Digging Into a MLB Team's Economics

koufax32 said:

Forbes has a great rundown of every team’s financial situation. According to them, CLE had a total of $284 mil. In revenue with player expenses costing $144 mil. Cot’s has them at a tick under $151 mil.

https://www.forbes.com/teams/cleveland-indians/

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I'm not an accountant. From the perspective of the layman, it's hard to see how the numbers go from $284 million of revenue AFTER debt payments according to the footnote and pay the players $144 million and "only" make a profit of $31 million. Where did the other $109 million go? Into the gorge of accounting hijinks peril?

Rough Carrigan said:

I'm not an accountant. From the perspective of the layman, it's hard to see how the numbers go from $284 million of revenue AFTER debt payments according to the footnote and pay the players $144 million and "only" make a profit of $31 million. Where did the other $109 million go? Into the gorge of accounting hijinks peril?

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Travel
Rent
Spring Training expense
Accountants expense
Infield dirt
Minor leagues
Scouts
Baseballs
Etc

Rough Carrigan said:

I'm not an accountant. From the perspective of the layman, it's hard to see how the numbers go from $284 million of revenue AFTER debt payments according to the footnote and pay the players $144 million and "only" make a profit of $31 million. Where did the other $109 million go? Into the gorge of accounting hijinks peril?

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They didn't make a profit of $31 million according to that, it's their EBITDA (earnings before interest, taxes, depreciation, and amoretization). Their actual profits would probably be well below that figure.

As for where did the other $109 million go, do you think a MLB organizaiton is just the players? Hell, outside of the baseball organization (which would also include all the scouts, coaches, front office analysts, etc) you also have an entire operational organization with the requisite accounting, legal, marketing, customer service, etc staffs and budgets.

While league-wide revenues and player salaries are diverging, there is an argument to be made that it's simply a byproduct of teams operating increasingly as rational economic actors. Much of that revenue increase is being driven by TV deals, which (particularly in the case of MLB-wide deals) are neither attributable nor affected by individual players. Wins are only particularly valuable in a specific range (an extra win adds virtually no additional revenue up until, IIRC, the mid 70s, and that revenue is fairly negligible until you get into the 80s) with the only high value wins being those that typically would make you more likely to make the playoffs (from mid 80s to mid 90s). That's a really narrow band for where a team can say "if we add this player, the extra wins they provide will bring in more revenue than the salary we're paying".

Lose Remerswaal said:

Travel
Rent
Spring Training expense
Accountants expense
Infield dirt
Minor leagues
Scouts
Baseballs
Etc

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They don't pay the scouts shit. They don't pay minor leaguers shit. They don't pay the ushers, vendors and ticket takers shit. They mostly don't payer the office staff that much. If the entirety of those four levels of staff totals $4 million it would surprise me. And that would still leave $105 million. The minor league teams also have their own revenue, don't they?

I'm deeply suspicious that Cleveland Indians Inc is being charged twice what they should by Dolan Air Charter, getting charged twice what they should for hotel bookings by Dolan Accommodations, etc etc

Rough Carrigan said:

They don't pay the scouts shit. They don't pay minor leaguers shit. They don't pay the ushers, vendors and ticket takers shit. They mostly don't payer the office staff that much. If the entirety of those four levels of staff totals $4 million it would surprise me. And that would still leave $105 million. The minor league teams also have their own revenue, don't they?

I'm deeply suspicious that Cleveland Indians Inc is being charged twice what they should by Dolan Air Charter, getting charged twice what they should for hotel bookings by Dolan Accommodations, etc etc

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You realize the Indians have over 100 scouts, right? So even if the pay mid range of $40k per, there’s your $4M.
Then 9 minor league teams.
Then signing bonuses for draft picks.
Then travel expenses - air, hotels, per diems, etc for 40 guys a night.
Then all their own front office staff.
Then they pay the concessions company.
Then they pay the field staff.
Then they pay the coaches.
Plus the minor league coaches.
Then they pay the grunts and clubhouse guys.
Then they pay to have stadium cleaned.
And the people working the ticket booth.
And the marketing people trying to sell packages.
Also, they have utilities.
And upgrades to stadium.
And equipment.

And as noted, taxes ok that revenue.

But yeah, they only have $4M in expenses.

Thank you. Math seems hard to Rough.

Spring Training alone is expensive. Field and stadium maintenance is expensive. And there are approx 100 ushers at a full ballpark. They arrive 2 hours before game time and leave 30 minutes after, so 5.5 hours work for a 3 hour game. And they are unionized (they get break(s) during a game.

