiated

by Commissioner Bud Selig, the team's former owner. That plan added

nearly $30?million to the Brewers' coffers last year, which combined

with the team's tremendous per-capita attendance, allowed the payroll

bump.

Unless you think Attanasio is lying of course.

[kramnoj]

That figure isn't attributed to anybody. It certainly isn't part of a quote from Attanasio.

[logan82]

That figure isn't attributed to anybody. It certainly isn't part of a quote from Attanasio.

If you take the time to look around the internet you will find article after article putting us over $25m in revenue sharing received just a few years back. Feel free to ignore my previous post but I think you would be flat out wrong. Our payroll would be in the $40-50m range without revenue sharing and we would be even less competitive.

 

The last year that revenue sharing was released we got $25m. Are you trying to say that has gone down over the years? We are still in the smallest MLB market and our TV contract still stinks.

[kramnoj]

Yes, in years past the Brewers got lots and lots of revenue sharing. But that doesn't mean that a team that has drawn 3 million fans in consecutive years is getting that much money. Until you can piece together evidence that they are, you don't really have any standing to say that I am wrong.

 

In another thread you are saying that the JS gets basic facts wrong. Why would you assume they would get this one correct?

[logan82]

Yes, in years past the Brewers got lots and lots of revenue sharing. But that doesn't mean that a team that has drawn 3 million fans in consecutive years is getting that much money. Until you can piece together evidence that they are, you don't really have any standing to say that I am wrong.

 

In another thread you are saying that the JS gets basic facts wrong. Why would you assume they would get this one correct?

The second post has the Wall Street Journal as it's source. $25m in 2005. I know you disagree but I see no reason to believe the Brewers are not receiving significant revenue sharing.

[kramnoj]

Post 94 doesn't contradict anything I have written. If you read your own link, you can see that revenue sharing can decrease by $9-10M in a single year, contradictory to your own questioning that this can happen.

 

Since you are so confident that the Brewers are getting so much in revenue sharing, how do you reconcile the Rangers revenues and their revenue sharing with the Brewers reported revenue? Until you can do so, saying I am flat out wrong is irresponsible.

[strawbossisevil]

Perhaps this point has been made, but it would seem to make sense to me that if a team takes revenue sharing (whose purpose is to create a more even financial playing field amongst the clubs), then the league should just determine what type of profit these owners are allowed to take.

 

It could be a condition of receiving revenue sharing. For example, if a team receives revenue sharing, the owners revenue must be capped at 5 million per year (or something like that). The rest of the money would then have to go toward improving the ballclub (either that year, or set aside for a future season if there is no immediate need for it in the current season).

 

This would prohibit a group of owners like the ones in Pittsburgh, or Florida from giving themselves grossly inflated profits at the expense of the Yankees. And if you make it so that the funds need not be spent in a certain season, it removes the "Randy Wolf" argument. Teams would be able to use the money when they felt that it was in their best interests, rather than be forced to spend it whether such spending is needed or not. For example, the Brewers could save such money when a player like Prince Fielder is young and cheap, and then use the funds to make him a competitive offer when he approaches free agency.

 

I do think, however, the owners should get some financial kick back (even the ones involved in revenue sharing), it is after all a financial risk to own a major league ball club. So they are entitled to a slice of the pie, but I don't think that it is right (if they are getting money from other organizations for the purpose of being competitive) for them to determine how big that slice of pie should be.

[endaround]

The easiest thing to do is to determine small markets and then base revenue sharing on $/per person the team generates in the market. So the greater $ per person generated the more revenue sharing a team gets. It will reward teams for pulling in fans instead of driving them away. And in no sense should Miami be considered a small market. It's 5.4m metro size puts it in with DC and Atlanta. Milwaukee's metro area is 1.5m, KC is about 2.1m, Cleveland is 2.1m, Cincy is 2.2m, Pittsburgh 2.3m When you start calling the Twin Cities at 3.2m and Miami at 5.4m "small market" you buy into owner spin.

[jeffy]

Perhaps this point has been made, but it would seem to make sense to me that if a team takes revenue sharing (whose purpose is to create a more even financial playing field amongst the clubs), then the league should just determine what type of profit these owners are allowed to take.

 

How about $0? Why should team owners be entitled to any operating profits? They will make plenty of money when they sell the team, if that is their goal.

[MJLiverock]

Perhaps this point has been made, but it would seem to make sense to me that if a team takes revenue sharing (whose purpose is to create a more even financial playing field amongst the clubs), then the league should just determine what type of profit these owners are allowed to take.

 

How about $0? Why should team owners be entitled to any operating profits? They will make plenty of money when they sell the team, if that is their goal.

Should players then be told to take less money since they can just make it up in endorsement deals or autograph shows after they retire? With zero owner profits and lower player salaries tickets would be cheaper.