Payroll vs Revenue?

[Yoosh]

So there has been a lot of talk lately of payroll. Max payroll etc etc....

 

What I came across is a few discrepancies in Revenue vs Payroll. Using these two references listed below to produce our revenue and payroll figures (and profit). The two teams I used are the twins and the phillies.

 

2011 Revenue and profit

Twins: 213 million (26.5 million in profit/income)

Phillies: 239 million (8.9 million in profit/income)

 

2012 Payroll figures

Twins: 94 million

Phillies: 173 million

 

How is it with only 20 million more in revenue the phillies can achieve a payroll $79 million higher and still turn a 9 million dollar profit? To calculate operating expenses I used the following calculation: Total revenue - Payroll - Profit(income)

Phillies

$239mil - $173mil - $9mil = $57mil in operating expenses.

Twins

$213mil - $94mil - $26.5mil = $92.5mil in operating expenses

 

So the twins use $35 million more a year in operating expenses than the phillies do? Is their (the phillies) stadium deal that much more rich or are the twins that cheap? Is my math out to left field? My level of understanding in this subject is minimal at best. Hopefully one of the better educated posters out there could help me understand if I'm crazy or my train of thought is correct and we the Minnesota fans are getting a bum deal?

 

http://www.forbes.com/lists/2011/33/baseball-valuations-11_land.html

 

http://espn.go.com/mlb/team/salaries/_/name/min/minnesota-twins

 

 

P.S. Hello from Italy!

[gunnarthor]

Honestly, it's all speculation until the owners are forced to show the books. Forbes is making guesses, too.

 

The Dodger divorce showed a little bit of how owners can move money around so it doesn't seem like the team is making profit while making a lot of it. -shrug- I'm of the opinion that the Twins could easily spend much more every year if they wanted to without hurting their bottom line but, like most teams, don't.

[Highabove]

So there has been a lot of talk lately of payroll. Max payroll etc etc....

 

What I came across is a few discrepancies in Revenue vs Payroll. Using these two references listed below to produce our revenue and payroll figures (and profit). The two teams I used are the twins and the phillies.

 

2011 Revenue and profit

Twins: 213 million (26.5 million in profit/income)

Phillies: 239 million (8.9 million in profit/income)

 

2012 Payroll figures

Twins: 94 million

Phillies: 173 million

 

How is it with only 20 million more in revenue the phillies can achieve a payroll $79 million higher and still turn a 9 million dollar profit? To calculate operating expenses I used the following calculation: Total revenue - Payroll - Profit(income)

Phillies

$239mil - $173mil - $9mil = $57mil in operating expenses.

Twins

$213mil - $94mil - $26.5mil = $92.5mil in operating expenses

 

So the twins use $35 million more a year in operating expenses than the phillies do? Is their (the phillies) stadium deal that much more rich or are the twins that cheap? Is my math out to left field? My level of understanding in this subject is minimal at best. Hopefully one of the better educated posters out there could help me understand if I'm crazy or my train of thought is correct and we the Minnesota fans are getting a bum deal?

 

http://www.forbes.com/lists/2011/33/baseball-valuations-11_land.html

 

http://espn.go.com/mlb/team/salaries/_/name/min/minnesota-twins

 

 

P.S. Hello from Italy!

 

 

Welcome to the Forum. You may currently be holding the distance record for a member.

Forbes has a very fine group of forensic Accountants. I will wager that their numbers are very close. A sports Teams revenue streams are pretty easy to track.

[diehardtwinsfan]

well, to answer the original question, assuming those numbers are accurate, one ownership group is far more willing to spend to win than another....

[Boom Boom]

I can't speak for the Phillies but the Twins money numbers are notoriously hazy and vague. Forbes is a legitimate source but if they're trusting the Twins numbers they're probably somewhat off.

 

What I've heard frequently since the opening of Target Field is that the Twins still have one of the worst television deals in MLB. So plugging one hole only magnifies another.

[nicksaviking]

There is a lot less tolerance for losing in Philedelphia than there is in Minnesota. Here we say "Aw shucks, maybe next year." In Philly, the entire organization gets death threats from half the population. Maybe it's time we start throwing beer bottles and snowballs at Santa to show management we are serious about winning too. Minnesota Nice certainly helps to encourage tolerance for unimpressiveness.

