Sunday, February 15, 2009

Back of the Napkin: Twins Revenues, Part 1

What makes good writing? Opinions? Accuracy? Insight? Lots of question marks? Yes, yes, yes and absolutely yes. But Rule 1 is “Keep it entertaining.” And rule 2 is “There is no rule 2.”

Which brings me to why I'm writing: Rule 1 might be a problem today. But we’re gonna give it a try.

I expect Rule 1 is a good chunk of the reason I’ve never really seen an in-depth analysis of any major league baseball team’s revenue streams. That’s my conclusion after researching a story about the Twins revenue streams for this year’s GameDay program. And that surprises me because I had previously though that it was either too private or too complicated.

It’s private, but not too private. Turns out there are a lot of business magazines and authors that follow this stuff and piece things together. Even the MLB.com web site has primers on the central fund, the luxury tax, and revenue sharing. There’s also no shortage of reports on television and radio contracts that can provide some rough numbers. And in the Twins case, we discovered an interesting public domain document a year ago that broke down anticipated revenues from their 2007 season.

And it’s also not too complicated, provided the level of specificity you’re looking for doesn’t go beyond “back-of-the-napkin” numbers. For instance, say I wanted to figure out the Twins revenue on program/scorecard sales. If I had a decent idea of their paid distribution and their price, I’d have a good idea of that revenue.

But today, we’re going to go a level higher than that and concentrate on that public domain document. The document is actually the 2008 budget for the Metropolitan Sports Facilities Commission, which oversees the Metrodome. Its purpose is to explain the 2008 budget for that body. And to do so, it examines the 2007 activity of that commission, including lots of details about the revenues of the Twins, Vikings and Gophers.

For instance, on page 4, we see “MN Twins Share of concession receipts” for 2007 (Projection) spelled out. It’s $5,920,000. And it appears that is only inside the dome, because a few lines below it we see “MN Twins share of plaza concessions receipts” which totals another $217,800. Which brings us to a grand total of $6,090,000.

You know what? This is already getting dry. Let’s try and jazz it up with a little graphic that we can display every time we want to add up these numbers:

Ooh, that’s better. One more note before we move on from the concessions revenues– it doesn’t appear to include novelties. The commission receives money from the sale those novelties, but that must come from the Twins. How much do the Twins make? We can’t really tell, but the Commission’s cut was $145,895. I’d be shocked if the Twins' was less, so we’ll add that too.

There’s one more thing we should talk about on page 4 midway down the page. It’s a “Facilities Cost Credit” for $3,384,000. It’s not explained on this page, but it is on page 12:

“In 1998 the Commission created the facilities cost credit to assist the MN Twins, MN Vikings and University of Minnesota football Gophers in enhancing team revenues and/or reducing event day cost of operation in the Metrodome. Since 1999 the Commission has issued an annual payment to the MN Twins and the University of Minnesota football Gophers that is equal to the admissions tax paid by each team for their events in the Metrodome.”

Near as I can tell, that means that the Twins are supposed to be paying a $.10 per dollar admissions tax for every ticket sold, but in 1999 the Commission decided they would refund that money to the Twins. So we can add that to the Twins total.

But that doesn’t seem to be the only rebate the MSFC gives the Twins, because on page 8, there’s another line item called “MN Twins Reimbursed expenses” for $2,140,000. There’s no explanation, but the line item code isn’t equal to anything else we’ve tracked so far, so let’s add that.

And, of course, we haven’t figured out ticket revenue yet, either. The commission doesn’t say what the Twins took in as ticket revenue, but it does tell us the attendance (2,200,000) and the average price per ticket ($17.92). Multiplying them together gets us $39,424,000, which should at least be in the ballpark. When we add that to our other numbers, the grand total is….





So is that all of the Twins revenue? Not by a long shot. In 2007, the Twins had a payroll of $70M, and given their claim of budgeting payroll to be around 52% or revenues, their total revenues should be closer to $134M. So we have about $83M more to find.

And we will. This is only one document. We haven’t reviewed the luxury tax, revenue sharing, TV contracts, radio contracts, the “Central Fund” or the aptly nicknamed “BAM." We’ll get to that in parts 2 and 3. Possibly as soon as next week.

So, can this ever be entertaining?

7 comments:

Anonymous said...

Great post! Its a dry subject but its really interesting stuff.

Marv said...

Looking forward to the next posts. This will be enlightening.

Curveball said...

Novelties? DOubt the commission gets more than 10% of that revenue. But the other question, how much goes to the big major league baseball pot, which then distributes it to the player association (doesn't a player get a percentage of each shirt sold with their name on it, each team with their logo, etc.). Would this be above and beyond the check players get each year for stuff like baseball card money, etc.

Is corporate box revenue, above and beyond the ticket, price, also something the Twins get...split with the Vikings, perhaps?

Wonder what the actual add revenue is for the Twins...especially now that they own their own broadcasts. When John Gordon says "Snapper Mow Them Down Inning," someone pays. Any idea what ad rates are for the Yearbook, scorecards? Probably more than Gameday.

Anonymous said...

Yes, it's entertaining, for me anyway. I love this stuff.

Anonymous said...

Merchandizing, revenue sharing, and television/radio... That's probably most of the 80M you are looking for.

T Dog said...

Good undertaking. I'd like to know A LOT more about Twins finances. If the "facilities cost credit" equals 10% of the ticket sales, that grosses up to $33,840,000 for ticket revenue, which is about 5.6 mil less than average ticket price times announced attendance. I would tend to trust the former numbers more, because that would be an exact calculation from the books, as apposed to perhaps involving a puffed attendance number (give-aways, etc).
Can't wait for your next post.

Kyle said...

Just wondering, but I think the Twins probably sell more tickets than for those that actually attend the games. For example corporations and individuals who buy season tickets probably don't use all of their tickets for every game, but those seats are still paid for. Unless the attendance figure is actually seats sold and not actual attendance?