"only 5 teams made money"...

http://www.usatoday.com/sports/baseball/stories/2001-12-05-focus-expenses.htm

 

You know, I wonder how many fans baseball has lost because of all this crap. I wonder how many new fans it would gain if they fixed all their problems with revenue sharing and a salary cap.

Here's my deal:
I'm not much of a baseball fan (read: Astros fan). The reason is simple: I just feel like the Astros won't ever do anything simply because they don't have the financial ability to do anything. Of course, there are a few exceptions, like us getting Randy Johnson. We have a great GM, and a great farm system, but I just hate attaching myself to the team, because the thought is always there that we won't be able to afford the players who have the potential to 'get us there' in a few years.

And then the owners go and approve an extension for Bud Selig. I just don't understand baseball. I lost interest in football when the Oilers left, and I have virtually no interest in baseball for the reasons listed above.

How can I have interest when we don't re-sign great/good players like Alou and Castilla, simply because we can't afford them? How can the Astros continue to rely on farm system potential and cheap FA's year in and year out? Personally, I'm just amazed that we've done as well as we have the last few years. We might lock up Berkman and Oswalt, but they'll be gone in a few years, or some other really good player will get his Astros card punched before he leaves/gets traded.

The baseball fan is inside me, but Bud Selig won't let that fan grow. This just sucks.

 

Thanks for the link, shanna. I find it hard to believe that the Stros lost 1.2 million last season (before revenue sharing and interest). How can the Rangers make twice what the Astros do from their media deals, especially since both teams are shown on Fox Sports Southwest?

 

Wait until they sell those teams....That's where they make the money back.

 

<B>Wait until they sell those teams....That's where they make the money back.</B>

Yeah, but that's all a sham. The prices are being inflated for a business that's not making money. Ultimately, the price has to reflect the realistic value of the business and if the business is a permanent money loser, the value has to go down.

Baseball has to be careful -- franchise values will stay high as long as owning a franchise is a "status symbol" for multi-billionaires. If that falters, though, all that value is going to come crashing down (ie, Enron).

<B>How can the Rangers make twice what the Astros do from their media deals, especially since both teams are shown on Fox Sports Southwest?</B>

Sam, good question. I have no idea. I do know that Ch51 is a pretty crappy station for all the away games. I wonder if that half of the Rangers deal is better? (I have no clue)

 

The Rangers deal is as good as it is because Tom Hicks bought a TV station, the Stars, the Rangers and the Mesquite Rodeo and started work towards making his own regional sports network. Fox Sports had to make a knockout deal in order to keep that competing channel off the air.

One of the things about these numbers, though, is that they include non-cash expenses (including things like depreciation, etc). Without a more detailed accounting of the revenue and expense numbers, we can't really know anything about the true situation facing Major League Baseball.

Like Paul Beeston once said, "Under generally accepted accounting principles, I can turn a $4 million profit into a $2 million loss."

In previous years, Andrew Zimbalist went through Florida's claimed loss of $29 million and found that under the shady bookkeeping and hidden revenues, the Marlin actually made a $14 million profit.

And that sort of thing appears to have happened here, too, these numbers show the Giants with a loss while the Giants themselves told the San Francico Chronicle that they made a small profit of around $1 million after debt and all other payments for 2001.

Until the books are completely opened and an independent auditor is allowed to conduct an audit, it's hard to believe any numbers that come out of the mouths of MLB. Remember, they have a vested interest in making it appear that their teams lose significant money.

 

Braves and Dodgers don't draw as well as other teams with huge payrolls.

I am very skeptical about all of this.

 

Interesting and timely set of numbers considering that the owners will begin negotiating a new contract with the player's union in the not too distant future.

 

On CNN, Bud Selig was being questioned by Congress earlier today. He said that the Player's Union had accepted these numbers to be accurate (or least, whatever #s were given to Congress, which I presume are the same as these). If Selig was lying, he just committed a major, major felony, so I presume there's at least some accuracy to these.

Edit: He also said this is the first time baseball has come to Congress with so detailed numbers and numbers on individual teams. I assume that means that the numbers in USA Today are the ones he's referring to.

 

They can be accurate numbers and still not paint an accurate picture.

For example, AOL Time Warner can make the Braves lose money while not doing anything illegal. They just don't pay market value for the TV rights. Because they own the station and the team, there's nothing inaccurate about the numbers themselves (and certainly nothing that violates GAAP), but it doesn't give an accurate picture of the situation.

