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Part One
Part Two

MLB’s financial disclosures break down team revenues into five categories.
Two, regular-season game receipts
and
local media money,
were discussed in the first two installments of this series. The third column, postseason
revenue, contains a few surprises:


Team                   Postseason Revenue

New York Yankees $16,000,000 Arizona Diamondbacks $13,000,000 Seattle Mariners $7,392,000 Oakland Athletics $2,686,000 Atlanta Braves $2,629,000 Cleveland Indians $2,000,000 St. Louis Cardinals $1,488,000 Houston Astros $519,000 Chicago Cubs ($17,000) New York Mets ($154,000)


That’s right: even though they lost the World Series, the Yankees wound up
with the most postseason revenue. Don’t ask me how.

Almost as remarkably, two teams claim to have lost money on the postseason.
The losses reported by the Cubs and Mets probably relate to the cost of
selling tickets to games that were never played, but:

  • clubs already impose a nonrefundable service charge to cover such costs.

  • they earn interest on the ticket money before it’s refunded or applied
    to 2002 season tickets.

  • other clubs in the same position report no losses.

The fifth column represents national revenue: income from the Fox and ESPN
television contracts, the sale of licensed merchandise, and the like.
Twenty-eight of the 30 teams received $24,401,000, while the two newest
expansion franchises, the Diamondbacks and Devil Rays, got only $18,479,000.
This shortfall, which has persisted since the teams began play in 1998, is
properly considered part of their expansion fee.

Of note here is the ratio of national to local revenue. According to MLB,
just 20.3% of MLB’s total revenue–$720 million out of $3.548 billion–came
from national sources. Increasing this ratio would be the most painless way
to improve small-market competitiveness.

Overall, the fourth column–"Other Local Operating Revenue"–is
the most interesting. This catch-all category includes concessions, parking,
stadium advertising…and especially luxury boxes and club seats. The table
below shows why clubs fight so hard for new parks.


Team

Other Local
Operating
Revenue

Stadium
Opened
(Renovated)

Stadium
Owned By

San Francisco Giants

$61,524,000

2000

Team

Seattle Mariners

56,211,000

1999

Government

New York Yankees

47,057,000

1923 (1976)

Government

Cleveland Indians

45,295,000

1994

Government

Los Angeles Dodgers

41,100,000

1962

Team

New York Mets

38,162,000

1964

Government

Atlanta Braves

37,692,000

1997

Team

Milwaukee Brewers

37,010,000

2001

Gov’t.: 64%, Team: 36%

Houston Astros

36,826,000

2000

Government

Colorado Rockies

35,197,000

1995

Government

Texas Rangers

34,561,000

1994

Government

Arizona Diamondbacks

32,970,000

1998

Government

Chicago Cubs

30,642,000

1914

Team

Baltimore Orioles

29,691,000

1992

Government

Boston Red Sox

29,485,000

1912

Team

Tampa Bay Devil Rays

28,633,000

1998

Government

St. Louis Cardinals

27,581,000

1966

Team

Pittsburgh Pirates

26,598,000

2001

Government

Chicago White Sox

26,291,000

1991

Government

Anaheim Angels

26,195,000

1966 (1997-99)

Government

Detroit Tigers

21,018,000

2000

Government

Toronto Blue Jays

14,255,000

1989

Private

Oakland Athletics

13,932,000

1968 (1996)

Government

Kansas City Royals

13,270,000

1973

Government

San Diego Padres

8,504,000

1969 (1997)

Government

Philadelphia Phillies

7,739,000

1971

Government

Minnesota Twins

6,987,000

1982

Government

Cincinnati Reds

6,523,000

1970 (2001)

Government

Florida Marlins

4,037,000

1993

Ex-Owner

Montreal Expos

2,829,000

1976

Government


Sources: MLB financial disclosures; Munsey & Suppes Ballparks site
(www.ballparks.com).

Every team in the top half of the table either owns its park, plays in a stadium
less than ten years old, or plays in New York. The Yankees and Mets
both rank in the top six despite the relative age of their facilities and
both are pushing hard for new taxpayer-subsidized stadia. Even after
September 11, outgoing Mayor Rudy Giuliani was offering more than $500
million toward the construction of retractable-domed parks for each club,
though there’s virtually no chance the City Council will appropriate such
funds any time in the foreseeable future.

For now at least, the most lucrative local venue is San Francisco’s Pacific
Bell Park, the first privately-financed ballpark constructed since 1962.
Shortly after it opened, owner Peter Magowan told ESPN that the Giants were
meeting their $20 million annual debt service from in-stadium advertising
alone.

San Francisco’s example has not, however, inspired other owners to follow
this path. Why should they, when by threatening to move (or now, to
contract) they can get the taxpayers to finance most or all the cost of
their new park?

