Brewers Payroll 2020 and beyond

[TURBO]

Why does everyone on this thread seem to think "they know" what is going on financially with this team?

 

It doesn't really matter what articles you pull up, what information is shared here, only a few select people know Mark A.financials, and thoughts, and no one on this board is one of those people.

 

Lots of people talking about a lot of things and acting like they know the deal, but no one really does...(myself included)

 

It is beginning to get quite comical.

[JimH5]

This Dodgers minority owner says the pandemic is unlikely to hurt franchise values:

 

https://finance.yahoo.com/news/la-dodgers-newest-coowner-pandemic-wont-hurt-pro-franchise-values-192843227.html

 

Because of the exclusivity of club ownership, wealthy people want in. It's a public sign of achievement and wealth and it feeds their vanity.

[Simba2020]

This Dodgers minority owner says the pandemic is unlikely to hurt franchise values:

 

https://finance.yahoo.com/news/la-dodgers-newest-coowner-pandemic-wont-hurt-pro-franchise-values-192843227.html

 

Because of the exclusivity of club ownership, wealthy people want in. It's a public sign of achievement and wealth and it feeds their vanity.

The franchise values will not go down but the equity value will decline as the balance sheets aren't in the same place as they would typically be. Plus a number of professional teams likely took on more debt further reducing the equity value.

[nate82]

This Dodgers minority owner says the pandemic is unlikely to hurt franchise values:

 

https://finance.yahoo.com/news/la-dodgers-newest-coowner-pandemic-wont-hurt-pro-franchise-values-192843227.html

 

Because of the exclusivity of club ownership, wealthy people want in. It's a public sign of achievement and wealth and it feeds their vanity.

 

Relevance?

[JimH5]

This Dodgers minority owner says the pandemic is unlikely to hurt franchise values:

 

https://finance.yahoo.com/news/la-dodgers-newest-coowner-pandemic-wont-hurt-pro-franchise-values-192843227.html

 

Because of the exclusivity of club ownership, wealthy people want in. It's a public sign of achievement and wealth and it feeds their vanity.

 

Relevance?

 

A baseball owner is saying that yearly profits aren't essential to growing or maintaining franchise value.

[ctmyers]

This Dodgers minority owner says the pandemic is unlikely to hurt franchise values:

 

https://finance.yahoo.com/news/la-dodgers-newest-coowner-pandemic-wont-hurt-pro-franchise-values-192843227.html

 

Because of the exclusivity of club ownership, wealthy people want in. It's a public sign of achievement and wealth and it feeds their vanity.

 

Relevance?

 

A baseball owner is saying that yearly profits aren't essential to growing or maintaining franchise value.

 

Which is basically irrelevant because franchise value has very little to do with operating revenue.

 

“It’s been absolutely devastating from the revenue perspective,” Smolinksy says.

[Fear The Chorizo]

This Dodgers minority owner says the pandemic is unlikely to hurt franchise values:

 

https://finance.yahoo.com/news/la-dodgers-newest-coowner-pandemic-wont-hurt-pro-franchise-values-192843227.html

 

Because of the exclusivity of club ownership, wealthy people want in. It's a public sign of achievement and wealth and it feeds their vanity.

 

Relevance?

 

A baseball owner is saying that yearly profits aren't essential to growing or maintaining franchise value.

 

Maintaining profitability is essential to avoiding owners having to sell said franchise because they ran the business operation into the ground.

 

The size of an organization's team payroll (including players) is a direct product of the size of its operating revenue - which has very little or nothing to do with a franchise's value.

[PeaveyFury]

The size of an organization's team payroll (including players) is a direct product of the size of its operating revenue - which has very little or nothing to do with a franchise's value.

 

Quoting the above one more time for emphasis. Spot on.

[Simba2020]

The size of an organization's team payroll (including players) is a direct product of the size of its operating revenue - which has very little or nothing to do with a franchise's value.

 

Quoting the above one more time for emphasis. Spot on.

It's very true that payroll is going to be a reflection of overall revenues. Owners do not expect or want to lose money, certainly not in the long-term. However, revenues are a main driver of franchise values. The more revenue generating capabilities for a franchise, the more it's going to be worth.

[PeaveyFury]

The size of an organization's team payroll (including players) is a direct product of the size of its operating revenue - which has very little or nothing to do with a franchise's value.

 

Quoting the above one more time for emphasis. Spot on.

It's very true that payroll is going to be a reflection of overall revenues. Owners do not expect or want to lose money, certainly not in the long-term. However, revenues are a main driver of franchise values. The more revenue generating capabilities for a franchise, the more it's going to be worth.