[powrwrap]

I think by using Philadelphia as an example you have found an anomaly. There have been several factors that combined at the same time to cause payroll to go up. They've won their division 5 years in a row, been to the World Series twice. Before winning the division 5 times in a row, they finished 2nd three times in a row. This kind of success in a big market will drive up payroll. Owners can see the payback if they spend the money. The Phillies committed money to a bunch of players during their run-up of success. In 2009 their payroll was 'only' $113M. I'd like to know what their revenues were then (the year after they won the World Series.) Now they have a bunch of players with one or two years left on their expensive contracts. If they don't re-sign Cole Hamels it could be a signal that they don't see a return on their investing in payroll anymore.

 

The Twins can't see a return on spending on payroll so they won't do it at this time.

 

Look at the payroll vs. revenue ratios. The Phillies are out of whack at payroll being 73% of revenues. The Yankees, with $198M in payroll are at a ratio of 46.3%.

 

Also, as diehardtwinsfan stated, one ownership group is more willing to spend than another. Perhaps they are making emotional decisions rather than business decisions in Philadelphia. And let's not forget the fans expectations in Philadelphia. LOL!

[IdahoPilgrim]

I also am somewhat suspect of the numbers, because the books of neither team is public record and we could be very well comparing apples and oranges.

 

That being said, I think the question being raised here is not what should the Twins payroll be, but are their other expenses out of whack compared to other MLB teams. Payroll we've got a pretty good handle on - the numbers are readily available. We don't know how much is being spent in the back office, on scouting, on medical staff, on administration, etc. I think Yoosh is suggesting that there is fat there that needs to be trimmed and which could then be reinvested in player payroll.

[DPJ]

The Twins have one of the worst TV deals in the league which I believe they just resigned a year or two ago. How the 12th biggest market in the US, NTM that Twins TV ratings have always been strong sign for pennies. While the San Diego Padres just signed a huge new TV deal which earns them 25 million a year now and could go as high as 75 million makes no sense to me.

 

Plus it's pretty damn clear the Twins are looking to make a profit and not a little one.

[Guest USAFChief]

I have suspected for three years now that the Pohlads, rather than making their stadium construction contribution out of their pockets (as promised), are instead making that contribution out of stadium revenues instead.

 

That would explain a lot if true, would mean they haven't actually contributed a dime towards stadium construction costs.

[drivlikejehu]

I have suspected for three years now that the Pohlads, rather than making their stadium construction contribution out of their pockets (as promised), are instead making that contribution out of stadium revenues instead.

 

That would explain a lot if true, would mean they haven't actually contributed a dime towards stadium construction costs.

It's even worse than that, because the new stadium significantly increased the value of the franchise. So in reality their "contribution" to the stadium is just a slight reduction in their massively increased overall return.

[powrwrap]

I have suspected for three years now that the Pohlads, rather than making their stadium construction contribution out of their pockets (as promised), are instead making that contribution out of stadium revenues instead.

 

That would explain a lot if true, would mean they haven't actually contributed a dime towards stadium construction costs.

According to the agreement between the Twins and the Ballpark Authority the Twins had to provide advanced funding to start construction of Target Field with the stipulation that if the Ballpark Authority defaulted on their end of the deal the Twins would get their money back. How much was this advanced funding? Who knows, but I bet it wasn't chump change.

 

If you believe the Twins are making installment payments directly to the Ballpark Authority, please provide some proof. A more likely scenario is that the Twins obtained financing for their $130M contribution elsewhere, paid the amount in total to the Ballpark Authority and are now repaying that loan.

[Shane Wahl]

According to the agreement between the Twins and the Ballpark Authority the Twins had to provide advanced funding to start construction of Target Field with the stipulation that if the Ballpark Authority defaulted on their end of the deal the Twins would get their money back. How much was this advanced funding? Who knows, but I bet it wasn't chump change.

 

If you believe the Twins are making installment payments directly to the Ballpark Authority, please provide some proof. A more likely scenario is that the Twins obtained financing for their $130M contribution elsewhere, paid the amount in total to the Ballpark Authority and are now repaying that loan.

