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Scott Boras and Rob Manfred by Joe Cantiello Scott Boras was recently called a
liar by Rob Manfred. Why? Because Boras said that some MLB teams are
receiving a combined total of about $80 million to $90 million a year from
MLB’s revenue sharing and Central Fund programs and then spending a
comparative minuscule amount on payroll and pocketing the difference for a
tidy profit. Manfred’s exact words:
“Just like when he ( Guess what? One of
the sources The
Pirates’ President
Frank Coonelly then joined in the fray by saying the $35 million Central
Fund figure Boras is using is "inaccurate" to which Madden makes
the admission that “… Coonelly is right.” And then says, “When I
first reported the $75 million booty the Pirates received, I broke it down
to $35 million in central fund monies and $40 revenue sharing. In fact, it
was just the opposite, but the bottom line is, it still adds up to $75
million.” And
the bottom line is that using the Pirates revenues Boras is within at
least $5 million of being totally correct in his accusations of MLB teams
and the fact that certain teams don’t use the money from baseball to
support their on-field product by paying players either through free
agency or by providing raises for their growing talents, achievements and
contributions to the betterment of the teams under this present
discussion. But
the real twist of the knife that Madden applies in his rebuttal to
Manfred’s assertion that "no one club is getting $80 or $90 million
in combined revenue sharing and Central Baseball funds," is that the
Florida Marlins did, in fact, receive $40 million from the two revenue
streams, central fund and revenue sharing, for a total of: $80 million! And
the final coup de grace by Madden is this bon mot: “And here is another
figure Coonelly will probably want to refute: According to my sources, the
Pirates were one of the teams to make a profit this year - approximately
$14 million, which is not bad for a team with 99 losses and 17 straight
losing seasons. What we do know is Pirates chairman Bob Nutting is not
re-investing his revenue sharing in payroll, although there are disturbing
rumors in Boras
also says Manfred can simply prove him wrong by just opening the books. The
point is this is an issue I have covered in my recent rebuttal to the call
from many well meaning and intentioned people when they ask for a salary
cap to establish a more competitive playing field for teams in MLB.
The system can and will work… revenue sharing through donations
by the wealthier teams to the less wealthy teams and from the distribution
of shared national money… if teams will only use the money they receive
for its intended purpose. To make their teams more competitive on the
field of play by hiring better players. Whether
the sums being discussed here are $75 million or $80 million, or even if
Manfred and others are correct and the sums are smaller say about $45
million or $50 million … (which in my opinion with the data I have
gleaned from the net and other sources is hardly likely) … that is a
tidy sum that could be used to hire on some very good baseball talent for
a team. If the team’s front office did their homework and due diligence
they might not hire on a Sabathia or Teixeira but they certainly could
afford to take on the salaries of players of say a Bobby Abreu who went
for about $5 million in 2009 to the LA Angels. A Bobby Abreu who could
provide about 15 to 20 home runs, 100 RBIs and 100 runs scored in the
middle of a team’s lineup. Gee,
that $80 million number again. Stark
says here are his facts: • Central
fund (includes national TV, radio, Internet, licensing, merchandising,
marketing, MLB International money): Each team, from the Marlins to the
Yankees, gets the same central-fund payout. And that check comes to
slightly over $30 million per team if you deduct the $10 million in
pension and operations fees, or just over $40
million (my emphasis)
if you don't. • Revenue
sharing: This sport shared $400 million in revenue this year... Now every
club's payout is different. But the five neediest teams -- which we
believe to be the Marlins, Pirates, Rays, Blue Jays and Royals -- averaged
somewhere in the vicinity of $35
million in revenue-sharing handouts per team. And that still left over
$200 million -- more than $20 million a club -- for the rest of the
"payees" to divvy up. (my emphasis) • Local
TV/radio/cable: Good luck getting these exact figures. But we know that 29
of the 30 teams make at least $15 million a year in local broadcast money,
and no team rakes in under $12 million. My math
says, and this is before using the Starks’ media money, the numbers of
shared revenue by at least five teams is $75 million. Which puts Madden,
and And if
in fact the media money is considered the financial figures surpass even
Boras’ allegations of how much money is involved before a team sells one
ticket, one hot dog or even one over inflated beverage of each fan’s
choice. Using Starks minimum of $12 million for media rights, and then
adding to his numbers for the central fund distribution and then the
maximum revenue share figure, a team could receive; the total is at a
minimum of $87 million and could easily go beyond $90 million. So
following this logic Starks then makes the next logical leap: “…(there
are) a minimum of a dozen teams… that aren't spending that same number