The Marlin used to not count any luxury box revenue at their stadium. That money went to the stadium operating company instead of the team. Of course, the Stadium operating company and the team were owned by the same company, but that effectively shifted revenues away from the club itself and painted a much more dire picture of the team's financial health. This is actually a common dodge used by several teams in several sports (Including Tom Hicks' Dallas Stars. I'm not sure how the luxury box revenues are tallied at the Ballpark). Again, nothing to go against GAAP, but also not an accurate picture of the health of the franchise.

And that's just a few examples. There are many, many more. We have to see every line item to know whether these numbers paint an accurate picture of the health of a particular team. It really is true that a $15 million profit could easily be turned into a $30 million loss just by choosing different columns to write the numbers down in. The numbers would still be "accurate" and still be in line with Generally Accepted Accounting Principles, but they wouldn't paint an accurate picture of the franchise's financial health. They aren't even showing us a full income statement. If Bud is interested in proving his point, he'll actually open the books rather than just giving us a very small glimpse at the final numbers.

 

<B>They can be accurate numbers and still not paint an accurate picture. </B>

Agreed, but if that were the case, why would the MLBPA even give any credibility to them? Selig presented it as though MLBPA agreed that MLB really was losing this kind of money. I guess Selig could be twisting Fehr's words, but seems like that would totally undermine his credibility as soon as Fehr is called (assuming he is) to clarify. Then again, Selig isn't that bright, so who knows.

 

On another note, I heard that during the Enron Field negotiations, McLane wanted to open his books but Selig would not let him until after the next MLBPA negotiations. McLane said he would do after this to show he's losing money. It will be interesting to see if, after the new agreement happens, McLane does open his books.

 

Here is the funny part. Talk about a hex. The Cubs lost $1,700 because of the postseason. Uhm, they didn't even make it and still took a loss!!

 

I loved watching Selig get grilled by congress.



12/06/2001 - Updated 05:41 PM ET



Selig testifies in antitrust hearing

By Ronald Blum, The Associated Press


WASHINGTON — Baseball commissioner Bud Selig took his case for eliminating teams to Congress on Thursday and was greeted by skeptical committee members and hostile questions from Minnesota's governor. Selig testified before the House Judiciary Committee, which is considering legislation to repeal baseball's 79-year-old antitrust exemption. He said baseball owners would suffer a $232 million operating loss this year and claimed it was largely due to players' salaries caused by free agency and salary arbitration. Minnesota Gov. Jesse Ventura, another witness who was seated next to Selig, had a hard time believing the commissioner's claims of large losses by owners. "It's asinine," Ventura said, interjecting an answer while Selig was being questioned. "These people did not get the wealth they have being stupid."


Ventura also expressed doubts about the need for a new stadium for the Minnesota Twins, which along with the Montreal Expos is believed to be slated for elimination. Selig claims the Twins need a new ballpark to survive, but the Minnesota Legislature has failed to support public financing.

Some congressmen appeared dumbfounded by Selig's vague answers to some questions.

When Rep. Robert Wexler, D-Fla., asked Selig to say on a 1 to 10 scale whether the Florida Marlins would remain in existence, Selig responded, "We're there now and let's hope it all works out."

Wexler didn't know what to say and was asked by committee chairman James Sensenbrenner if he was speechless.

"With all due respect, if fans are going to get those kinds of nebulous responses from the commissioner of baseball, there's almost a compelling reason from the whole lot of us to support the legislation so we can get some direct answers," Wexler said.

Rep. Anthony Weiner of New York City ripped Selig with a sarcastic comment on the Milwaukee Brewers, the team the commissioner used to own.

"I've been particularly impressed with your management of the Brewers, because it's always a good weekend when the Brewers come to town," Weiner said.

Sensenbrenner, who is from Wisconsin, drew laughs when defended his home state team, "Those words will be stricken from the record."

Selig campaigned for the owners' bargaining position in their labor negotiations with players and said it would help small-market teams such as the Cincinnati Reds.

"The bottom line is the system needs to be fixed," he said. "Cincinnati is the prototype of why we need to change the system. If baseball is to succeed, it needs to succeed in middle America.

"The fight is here, to be very candid with you, for the Cincinnatis of the world."

Union head Donald Fehr did not attend the session because of the union's executive board meeting in Texas, but his brother, Steve, spoke for players and opposed Selig's view.

"The players have long believed it is not in their interest to accept a salary cap," Fehr said. "They are, in general, opposed to a salary cap. They believe in a market-based system."

Selig released an unprecedented amount of financial information on the 30 major league teams to the committee.

