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A Snapshot of Team Finances: Middle Tier

Posted By Wendy Thurm On March 21, 2013 @ 12:00 pm In Blue Jays,Braves,Daily Graphings,Diamondbacks,Mariners,Mets,Nationals,Orioles,Reds,Twins,White Sox | 44 Comments

As we explained yesterday in Part 1 of the series, we’re looking at the financial health of all thirty major league teams. The focus is on attendance, local TV contracts, and estimated 2013 payroll. We’re not ranking the teams one to thirty because we lack the kind of detailed information that would make such a ranking meaningful. We do, however, have enough information to paint with broad strokes, so as part of our attempt to give an overview of where each team stands as 2013 begins, we’ll look at their access to monetary resources for the upcoming season.

We’ve grouped the teams in tiers. Today we look at the ten teams in the middle.

In alphabetical order, by team name:

Toronto Blue Jays

2012 Attendance: 2,099,663
Local TV AAV: $36 million (estimated)
Estimated 2013 Payroll: $114 million

Rogers Communications, Inc., one of Canada’s largest telecommunications and media companies, bought the Blue Jays in 2000. That’s been both a blessing and a curse. Even with the resources of a large, public company behind the them, the Blue Jays have see-sawed between big payrolls and medium-sized ones for the last ten years. Until now. The Blue Jays unloaded their stocked farm system this winter to bring in Mark Buehrle, Josh Johnson, Jose Reyes and R.A. Dickey via trades, and pushed the payroll to $114 million, the highest in team history. With the Yankees battling injuries and the Red Sox still in quasi-rebuilding mode, the Blue Jays are primed to pounce in the American League East. Let’s see if fans reward them with better attendance.

Atlanta Braves

2012 Attendance: 2,420,171
Local TV AAV: Not available, but believed to be on low end
Estimated 2013 Payroll: $85 million

The Braves feel like they should be in the top tier of teams. Atlanta is the 9th-largest media market in the country, just a bit behind Washington, D.C. and Boston. And yet, the Braves are firmly in the middle tier, as judged by our financial metrics. Indeed, even with the trade for Justin Upton and the free-agent signing of his brother B.J., the Braves’ payroll will be lower in 2013 than in 2012, thanks to Chipper Jones‘ retirement. The Braves are saddled with a notoriously unfavorable local TV contract executed by former owner Time Warner just before the sale to current owner Liberty Media. Braves executives say their hands are not tied by the TV deal, but you have to wonder how much more of a powerhouse the Braves would be if they could re-negotiate that deal in today’s inflated local TV-rights world.

Arizona Diamondbacks

2012 Attendance: 2,177,617
Local TV AAV: $31 million
Estimated 2013 Payroll: $84 million

The Diamondbacks haven’t done anything special to deserve their place in the middle tier other than be located in Phoenix, the 13th-largest media market in the country. Their attendance has hovered around 2.1 million for the last five years. Depending on other teams’ fluctuations, the D’Backs have ranked between 18th and 21st in attendance for five years running. The TV contract is on the low end with an expiration date after the 2015 season. Payroll is back to the levels first seen in Phoenix in 2001 and 2002, but with salary inflation, the D’Backs are getting less for the same dollars.

Seattle Mariners

2012 Attendance: 1,721,920
Local TV AAV: $45 million
Estimated 2013 Payroll: $78 million

The Mariners have been in a downward spiral of spending less and losing more for several years now, all of which has led to a rapid decline in attendance. Even with a fairly lucrative local TV deal, the Mariners two key principals — majority owner Hiroshi Yamauchi (formerly the chairman of Nintendo) and chief minority owner Chris Larson — have been unwilling to invest in free agents not named Felix Hernandez. Still, Seattle is the 12th-largest media market and a city quite capable of strongly supporting its baseball team when there is a something to cheer for.

New York Mets

2012 Attendance: 2,242,803
Local TV AAV: $65 million
Estimated 2013 Payroll: $85 million

Since revelations that the Mets’ owners had lost hundreds of millions of dollars in the Bernie Madoff scheme, the franchise has been mired in debt, more debt and controversy. The trustee in the Madoff case sued members of the Wilpon and Katz families for conspiring with Madoff, and then settled for pennies on the dollar, in part, because he concluded the Wilpon-Katzes couldn’t pay a larger amount. In February, Fred Wilpon announced to the media gathered at the Mets’ spring training facility that the family was now “debt-free,” but there is little evidence to suggest Wilpon was telling the truth.

And so general manager Sandy Alderson continues to operate on tight budget for a team in the largest city and media market in the country. Gone are the days of 2008 and 2009, when the Mets’ payroll reached past $130 million. This year’s $85 million payroll is on par with division rival Braves, but the money is poorly allocated on the oft-injured Johan Santana and the since-departed Jason Bay.

The Mets did what they needed to do to keep fan-favorite David Wright but traded fan-favorite R.A. Dickey instead of paying him a market-rate salary. Even with Dickey’s Cy Young season, the Mets’ attendance dropped to its lowest since 2003. Look for a further drop this season.