-- $80 million -- on their major league payroll. So it isn't just Scott
Boras who has the right to ask: What's up with that?” Stark
then says, “Even if you ignore the regularly scheduled They
see the payroll figures we see. They see a dozen teams that have wiped at
least $30 million in salaries off their books (in departing free agents)
this winter. So while they recognize that certain teams -- like the Tigers
-- have had a rough year, agents everywhere are clearly skeptical that
those cries of poverty they're hearing from almost every club are legit. But
when people like us try to separate reality from illusion with actual
numbers, what we hear from the powers that be at MLB is that even those
numbers are misleading.” Manfred
himself counters the allegations by saying "When you evaluate a
baseball team, you need to understand that these teams have expenses in
addition to the 25-man roster on the field. They have multimillion-dollar
benefit costs. They have the cost of paying 15 players on the [40-man]
major league roster who are not in the big leagues. "They
have the cost of their player-development system, which averages $15
million [per team] a year. They have the cost of acquiring [amateur]
players through the [June] draft and internationally, which averages $9
million [per team] a year. So for anybody to take a club's revenues and
say that 60 percent should go to major league payroll, that's just a
fundamental misunderstanding of this business." And
Stark counters Manfred by saying, “ Don't teams also have streams of
income we haven't discussed here? Parking? Nine-dollar beverages?
Sponsorships? In-park souvenir sales? Etc., etc.? And the
fact is, yes, they do. But exactly what are these numbers and do they
justify Boras’ allegations or Manfred’s refutations? Let’s
use the team du jour and look into a team’s finances for 2001 through
2008, the Pittsburgh Pirates: CRACKING
THE FINANCIAL CODE Breaking Down Baseball’s Books in the 21st Century Team: Pittsburgh Pirates Principal Owner: Kevin McClatchy Most Recent Purchase Price: $92 million (1996) Stadium: Facility Cost: $228 million Percentage of Stadium Publicly Financed: 85% Facility
Financing: The Pirates contributed $40M to the project. The remaining
amount came from the state, county, and city as part of an $809M sports
facilities/convention center financing proposal that included Heinz Field
for the Steelers. UPDATE: In May 2000, the Pirates and the city reached a lease agreement called “Plan B.” The plan calls for the Pirates to pay $100,000 in annual rent and contribute the proceeds of its 20-year, $30M million naming rights deal with PNC Bank. The team will also pay $375,000 a year in ticket surcharges and 5% of the gate over $44.5 million and 10% over $52 million. Finally, the team has agreed to pay 5% of the concession revenue earned over 42% of the aggregate gross and 10% of concession revenue over 45% of the aggregate gross, along with 5% of gross food and beverage revenue over $9 per capita.
(Use an average
of $25.00 x 81 for club seat cost or $2,025 as year. Pirates have 2800
club seats so the yearly income from these seats would be about
$5,670,000. The club seat value is based on the assumption that all club
seats were sold in the inaugural year of In 1999 In 1995, Kevin McClatchy was investigating buying the
Pirates and his interest was significant because of his promise to keep
the team in Only the year before, Pirates had announced that
because of their financial situation that they needed a new ballpark to
survive in Mayor
Tom Murphy was not especially keen on losing, on his watch, what was a
110-year-old institution and a part of There
was one detail that still needed to be ironed out however with the
mayoral-led plan for ballpark financing in The mayor and his consortium had to turn to what was
referred to as the Regional Asset District tax (RAD) to get the county’s
share of the funding. RAD was a special 1% In July 1998, the RAD board approved, after some contentious debate, using their revenue to finance new stadiums for the Pirates and coincidentally the local NFL team, the Steelers. The Board voted to authorize the funds with a bare-minimum majority. The outcry from Pittsburgh citizens was large and vociferous regarding the mayor’s and the commission’s end-around play to establish county funding but when the state legislature approved the last piece of the financing puzzle, by voting their share in February 1999, the financial pieces were now all in a row to fund the construction of a new stadium for the Pirates. After a relatively simple and
easy selection of land on the north shore of the While By the fact that the Pirates exist in Pittsburgh and
the market area is saturated with other games -- with other nearby cities
and their own broadcasts as well as the broadcasts of larger cities that
have further-ranging broadcast signals and successful (winning) programs,
the viability of a cable company paying large sums to broadcast Pirates
games is just not that appealing. Simply put, cable companies make money
from advertising that they show during a broadcast of a team’s games. If
the ratings (the market share of the audience during the showing of the
game) are not large, or at least appreciable, then companies will not pay