Seattle, which ranks second in local revenue, received $372 million in
public money toward Safeco Field, then whined for years about the unfairness
of holding the team responsible for cost overruns on the $517-million park.
Despite the enormous subsidy, the Mariners keep all money from luxury boxes,
advertising, concessions, and parking; they even have the right to all rents
derived from non-baseball use of the publicly-owned stadium.

Much of the Yankees’ local money is generated by MLB’s most creative
marketing team. George Steinbrenner signed a multimillion-dollar sponsorship
contract with adidas that came close to, but didn’t, overlap other
companies’ national licensing agreements with MLB. Later the Yankees entered
into a cross-promotional deal with the world’s most famous soccer team,
England’s Manchester United. Rather than blame the Yankees for developing
new revenue streams, the other owners should ask why Major League Baseball
Properties didn’t get there first.

The #5 Dodgers exemplify another benefit of privately-owned stadia: the club
has an incentive to invest in the maintenance and periodic improvements
needed to keep the park economically viable over the long term. The #15 Red
Sox, playing in 89-year-old Fenway Park, earned almost as much as the
Orioles took home from nine-year-old Camden Yards, the model for modern park
design.

Below Los Angeles on the list, many of the reported figures are most notable
for what they don’t include. During Commissioner Bud Selig’s recent
testimony before Congress, he swore up and down that MLB had provided all
the information needed to evaluate its finances, even as he refused to allow
Don Fehr to discuss additional data provided to the MLBPA in confidence.
These additional numbers would help to explain some of the anomalies in the
reported data.

The first time the owners opened their books, in 1985, the MLBPA retained
Stanford economist Roger Noll to look for hidden revenue and excessive
expenses. He found both. For example, the St. Louis Cardinals assigned all
of their concession and parking revenues to a related company, removing an
estimated $2 million from their books. It’s impossible to tell from the
figures released by MLB whether this practice has continued under the
Cardinals’ new ownership.

Thirteen years later, economist Andrew Zimbalist reviewed the Florida
Marlins’ claim to have lost $34 million in their World Championship season
of 1997. Zimbalist found that Marlins owner Wayne Huizenga, who also owned
Pro Player Stadium through a different entity, attributed about $38 million
of luxury suite, club seat, parking, concessions, advertising, and
naming-rights revenues to the stadium rather than the team. This finagling
made a profitable venture appear to be hemorrhaging money, and was used to
justify Huizenga’s gutting of the team and subsequent demands for a new
taxpayer-funded park. When Huizenga sold the Marlins, new owner John Henry
inherited the revenue-sucking lease. As a result, the Marlins rank next to
last in other local operating revenue despite playing in a modern facility.

Toward the other end of the list, AOL Time Warner, owner of the #7 Braves,
is hiding tens of millions of dollars in superstation revenue. As noted in
my last column,
the money
from national telecasts of Braves games isn’t included in "local broadcasting
revenue."
"All other local
operating revenue" is the only other category in which it could fall,
but it’s not here either: the Braves’ revenues in this category are typical
for a team in a new park. The Cubs may have similarly failed to report their
income from national WGN telecasts.

The Tigers’ figures also look highly suspicious. Playing in a new park
loaded with luxury suites, food courts and related non-baseball
amenities–even a carousel!–the Tigers claim to have earned $15 million
less than the Brewers and Astros generated in similar new facilities. Tigers
owner Mike Ilitch also owns a pizza chain and numerous other properties in
the area around Comerica Park, providing ample opportunity to hide baseball
revenues in other companies.

Remember when SkyDome was hailed as the future of stadium design? Five years
after it opened, the government of Ontario sold it at a $450-million loss.
Four years later the new owners filed for bankruptcy. The Blue Jays even
threatened to move back to decaying Exhibition Stadium unless they received
new lease concessions. Their stadium-related revenues now rank in the bottom
third of MLB.

All of the eight teams below the Jays are either lobbying for new parks or
have new facilities under construction. Although the home stadia occupied by
the A’s, Padres, and Reds have all undergone recent renovations, none
benefitted the teams. Cincinnati lost 10,000 outfield seats when
construction began on a new baseball-only park next door, while the Oakland
and San Diego stadia were made more football-friendly.

No park is more football-friendly than the Metrodome, where the Twins labor
under a horrendous stadium lease. Because the Metrodome was built in
response to threats by the NFL Vikings to move, the Vikings get all the
luxury-suite and related money. At the time the Twins were owned by Calvin
Griffith, who stopped listening when he heard the words "free
stadium" and never thought to read the fine print.

Finally, the Expos show that it’s impossible to make money from the park
without enticing more than a handful of people to pay their way in.

In my next column, I’ll examine MLB’s most visible expense, player salaries.

Doug Pappas is chairman
of SABR’s Business of Baseball Committee. His writings on the subject are
archived at http://roadsidephotos.com/baseball/.
Although his early professional experiences included helping the USFL win $3
in its antitrust suit against the NFL and watching Bowie Kuhn flee to
Florida one step ahead of his bankrupt firm’s creditors, he continues to
practice law in New York.

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