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Home Maury Brown Leaked Tampa Bay Rays Docs Make Case for Revenue-Sharing, New Ballpark

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Leaked Tampa Bay Rays Docs Make Case for Revenue-Sharing, New Ballpark PDF Print E-mail
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Written by Maury Brown   
Thursday, 26 August 2010 23:05

Breaking Down the Deadspin DocsWhen the leaked MLB financial documents hit the public, and especially so since The AP got a jump the Sunday night before, the focus was acutely focused on the Pirates. Given 18 losing seasons, and the fact that the club was shown to had received just shy of $70 million in revenue-sharing for 2007-2008 ($69,348,964, to be exact), and at the same time shown to have a profited to the sum of $29,416,281, the immediate reaction has been that “losers on the field are winning on profits”.

But, as the dust has settled, other topics have surface. Certainly, the issue of revenue-sharing is one (see Will Leaked MLB Financials Alter Revenue-Sharing?), and the issue of the Marlins profiting (extensively) in 2008, yet crying poor when asking for public subsidy from Miami-Dade Co. (look for a future column shortly on this). Both stories have reinforced the belief by many that “the system is broken. Clubs taking revenue-sharing are living on welfare.”

But, in looking at the financials of the Tampa Bay Rays show that while modest profits have taken place, without revenue-sharing (and the good fortune of making a run in the postseason in 2008), Tampa Bay would have shown a loss, not profit.

For 2008, the year the Rays made the World Series, the end of year player salary totaled $56,018,335, a striking increase from the $35,563,605 the year prior, or an increase of 53 percent.

At the same time, while going all the way to the World Series, the increase in ticket revenues did not mirror the increase in player payroll. For 2007, the year they went 66-96, the Rays had ticket revenues of $27,963,739. In 2008, winning the AL East and posting a 97-65 record, the club garnered $39,013,069 in ticket sales, or an increase of 40 percent. Suite revenues were almost static between the years ($2.94 for 2007, while $2.93 million for 2008), but at least the club saw a sizeable uptick of more than $6 million in concessions revenues ($9,551,348 up from $3,410,472, or an increase of 180 percent.

Rays Financials
Click to see the leaked Rays financials

All told the Rays had revenues of $160,961,576 for 2008, up from the $133,777,450 in revenues the year prior, an increase of 20 percent. However, expenses jumped from $112,089,881 in 2007 to $146,759,370 in 2008 the year they won the ALCS, or an increase of 31 percent. The reason? The aforementioned player salary increase, as well as jump from $19.2 million in sales and marketing for the 2007 season to just over $23 million in 2008, a sign that the Rays were trying to strike while the iron was hot.

But, the 11 percent gap (and as we’ll see, profits would have turned to losses) is within the extra revenues gained in the postseason. What’s key in this look at the finances centers on that incredible run.

During the 2008 postseason, the Rays saw a total of 6 home games played at Tropicana Field (2 ea. for the Division Series, ALCS, and World Series). Clubs don’t gain every red cent in revenues from postseason play. Indeed, the players get the vast majority of it. The following shows how revenues that go to the players are broken out for postseason play (see the Major League Rule for added details):

  • Sixty percent of the total gate receipts from the first four World Series games;
  • Sixty percent of the total gate receipts from the first four games of each League Championship Series; and
  • Sixty percent of the total gate receipts from the first three games of each Division Series.
  • Based upon this, ownership profits are 100 percent for any games after that are “deciding”.

In total the Rays pulled in $17,674,301 that is attributed just to the postseason. If they had not made the postseason, total revenues would have been $143,287,275 and increase of 7 percent as opposed that 20 percent increase. In light of the amount of spending by the club that season, it was a tightrope where missing the playoffs, or not going deep into the postseason could have altered the outcome of the bottom line substantially.

The picture being painted here isn’t one of a club working to gain maximum profits, but rather one doing what one would think a club should do: take as much money as is available and try to maximize it to improve the product on the field and spend extra to get the word out via sales and marketing.

But, going back to those profits based on the leaked Rays Consolidated Balance Sheets for 2007-08, here is the Net Income (remember, Net Income does not include current or long-term liabilities for a club), a measure of profit for the Rays:

Rays Net Income

Year

Club

Amount

2008

Rays

$4,016,163

2007

Rays

$11,066,191

 

TOTAL

$15,082,354

 

After going through the numbers, suddenly that $4,016,163 doesn’t look so terribly big. Miss the playoffs, or receive less in revenue-sharing, and a net gain is suddenly a net loss.

How The Rays Are A Shining Example

When Bud Selig asked for increase revenue-sharing in 2000 through his Blue Ribbon report, maybe this snapshot of the Rays from 2007-08 was his vision. While the Marlins (and to a lesser extent, Pirates) actions have been questionable as it pertains to the use of revenue-sharing dollars, the Rays (at least for the two years we have visibility to) fall within the spirit its design.

But, if there was another take-away from the figures, it seems to be this: the Rays require better attendance, and that plays into a the need of a new ballpark. Selig’s nirvana of having the lowest revenue-markers being able to stay on the same footing as their big market counterparts such as the Yankees and Red Sox sits on razor’s edge. There is no margin for error. Glance at the Rays financials, and there are small things that, in total stand out… Central Fund dollars dropped, as did sponsorships and advertising in a year when the team went to the World Series. The ability to project costs and revenues is uncertain, and with it, when the rate of expenses and revenues are within relative small distance, it’s shows that the talk from Stuart Sternberg has merit and is worth considering.

What is also clear is the Rays are teetering ever so close to having this “loser-to-winner” story collapse under its own weight. Keeping this group of players together, or being able to go after any free agents is going to get harder and harder as young talent hits or advances through salary arbitration.

The bottom line of the bottom line is the Rays are in dire need of increased revenues. After what the fallout from the leaked documents, the idea that revenue-sharing will be increasing in the next CBA seems a far off notion. Increased revenues are going to have to come through the front door for the Rays. Most immediately, ticket revenues has to be front and center, and so attendance watching is going to be paramount. Eventually, the great showing in 2008, and the capacity to do it again in 2009 will pay dividends when local television and radio contracts come up for renewal. But, the writing is on the wall with the Rays docs.... Without revenue-sharing assistance, the chances for the Rays to even be near the position they are in now would be a far off dream. At least in this instance, the Rays show how the system can, and should work, if – and this is a big IF – it is not taken advantage of.

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Maury BrownMaury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey, as well as a contributor to FanGraphs and Forbes SportsMoney. He is available for hire or freelance. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network.

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