a premium to buy advertising time during Due to the fact the Pirates are a losing team it goes hand in hand that their games are also sparsely attended and they struggle to even attain a fan base of over 1.6 million people. Outside of 2001, when PNC opened for business, the Pirates have only surpassed 1.8 million in attendance twice (2005 and 2006) and have only averaged about 1.67 million in the other five years since 2001. Either by virtue of their ill-attended games or other rationale or any combination of reasons the Pirates’ owners fall back upon, the team has historically kept their player payroll among the bottom third of the thirty MLB teams. In 2005 the player payroll was about $33.6 million, which was the second-lowest MLB payroll at the time. In 2005 only three teams, with the Pirates being one of them, were below $40 million in payroll. Their payroll in 2005 was less than 50% the $73 million average payroll for a MLB team. A Pittsburgh Post-Gazette article pointed out that in 2005 the Pirates did increase their payroll from their 2004 outlay -- by $1.4 million -- while two of their geographical neighbors in similar markets, Cincinnati and Milwaukee, increased their payrolls by more than 30%. The Post-Gazette projected the Pirates operating profit would be similar to the Forbes Magazine list in 2004 for the Pirates operating profit of $12.2 million. This would be more than $8 million over the average profit of the other 29 MLB teams in 2005. Forbes actually listed the Pirates profits for 2005 at over $21 million while my estimates place their profit at over $26 million. The Post-Gazette then asked:
No real answers were forthcoming in 2005 and, now, in 2009, when many of the same questions are being asked due to the Pirates unloading of players with “large” contracts or due to receive “large” increases in contract money, as little has changed with the Pirates except that they are still losing on the field and they are still making profits. In 2009 Pittsburgh Pirates are making Ben Bouma, an ESPN and TBS producer and former Pirates’ public relations director, who lives in Pittsburgh and calls himself an avid Pirate fan, makes the point that in 2009, “Four players in MLB make $20 million and three of them play in that (Yankees’ Derek Jeter, Alex Rodriguez and Mark Teixeira) infield. (Manny Ramirez is the fourth.) With (most) of the season gone, the Pirates are (now) only on the hook for less than $9 million for the remainder of the 2009.” Bouma’s words are succinct and are notable because as recently as 1997 the Pirates payroll was $9 million – which was $1 million less than the $10 million salary that Albert Belle, of the Chicago White Sox, made that year. And, Belle was 1 of 14 players who earned $7 million or more or were within a least $2 million of the Pirates total 1997 payroll. And, in 2009 the Pirates players’ salaries totaled $25 million (as of August 2009) ... considerably less than what Alex Rodriguez earns in one season, and by $10 million the lowest in the majors. Bouma goes on to say that the highest-paid player on the Pirates in 2009 doesn’t even make the MLB average salary of $3.26 million. Pitcher Paul Maholm is the most expensive guy on the books, a $2.5 million hit for the 2009 season. Bouma basically decries this reality in Bouma points out that, according to a Wall Street Journal article, the Pirates received from MLB’s revenue sharing program $27 million based on all of the thirty MLB teams’ local revenues for the 2008 season. The Pirates also received another check from MLB’s Central Fund (that all MLB teams received) of about $35 million. In other words, the Pirates pulled in about $62 million before any one buys a Pirates ticket, pays for any concessions or before any revenue that the Pirates will make from local media or advertising agreements comes in. Plus, as Bouma notes, there will also be an eventual distribution of monies from MLB’s hugely successful MLBAM, (MLB Network, MLB.com, MLB.TV and extra innings package) that the Pirates will receive. Bouma speaks out loud in a prominent voice the words
and feelings of the general fan that exists in The problem and the reasons that ultimately elicit Bouma’s words and many other Pirate fan’s words is that the Pirates, since 2004, have been profitable. They have been profitable to the tune (depending on whose financial numbers you use) of about $12 million to close to a possible $35 million plus a year. Highly recognized Forbes magazine’s yearly figures peg the Pirates operating profits as being between $12 million and $25 million for the time period of 2004 to 2008. The Pirates have made all of this money despite
continual and consistent losing. They
have made all of the money despite a player payroll that ranks in the
lower third of the thirty MLB teams and at about an average of $44 million
for the last eight seasons. Even team president Frank Connelly, in 2008,
admitted to the The Pirates’ finances are kept private, as is their business right as a private corporation. Thus the public may never know exactly how profitable the Pirates actually are; but the fact remains under present MLB financial structure the Pirates are rewarded for being failures and are in fact making money. Connelly says that the Pirates use their profits,
which as has been pointed out is significantly due to the success,
largesse and socialism of MLB, to improve the team. They do this not
necessarily on the field but in other ways such as enhancing player
development and through investments. He points out to the Tribune-Review