I left out Field Manager and coaches and GM and all his assistants. And the rest of the Front office (VP of this, that, and everything, and you know they all make good money). And if the team has a charitable affiliation there is likely 7 figures going to charity each season.

Rough Carrigan said:

They don't pay the scouts shit. They don't pay minor leaguers shit. They don't pay the ushers, vendors and ticket takers shit. They mostly don't payer the office staff that much. If the entirety of those four levels of staff totals $4 million it would surprise me. And that would still leave $105 million. The minor league teams also have their own revenue, don't they?

I'm deeply suspicious that Cleveland Indians Inc is being charged twice what they should by Dolan Air Charter, getting charged twice what they should for hotel bookings by Dolan Accommodations, etc etc

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The minor league teams are (unless they're a directly owned affiliate) their own entity with their own revenue and costs, the players just aren't one of the latter.

You're also ignoring all costs that aren't literal payroll, including everything from: insurance, equipment costs and park upkeep, rent, advertisements and promotions (which is almost certainly a larger proportional outlay for a smaller team like the Indians than it is for a major market team like the Red Sox), customer service and ticket services, among the myriad and sundry of other costs that it takes to run a business. If player salaries are basically the "cost to create the product" (i.e. in accounting parlance, COGS) then the Indians reported breakdown of roughly 50% of total revenue on COGS and another 40% on operational expenses sounds completely reasonable. What I'd be interested in hearing is how they are accounting for things like broadcast rights. Based on the footnotes to the Forbes piece, that revenue number does not sound like it includes TV revenues, which the Indians could theoretically be classifying as "non-operating" income (I'm not an accountant, so I'm not sure how feasible that is, but it doesn't strike me as immediately impossible. That would give them a much higher net income (final "profit") than the number they're talking about publicly. But again, I have no idea over whether that's actually happening...it's just a much more reasonable way the Indians could actually be deflating their public profitability, unlike your wildly inaccurate hypothesis.

Papelbon's Poutine said:

You realize the Indians have over 100 scouts, right? So even if the pay mid range of $40k per, there’s your $4M.
Then 9 minor league teams.
Then signing bonuses for draft picks.
Then travel expenses - air, hotels, per diems, etc for 40 guys a night.
Then all their own front office staff.
Then they pay the concessions company.
Then they pay the field staff.
Then they pay the coaches.
Plus the minor league coaches.
Then they pay the grunts and clubhouse guys.
Then they pay to have stadium cleaned.
And the people working the ticket booth.
And the marketing people trying to sell packages.
Also, they have utilities.
And upgrades to stadium.
And equipment.

And as noted, taxes ok that revenue.

But yeah, they only have $4M in expenses.

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Where do you get the idea that the Indians have 100 scouts? Did you only look at the Wikipedia page that lists Red Ruffing and Cy Slapnicka among them, two guys who've been dead for more than 30 years?
https://en.wikipedia.org/wiki/Category:Major_League_Baseball_scouts_by_team

It's probably half that but you can look around all you want and not find anyone saying specifically on line that team X has this many scouts. About the best you can do is something like the article below from 2017 which says the Braves have as many as 30 scouts watching games at the height of the high school and college seasons. And according to everything I've read, the average scout salary is, unfortunately. less than 35K. They don't pay any of the people you list shit.

https://www.mlb.com/braves/news/braves-scouting-director-preps-for-2017-draft/c-214921442

Feel free to check out these financial statements from a decade ago:

https://deadspin.com/5615096/mlb-confidential-the-financial-documents-baseball-doesnt-want-you-to-see-part-1
https://deadspin.com/5619509/mlb-confidential-part-2-seattle-mariners
https://deadspin.com/5619951/mlb-confidential-part-3-texas-rangers

At least at that time, operating expenses were => player salaries. They may not have increased at the same level but they surely have increased. Hell, just the Analytics departments alone are costing quite a bit now.

Rough Carrigan said:

Where do you get the idea that the Indians have 100 scouts? Did you only look at the Wikipedia page that lists Red Ruffing and Cy Slapnicka among them, two guys who've been dead for more than 30 years?
https://en.wikipedia.org/wiki/Category:Major_League_Baseball_scouts_by_team

It's probably half that but you can look around all you want and not find anyone saying specifically on line that team X has this many scouts. About the best you can do is something like the article below from 2017 which says the Braves have as many as 30 scouts watching games at the height of the high school and college seasons. And according to everything I've read, the average scout salary is, unfortunately. less than 35K. They don't pay any of the people you list shit.

https://www.mlb.com/braves/news/braves-scouting-director-preps-for-2017-draft/c-214921442

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Yes, you’re absolutely right. I did eff that up. Doesn’t change the point. Here’s something you should look at.

http://cleveland.indians.mlb.com/team/front_office.jsp?c_id=cle

But you’re going to stick with that they only have $4M in expenses and Dolan is double dipping? That’s before anything else, that’s just office staff.

new backup catcher acquired.