 

Good clarifying point- I read the post I quoted to read more towards 'the payroll is a function of operating revenue, but payroll is not a product of franchise value.'

[Fear The Chorizo]

The size of an organization's team payroll (including players) is a direct product of the size of its operating revenue - which has very little or nothing to do with a franchise's value.

 

Quoting the above one more time for emphasis. Spot on.

It's very true that payroll is going to be a reflection of overall revenues. Owners do not expect or want to lose money, certainly not in the long-term. However, revenues are a main driver of franchise values. The more revenue generating capabilities for a franchise, the more it's going to be worth.

 

I'd argue that how a front office utilizes the main economic elements that bolster franchise value (market size, infrastructure (i.e., stadiums), and the system a franchise operates under in the league it's affiliated with) parallels how much operating revenue they can generate - but operating revenue itself isn't a direct driver of a franchise's value...it's more of a product of it.

 

The main driver in franchise value is its exclusivity - major sports league franchises are finite in number, and demand will always outpace supply. However, the only way a franchise's value can be realized by an owner (or ownership group) is if they sell it and are no longer "part of the club".

[josh]

"franchise value has very little to do with operating revenue"

 

I don't see how that can be true. Operating revenue going to zero would bring franchise values to zero, for example.

 

Confidence in projected operating revenues over... quite a long term... seems to me to be a primary component of franchise value. (Profit being a more direct component, of course.)

 

Maybe it makes sense to suggest that a few years of COVID-induced shortfalls won't affect longer-term valuations. It's not unreasonable to quibble about how player payroll fits into the balance sheet. But the notion that revenue is irrelevant to a business's value is a bridge too far.

 

I'd be eager to hear a more detailed case for that, if you have one.

[owbc]

"franchise value has very little to do with operating revenue"

 

I don't see how that can be true. Operating revenue going to zero would bring franchise values to zero, for example.

 

Confidence in projected operating revenues over... quite a long term... seems to me to be a primary component of franchise value. (Profit being a more direct component, of course.)

 

Maybe it makes sense to suggest that a few years of COVID-induced shortfalls won't affect longer-term valuations. It's not unreasonable to quibble about how player payroll fits into the balance sheet. But the notion that revenue is irrelevant to a business's value is a bridge too far.

 

I'd be eager to hear a more detailed case for that, if you have one.

 

I don't think revenue really matters at all in the long term. Revenue goes to payroll. Revenue goes down, payroll goes down. Value doesn't necessarily change.

 

I think you have to take off your business hat when thinking about pro sports teams. These are toys for billionaires, like luxury cars or yachts. Nobody buys a Masarati because it's a good investment.

 

Really the 'value' of a sports franchise is whatever a buyer is willing to pay for it, and in the case of pro sports teams there is way more demand than supply. There's some value in capital (stadiums etc.) but the main reason the Milwaukee Brewers are worth twice as much as they used to be is because billionaires have doubled their net worth in the last 10 years and the number of sports team toys has remained essentially constant.

 

Just look at what people are paying for MLS teams, which is a sports league that bleeds money

[josh]

I think you have to take off your business hat when thinking about pro sports teams. These are toys for billionaires, like luxury cars or yachts. Nobody buys a Masarati because it's a good investment.

 

This is a good point. Got me thinkin’ on it. Thanks.

[Axman59]

If you feel this strongly I'd suggest you go to a Mets board and pick up some Mets gear while you're at it if you're tired of things here after a dozen posts. Trust me, nobody will miss you.

 

I'm not a Mets fan so I will decline your offer.

[JimH5]

Here's a poignant piece I stumbled across, talking about teams and debt. This quashes my thought that a team's owners can use the equity in the team to secure debt. Maybe.

 

https://www.sportico.com/business/finance/2020/pro-sports-borrowing-billions-in-debt-for-pandemic-1234613560/

 

It doesn't cite baseball specifically, but says that sports league rules prohibit such financing. However, it says that the leagues themselves and lenders have been issuing loans to teams, and that it's not rare.

 

I imagine that the league rules prohibiting the use of teams as collateral is so that the leagues can control to whom franchise ownership is transferred. I don't think it's illegal to seek such a loan, or even against accounting principles, but a group like the MLB ownership group doesn't want a lender to foreclose on a franchise. League owners want to approve who is let into the club.

 

That said, leagues themselves often serve as lenders to clubs, including to offer cashflow assistance. In the case of such loans, I'm not sure what a team has to do to borrow from their league, and at what rates...and what recourse the league would have in the event that a team doesn't repay.