that the Pirates, in 2008, were in the process of building a $5 million
baseball academy in the Back in May 2005, Dejan Kovacevic of the Pittsburgh Post-Gazette wrote an article on Pirate finances titled Pirates profit is there but where is it going? In that article Kovacevic says the Post-Gazette asked then Pirates managing general partner Kevin McClatchy if the Pirates had spent all their 2004 (about $13 million) revenue share money on their minor league system and McClatchy said “No, we didn’t pour all of it into the system... we’re trying to get the team back afloat to balance the ship with our debt.” Kovacevic points out in the article that paying debt is not an allowable use of revenue share funds. McClatchy eventually denied using any revenue share money that the Pirates received in 2004 to pay down debt and declared “we are in full compliance with all regulations” regarding using revenue share funding. Curiously Connelly was never, to my knowledge, called upon to clarify his declaration that the Pirates may have used some of their profits that were in large part funded by revenue sharing to pay down debt. In 2001 the Pittsburgh Pirates payroll was at about $57.8 million. In 2001 when the Pirates débuted PNC Park the
Pirates received about $1.8 million in revenue share funds. The Pirates
drew almost 2.5 million general admission fans. Their 65 brand new luxury
suites were 100% sold for terms of three, five and seven year contracts
for about $80,000 a season. And, most of those contracts were for the
seven-year term. The ultimate value the Pirates were to derive from those
suites was not just measured in the revenue generated by the fact a suite
was sold but by whether the owner of the suite utilized the suite and then
how he utilized the suite throughout the season. Corporations in Coincidentally, this is a revenue source that is in all likelihood underreported or easily disguised by teams as being “part” of overall luxury suite revenue. Industry standards estimate revenue from suite concessions usually brings ball clubs an additional 15% to 25% in revenues over the cost of the initial rental fee for the suite. Therefore in 2001 the Pirates not only received approximately $5.2 million in new suite revenues but they also received a low estimate of at least $1.04 million in food and beverage revenue from the people who attended games at PNC in those suites. And the more corporations used those suites for business purposes then in all likelihood the more the extra percentage of revenue was closer to the 25% number than the lower 15% number. The Pirates in 2001 also were experiencing, because
of this shiny new exhibition palace, a spike in attendance revenues from
not only general admission sales but from premium or club seats also.
In 1996 attendance at Three Rivers Stadium ended at about 1.3
million people, which was a low point during the time leading up to PNC
opening. The highest attendance during the five years preceding PNC
(1996-2000) was about 1.7 million people. In 2001 an average of just under
31,000 fans attended games in the Pirates new ballpark for an estimated
attendance of about 2.4 million gate admissions. These 2.4 million
admissions was an improvement of over 1 million tickets sold in 1996 and
most, if not all, bought food, drink and souvenirs while attending a game
at the band new (After deducting parking and tickets for a family of four from the Fan Index Cost (FCI) and then dividing by four the remainder a figure spent by each fan at PNC in 2001 can be estimated at about $13. Multiplied by their gate attendance that would mean the Pirates grossed an estimated $29,235,480 and then if they received the industry standard from their concessionaire of about 45% of that gross they netted an estimated $13,155,966.) At this point in 2001 the Pirates have already
realized revenues directly relayed to Now, add in club seat revenues, MLB Central Fund
distributions and to their revenue share and other revenue streams and the
Pirates total revenues before expenditures in 2001 is over $120 million
which is related due to the fact attendance increased by about 77% in at Now deducting the Pirates payroll, $53.2 million, and expenses of about another $54 million which are inclusive of the Pirates player development, spring training, equipment, travel, coaching and front office staff, administrative costs and stadium expenses and the Pirates before taxes and debt are left with an operations profit of about $12.8 million dollars in rounded off numbers using “ballpark” figures. Forbes which is generally used as a rule of thumb for judging whether teams are profitable says the Pirates made $12,980,000 in operating profits in 2001. (My numbers place their operating profits at $7,555,756 in 2001.) From 2001 on until 2008 the Pirates’ financial
numbers take a downturn. A clarification is necessary, however. Attendance
revenues and associated other revenues such as concessions take a
downturn. The Pirates’ franchise, due to MLB distributions, is primarily
funded by the Central Fund and revenue sharing and is a profitable
enterprise except for a slight downturn in 2002 and 2003. (Forbes
lists the Pirates as losing $1.6 million and $300,000 respectively in each
of those years while l have numbers that indicate the Pirates made a
profit in 2002 of about $9.12 million and lost about $3.7 million in 2003.
