Wednesday, July 28, 2010

Reality Checking the Geek Chorus

Really? 74 comments? I get 74 comments when I try to suggest that the 3-year, $41 million contract tied to Dan Haren’s 4.6ish ERA isn’t a bargain? That’s the cross the Geek Chorus wants to carry?

Hey, I’m game. The Geek Chorus, which is what I'm now calling the comments section, is here to provide a counterpoint – and some comic relief. If you want to argue that we as fans are currently entitled to unlimited funds from the Pohlads due to our support of this team, go for it.

Geek Chorus: Just because you want to trumpet your half-@** analyis, don’t expect the rest of Twins Territory to embrace your Montgomery Burns fetish.

Twins Geek: I don’t know exactly which of Burns’ fetishes you’re talking about – and I don’t want to. But this strikes me as lashing out at a truth. Sort of like a desperate 6-year-old, wanting her Malibu Stacy doll. She doesn’t care what it costs – it’s CHRISTMAS, dammit.

(Oh, and like Malibu Stacy, “Math makes her brain hurt.”)

GC: I’ll give YOU a brain hurt. Ok Poindexter, prove it to me. Prove to me that the Twins aren’t going to have a payroll closer to $120 million next year.

TG: Let’s take a look at the Twins recent payroll spending, shall we? This is according to USA Today (which ignores some signing bonuses, but still):

2006: $63M
2007: $71M
2008: $57M
2009: $65M
2010: $98M

The increase of $33M and 50% of payroll over the last year has an obvious source – the new stadium. Actually, if you take a look back at last season’s TwinsCentric Offseason GM Handbook, you can see where that increase comes from. We did a pretty nice job of predicting it:

Still, you’ll notice that the Twins payroll has basically leveled off since the announcement of the new taxpayer subsidized ballpark. And while MLB (and the rest of the world) has faced a recession during that time, we haven’t seen similar stagnation in other teams’ payrolls. Overall, major league payroll climbed 7% across the board over those two years. If the Twins payroll climbed a similar amount, it would be closer to $77 million this year, $12 million higher than it actually was.

So, given that level, we’ll add a 5% increase for 2010 and another $15 million to $20 million bump from the new stadium. Add all that up and you have 95 to $100 million to spend.

GC: Is your arm OK from patting yourself on the back? So, you’re saying that the entire $33M bump wasn’t solely due to the new stadium?

TG: Actually, no, I don’t care. The truth is that wherever that new money came from, it isn’t coming again. Either it was a result of the new stadium, or it was a result of not appropriately growing payroll earlier and then also getting a smaller bump from the new stadium. Either way – it isn’t happening again.

GC: Posh. How do you know that the $97M was even the limit this year?

TG: Look back at the Orlando Hudson signing. Hudson (and a few other desirable free agents like Felipe Lopez) were sitting out there just waiting for a deal. Hudson was literally the PERFECT fit for this team – a second baseman with multiple gold gloves that could bat second in the order. And yet, he didn’t sign until February 4th for $5 million. And it was reported three days earlier that the Twins couldn’t afford even $3 million.

GC: Maybe that’s just good negotiating.

TG: It’s undoubtedly good negotiating. But it also sounds like (and there were plenty of rumors afterwards to support it) that the Twins had reached their budget at about $95M and were stretching to $97M. After all, if they had money left it the budget, why didn’t they have moved to shore up the bullpen in March when they were freaking out about Joe Nathan’s injury?

GC: Whatever. So they were at their limit. The Twins are making money hand over fist. They’re making far more money than they could have anticipated.

TG: No, they aren’t. Don’t get me wrong – they’re making out like bandits in the new stadium, but what exactly could they have not anticipated? They had to anticipate the seat sales, especially given their season ticket sales of almost 20,000 seats. Their local TV contract is fixed. Their radio contract is fixed. Their national revenues (such as TV) are fixed. Their apparel sales are split with the league. Their corporate sponsorships were set long ago. (Oh, and forget about concessions being a huge moneymaker. That’s not going well.)

Ratings are up? Great – that’s a boon to Fox Sport North. Radio ratings are up? Good news for ESPN 1500 for the $1 million they’re paying the Twins to broadcast their games. (And probably to the Twins for their radio advertising, but this isn’t a bonanza.)

It’s not that the Twins aren’t making great money. They are. It’s that there is NO WAY they are making tens of millions of dollars more than they could have anticipated.

And there is REALLY no way they are going to make tens of millions of dollars more next year than they made this year. Where are they going to make it? Ticket demand always softens in the second year of a stadium. TV is fixed. Radio is up for negotiation, but we’re talking about an increase of a million dollars a year at most (and probably not).

There will likely be an overall increase similar to what we’ve seen from the rest of MLB – about 5%. If the Twins, due to some increased revenue, add another 5%, we’re up to maybe a 10% increase in payroll – which bring things up to about $107M. Which is enough to basically not re-sign any impending free agents, let alone pay a big trade acquisition.

