OT- The bad business of baseball....

[patfanken]

and how it relates to the game of professional football

I just read a report that there are now NINE franchises in MLB who now fall BELOW the acceptable debt limits MLB has set up. This includes 2 cornerstone franchises (Mets and Dodgers, the current AL champions, and former world champion Phillies.

It got me thinking about the costs of the game, since like the Sox, the Phillies sell out every game. Then I started googling.

The capacity of Fenway has several listings, so I settled on the mean of 37,500. Again, according to google the average ticket price at Fenway is a league high of $55 (the league low was $36) So when you do the math, the Sox get about $169MM in revenue from the gate. The bad news is that their payroll (just for players) is around $162MM. And that number will probably grow as the season wears on as the Sox have to add players. Safe to say that when all is said and done, ASSUMING the Sox sell out all their games the total gate of the most successful franchise in the league will just pay for the salaries of
the players.

It will not cover the costs for putting up 50 odd people for 90 odd nights of hotels. About $5MM/season

It will not cover the cost of of all the coaches, manager, front office people, support, service, and security people it take to open Fenway for a game

It will not cover the cost of a private jet AND FUEL, and airport costs for the 82 regular season away games

It doesn't cover the cost of outside professionals like lawyers, accountants and insurance.

It will not cover the cost of the upkeep of the spring training facility and support staff down there.

It will not cover the cost of supporting several minor league teams.

It doesn't cover the costs of the tens of millions that have been spend renovating the park.

Yes, I know there are obviously several OTHER revenue streams that make the Sox valuable. Among them being TV, radio, merchandizing, food, etc. Their TV network being most important and the most valuable asset other than franchise itself.

I bring this up because I happen to know one of the small limited partners of the Red Sox. He's I guy I played football against in college (he went to Trinity) He once told me that even though the Sox have the 2nd best TV deal in the league (at least it was at the time we had this conversation which was a few years ago), plus great attendance and fan support; they really didn't start making money UNLESS they made it to the playoffs.

Now at the time, I thought he was just full of sh!t, because how could they NOT be just raking it in, with the full attendance at the league's highest prices, one of the best TV/radio deals, and the merchandizing. BUT when you start to think about the myriad operating costs, its hard to think that that $169MM in gate receipts cover even half the costs of operating during the year.

Now you have probably been wondering what this has to do with the Pats. Well nothing really. Just that the Pats are ALSO one of the best run franchises in their sport, and they too need need to make at least twice what they bring in in gate receipts just to break even. Plus the more I think about it. Owning this franchise is probably one of Bob Kraft's LEAST profitable businesses...though I'm sure it certainly is the most fun.

Any who thinks the owners are making just huge amounts of money just has to look at the operating expenses of the GB Packers to see how much it costs to run a franchise. I would think that they aren't too much different across the league.

Again, just some thoughts on a slow day.

 

[Deus Irae]

Here's a Forbes analysis of the Red Sox for 2009:

#3 Boston Red Sox - Forbes.com

 

[borg]

and how it relates to the game of professional football

I just read a report that there are now NINE franchises in MLB who now fall BELOW the acceptable debt limits MLB has set up. This includes 2 cornerstone franchises (Mets and Dodgers, the current AL champions, and former world champion Phillies.

It got me thinking about the costs of the game, since like the Sox, the Phillies sell out every game. Then I started googling.

The capacity of Fenway has several listings, so I settled on the mean of 37,500. Again, according to google the average ticket price at Fenway is a league high of $55 (the league low was $36) So when you do the math, the Sox get about $169MM in revenue from the gate. The bad news is that their payroll (just for players) is around $162MM. And that number will probably grow as the season wears on as the Sox have to add players. Safe to say that when all is said and done, ASSUMING the Sox sell out all their games the total gate of the most successful franchise in the league will just pay for the salaries of
the players.