Washington Nationals

2012 Attendance: 2,370,794
Local TV AAV: $29 million but locked in dispute with Orioles for higher fees
Estimated 2013 Payroll: $115 million

The Nationals may be the best team in the league this season and they are charging hard into the top tier when measured by financial health. Washington’s payroll made a big leap in 2012, going from $68 million to $92 million. They’ve nearly matched that increase this season with a franchise-high payroll of $114 million reflecting the additions of Dan Haren and Rafael Soriano. D.C.’s two brightest stars on and off the field — Stephen Strasburg and Bryce Harper — will earn less $6 million combined.

The Nationals are banking on a favorable resolution of their dispute with the Orioles over the local TV rights fees. I explained the details back in November, but the short version is this: MLB oversaw the creation of MASN as a way to placate the Orioles when the Expos moved to D.C. The deal established the Nationals’ TV rights fees at a fairly low rate, but escalating each year. It also gave the Nationals the right to petition for even higher fees if supported by the ratings. The Nationals petitioned; the Orioles rejected the request; and the two sides have been in a stalemate.

The big unknown for the Nationals is whether fan support will grow after the team’s first postseason appearance and high expectations heading into 2013.

Baltimore Orioles

2012 Attendance: 2,102,240
Local TV AAV: $29 million but locked in dispute with Nationals (see above)
Estimated 2013 Payroll: $90 million

The Orioles’ surprising run to a wild-card berth in 2012 brought some fans back to Camden Yards. Attendance broke the 2 million mark for the first time since 2007, but the team is a long way from the glory days in the first of the new, vintage ballparks. The payroll creeped up a bit from last season, mostly due to salary increases to Adam Jones, Nick Markakis, and Jim Johnson. Other than adding Jason Hammel, the Orioles didn’t do much in the offseason.

Owner Peter Angelos could generate more cash for the team from MASN, but he’s locked in a dispute with the Nationals over the broadcast fees. Under the agreement that created MASN, the Nationals and Orioles receive the same broadcast fees but the Orioles — which own a larger share of MASN equity — receive higher investment income. Angelos has no interest in extracting more cash from MASN if it means more going to the Nationals, as well.

Cincinnati Reds

2012 Attendance: 2,347,251
Local TV AAV: $30 million
Estimated 2013 Payroll: $100 million

Small-market team succeeds with a steady-as-she-goes approach and a deep and loyal fan base. That’s the headline on the Reds’ financial health heading into 2013.

Cincinnati is the smallest media market of the thirty MLB teams — just under 900,000 households. The metropolitan area boasts just over 2 million people, which includes parts of northern Kentucky and eastern Indiana. Yet even with that size, the Reds have topped 2 million in attendance all but three years since 2001. Last season was the higher water mark.

Perhaps it’s no coincidence, then, that the Reds’ payroll will hover right around $100 million this season, a sizable jump from the $87 million they spent in 2012. Much of that rise comes Joey Votto‘s higher salary (although his 10-year/$220 million deal doesn’t start until 2014), but Votto and the rest of the roster wouldn’t be possible without strong attendance and a decent local TV contract for the team in the smallest city in the majors.

Minnesota Twins

2012 Attendance: 2,776,354
Local TV AAV: $29 million
Estimated 2013 Payroll: $79 million

The Twins’ TV deal is on the low end, particularly when compared to the Reds’ contract. Minneapolis-St. Paul has twice as many households in its media market compared to Cincinnati and the Twins’ higher attendance over several years suggests a stronger fan base. The Twins entered into their deal with Fox Sports North before the 2011 season, so they may be playing catch-up with other mid-market teams for a while.

Minnesota’s payroll is down significantly this season after peaking at $113 million in 2011. With Joe Mauer, Justin Morneau and Josh Willingham getting close to 60% of all player salaries, there’s not much left for re-building a team that has suffered through two dreadful seasons after a decade of winning baseball.

Chicago White Sox

2012 Attendance: 1,965,955
Local TV AAV: $50 million (estimated)
Estimated 2013 Payroll: $115 million

If you’re a White Sox fan, you might be miffed by my inclusion of the White Sox in the middle tier. Don’t be. First, this is just an exercise in estimating each team’s financial resources and how those stack up to the other 29 teams. Second, the White Sox and Cardinals were damn close and I had to choose one for the middle tier because I’d decided to split the teams up 10-10-10, and I’m compulsive like that.

That’s all a long way of saying that the White Sox are very close to the top tier of teams, if not in the top tier. At the same time, attendance is a perennial issue for the South Siders, particularly in a metropolitan area with more than 10 million people. It’s also a bit surprising given the data I reported last week from the SABR Analytics Conference — that the White Sox have more “unique” fans in the Chicago TV market than do the Cubs, because so many Cubs fans live outside the metro area.

This isn’t about “attendance shaming” as some like to call commentary on a team’s attendance. It’s about whether the White Sox can do a better job connecting with their existing fans and getting them to the ballpark, where they will invariably spend more money on food, drinks and merchandise.

Next up: A Snapshot of Team Finances: Top Tier


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