Sure they may have paid the money right away, but that doesn't mean that they are "paying themselves back" now. I am not saying that they are, but just that your point doesn't refute what USAFChief claimed.

[Thrylos]

What kind of revenues are those? Ticket revenues? Revenues from all sources? Something just does not add up on the Phillies' side. I will give you an example: Last year they pretty much sold out every game and their TV contract (that expires in 2015) is for $24M annually. Their TV provider is the Comcast Sports Network. The Phillies own a third of it. So they profit additionally from that venture....

 

And checked that Forbes' article... Here is the catch: they have a footnote on "revenue" that defines it as: "Net of stadium revenues used for debt payments." whatever that means...

[Boom Boom]

What kind of revenues are those? Ticket revenues? Revenues from all sources? Something just does not add up on the Phillies' side. I will give you an example: Last year they pretty much sold out every game and their TV contract (that expires in 2015) is for $24M annually. Their TV provider is the Comcast Sports Network. The Phillies own a third of it. So they profit additionally from that venture....

 

And checked that Forbes' article... Here is the catch: they have a footnote on "revenue" that defines it as: "Net of stadium revenues used for debt payments." whatever that means...

Wow. The Twins TV contract is for $29 million annually. I didn't realize the Phillies had it so bad.

 

I wonder what the Twins payroll would look like if their Victory Sports ship had stayed afloat. Probably about the same...

[powrwrap]

Sure they may have paid the money right away, but that doesn't mean that they are "paying themselves back" now. I am not saying that they are, but just that your point doesn't refute what USAFChief claimed.

Just what is the contention?

 

Look, if the Twins took out a loan to pay the Ballpark Authority up front and then use revenues to repay the loan....is that really worthy of criticism?

[DuluthFan]

I note that you are using LAST YEAR'S revenue numbers but THIS years payroll.

I think coming into this season everyone, including management, did not project that this year's team would be able to contend for a playoff spot. With that as the projected performance, what did you think the projected revenue would be? More? Not likely. You would have to assume attendance would be down from the past two years. If attendance is down, then concessions and ballpark revenue would most likely drop as well. How much was it projected to drop? I don't know but the Twins did the math. I am sure the Phillies did the same. The Phillies were coming off a playoff season and were projected to contend again. If they thought they would be in the situation they are in right now, they may have spent differently. The Phillies are now involved in trade rumors because they have to adjust their spending to take into account a reduced revenue projection for the rest of the year.

[Guest USAFChief]

Just what is the contention?

 

Look, if the Twins took out a loan to pay the Ballpark Authority up front and then use revenues to repay the loan....is that really worthy of criticism?

The contention is "Twins ownership contributed little if any of their own money towards stadium construction. They are using ballpark revenues to fund that "contribution."".

 

That, in turn, obviously affects funds available to operate the club, including payroll.

 

Whether that is worthy of criticism is in the eye of the beholder. IMO, that's not exactly within the spirit of agreements made when the stadium was approved.

[powrwrap]

I note that you are using LAST YEAR'S revenue numbers but THIS years payroll.

 

Yes, I noticed that too, but it's OK to use those numbers as payroll in the upcoming year will be based in part on revenues of the current year.

 

The Phillies were coming off a playoff season and were projected to contend again. If they thought they would be in the situation they are in right now, they may have spent differently. The Phillies are now involved in trade rumors because they have to adjust their spending to take into account a reduced revenue projection for the rest of the year.

 

Correct. The Phillies spent when they knew they would have revenues and a chance to win. Their nice run is likely over.

 

BTW, welcome to Twins Daily Forums.

[powrwrap]

IMO, that's not exactly within the spirit of agreements made when the stadium was approved.

So if you were with the Ballpark Authority you would have put language in the agreement that the Twins contribution must come from the owners of the Twins and it may only include revenues NOT derived from the operation of the Twins?

 

Sheesh? Really?

[Boom Boom]

The contention is "Twins ownership contributed little if any of their own money towards stadium construction. They are using ballpark revenues to fund that "contribution."".

 

That, in turn, obviously affects funds available to operate the club, including payroll.

Whether that is worthy of criticism is in the eye of the beholder. IMO, that's not exactly within the spirit of agreements made when the stadium was approved.