GC: But what about this? Didn’t the Twins already talk about a $120 million payroll?

TG: No, they didn’t. In a feel-good press conference after Joe Mauer signed, LaVelle E Neal said he and Joe Christensen walked away with the “feeling” that maybe the Twins might increase that much, given Jim Pohlad’s joviality at the press conference. Well of course he was optimistic – he had just signed Joe Mauer. That’s a long way from announcing a payroll level.

Payroll level is easy thing to ask the Twins, but they since the Bill Smith era began, they generally haven’t answered it. But a general impression on a day when the LAST thing anyone wants to talk about is fiscal reality is thin soup. I’ll stick to data, thanks.

GC: Especially when it makes you look oh so smart and allows you to defend the do-nothing front office. Pohlad is worth BILLIONS. He should be spending the money.

TG: Uh-huh. Here's 3 rules I live by. You might want to try them.

1) I don't tell George Clooney how to dress.
2) I don't tell Wilt Chamberlain how to meet women.
3) I don't tell the Pohlad's how to manage their money.

GC: Meanwhile Jhonny Peralta is joining the Tigers. How do we respond to that?

TG: Panic, maybe? After all, who wouldn’t want a defensively limited third baseman with a 697 OPS? When you have a shot at that guy, you’re got to pull the trigger.

GC: It’s more than the Twins have done.

TG: It sure is. If only the Twins could dig up a third baseman who could hit. I sure wish we had one of those. Oh, wait….

9 comments:

CapitalBabs said...

hey, I'm curious about the concession sales comment. What's the current numbers and what were they projecting? I'm TOTALLY interested in that factor.

Bryz said...

And there is REALLY no way they are going to make tens of millions of dollars more next year than they made this year. Where are they going to make it?

I think this is a great point that many people seem to have failed to consider. It's not like the Twins will be earning more next year that what they will earn this year. Sell more tickets? When practically every game sells out, that's not possible. Even if they increased standing room sales by 1000,* assuming $22 per ticket, that would only generate another $1.78 million. Congrats, you've paid Brendan Harris' 2011 salary.

* As an usher, please God, no. Trying to get 2000 standing room people per game** is already too many.

** Clearly, the Twins are only selling about 1000 SRO tickets per game if most attendances are around 40,500.

I hate to be negative, but I have a feeling that there won't be a big addition to the club for 2011.

Anonymous said...

John,

I love you man, and have made fun of you for dressing like a herb, so yeah, maybe you can't, but Clooney ain't the best dresser around. He's just good looking.

Jesse said...

We talked about payroll around the same time, and basically I came to the same conclusion you did both in regards to projected 2011 payroll and what we should expect the payroll limit to be next season: http://tiny.cc/e40ts

It's a frustrating argument to defend, especially coming from a standpoint where you understand that there actually ARE limitations. But yeah, I'd like to know more about that concession sales comment, too.

Also, I like the term Geek Chorus. When you get your own radio show, call your listeners this.

rob said...

I agree with you :)
However they can raise the money, a ticket price increase of $3 would probably raise another $10 million.
There are obvious limits to this strategy long term, but they can raise a little extra money without major issues. The Television deal with FSN is up in 2 seasons, after 2012. They are getting far,far less money from it then most teams...

Maija said...

This is great--I have been getting a little annoyed with these comments too. You're response to telling the Pohlads to spend more is brilliant.

As for concessions--I agree they probably aren't making a whole lot of profit there. The Twins have much greater operating costs at Target Field which they have to cover.

This is an interesting article on this topic: http://minnesota.publicradio.org/display/web/2010/04/12/twins-finances/ One economist estimated they could expect a $10-$15 million a year boost in profit.

Then there is the fact that the Twins aren't going to be getting as much in revenue sharing, with the high payroll. The article cited says it could be a $20 million hit, although no telling if that is reliable. Also, recovering from the $200 million the Twins threw into the stadium in the first place...

I just think that, when this amount of money is being thrown around, it's hard for people to comprehend that there is actually a limit.

TheJazzyOne said...

Heh, nice post. I love your answers to the comments.

Jewscott said...

If you want to make the Nelly-esq argument that "Hey, it must be the money," that's fine John. But couldn't the team simply send Haren and his contract packing in Decemeber to cut corners then?

Anonymous said...

Totally disagree with your remark that Twins fans shouldn't be telling Pohlad how to spend his money. Sure, it's his investment, and at the end of the day he is the only one who decides where additional money will be spent. But owning a pro sports team is not a basic investment. When you buy a team, it is with the expectation that you are buying it to put money into it to increase the value. Fans count on this, and it's better for the sport as well. If you own a pro sports team, OWN the team and continue to invest in it, otherwise don't buy it in the first place. It's that simple.