Is this tangent even necessary? $4M on staff is laughable on its face, not to mention as a figure of overall operating expenses. They clear that multiple times over before they even get out of the C-Level. They probably pay that much dealing concessions too. Let’s just stop.

Papelbon's Poutine said:

Yes, you’re absolutely right. I did eff that up. Doesn’t change the point. Here’s something you should look at.

http://cleveland.indians.mlb.com/team/front_office.jsp?c_id=cle

But you’re going to stick with that they only have $4M in expenses and Dolan is double dipping? That’s before anything else, that’s just office staff.

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Read what I said. Somebody trying to be clever misrepresented what I said. I said that I'd be surprised if their payments to other payroll besides MLB players exceeded $4 million. Maybe that's a little low but not outrageously. And I'm skeptical that everything else makes up $103-105 million. Though, a big cost that someone brought up that I had forgotten was the cost of draft signing bonuses which, along with foreign signings must total about $10 million.

That's an interesting list but are there more than 20 people there being paid more than 50K? Some of those peoples jobs are described as maintenance/custodial. There's no way Dolan's being a good guy and paying them a lot of money.

I'm skeptical that any team is really honest in its accounting. The classic recent example revealed to the general public was that Liberty Media's required public filings showed that the Braves were being drastically underpaid for their tv rights by the TBS arm of the same company.

Rough Carrigan said:

Read what I said. Somebody trying to be clever misrepresented what I said. I said that I'd be surprised if their payments to other payroll besides MLB players exceeded $4 million. Maybe that's a little low but not outrageously. And I'm skeptical that everything else makes up $103-105 million. Though, a big cost that someone brought up that I had forgotten was the cost of draft signing bonuses which, along with foreign signings must total about $10 million.

That's an interesting list but are there more than 20 people there being paid more than 50K? Some of those peoples jobs are described as maintenance/custodial. There's no way Dolan's being a good guy and paying them a lot of money.

I'm skeptical that any team is really honest in its accounting. The classic recent example revealed to the general public was that Liberty Media's required public filings showed that the Braves were being drastically underpaid for their tv rights by the TBS arm of the same company.

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I read what you said. Then I pointed out all the other things you’re leaving out, unless you’re trying to say everything listed as not major league payroll doesn’t count. And it was me that pointed out signing bonuses for draft. And about a dozen other expenses.

I don’t disagree teams probably are dishonest in accounting (as most any large business is) I just think you’re far far far off base here.

Honestly, what would you estimate their utility and maintenance bills to be even?

Upkeep and maintenance on the stadium is going to be a lot more than $4M in a season.

That doesn't include the annual stadium upgrades that every team does.

lexrageorge said:

Upkeep and maintenance on the stadium is going to be a lot more than $4M in a season.

That doesn't include the annual stadium upgrades that every team does.

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Are you sure that it costs the Indians more than $4 million every season for upkeep and maintenance of Progressive Field? Are you sure that they're even the ones paying it however much it is? They only paid for a small fraction of the cost of that park. And are you sure that the Indians upgrade that park annually? I'm not asking in a combative or sarcastic way. Are there any references to confirm those things?

Rough Carrigan said:

Are you sure that it costs the Indians more than $4 million every season for upkeep and maintenance of Progressive Field? Are you sure that they're even the ones paying it however much it is? They only paid for a small fraction of the cost of that park. And are you sure that the Indians upgrade that park annually? I'm not asking in a combative or sarcastic way. Are there any references to confirm those things?

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Start with a cite they only paid a fraction - in parlance, yes, there was a tax for city subsidy but was it a pittance or the Marlins fleecing Miami? I’m aware they put in a ‘sin tax’ to help but by what %?

Then come come back and ask us to explain how a company how has literally probably a thousand employees, plus expenses, minus taxes *might* have more than $4 in expenses. Also, what you think it costs to upkeep and maintain a friggin stadium.

I had to sift through a lot of articles and web sites to finally get a number but the article below says that the "DC Sports and Entertainment Commission" sets aside $1.5 million per year for the maintenance of the Nationals' park, which, is a very nice park. If there's a better reference to corroborate $4 million per year I didn't see it.
https://ggwash.org/view/32079/was-nationals-park-worth-it-for-dc

I have a copy of a city controller's report on stadium lease comparisons for 15 MLB cities that I got about 20 years ago. Frankly, I cannot recall how I acquired it so I don't want to just scan it and post it but it is quite interesting to learn about the various items listed...cost/rent/term/gate/concessions/advertising/naming rights/enhanced seating/non-game events/maintenance/capital improvements/parking. It discusses the differences for game/non-game events with splits to team/public/city and eye-opening from the point of view on how various cities and clubs handled things.