For 2001, only the Chicago Cubs, Kansas City Royals, Milwaukee Brewers, New York Yankees and Seattle Mariners finished in the black.

The Expos' total losses after interest payments were $12.8 million last season; the Twins lost $3.8 million. Selig estimates this year's losses among the 30 teams at a combined $519 million.

According to the nearly 60 pages of documents obtained by USA TODAY, only the Yankees and Cleveland Indians operated profitably during the 1995-2001 period while baseball had operating losses of $1.4 billion. The Yankees, who were in the World Series five times during the period, had profits of $93.6 million. The Indians earned $39 million.

Some points found in the financial information:

The Arizona Diamondbacks won the World Series, but it was a costly title. The team lost $44 million in 2001.
The New York Yankees got the most from local television, radio and cable contracts in 2001 ($56.8 million). New York's other team, the Mets, received the second most ($46.3 million). The Montreal Expos received the least from local media sources ($536,000).
The Yankees also spent the most in 2001 ($201.3 million in operating expenses) but also had the most revenue ($242.2 million). The Yankees also paid the most into the revenue-sharing pool ($28.5 million). The Expos received the most from the pool ($28.5 million) followed by Minnesota ($19.1 million) and Florida ($18.6 million). Not coincidentally, these are the teams most discussed when candidates for contraction arise.
The Yankees netted the most in 2001 in regular-season gate receipts ($98 million) and also made the most in the postseason ($16 million). The Boston Red Sox, whose home stadium, Fenway Park, has the smallest seating capacity in the majors, was second in regular-season gate receipts ($89.7 million).
The poorer teams can't increase their spending enough to prevent a growing gap between the rich and poor teams. In one chart, baseball divides the 30 teams into four quartiles based on payrolls. Just one team (San Diego, 1998) lower than Quartile 1 advanced to the World Series between 1995 and 2001. During that span, 224 postseason games were played, with only five teams from Quartiles 3 and 4 making the playoffs. They won just five games and all lost in the first round.
As industry revenue has risen from $1.38 billion in 1995 to $3.55 billion in 2001, the gap in local revenue and payroll between the high-revenue clubs and low-revenue clubs continues to grow. In 2001, for example, the Expos had local revenue of $9.8 million and a payroll of $30.6 million. The Yankees had local revenue of $217.8 million and a payroll of $120.9 million.
Average payroll increased by 17% in 2000 and 13.1% in 2001. The average payroll has grown 98.4% from 1995 ($33.12 million) to 2001 ($65.72 million). The increase in the top two payroll groups remains greater than in the other two.
Local revenue grew 141% from 1995 ($1.2 billion) to 2001 ($2.8 billion). From 1995 through 2001, five teams averaged local revenues of more than $100 million, while seven teams averaged local revenues less than $40 million.
The difference in average local revenue between the first and last payroll group was $47.7 million in 1995. The difference was $115.6 million in 2001.
Since 1993 the total industry debt increased 429%, from $593 million to $3.14 billion. Average club debt is approximately $105 million.
Deferred compensation commitments in 2001 total an additional $1.11 billion.

http://www.usatoday.com/hear.htm

 

Three people are up for the same major accounting job and are being interviewed by the CEO.

The CEO interviews the first candidate, show him the books and asks, "How much money did we make last year?"

After careful consideration, the candidate answers, "6 million dollars"

The CEO goes to the second candidate and asks him the same question, after more careful consoderation, this candidate answered, "three million dollars"

The CEO then went to the third candidate and showed him the books and asked him the same question, without skipping a beat the candidate replied, "How much did you want to have made?"

Guess who got the job?


As has been already eloquently stated, major league baseball franchise routinely, and systemically stretch the actual truth to accomodate their vision that they lost an inordinate sum of money.

Example : The Atlanta Braves say they lost a "mammoth" sum of money last year - so they signed an old pitcher with 10 career saves to a 3yr, 30 million dollar contract to close for them. Riiiiiiight.

Although I can't say for sure why the Player's Union has validated these numbers, I can take a few guesses. First off, if they painted baseball owners as greedy, and furtive as they are, I imagine there would be a general disgust among the ticket buying public. I imagine it would be nearly impossible to get a new stadium built, or even to get funds to expand the old ones. I imagine that there would be a sharp decline in attendance at parks, and a decline in TV ratings, which would depreciate the value of previously lucrative TV contracts.

Players know this, they know they can paint the owners as somewhat greedy, but that they can't go too far for risk of alienating the public, especially on the heels of the 94 canceled World Series.