The Pirates average, according to Forbes, about $18 million a year in
profits between the years 2004-2008. (My numbers put the average at about
an average of $22.7. However in 2006 I list in their revenues a MLB
distribution of $11.3 million that each of the 29 clubs received when the
sale of the The impact of the above is that the Pirates plead poverty and thus each year conduct fire sales of their player talent who are about to receive significant raises in contracts. Yet unless there is some information that both Forbes and I are unaware of, the Pirates are a very profitable group who could at the very least raise their player payroll above the insanely low figure that Bouma says that the Pirates are responsible to pay their players by the end of the 2009 season. In fact considering they began the year with a payroll around $50 million plus and probably will wipe out about 33% to maybe 50% of that remaining debt of the prorated salaries in 2009 and future debt of the bonuses and salary owed to the traded players, that leaves them with only about $9 million due in player compensation in 2009 according to Bouma -- and who knows exactly how much money off the future books owed to players. The Pirates, when the revenue check comes in the mail next year, should once again be awash in wealth and profitability gratis from MLB. (Which we now
know when combined with the Central Fund check is about $75 million.) Andrew Zimbalist, a noted professor of economics at Allen Sanderson, another economist from the Sanderson is clearly making a direct reference to the Pirates ownership group. The Pirates, along with a few other clubs, are prime examples of what Sanderson is referring to in his quotes from the Post-Gazette article. Specifically, that teams with so-called low revenue who spend low amounts to fund their on-the-field product could now profit even though they were losers because of revenue sharing. Finally, it should be noted that Forbes in its yearly financial figures not only estimates each team’s profits or losses but also places a value on what the team is worth on the open market if it was for sale. In April 2009, when the 2008 numbers were released, the Pirates were valued at $288 million. When general managing partner McClatchy’s group purchased the Pirates in 1996 they paid $90 million for the franchise. By 2001 when PNC opened they were listed by Forbes with a value of $108 million which represented a 12.5% increase in value in just five years on the owner’s investment. By 2005 when the Post-Gazette article was written, the Pirates’ value was at $218 million, which represents a phenomenal increase of 100.1% increase in the team’s value since the Pirates began playing at PNC in 2001 and an even more phenomenal increase of value since McClatchy’s group purchased the Pirates in 1996 of 142%. The lesson is that whether teams show an operating profit or loss or a even a profit or loss after “earnings before interest, taxes, depreciation and amortization” (EBITDA) the true value of a team is not realized until the team is ultimately sold. In no case in recent memory has any major league team been sold for a loss. Even the Montreal Expos’ owners did not fare badly when all was said and done. (See the
Nationals and Marlins sections on the revenue-sharing project, coming soon
to Informative Sports, and the
certain references to Jeffry Loria and John Henry throughout.)
Now let’s look at some more
intriguing numbers. Starting in 2001 we know for a fact (okay commissioner
Bud Selig’s facts but none the less expressed numbers as facts before
Congress) that MLB distributed $24,401,000 to almost ever team in both
leagues except for Maury Brown, (Biz of Baseball)
writes “…that a funny thing happened starting last year: reports on
revenue-sharing in Major League Baseball dried up. While there was plenty
of stories dealing with ownership rhetoric (i.e. the Yankees complaining
about the system, and low-revenue making clubs calling for a salary cap),
there were no stories on the amount of money being transferred from payors
to payees. Since the institution of the system in baseball, you could
count on at least one solid story from The Associated Press on the matter.
