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December 6, 2001

The Imbalance Sheet

(Semi-) Open Books

by Keith Law

I'll give baseball's owners some credit, since they are actually going to come somewhat clean on the money they make. How clean they come will determine how well they fare in the next round of labor negotiations, and to what degree they seize the villain's throne in the eyes of the fans.

ESPN.com reported yesterday that 11 major-league teams showed an operating profit in 2001. They were led by the Yankees, who are so profitable not even Enron's ex-CFO could screw them up, with a claimed operating profit of $41 million. Why "claimed?" add it up:


Revenues:

Gate receipts: $98 million Local TV revenue: $57 million National TV revenue: $12 million Merchandising Concessions Parking

TOTAL: $167 million

Expenses:

Player salaries: $110 million Everything else

TOTAL: $110 million

So what the Yankees expect you, gullible reader, to believe is that they blew $16 million PLUS the total of all of their revenues from those other sources--which runs into the tens of millions--on other expenses. It is very possible that they did so, but if they did, it's because they wanted to do so, not because baseball's economics are somehow out of whack. George Steinbrenner may have paid himself a $5 million salary for being Mr. Boss-man, which is hardly a reason to go begging to Congress for absolution.

Behind the Yankees on the operating profit chart were a trio of new-ballpark clubs, the Mariners, Giants, and Brewers. The Brewers came in at $14.4 million in profit, despite earning just $5.9 million in local broadcast fees. This means that baseball wants you to blindly accept that 26 major-league clubs earned less than that in operating profits, even though 28 teams earned more from local TV. Let's consider who, exactly, we're talking about:

  • The Mets, who may currently be #2 in the hearts of New Yorkers, have been #1 many times before, and won the NL pennant in 2000. The Mets earned more than $46 million in local broadcast revenues, drew more than 2.6 million fans (600,000 fewer than the Yanks), and spent $93 million in player salaries. They clearly earned at least $20 million in operating profit, even with conservative estimates for their other revenues.

  • The Braves, who drew 2.8 million fans and spent $91 million on player salaries. The Braves regularly claim almost no revenues from local television, because they're owned by the same company that owns WTBS. However, fairly valued, those TV rights would make the Braves insanely profitable.

  • The Red Sox, who took in more than $89 million in gate receipts this year, and paid out about as much as the Yanks did in salaries. The difference? The Sox and New England Sports Network are both majority-owned by the Yawkey Trust. That entity, if you didn't hear, is selling its 52% share in the team, the park, its 80% stake in NESN, and some land in the Fenway area, with bids expected to top $400 million. I would bet that those bidders aren't expecting an operating margin of about 8%.

  • The Pirates, who drew 2.4 million fans this year to their new ballpark, despite its expensive tickets; earned about $10 million in local broadcast rights; and spent $52 million in player salaries. You can just imagine what they would have earned had they not poured $14.5 million into the pockets of Kevin Young, Pat Meares, and Derek Bell.

And so on. In other words, baseball's owners aren't truly coming clean, they're just coming cleaner than they've come before. That might be good enough for Congress, but it's not going to be good enough for the Players Association, and it's clearly not good enough for the fans. Baseball has to stop lying about its finances if it wants to stop alienating its fans.

Keith Law is an author of Baseball Prospectus. You can contact him by clicking here.

Related Content:  Baseball Salaries

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