It will not cover the costs for putting up 50 odd people for 90 odd nights of hotels. About $5MM/season

It will not cover the cost of of all the coaches, manager, front office people, support, service, and security people it take to open Fenway for a game

It will not cover the cost of a private jet AND FUEL, and airport costs for the 82 regular season away games

It doesn't cover the cost of outside professionals like lawyers, accountants and insurance.

It will not cover the cost of the upkeep of the spring training facility and support staff down there.

It will not cover the cost of supporting several minor league teams.

It doesn't cover the costs of the tens of millions that have been spend renovating the park.

Yes, I know there are obviously several OTHER revenue streams that make the Sox valuable. Among them being TV, radio, merchandizing, food, etc. Their TV network being most important and the most valuable asset other than franchise itself.

I bring this up because I happen to know one of the small limited partners of the Red Sox. He's I guy I played football against in college (he went to Trinity) He once told me that even though the Sox have the 2nd best TV deal in the league (at least it was at the time we had this conversation which was a few years ago), plus great attendance and fan support; they really didn't start making money UNLESS they made it to the playoffs.

Now at the time, I thought he was just full of sh!t, because how could they NOT be just raking it in, with the full attendance at the league's highest prices, one of the best TV/radio deals, and the merchandizing. BUT when you start to think about the myriad operating costs, its hard to think that that $169MM in gate receipts cover even half the costs of operating during the year.

Now you have probably been wondering what this has to do with the Pats. Well nothing really. Just that the Pats are ALSO one of the best run franchises in their sport, and they too need need to make at least twice what they bring in in gate receipts just to break even. Plus the more I think about it. Owning this franchise is probably one of Bob Kraft's LEAST profitable businesses...though I'm sure it certainly is the most fun.

Any who thinks the owners are making just huge amounts of money just has to look at the operating expenses of the GB Packers to see how much it costs to run a franchise. I would think that they aren't too much different across the league.

Again, just some thoughts on a slow day.

The Sox are hurting so bad that they barely could afford their NASCAR team, their Premier League soccer team, their new rodeo venture....etc.
Not sure why you think ticket sales are the appropriate measuring device considering Forbes states an additional $100 mill of non ticket revenue. Factor in the ticket scam where ownership buys blocks of seats for themselves and then resells them through the brokers. Guess your buddy doesn't get his cut. It is my understanding that these $5 million limited partners don't see the books/ don't receive dividends...but do get 4 box seats out of the deal, and the pride that they own a fraction of the team.

 

[PATSNUTme]

Tunescribe must be on vacation.

 

[BradyFTW!]

Last I checked, the MLB is only one of the three major sports leagues that isn't in the midst of a work stoppage (NFL), about to be (NBA). The revelation that nine teams are below the acceptable debt limit is alarming, but it's far more a sign of today's economy than a fundamental flaw in the MLB model. All of the sports leagues are struggling right now, MLB arguably the least so among them.

Plus, after what the league just did to the Dodgers, I would be surprised if that number doesn't go down, considering that Selig has shown that he isn't afraid to go against an owner and get his hands dirty.

I'm actually not a fan of the MLB model, since I like parity, but it works fine for what it is. MLB owners put their money where their mouth is, and are actually interested in making their game viewable to fans (as a displaced Bostonian, I can watch all Sox games with a simple, yearly MLB.tv pass. With the NFL, I would have to get directv and then pay for Sunday Ticket. stupid.)

I do think that the MLB has troubling times ahead, but mostly because I question how relevant it will remain as attention spans get shorter. There will be major problems, but they won't be because of the business model.

 

[FreeTedWilliams]

The Sox own half of NESN, so they pay themsleves for their own broadcast rights and reap the revenue from that. That is the big money earner that the Sox get, they get all the New England NESN money, plus the money for the MLB Extra Inning subscribers nationwide.

YOu have to figure that each of the 37,000 spends an average of $28 on concessions, which would equal a cool million dollars for each of the 82 home games, plus making the playoffs every year, which is all bonus money as the league pays the players, so the gate and the concessions are all gravy for the team.