I've been trying to type it out, omitting all references to specific clubs, but that is very time consuming and I'm really tied up with another project.

Rough: Did you read the Deadspin links to actual Financial Statements I put up earlier in this thread? I think you should take a look before you keep stating your estimates.

And if you don't think there are 20 people being paid $50K who aren't players on the team then you're living in 1975. Start with the coaches and manager, the GM, the Assistant GMs, all those Vice Presidents and AVPs, etc. You're not even close.

Rough Carrigan said:

I had to sift through a lot of articles and web sites to finally get a number but the article below says that the "DC Sports and Entertainment Commission" sets aside $1.5 million per year for the maintenance of the Nationals' park, which, is a very nice park. If there's a better reference to corroborate $4 million per year I didn't see it.
https://ggwash.org/view/32079/was-nationals-park-worth-it-for-dc

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Please quote the post where I said they pay $4 per year for park maintenance...I’ll wait..just like I’m still waiting on your cite for the amount the ‘fraction’ they paid to build it.

Did Dolan like run over your dog or something?

Rough Carrigan said:

Read what I said. Somebody trying to be clever misrepresented what I said. I said that I'd be surprised if their payments to other payroll besides MLB players exceeded $4 million. Maybe that's a little low but not outrageously. And I'm skeptical that everything else makes up $103-105 million. Though, a big cost that someone brought up that I had forgotten was the cost of draft signing bonuses which, along with foreign signings must total about $10 million.

That's an interesting list but are there more than 20 people there being paid more than 50K? Some of those peoples jobs are described as maintenance/custodial. There's no way Dolan's being a good guy and paying them a lot of money.

I'm skeptical that any team is really honest in its accounting. The classic recent example revealed to the general public was that Liberty Media's required public filings showed that the Braves were being drastically underpaid for their tv rights by the TBS arm of the same company.

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Are you accounting for how much they are paying Mark Shapiro and Terry Francona in that $4 million figure? The bench, pitching, and hitting coaches are 6 figure salaries too. Draft and international free agent bonuses are $10-12 million.

I agree with you that they pay most non major league players shit. The average salary of a player not on the 40 man roster is about $10,000.

Plympton91 said:

The average salary of a player not on the 40 man roster is about $10,000.

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Hyperbole is the enemy of the argument.

In A ball? Sure, $10k or less happens. But not in AA or AAA.

Papelbon's Poutine said:

Please quote the post where I said they pay $4 per year for park maintenance...I’ll wait..just like I’m still waiting on your cite for the amount the ‘fraction’ they paid to build it.

Did Dolan like run over your dog or something?

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Sorry, it was another poster. I responded to both you and him in the same post without making that clear. My mistake.

Lose Remerswaal said:

Hyperbole is the enemy of the argument.

In A ball? Sure, $10k or less happens. But not in AA or AAA.

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15 of the 50 players in AA and AAA are on the 40 man roster, so they’d be included already in the payroll figures. The minimum AAA monthly salary is $2150 per month for 6 months, and $25 a day meal money for road games. Marginal veteran free agents on split contracts make significantly more, sure. But for a typical guy drafted in the 10th round and moving up 1 level at a time in his 4th or 5th pro season, it’s maybe $14,000 I guess not $10,000.

I looked at Cleveland's schedule for 2018, and I counted a total of 39 flights between cities over the course of the season. I assume that is typical, so I rounded to 40. Doing a quick google search brings up that chartering a 737 costs about $25K for standard 4 hour block time, plus fuel expenses (~$3K/hour). Maybe baseball teams get a break and it's $20K/flight plus fuel (which may very well be half of what they actually pay; the estimates for chartering a 737 had quite a bit of variability). There's close to $1M right there.

As for hotels, MLB teams tend to stay at large hotels near the stadiums such as Marriott and Hilton. Assuming MLB gets a break, the minimum would be an average of $150/nt (basically half of the individual room rate at a lot of these hotels). I assumed about 40 rooms for players, coaches, trainers, etc. There's another $500K for the 80+ nights a team spends in a hotel.

There are other travel costs to consider: charter busses for getting to/from the airports, individual flights for minor leaguers called up the last minute or for next day's starting pitcher, etc. It's not hard to see yearly travel costs approach $2M or more for a typical baseball team.

Plus per diems when on road.