Thursday, August 26, 2010

Bucs vs. The Bay By The Books.

OK, while not a CPA, Green Weenie proudly owns up to working in the City Controller's Office, so a financial statement is not exactly Greek to him. We thought we'd present the Bucco books by breaking out the numbers and showing them to the baseball citizenry without a lot of heat, just a little back-of-the-envelope adding and subtracting.

We're sticking to the 2008 figures, because that's the year we have the complete paperwork for. Tampa Bay will be our sister city for comparative purposes, because it's pretty similar in metro population and provides a better picture than the sad sack Marlins or the moneybag Yankees.

The Ballyard: In 2008, the Pirates netted $37.1M from warm fannies and suites. Tampa netted $41.9M in tickets and suites (PNC drew 1.6M fans, TB 1.8M).

Pittsburgh concession sales (they are operated under contract by ARAMARK) and MLB licensing fees were good for $16.9M; Tampa earned $18.1M. Pirate signs, ads, and the PNC naming rights were worth $11.2M; Tampa's marketeers brought in $11.6M

Finally, the media rights including local TV/radio fees and the MLB Central cut were worth $41M for Pittsburgh and $33.2 for Tampa. The Rays added $17.2M that the Bucs can only dream about in playoff profits, and $3.3M Tampa claims in other income that the Pirates probably included with other items.

Throw in spring training, and playing the games was worth $106.9M to the Bucs and $125.3M for the Rays. Nine teams spent more on their payrolls in 2008 than the Pirates brought in on their own.

Revenue Sharing: $39M for Pittsburgh; $35.3 for Tampa. So with all the money accounted for, the Pirates have $145.9M to play with and the Rays purse is $160.9M.

It cost the Pirates $20.3M to run the ballpark operation (hey, you didn't think the ushers lived on your tips or the Parrot on birdseed, did you?) and Tampa dished out $10.5M; apparently they don't hire the Zambelli brothers and an 80's band every weekend.

Team operations - trips, insurance, unis, etc. - cost the Pirates $12.6M and the Rays $11.8M. Tampa also ran up $6.2M in playoff expenses.

Salaries: Aye, carumba. The Pirates paid $51M in player salaries, $23.2M for player development, and $17.1M for staff, a grand total of $91.3M. Tampa coughed up $56M for players, $21.9M in player development, and $40.3M in staff at a cost $118.2M.

That left the Pirates with $21.7M and Tampa with $14.2M to deal with debt payments and capital expenses. The Pirates paid down $7.3M on $120M in debt (not a red flag: the Pirates debt-to-value ratio is about 35%; nine MLB teams are at 50%+, plus we estimate about $20M remains from an old URA loan that doesn't need repaid if the team stays in Pittsburgh), and the Rays $10.2M. There were no ownership dividends, so the money went back to the team, not their paper-holders.

End result - Pittsburgh pocketed $14.4M (it dropped to $5.4M in 2009), and Tampa $4M. For the Pirates, that's just about right; the budgetary rule of thumb is to plan for a 10% carryover to the next fiscal year. For Tampa, well, they're on the light side.

In 2008, the Pirates got $39M in revenue sharing and $30.9 in MLB licensing and broadcast deals; almost half their income came from league coffers. Tampa shares the boat; they pocketed $65M of the league's loot. Without revenue sharing in particular, both team are losing business models.

Pittsburgh is trying to follow Tampa's baseball model by spending on kids and eventually becoming a home grown club. It's the only model that makes economic sense, and the Pirates are still two or three seasons away from realizing that goal, if they can hold on to what they've got.

But whether they grab the brass ring or not, this much is clear from the books: no one is lining their pockets in Pittsburgh or Tampa. The owners only payoff will come if they can add some value to their team and sell it down the road; the Pirates were purchased for $92M in 1996 and is estimated to be worth $292M in 2008. That's an intangible but sizable increase.

The batter's boxes at PNC Park and Tropicana Field are not lined with gold. The franchise, oddly enough, is a money-maker only if it's sold. They seem to be prudently operated, but it's hard to envision them getting to the point where they bring in enough income to succeed without the league's revenue-sharing subsidy.

The answer probably lies in continued sharing and growing of league-wide revenues, such as the MLB Central, Properties, and Advanced Media funds which split the broadcast, merchandising, and licensing pots evenly among the have and have-nots. Along with that, some cost containment measures would benefit the league as a whole, including opening the draft to all international players, a hard slot, and a salary cap, either soft or hard.

Until the teams are on a somewhat equal playing field, the smaller revenue clubs will depend on revenue sharing not just to compete, but to survive.

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