But, over the last two years, there has been nothing. The reason? Sources
within baseball appear to have decided not to release the figures.”
Brown
(http://www.bizofbaseball.com/index.php?option=com_content&view=article&id=3293:how-reports-on-revenue-sharing-figures-in-mlb-have-dried-up&catid=26:editorials&Itemid)
goes on to report “In the interest of those that look at revenue-sharing
in baseball, I have compiled what is believed to be the only years where
figures for all 30 clubs were released to the public. Note that the
figures for 2002-2003 by way of The Associated Press are the most accurate
while the figures from the Wall Street Journal from 2005 are rounded.
Partial 2006 figures from Philadelphia Inquirer are provided, as well.” (Browns
numbers are in table side bar which has additional figures that have been
gathered from various internet and newspaper sources.) Jorge
Costales, an avid Marlins fan and a CPA has also compiled some interesting
financial figures and data. In an interview with Hardball Times (http://www.hardballtimes.com/main/article/interview-jorge-costales-business-of-baseball-fiend/)
he says “While Forbes
provides the most vital elements of MLB’s financial puzzle, there were
gaps to be filled on the revenue side. Namely, the breakdown between the
local vs. national revenues—Forbes provides the revenue from gate
receipts and the total revenues. John
Brattain (wrote in his article) "The Loria and Short of it,"
March 5, 2008, for Hardball Times. He has a lot of detail on what the
Marlins have received, including they were slated for $25 million in 2008.
Given their payroll was about $22 million, they started off with money in
the bank. Less than 3 weeks after Mr. Brattain's piece came out, the AP
published a story on how smart the Marlins were because Arod made more
than their whole payroll. The AP story appeared everywhere and took the
focus off what really goes on in revenue sharing and put it back where MLB
is determined to keep it.” All of
these sources give evidence that give proof that Manfred, as the
spokesperson for MLB, is setting up a well known ruse or smoke screen that
is commonly used in many other circles which in fact is sometimes
contradictory to his own previous made statements. Michael
Bloomberg did it in his recent NY mayoral race. And the pharmaceutical
companies and the insurance industry are doing it now regarding the
national health issue as they have already spent about $600 million to
discredit a national health care plan as I write this article. All use
either misdirected half truths or scare tactics to divert the attention
from the real issue at hand. In this case from the fact that MLB gives out
large sums of money… millions and millions of dollars to teams to spend
on bettering their on field product yet they do not do so. But his
ruse, this tactic, by Manfred is not anything new. Manfred has been doing
this since at least 2000. Noted sports economist Andrew Zimbalist wrote in
his “Rob Manfred, what planet are you
on?” in August 28, 2000 (http://www.sportsbusinessjournal.com/article/10547)
“Oy vey! Rob
Manfred, what planet are you on? I don't believe there is one accurate
sentence in (his words) "Zimbalist swings, misses with evaluation of
MLB's financing”, to my Aug. 7 column on MLB's Blue Ribbon Panel report. Let me
begin with Manfred's most troubling accusation — that I breached an
understanding regarding the use of financial data provided to me by MLB in
1990. Manfred writes that MLB gave me the data on the "representation
that [I] would provide an evenhanded analysis of the quality of that
information." Huh? I asked for team revenue data so I could do
econometric estimates of the value of output produced by players, and that
is what I did. I did nothing else with that data and, indeed, I could do
nothing else because it contained no details — not even the level of
detail appearing on an income statement. The subsequent critiques I have
written on baseball accounting have nothing to do with the summary revenue
data provided to me in 1990. Despite Manfred's belief that these critiques
constitute an "amateurish attack" on baseball's financial
accounting, they are fully in accord with the observation I cited from
current MLB COO Paul Beeston. Next
Manfred asserts: "First and most important, Mr. Zimbalist ignores the
fact that the Blue Ribbon Panel's analysis and recommendations are not
based on any claim of financial woes by baseball." Excuse me? After I
criticize others for dismissing the panel's report just because of its
assertion of widespread financial woes, I write: "These and other
shortcomings, however, have little to do with the main thrust of the
report's analysis." Then,
according to Manfred's litany of my transgressions, "Zimbalist goes
on to criticize the Blue Ribbon Report's analysis of franchise values on
the basis that it covers only a limited time period." Come again? My
only sentence vaguely related to this point is in criticism of the Michael
Ozanian-Kurt Badenhausen op-ed in The Wall Street Journal. Manfred
presses his view further: "Zimbalist proceeds to endorse an analysis
of franchise values done by Ozanian and Badenhausen." What can I say?