You could be right, Chief. Let's say hypothetically the Twins were not using ballpark revenues to fund their contribution. If that was the case, do you think the Twins would be spending more on players?

 

If not, IMO it really doesn't matter which pocket the money is coming out of.

[bteichr]

The contention is "Twins ownership contributed little if any of their own money towards stadium construction. They are using ballpark revenues to fund that "contribution."".

This is a difference without a distinction. Since they own the team, ballpark revenues belong to the Twins owners. So whether they reach into their personal bank accounts or use ballpark revenues is irrelevant. We may be dissapointed that they don't spend more on payroll, but that has nothing to do with how they are paying for their share of the stadium.

[Highabove]

I believe the Twins are getting the cash from the naming rights for Target Field

According to Bloomberg Business Week , the deal is 125 million over 25 years.

That should more then pay for the Pohlad's personal contribution.

[powrwrap]

the deal is 125 million over 25 years.

That should more then pay for the Pohlad's personal contribution.

The Twins' contribution was $130M.

[Guest USAFChief]

This is a difference without a distinction. Since they own the team, ballpark revenues belong to the Twins owners. So whether they reach into their personal bank accounts or use ballpark revenues is irrelevant. We may be dissapointed that they don't spend more on payroll, but that has nothing to do with how they are paying for their share of the stadium.

Huh?

 

a. They pay for the $130M stadium contribution out of their personal wealth. Up front. No stadium revenues are used to pay for their share of construction costs. All stadium revenues are available for operating expenses of the team.

 

b. They don't pay for the $130M stadium contribution out of their personal welath. They borrow the $130M, pay interest for a couple years during construction, and then stadium revenues are used to pay for the loan covering their share of contruction costs. Some amount (let's use $15m/yr) is taken from stadium revenues to pay the principle/interest on the construction loan.

 

You don't see a distinction there in how much of annual revenue is available for payroll?

[Guest USAFChief]

So if you were with the Ballpark Authority you would have put language in the agreement that the Twins contribution must come from the owners of the Twins and it may only include revenues NOT derived from the operation of the Twins?

 

Sheesh? Really?

In retrospect, perhaps the state should have demanded such language.

 

Since that obviously didn't happen, the Pohlads are free to do as they wish. And I'm free to think that's somewhat dishonest on their part, and contributes to payroll not meeting what I think are reasonable expectations as a fan, and reasonable expectations from those who ARE paying for the stadium (of which I am not, on any kind of regular basis.)

 

Not that it matters, but do you work in some sort of PR role for the Pohlad family?

[powrwrap]

Huh?

 

a. They pay for the $130M stadium contribution out of their personal wealth. Up front. No stadium revenues are used to pay for their share of construction costs. All stadium revenues are available for operating expenses of the team.

 

b. They don't pay for the $130M stadium contribution out of their personal welath. They borrow the $130M, pay interest for a couple years during construction, and then stadium revenues are used to pay for the loan covering their share of contruction costs. Some amount (let's use $15m/yr) is taken from stadium revenues to pay the principle/interest on the construction loan.

 

You don't see a distinction there in how much of annual revenue is available for payroll?

The assumption is that they've got $130M lazing about with which to use as their contribution. If so, they are faced with a business decision. Should they take that $130M out of whatever investment vehicle it is currently in and pay the ballpark contribution with it or should they borrow money at ridiculously historical low interest rates and then pay off that loan? And then use the interest paid on the loan as an expense on their tax return.

 

Gee, I wonder what I'd do...

[powrwrap]

Not that it matters, but do you work in some sort of PR role for the Pohlad family?

No, but I'm obviously, transparently, working on a section of my future resume as I'm typing this.

[YourHouseIsMyHouse]

The Pohlad's are a very shady family, but I am really not concerned with the payroll. I'm happy with a 100-110 million budget. It's a little below that now, although I'm sure they'd spend a little more if this was a contending team.

[Obie]

Professional sports franchise economics are far beyond my understanding. What I find curious are two inconsistent fan rants: a) abuse heaped on the Pohlads for not spending more on personnel and abuse heaped on the Pohlads for paying market value for Mauer and Morneau.