You have to hand it to Lucchino, Warner, et al, EVERYTHING they have done since the bought the team has turned out well and made them money.

The Sox are a money making machine, even with the samll ballpark.

 

[Gainzo]

The Sox are a money making machine, even with the small ballpark.

They sure are. NESN is a big part of their revenue stream but the amount of advertising they generate is insane. Fenway is plastered with ads as are the pregame, game and postgame on NESN.

 

[Tunescribe]

Tunescribe must be on vacation.

I wish. So, why hasn't this thread been moved yet? I nominate the stick-and-ball forum. Or, the practice squad forum. Either will do nicely.

 

[patfanken]

Here's a Forbes analysis of the Red Sox for 2009:

#3 Boston Red Sox - Forbes.com

Thanks DI for the link. Perhaps you can help me in my interpretation of the information. Now it looks to me that in the 10 years between 2000 and 2009 the Sox lost money (operating income) in 5 of those years and ONLY had significant profits in 3 of the 10 years while suffering significant losses in 4 of them.

The snap shot was unclear if the data shown was strictly Red Sox driven, or included income and revenue profits and losses from their TV, soccer and NASCAR investments....or Bullriding. .

I'm also not sure about were all the revenue was coming from. Again was it strictly baseball driven. With all the different sources its hard to figure out what is what.

The point of my little exercise was to point out that simply talking about the enormous amount of revenue well run franchises make, while impressive, don't eliminate the MASSIVE operating costs it takes to run one of these franchises.

One poster mentioned $100MM in non-gate revenue. I don't doubt him. But is 100MM sufficient to operate a major league franchise. Just think that the Sox are probably paying Terry and the coaches close to 10MM/yr. How much do you think Theo and the rest of his FO staff and assorted management types. Maybe another 5-10MM? So that 20% of your non-player operating income BEFORE you start to pay the 100+ peons needed to open the doors at fenway. That is BEFORE you warm up the Jet, etc, etc, etc,

So unless I'm reading this incorrectly (and for gods sake please tell me quickly if I'm wrong), during a strong economy and good financial times for Baseball in general. In fact a Golden Era in Red Sox History, the club lost money in 5 of those 10 years.

Again the point is to have people understand that REVENUE does NOT equal profits, and give some people some perspective into the huge operating cost of one of these franchises.

Also consider that BOTH the Sox and Pats are 2 of the best run franchises, operation in a very good market place, with resources beyond what a lot of teams have available to them. The VAST majority of professional franchises are NOT as lucky. Yet even WITH these advantages it isn't easy to make money in professional sports.

Again, I'm waiting to hear from the knowledgeable financial guys on this.

 

[patfanken]

It is my understanding that these $5 million limited partners don't see the books/ don't receive dividends...but do get 4 box seats out of the deal, and the pride that they own a fraction of the team.

My friend was an owner prior to Werner and Henry so in his deal, he gets a % of the net profits. He claims that under both previous and current ownerships, he didn't get a check every year and the Forbes article confirms it ( I think)

 

[Joker]

Joe Kerr's Philosophy...

Believe Nothing...Suspect EVERYTHING

 

[patfanken]

I wish. So, why hasn't this thread been moved yet? I nominate the stick-and-ball forum. Or, the practice squad forum. Either will do nicely.

Don't be so critical. Like you have something more important to talk about, like the length of Brady's hair, how the FA period is going so far, or maybe how that 2012 draft is shaping up.

Cmon, give me a break. I was tired of talking about who is or should be blamed for the lockout, and I really don't care who showed up for shorts and tee shirts fun and games at BC.... (well I was really, but it wore off soon)

Besides it does have "some" relevance to our current situation. Maybe not much, but I didn't have much going on today.....and.......

