Thursday, July 13, 2006

The Right Way™

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This weekend the Twins will begin their quest to recapture the title of American League Central’s resident dynasty of the “oughts”, and will do so against the AL Central’s dynasty of the nineties. Popular perception for Cleveland’s recent domination of the division is that they did it The Right Way™, by developing young players and signing them to long-term contracts. That perception is half right.

It’s true that Cleveland’s talented teams were largely home grown. It’s also true that they further developed the practice of offering long-term, guaranteed contracts to promising young players in return for a hometown discount. On the other hand, some of those contracts, like those for Carlos Baerga, Kenny Lofton or Roberto Alomar, eventually became loadstones around their neck. And the practice of giving away countless prospects, without acquiring the ace starter they seemingly needed, will likely haunt Indian fans until their next chance at a world championship.

Regardless, the front office fielded dominant teams from 1995-2001 and the Indians won six division titles. But guess what else Cleveland did from 1995 – 2001?



Cleveland started spending in 1992, and kept increasing their payroll until 2002. This was almost entirely fueled by their new ballpark, Jacobs Field, which opened in 1994. Previously, they had never spent more than $20 million on payroll. By the end of their run, they had more than quadrupled that number.


Pop quiz, hotshot. What’s the difference between a three-year streak and a seven-year dynasty?

Answer: Revenue.

The Twins are attempting to do now what Cleveland did in the late 90’s – renew a dynasty as one generation of players replaces another. Those departures weren’t due to the player development side. They were driven by limitations surrounding marketing and sales. The Twins have relied on the same revenue sources they relied on in the nineties: namely, attendance in a crappy indoor stadium and TV contract in a market that is monopolized by a single regional sports channel.

The new ballpark is one attempt by the Twins to change that paradigm, and the contract negotiations with WCCO are another. Their failed attempt at Victory Sports was yet one more. Whether you think the Twins are justified or not in these endeavors, whether you think the Twins are competent in their effort in these areas, and whether or not you think some moral high ground exists surrounding these issues, you can't argue with one point:

Winning consistently takes money. It's the gas that fuels continued success.

So understand that you can't have it both ways. You can't complain about the Twins being small market, or never signing a big free agent, and also complain about the passed stadium bill, or wax nostalgic about your history with a particular AM frequency. They're two sides of the same coin.

But Carl is RICH!! He's a billionaire, for Chrissakes! He can't take that money with him - why not spend an extra $20 million??!!??"

Indeed, he is rich. And he probably could shake half that much just out of the cushions of his couch. Of course, he could also give that $20 million to the fine arts. Or to homeless shelters. Or maybe children's cancer research. Hmmm....maybe we should let him decide what to do with his money.

Cleveland did it The Right Way™ all right - they used the success of their team to harvest additional sources of revenue, and used that revenue to continue to fuel the success of their team. It's a cycle that feeds itself until the talent dries up. At which point, you scale back, stock the minor leagues, rinse, lather and repeat.

As for our favorite small market team, the Twins success for this year will rest on the shoulders of Terry Ryan, the coaching staff and the farm system. But the Twins success for this decade and the next is resting on the efforts of the rest of the organization, like President Dave St. Peter. This realization is Cleveland's true lesson for small market teams.

7 comments:

frightwig said...

Even more important than the dollar figures, I think, is that Cleveland for 8 years ('95-02) committed to a payroll ranked in the upper third of the majors. In '95, $35.2 million rated 9th in the majors; over the next four years, the Tribe kept raising the payroll to earn a ranking of 4th. In 2000, a slight budget increase dropped the club's payroll ranking to 8th, but the next year another big push up to $92 million (2.61 times the payroll in '95) rated a 5th highest payroll in the majors. In 2002, before completely tearing down, the club's $78.9 million payroll ranked 9th in the majors.

To this point, the Twins have promised only a league-average payroll when the new park opens in 2010. If the Twins front office and fans hope to see the team emulate the success of the '95-02 Indians, I think ownership needs to set its spending goals much higher than that in the years to come, especially in a division where the White Sox and Tigers are no longer acting like small-time operators.

Unfortunately for Carl, you can't get a Top 5 payroll by spending just $45-59 million anymore, which goes to show how a new ballpark isn't the easy cure for losing that it might have been 10 years ago, but he (or his heirs) will just have to bite the bullet and spend more of that new revenue if he really cares about winning.