 

Anyway, I thought this added to our conversation...

[wntrtxn21]

Here's a poignant piece I stumbled across, talking about teams and debt. This quashes my thought that a team's owners can use the equity in the team to secure debt. Maybe.

 

https://www.sportico.com/business/finance/2020/pro-sports-borrowing-billions-in-debt-for-pandemic-1234613560/

 

It doesn't cite baseball specifically, but says that sports league rules prohibit such financing. However, it says that the leagues themselves and lenders have been issuing loans to teams, and that it's not rare.

 

I imagine that the league rules prohibiting the use of teams as collateral is so that the leagues can control to whom franchise ownership is transferred. I don't think it's illegal to seek such a loan, or even against accounting principles, but a group like the MLB ownership group doesn't want a lender to foreclose on a franchise. League owners want to approve who is let into the club.

 

That said, leagues themselves often serve as lenders to clubs, including to offer cashflow assistance. In the case of such loans, I'm not sure what a team has to do to borrow from their league, and at what rates...and what recourse the league would have in the event that a team doesn't repay.

 

Anyway, I thought this added to our conversation...

 

WOW, great article that puts a different perspective on finances in MLB. Thanks for finding it and posting the link. It certainly makes sense that leagues don't want their teams to use the franchises as collateral. The money numbers being thrown around is mind boggling.

[Simba2020]

I think you have to take off your business hat when thinking about pro sports teams. These are toys for billionaires, like luxury cars or yachts. Nobody buys a Masarati because it's a good investment.

 

This is a good point. Got me thinkin’ on it. Thanks.

Professional sports teams differ from luxury cars or yachts significantly. Unlike a yacht, baseball teams produce positive annual cash flows. In addition, most definitely not like a yacht, baseball teams have appreciated in value significantly. They may be considered a toy but owning one also serves the dual purpose of offering a great investment. I suspect if teams bled cash each year and there was no chance of the franchise appreciating in value, the number of people wanting to own these toys would dry up. They would let it be somebody else's headache.

[Simba2020]

"franchise value has very little to do with operating revenue"

 

I don't see how that can be true. Operating revenue going to zero would bring franchise values to zero, for example.

 

Confidence in projected operating revenues over... quite a long term... seems to me to be a primary component of franchise value. (Profit being a more direct component, of course.)

 

Maybe it makes sense to suggest that a few years of COVID-induced shortfalls won't affect longer-term valuations. It's not unreasonable to quibble about how player payroll fits into the balance sheet. But the notion that revenue is irrelevant to a business's value is a bridge too far.

 

I'd be eager to hear a more detailed case for that, if you have one.

 

I don't think revenue really matters at all in the long term. Revenue goes to payroll. Revenue goes down, payroll goes down. Value doesn't necessarily change.

 

I think you have to take off your business hat when thinking about pro sports teams. These are toys for billionaires, like luxury cars or yachts. Nobody buys a Masarati because it's a good investment.

 

Really the 'value' of a sports franchise is whatever a buyer is willing to pay for it, and in the case of pro sports teams there is way more demand than supply. There's some value in capital (stadiums etc.) but the main reason the Milwaukee Brewers are worth twice as much as they used to be is because billionaires have doubled their net worth in the last 10 years and the number of sports team toys has remained essentially constant.

 

Just look at what people are paying for MLS teams, which is a sports league that bleeds money

There definitely is a supply and demand issue that has driven up the overall value of sports teams. However, revenues are absolutely important in determining the value of a franchise. Teams trade on a multiple of revenue for a reason. The revenue multiples aren't the same for all teams of course. Big markets like New York, Chicago and LA will have higher multiples than those in Pittsburgh, Milwaukee, Cleveland and Kansas City. Owning a big market team offers greater notoriety, greater growth potential, larger pool of buyers, etc.

 

But there is a reason that the Yankees are worth twice what the Mets are. They play in the same market both with newer stadiums. While owning the Yankees would be a bigger feather in your cap than owning the Mets, it's not worth double. The reason for the difference in value is that the Yankees produce roughly twice the annual revenues.

 

Another way to look at it is let's assume Mark A. was willing to sell the Brewers for $1 billion. After arriving at that decision, Fox comes in and tears up the existing local TV deal and triples the carriage fees. American Family decided to kick in an extra $10 million a year in naming rights. Suddenly the Brewers revenues are up $50 million per year. Which team would you rather own? The team that generates X in revenue or the one that generates X + $50 million? I suspect we would all rather own the latter and accordingly, would be willing to pay more to do so. Thus the franchise value would go up due to the increase in revenues. Certainly Mark A. would not be willing to sell the same team for $1 billion after suddenly adding $50 million in annual revenues.