 

[Deus Irae]

Thanks DI for the link. Perhaps you can help me in my interpretation of the information. Now it looks to me that in the 10 years between 2000 and 2009 the Sox lost money (operating income) in 5 of those years and ONLY had significant profits in 3 of the 10 years while suffering significant losses in 4 of them.

It does say that, but it doesn't give us enough information to know the 'why' of it (How much is debt repayment and write offs, for example). I'd guess that Forbes is either missing something or doing something with the accounting.

 

[ausbacker]

It's a rather redundant thread when you consider your linch pin point is comparing gate takings against team expenditure to the detriment of the other income streams available to the Red Sox.

 

[Deus Irae]

Using that same 2009 year, the Patriots average ticket cost $117.84. Average attendance was 68,756, for a total of $8,102,207.04, *8 home games = $64,817,656.32 in ticket revenues, while the salary cap number was $127,000,000. So, the Red Sox ticket revenue basically covers player payroll, while the Patriots ticket revenue covered about half of player payroll.

 

[stinkypete]

The Sox are a money making machine, even with the samll ballpark.

One area where the Sox have been financially brilliant is with their ballpark. Recent improvements combined with the success of the team have re-established Fenway as some kind of shrine.

Fenway Park has the smallest seating capacity in MLB, yet the 6th greatest attendance in 2010. Combine that with league-high ticket costs, and Fenway Park is an absolute cash cow, more so than any other ball park in MLB.

Not to mention the revenue from the 50,000+ concerts that are held at Fenway annually (Police, Springsteen, Phish, Dave Matthews, Jimmy Buffett, New Kids on the Block, Aerosmith, etc.)

 

[Tunescribe]

Don't be so critical. Like you have something more important to talk about, like the length of Brady's hair, how the FA period is going so far, or maybe how that 2012 draft is shaping up.

Cmon, give me a break. I was tired of talking about who is or should be blamed for the lockout, and I really don't care who showed up for shorts and tee shirts fun and games at BC.... (well I was really, but it wore off soon)

Besides it does have "some" relevance to our current situation. Maybe not much, but I didn't have much going on today.....and.......

Tell ya what, Ken: You want to talk Bankofamericasox and MLB on the PATRIOTS forum, you should have no problem with me starting another OT thread here drawing parallels with the Wayland Ladies Auxiliary Croquet Team. Fair enough?

 

[Joker]

...oh...dee Wayland Ladies two by two...doo dah...doo dah...

some images, once seen, cannot be removed from one's memory banks...I think I'll bet on the bobtailed nag on the far left...:lol2:

 

[Ring 6]

Last I checked, the MLB is only one of the three major sports leagues that isn't in the midst of a work stoppage (NFL), about to be (NBA). The revelation that nine teams are below the acceptable debt limit is alarming, but it's far more a sign of today's economy than a fundamental flaw in the MLB model. All of the sports leagues are struggling right now, MLB arguably the least so among them.

Plus, after what the league just did to the Dodgers, I would be surprised if that number doesn't go down, considering that Selig has shown that he isn't afraid to go against an owner and get his hands dirty.

I'm actually not a fan of the MLB model, since I like parity, but it works fine for what it is. MLB owners put their money where their mouth is, and are actually interested in making their game viewable to fans (as a displaced Bostonian, I can watch all Sox games with a simple, yearly MLB.tv pass. With the NFL, I would have to get directv and then pay for Sunday Ticket. stupid.)

I do think that the MLB has troubling times ahead, but mostly because I question how relevant it will remain as attention spans get shorter. There will be major problems, but they won't be because of the business model.

I dont think currently having labor peace is the defining factor in judging a business model.

 

[Ring 6]

It does say that, but it doesn't give us enough information to know the 'why' of it (How much is debt repayment and write offs, for example). I'd guess that Forbes is either missing something or doing something with the accounting.

You provide the link, then when it shows something you didnt realize, you question its validity and imply phony accounting? What length will you go to in order to avoid amitting you are wrong about something?