Please read my article to learn that I did the opposite. Finally
there are claims that the only experience I have in professional baseball
is a stint consulting with the players association and that I have not
seen MLB financial information since 1992. Solidly wrong on both counts. Rob
Manfred is MLB's executive vice president for labor and human resources.
One presumes that he will be MLB's point man in the forthcoming
negotiations with the players association to reach a new
collective-bargaining agreement. Baseball fans can only hope that he
reacts to Don Fehr with more reason than he has reacted to me. Then in 2002 Zimbalist again must
respond to another Manfred counter attack (http://www.sportsbusinessjournal.com/article/9110)
when Manfred “…maintains
that I have no business addressing the issue of baseball's finances
because I have ‘not had access to such detailed information in more than
a decade.’ But shall we trust Manfred's sense of numbers if he believes
that there are more than 10 years between 1995 and 2002? In point of fact,
I have seen detailed financial records of several teams since 1995,
sometimes because my advice was being solicited. But the real point is
that the argument in my Dec. 24 column was not that I knew what MLB's
combined bottom line was in 2001, only that the numbers presented in
Commissioner Bud Selig's report to Congress were too incomplete to be
useful. Consider the following. Manfred
criticizes me for ‘assert[ing] there is bloating in MLB's central
office.’ For the record, the actual quote is: ‘Might there be some
bloating in the central office?’ But, more important, Manfred explains
there is no bloating and that the central office's budget of over $180
million ‘included substantial investments in baseball's Internet
business as well as moneys withheld to deal with the uncertainties
surrounding baseball's current labor situation’ (read: war chest in case
of a work stoppage). Manfred
makes my point for me. The funds invested in MLB's budding Internet
business and the labor unrest war chest are NOT operating expenses and do
not reflect the EBDITA or operating income of baseball's teams. So, if
there were, say, $100 million budgeted for these purposes, then MLB's
combined operating loss, according to Selig's figures, would fall from
$232 million to $132 million. To this, many other adjustments (see my Dec.
24 column) would have to be made to get a meaningful sense of the
industry's economic health. Next,
Manfred takes me to task for assigning such a low value of $140 million to
80 percent of NESN and wonders whence the figure emerged. The answer: I
spoke with individuals from two of the different groups bidding for the
Red Sox who gave me figures of between $120 million and $160 million for
100 percent of NESN. The number I used suggests a value of $175 million.
And, contrary to Manfred's puzzling claim, there is absolutely nothing
"inconsistent" between this estimated value and the notion of
synergies across ownership properties. There's
more to be said, but enough is enough.” The evidence both from people refuting
Manfred’s thinly veiled counter attacks accusations of MLB playing loose
with the finance numbers and with certain teams not using MLB money for
its rightful intent is stultifying. (For the record Andrew
Zimbalist was eventually employed by MLB during the last CBA negotiations
to change the revenue-sharing formula with the goal of improving upon its
contribution to greater competitive balance.) Manfred is to MLB
what Dick Cheney was and is to the Republican Party, i.e., its chief
attack dog and obfuscator of the facts. He is the principle and primary
sleight of hand artist with the facts. He sounds off with a lot of bluster
and fury that absolutely signifies nothing so that the real issue gets
hidden and thrown by the wayside. No one should ever not listen to any
opinion on any subject. Each person should always gather all the
information and facts no matter from what source they are from. Hear all
the information and opinions you can. Listen to all opinions but then use
your own common sense and use as Agatha Christies’ Hercule Poirot says
your “little grey matter” and think for yourself. Underneath the Look at the
situation like this: Recently
I read how MSNBC said that “Exxon Mobil Corp. reported that profits from
July to September dropped 68 percent…” and then immediately said that
the profits were “to $4.73
billion, or 98 cents
a share”. (http://www.msnbc.msn.com/id/33531739)
(See also: http://www.alternet.org/workplace/84439/)
Suddenly that 68%
“loss” didn’t seem so bad. And closer to home
the medical insurers and providers and the pharmaceutical companies employ
the same tricks. In one breath it is how much their costs are and how much
their profits have dropped yet they still reap how much in real money on a
yearly basis? Enough profit so
that they can spend about, according to some published reports (New York
Daily News 11/23), the small fortune of $600 million in lobbying costs to
fight the legislation that would create a national health care plan in the
US. And this is the same
tactic that MLB and Manfred are using when they attempt to discredit
anyone who has even a slightly discouraging opinion on baseballs financial
status. Baseball as an industry is making beau coup billions. Are some
teams making a lot more than others? Absolutely, yes, they are. BUT, all
teams are making money. It is just that some teams are making money on
other teams labors and investments. The real issue is
certain teams are receiving many millions of dollars and just don’t
spend it. Rather than bitch about the teams that are rich outspending
those poor teams, we should bitch at those poor teams to spend what they
got. Because, if they would just invest the money in their product...
