Don’t Expect Big Changes in Philadelphia

Late last week, it was announced that the Philadelphia Phillies had reached a 25-year, $2.5 billion TV rights deal. The club will remain with its current network, Comcast SportsNet. The Phillies have reportedly upped their equity stake in the network to 25 percent and will receive some portion of the ad money. 2016 is the first season under the new contract and revenues are expected to escalate over time, starting at around $65 million. I assume that our own Wendy Thurm will offer her usual sharp analysis on the business components of this deal. Today, let’s focus on why this won’t immediately affect the team’s overall strategy.

First, it’s important to acknowledge that this was obviously an expected deal, so the Phillies have almost certainly factored their future windfall into their plans. As such, fans hoping that the Phillies will enter the bidding for Masahiro Tanaka due to the new television deal are likely to be disappointed.

The club’s payroll has declined in recent years, even as the aging core has become more expensive. Thurm estimated that the Phillies payroll fell from $172 million in 2012 to $159 million in 2013. Phil Roth’s payroll tool shows that the Phillies’ high water mark was in 2011. And back in December, Phillies’ GM Ruben Amaro Jr. noted that payroll was unlikely to increase  in 2014. Amaro is not always truthful with his comments, so we do need to take that with a grain of salt, but there’s reason to believe that the Phillies payroll won’t grow unexpectedly.

With the recent middling performance of the club, the team’s record attendance has trailed off. 2011 saw the highest turnout per game in club history*. That rate dropped slightly in 2012, when the club went 81-81 and then fell precipitously in 2013. Turnout went from 44,000 fans per game to just over 37,000 fans per game. The club has to be concerned that the trend will worsen too. Last season still saw the ninth highest attendance in club history despite the drop off. If ownership is feeling conservative, they may want to earmark a large portion of the new TV revenues – both local and national – to covering for lost attendance.

*The highest attendance season was actually 2010 when the Phillies had 84 home games due to a G20 summit in Toronto.

When the Phillies had payrolls over $170 million, club president Dave Montgomery would occasionally comment that the club was not making much money and even hinted that the club was in deficit. Owners have a vested interest in managing expectations about the club’s ability to increase payroll, yet it’s believable that the Phillies were taking in less profit than some other teams during their payroll expansion era. In 2011, it was released that the Phillies were one of nine teams out of compliance with MLB’s debt rules. Whether the club is still over-leveraged by MLB’s standards is not known, but it does support Montgomery’s assertion that profits may have been less than desired.

In recent history, clubs have spent between 50 and 60 percent of revenues on the major league payroll. Revenues also have to be used in other areas such as stadium maintenance, debt payments, various insurances, staff, minor league affiliates, and the myriad other costs that go into maintaining a major league franchise. And of course, the owners will want to take their slice of the pie.

It’s unclear how much of the new TV deals will go towards major league payroll, since they do feel like found money. For example, building a new stadium to increase revenue involves a ton of costs, financing, and maintenance. Reaching a new television agreement simply means hiring a few extra employees (probably lawyers). The cost of acquiring a TV contract is seemingly quite a bit lower than other revenue streams. This leads to an expectation among the fans that all or most of the new found war chest will go into player payroll, but this sounds doubtful. Especially in light of the luxury tax system and amateur spending limits put in place by the most recent Collective Bargaining Agreement, both of which serve to constrain the areas where MLB teams can spend excess revenue.

All of these factors taken together mean that the Phillies are unlikely to re-expand payroll in the next couple seasons. With the deal now reached, the club may even be more aggressive in pursuing a rebuilding phase, since they now know for certain that strong television revenues are guaranteed beginning in 2016. The payout for fielding a competitive roster will also be higher in 2016 due to the increased equity stake, so there is some incentive  to plan for that season.

The good news for Phillies fans and insiders is that they almost certainly won’t have to suffer through the pain felt in San Diego and Houston, where some local distributors have refused to pay high carriage fees. Comcast is headquartered in Philadelphia and has a strong local presence. They practically own the sports complex in Philadelphia, including the local NBA and NHL clubs and dominate the market as the top cable provider. Even if some local providers refuse to pay the carriage fee, it won’t be as damaging as it has been in other marketplaces.

Of course, this is all pure speculation. Short of being included in the club’s internal meetings, there is no way to know what the Phillies’ brass is truly thinking. If the organization has proven anything in recent years, it’s that they’re perfectly happy to make moves that baffle the analysts here at FanGraphs and on other similar sites.

Nonetheless, if you’re a Phillies fan, don’t expect instant gratification. You should rejoice that the club’s financial future is now more secure than ever before, but the effects of that security are likely to be subtle to outside observers – at least for the next few seasons.



Print This Post



Brad is a former collegiate player who writes for FanGraphs, MLB Trade Rumors, The Hardball Times, RotoWorld, and The Fake Baseball. He's also the lead MLB editor for RotoBaller. Follow him on Twitter @BaseballATeam or email him here.


Sort by:   newest | oldest | most voted
Dick
Guest
Dick
2 years 7 months ago

I disagree.

Mike D
Guest
Mike D
2 years 7 months ago

I disagree.

Ad-Rock
Guest
2 years 7 months ago

I disagree

Spenny
Guest
Spenny
2 years 7 months ago

Agreed

Keith
Guest
2 years 7 months ago

Dick, you should go around the internet posting that on every comment section in existence. You’d be a legendary troll

MrKnowNothing
Guest
MrKnowNothing
2 years 7 months ago

Throwing more money at the problem won’t fix it. Lipstick on a pig.