One last thought: it seems like charitable giving is a poor analogy to increasing the Twins payroll, since, after all, the Twins are not a charity. The club is Pohlad's own business concern. "Spending money to make money" and doing what it takes to please his customers is something he should do out of his own business interest, if for no other reason.

When fans call for the owner to spend more money on players, we're just customers asking for a better product, which we have a perfect right to do.

Jack Ungerleider said...

So to take frightwig comments: The club is Pohlad's own business concern. "Spending money to make money" and doing what it takes to please his customers is something he should do out of his own business interest, if for no other reason.

When fans call for the owner to spend more money on players, we're just customers asking for a better product, which we have a perfect right to do.


If we look at it this way and we relate purchasing the product to attendance at the games, my question for the Geek and/or others is, How does our attendance rank in comparison to our payroll? And how does it compare to other teams?

frightwig said...

"Purchase" of the product could also be reflected by media ratings and merchandise sales.

Attendance at 2.034 million last year rated 9th in the AL, but gate receipts were up because of price increases. TV ratings last summer were up 55% over the previous season, and you can tell by looking around the ballpark that stores sell a lot of Twins merchandise. So I believe the support is pretty good for a mid-market, moderately successful club that operates on the cheap and hardly ever brings in a big-name talent to get people buzzing before spring training begins. And I would say that the Twins should not wait for fan support to increase before the payroll follows suit. The Twins should spend to win, driving increased fan interest and more revenue in turn. That's how any good business operates. Waiting for the big crowds to come through the doors before you put out the primo merchandise is backward and a model for failure.

brianS said...

I don't think I agree entirely with your critique, FW. Maybe I'm not quite reading it correctly.

When have the Twins been extraordinarily successful in terms of revenue? I don't have the data handy, but my guess is that the Twins in recent years made money hand-over-first in two seasons: 1988 and 1992. They basked in the reflected glow of the prior year's success, which itself had largely been the product of cheap, homegrown talent. In other words, by getting "lucky" in player development. Sure, they acquired some veterans to make a difference at the margin. But not by spending a lot of money.

Attendance in 1987 was 2.08 million (6th of 14 AL teams). In 1988, it was 3.03 million (1st). That has to be in excess of a 50 percent increase in revenue, matched with a substantially smaller increase in revenue. Those players were by-and-large young and homegrown or obtained on the cheap

1991 attendance was 2.29 million (8th of 14) and 1992's was 2.48 million (5th of 14). Obviously a much smaller bump. But still consistent with the theme of success -on-the-cheap pushing revenue.

That strikes me as characteristic of this weird cartelized industry. MLB teams enjoy a measure of local market power, which makes them fundamentally different from, say, a restaurant or a commodity manufacturer.

It probably doesn't make profit-maximizing sense for the franchise owners to compete all-out against each other every year. Instead, the smaller revenue clubs should probably do exactly what Minnesota, KC, etc. have done over the years: cut expenses to the bone when the club is unlikely to be highly competitive, concentrating investment on the farm system. Then, when the planets line up and you get a cluster of talent maturing at roughly the same time, go out and bid for those marginal services to put your team over the top. Lastly, reap the profits on the lee side of competitive success while preparing to shed expensive players.

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doofus said...

" One last thought: it seems like charitable giving is a poor analogy to increasing the Twins payroll, since, after all, the Twins are not a charity. The club is Pohlad's own business concern. "Spending money to make money" and doing what it takes to please his customers is something he should do out of his own business interest, if for no other reason. "

The fallacy of this arguement is not factoring the risk reward for the money being spent. The Twins spent money to lobby for a new stadium and it worked but the reward for doing so was great also.The Twins spent a few dollars to try to get Victory sportd up and running. If that was successfull He would have made several times the investment. If the Twins increase payroll by 30 million, How many fans do they need extra to go through the gate just to break even? Is it worth it as a business to invest an extra 30 million in the hopes of breaking even?

frightwig said...

"Then, when the planets line up and you get a cluster of talent maturing at roughly the same time, go out and bid for those marginal services to put your team over the top."
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I would say that this is exactly the situation the Twins front office has before it this winter and in the next 5+ years, which is why it's so important for ownership and the GM to adopt a more aggressive attitude now.