their players… and start becoming competitive and making a run at the
playoffs, and who knows what else beyond, then the people will start going
to their team’s games, and once there, they will start spending some of
their hard-earned dollars on food and beverage and all other sorts of team
inspired paraphernalia. And once businesses start seeing the amount of
people flocking to see their teams then those businesses will also want
access to those people’s wallets through advertising and the selling of
their own merchandise. More people means more money in every possible way
imaginable. That is how capitalism works. Build a product that has a sound
base and then sell it for a going source of revenue. It is what George
did with Yankees, believe it or not. Go back in MLB history to when CBS
owned the Yankees. Go check out how many people were going to the
Yankees’ games back then and how much money the team was earning. Then
fast forward to today and look at what the Yankees have become. The team,
the New York Yankees, is just a small part of the parent corporation,
Yankees Global Enterprises, which is a multi billion corporation of many
other businesses from the Yankees, to a multibillion dollar TV network
(YES) industry, to a concessions company (Legends Hospitality) and to
various other restaurants and other assorted businesses.
From a little simple
baseball team was developed a mega business that is worth more than over a
thousand times Steinbrenner’s initial investment. Not every franchise
can become the Yankees but every franchise can become self supporting and
give its fan base a legitimate hope to relish in a chance to say, as the
Philadelphia Phillies have recently done, “We are the best it the
game!” when their team wins the World Series. But the
ultimate take on all of this is what Stark eventually concludes in his
previously referenced article. He says
“Don't just tax the Yankees. If this sport has problems, they don't
begin and end with the Yankees. At least the Yankees take the revenue they
generate and plow it back into their franchise. At least the Yankees
finance more than just their own little $215 million baseball team. They
also pay $150 million a year (in luxury taxes and revenue sharing) to help
finance everybody else's baseball teams, according to The Wall Street
Journal. (Author’s note: Luxury taxes are used for other MLB purposes and not
doled out to any other MLB teams.) Those
are the rules. That's the system. And that system gives the Yankees a
choice -- to roar beyond the payroll threshold and pay an extra 40 percent
in luxury taxes for doing it. But if they do, they understand both the
upside and the downside of that choice.” So what
does Stark propose? A salary cap? A salary floor? Or both? Actually
he proposes something far more ingenious and simplistic. “Why
not extend the same choice to the teams that opt not to spend what other
teams spend? If the Marlins, Pirates or Padres think it's unnecessary to
spend $70 million or $80 million -- or even $50 million -- on their big
league payroll, hey, no problem. Just tax them for it. That's all. A few
years back, during a previous labor negotiation, MLB proposed a minimum
payroll, which we believe this sport needs. It was the union that rejected
it, for philosophical reasons. We think that was a mistake, but nobody
asked us. So why
not impose the same sort of tax on teams with payrolls below some minimum
threshold, exactly the way baseball taxes teams like the Yankees that
spend over the maximum threshold? That's the official proposal of
Rumblings and Grumblings. How
would it work? Well, we hear teams argue constantly that sometimes, the
only way to get better is to blow up their roster and start over. So we'd
allow for that. First
time a team goes under the threshold (salary floor) … we'd impose no
tax. But if a team stayed below that "minimum" for a second year
in a row, we'd tax it at 20 percent for every dollar below the threshold.
The third straight year, that tax rate would grow to 30 percent. And for
every year afterward, it would be 40 percent. Would
we solve all this sport's problems with that tax? Heck, no. … But it's
one small step toward fixing a broken system. And who knows? Maybe it
might even inspire everyone else to take one giant leap toward repairing
the rest of it.” I
actually like that idea. A lot! Comment on this article to Comments@informativesports.com
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