Nate
Guest
Nate
2 years 7 months ago

Trade for Mike Trout, sign him for the 25% equity stake in Comcast.

studstats_13
Member
studstats_13
2 years 7 months ago

How in the world would you trade for mike trout?

Richie
Guest
Richie
2 years 7 months ago

“Children, can you spell ‘joke’? Mr. Rodgers knows you can. Hmmm. OK, so Mr. Rodgers swings and misses every once in a while. Children, can you spell ‘chill’?”

Pat
Guest
Pat
2 years 7 months ago

Comcast owns the arena where the Sixers and Flyers play but does not own the Sixers. They sold to local investors a few years ago.

Leoz
Guest
Leoz
2 years 7 months ago

I’m relatively new to reading the articles here on fangraphs and I love the depth of the analysis on this site. I’m also a Phillies fan and largely share the evident skepticism of fangraphs’ contributors and readers towards the Phillies front office. That said, I would not be shocked to see the Phillies make a strong push to sign Tanaka.

The one truly redeeming aspect of the Phils offseason thus far is that they haven’t sacrificed a draft pick in order to sign a free agent. Although they overpaid on Byrd and Ruiz at least they didn’t make the mistake of both overpaying on a free agent and suffering the loss of a draft pick.

If it’s the Phillies’ goal to protect draft picks then it would obviously make perfect sense for the Phillies to be all-in on Tanaka. And although the Phillies have a bloated payroll and an aging roster there is money coming off the books in the near future – probably enough to fit a Tanaka-sized signing.

brrrrhead
Guest
brrrrhead
2 years 7 months ago

Smart teams WITH a ton of money obviously stand the best chance of winning. Philadelphia is only a team WITH a ton of money. They should spend some loot on a front office with a brain.
….start there

Ryne Duren
Member
Ryne Duren
2 years 7 months ago

As a long-time phan and ticket buyer, I have to agree with the concise analysis of brrrhead. These guys don’t have a plan. The old plan was “win now” at whatever cost. In spite of strong seasons, the early exits in the 2010 and 2011 playoffs exposed the limits of such a short-term plan. For whatever reasons — bad drafting, few international signings, or poor coaching — the front office has developed very few players who have generated 3 or more WAR in an MLB season since Cole Hamels was drafted in 2002 (?). Coupled with the high salaries and brittle bodies of aging players from the 2007-2010 era, the team has few near term options. The current front office inherited a World Series championship team and cash-generating machine in October 2008. The net result of the changes made since suggests that the Phillies won’t win 73 games in 2014, the number won in 2013. The front office should be embarrassed — and replaced.

t
Guest
t
2 years 7 months ago

Your comment on the Phillies’ drafts made me curious enough to check. You were right about 2002 and Cole Hamels. I didn’t do any real analysis but here’s a few phun facts.

Phillies’ first rounders since 2004 have compiled -1.6 bWAR for their various teams. Here is the total bWAR compiled by Phillies picks since 2003 broken down by round…because it was just easy to do it that way.

2nd round: -1.5
3rd round: 11.1 (Happ, Worley mostly)
4th round: 23.7 (mostly Bourn)
5th round: -0.1
6th round: 0
7th round: 5.8 (Kendrick)
After the 7th Outman is the only name I noticed worth mentioning as far as ML production.

And just for a quick comparison the Braves since 2003.

1st round: 29.1
2nd: 19.5
3rd: 17.1
4th: -.2
5th: .1
6th: -.9
7th: -.5
After the 7th you have Medlen, Belt, Hanson, Gattis.

Forrest Gumption
Member
Forrest Gumption
2 years 7 months ago

The Phillies will still overpay for decent players declining years then pull mind-numbingly stupid moves like attempting to block their only actual decent rookie in Dom Brown by saying Delmon Young was a RF when he hadn’t played there since 2007.

It would take a miracle for them to ever reach the playoffs anytime soon, but will continue to operate like they have a chance, instead of rebuilding like they should. The Braves and Nats are so much smarter and better, and the Marlins and Mets are going to be threats starting in 2015. Lots of basement years ahead for the Phillies. They really need to completely remove every single person currently employed in their front office, trade everyone they can and start over. If they do that they could be good in 3 years.

Antonio Bananas
Guest
Antonio Bananas
2 years 7 months ago

As a Braves fan, I love this. I hope they end up overpaying for Tanaka and I hope he ends up a bust.

coldseat
Guest
coldseat
2 years 7 months ago

“no plan”? think there has clearly been a plan in place since trade deadline 2012…sit tight, don’t sign any large/long FA’s, retool as best you can, wait out the large contracts to run out by 15/16…all while giving at least a chance of being wild card contenders, which is a must due to the big contracts that need to time out. No team stays on top forever and mid 2012 seems to have been Philly’s inflection point and the FO has acted accordingly.

someguy
Guest
someguy
2 years 7 months ago

According to Scott Boras the true value of the deal is closer to $200 Mil a year between the equity stake in CSN Philly plus advertising revenue. Everything above the $2.5 Bil rights fees is also exempt from revenue sharing.

Verveinc
Guest
2 years 7 months ago

Why not? Big changes are still possible and we should not give up so easily, we have to fight

wpDiscuz