[CheezWizHed]

Knebel's injuries reduced his performance last year. The risk of him not bouncing back in 2021 (and our financial constraints) made it worth the Brewers trading him to the Dodgers who will pay his ~$5M salary because they believe he can bounce back in 2021. Even more likely in 2022. But no one will pay $5M for Justin Grimm (for example) because he has a history of poor performance.

 

All MLB baseball teams showed the ability to easily make profits in the last 10-15 years. With COVID (like Knebel's injury), the performance of revenue dropped, but the long term viability (somewhat risky in 2021, even more likely to bounce back in 2022) is very good for any MLB team. Thus the short term revenue issues don't impact the long term viability of a team.

 

That is the difference between value and revenue. A franchise value won't drop because of short term revenue problems but certainly will with continued revenue issues. This is why there is no baseball in Montreal anymore.

[owbc]

There definitely is a supply and demand issue that has driven up the overall value of sports teams. However, revenues are absolutely important in determining the value of a franchise. Teams trade on a multiple of revenue for a reason. The revenue multiples aren't the same for all teams of course. Big markets like New York, Chicago and LA will have higher multiples than those in Pittsburgh, Milwaukee, Cleveland and Kansas City. Owning a big market team offers greater notoriety, greater growth potential, larger pool of buyers, etc.

 

But there is a reason that the Yankees are worth twice what the Mets are. They play in the same market both with newer stadiums. While owning the Yankees would be a bigger feather in your cap than owning the Mets, it's not worth double. The reason for the difference in value is that the Yankees produce roughly twice the annual revenues.

 

Another way to look at it is let's assume Mark A. was willing to sell the Brewers for $1 billion. After arriving at that decision, Fox comes in and tears up the existing local TV deal and triples the carriage fees. American Family decided to kick in an extra $10 million a year in naming rights. Suddenly the Brewers revenues are up $50 million per year. Which team would you rather own? The team that generates X in revenue or the one that generates X + $50 million? I suspect we would all rather own the latter and accordingly, would be willing to pay more to do so. Thus the franchise value would go up due to the increase in revenues. Certainly Mark A. would not be willing to sell the same team for $1 billion after suddenly adding $50 million in annual revenues.

 

Great points here--I like the Yankees/Mets analogy.

[djoctagone]

for those who are tabulating 2021 payroll, don't forget that waiver claims cost $100,000.

[Brewers Numbers]

for those who are tabulating 2021 payroll, don't forget that waiver claims cost $100,000.

I thought it was $20,000

[wibadgers23]

https://www.google.com/amp/s/www.bizjournals.com/milwaukee/news/2021/01/07/brewers-attanasio-closes-deal-to-sell-majority.amp.html

 

Mark A closed a deal to sell a majority stake in his investment firm. Would this have any impact on the payroll for this upcoming year? If there was ever a year for him to dig a little bit deeper into his pockets, this would be the year with a lot of teams seemingly not interested in spending much money.

[monty57]

https://www.google.com/amp/s/www.bizjournals.com/milwaukee/news/2021/01/07/brewers-attanasio-closes-deal-to-sell-majority.amp.html

 

Mark A closed a deal to sell a majority stake in his investment firm. Would this have any impact on the payroll for this upcoming year? If there was ever a year for him to dig a little bit deeper into his pockets, this would be the year with a lot of teams seemingly not interested in spending much money.

 

Looks like Attanasio's retirement plan. He's 63, gets a big payout now while continuing to work in a diminished role for five years and then gets his final payout at age 68, when he can finish his career and spend his time cheering for the Brewers. Good for him, he earned it.

 

As to whether this will effect the Brewers' payroll, I'd guess no because the money he just got is for him to be able to live out his life the way he wants. If he takes a chunk of it to put into Brewers' payroll (assuming that would mean it would go over payroll and likely be "lost") then he doesn't have his job to fall back on to replenish it... it's just gone. If anything, being retired would probably mean he's less likely to take extra risk with his personal money.

 

Attanasio has always been willing to go a little over budget if he thinks it's a meaningful move, and I agree with you that this could be a year where a little extra spending could go a long ways. But it's also a year where an owner could lose a lot of money if fans aren't allowed in the stands. If the next couple of weeks tick by and there are still good players without contracts, I still think that Attanasio will jump, and we'll get a good player or two on one-year deals.