Examining the Columbus Crew
August 18, 2009Keeping up with Lake County star Jason Knapp
August 18, 2009
When the Dolan family was finally heard from following the trades of Cliff Lee and Victor Martinez, the stock line to fans was that they were going to lose $16 million this year due to a 500k differential in fans coming through the turnstiles. At the time, I was just happy to finally hear from the owners of the Indians that their fire sale was about money. I get the arguments about needing to make good value of good players in years when the wins just aren’t coming. I understand that turning one guy on an uncompetitive team into four or five guys who might be able to contribute in the future is a reasonable strategy sometimes. But ultimately, the big excuse that had any teeth at all was the $16 million. I wondered exactly what that number was at the time, but still it seemed satisfactory to just finally hear someone admit that the moves were about money.
Yesterday Bill Madden of the New York Daily News added some eye-opening facts to the situation. First of all, as we all know MLB distributes profits from some of the richer teams to some of the poorer teams. For this season some $400 million was distrubuted. According to Madden, a little more than 25% of that figure was provided by the Yankees alone. Anyway, apparently the Indians received just north of $20 million from the revenue sharing fund. In addition to that, the Indians received a $35 million stipend from the MLB central fund that distrubutes profits from baseball’s larger TV deals, merchandise and satellite radio, etc.
If Bill Madden’s figures are correct, then the Indians started the season with $55 million in the bank even before one of the gates at Regressive Field had opened to the public. The Indians also started the year with a payroll in the neighborhood of $81 million. That means that the Indians needed to make up $26 million to cover their payroll. But this is when things get dodgy. When the Dolans were talking about their $16 million shortfall were they just talking about baseball operations? When they were quoting numbers from their projected income statement, did that statement include the revenues from local TV and radio? Does it include the sponsorships and advertising in the stadium? How about the money from the concessions? My point is that what we don’t know is whether we can believe that $16 million number at all due to the complex nature of baseball revenues.
When we are talking about revenue sharing I know it doesn’t include a lot of things. Teams like the Yankees pay out the most money, but they also do wonders to hide revenues into “non-baseball related” buckets so they don’t have to pay revenue sharing on it. The question is whether the Dolans are just talking about losing $16 million in baseball revenue? Does that mean they aren’t losing any money at all when you look at the entire Cleveland Indians financial picture? Then again, maybe I don’t want the answers to all these questions. If Larry Dolan starts talking to us about how high his mortgage payment is on the $323 million he paid to the Jacobs family for the team my eyes might glaze over.
Just for fun, let’s pretend that the Cleveland Indians are a home that Larry Dolan bought with a standard 30 year mortgage. So, Dolan has to come up with 20% to put down. That is $64,600,000. That down payment in and of itself represents an 85% premium over the $35 million Jacobs paid for the team in 1986. So, anyway, that means Dolan has financed $258,400,000. Let’s pretend he got a good 6% interest rate and he plans on paying it back over 30 years. If all these facts were true then his monthly payment on this loan would be $1,549,238.56. Multiply that by 12 to see what it costs per year and the number is $18,590,862.68. So, if my completely made up scenario and numbers are true, then the Dolan shortfall of $16 million can almost exactly be tied to the fact that he overpaid for the team after bidding against himself!
If Dolan wants to reduce those payments, maybe he ought to call Dan Gilbert who can surely help him refi.
14 Comments
Caveat emptor sports fans. Wake up.
Never, I love sleep.
I said this a couple weeks ago – they aren’t losing $16 million per se. They most assuredly missed their revenue forecast by $16 million. So they are most likely still profitable, but Mr Dolan’s coffers aren’t quite full enough.
Maybe they could have a KY giveaway night for all the season ticket holders.
Even the Natinals are profitable. I seriously doubt they’re LOSING any money.
Until they are at the point where they file for bankruptcy, all professional sports franchises are turning a profit. It’s funny (sad) when people believe otherwise.
The Indians have been listed for years over end under the Dolan ownership in Forbes as having been near the top in operating revenue. Whose fooling who here. Wake up.
way too complex to truly know which teams are profitable….
you have to add in scouting, Latin America academies, Asian academies, draft picks signings, minor league $$$ (they are separate entities but often subsidized by the team….and many of the players receive a salary from the team), rent on the Jake, mortgage on the team, payroll to all the random ushers, ticket agents, et cetera.
I am sure Dolan knows the exact number…I am sure the $16mil is a bit of hyperbole….but I am also sure few others know or could even really figure out what that number is.
Chris, Denny, Ben, Isis, you’re all right. The Indians did not lose ANYTHING, they are simply $16m short of projections.
Now, the way the Indians WOULD be losing money is… if they were to look at those projections and spend money accordingly, and THEN came up $16m short on projections. But since they did not spend any money, and actually dumped a lot of salary, they are most definitely profitable.
@mgbode: They could hire the entire Dominican Republic for the salary of one major league player. They have other budgets needs, but none come close to player payroll.
They’re not losing money; like everyone said, they’re making less than they had hoped. The Indians, like the Pirates, Brewers, Nationals, Twins, Royals, etc. are figuring that it’s easier to take the sure $10m and stink than it is to risk a big payroll and hope that fans show up.
@ Isis — “Whose fooling who here” should be “Who is” or “Who’s.”
Just FYI.
Boom.
With a name like “roosevelt” you had better be up for one of two things: lots of spending to get us through this recession, or aggressive expansionism to fetch us this supposed “Dominican Republic” to use as a hotbed of American baseballing talent.
They are losing my money, that’s all I know.
More yankeeland justification of the gross economic inequities in baseball. they just don’t want another league where their teams cannot dominate (NBA, NFL) simply by spending more. 220 does not equal 80.
Let’s face it, Lee was gone. 15 mil future bucks is too rich for the tribe. I’m glad we got something for him. The threat of pricey free agents has all small and mid-market teams over a rail. We are, in effect, 4A ball. Just enjoy it.
By the way, I love watching the tribe these days…
The thrill is back!