Posted on 12/06/2001 1:41:30 PM PST by NYCVirago
Commissioner Bud Selig will testify today before the House Judiciary Committee in Washington that the Los Angeles Dodgers topped the roster of Major League Baseball's 25 unprofitable teams last season with a $69 million loss.
A report Selig will unveil will also claim that Major League Baseball lost more than a half-billion dollars last season.
Selig is seeking to eliminate two of the 30 major league teams, and his testimony will come before a committee that includes Representative John Conyers Jr., a Michigan Democrat, who is the House sponsor of a bill that would strip baseball of its antitrust exemption as it applies to eliminating or moving teams.
Conyers, who asked Selig to appear, said yesterday that the financial data in the report was inadequate. The players' union, which has a copy of the report, is likely to challenge the figures.
The figures in the report show that the Yankees were one of five profitable teams, making an $8.2 million profit from their baseball operations after deductions for revenue sharing and interest on loans and deferred salaries. The Mets lost $5.2 million, the report says.
The Yankees outdid the Mets on every financial level, the report says. The Yankees had $24 million more in gate receipts and $8.5 million more from media payments. The Yankees' player costs were almost $19 million higher. The Yankees also paid $26.5 million in revenue sharing, as against the Mets' $15.7 million.
The report says the other profitable teams were Seattle, with $14.8 million; Milwaukee, with $9.0 million; the Chicago Cubs, with $2.9 million; and Kansas City, with $1.5 million. Kansas City, a classic small-market team with only $19.5 million in gate receipts last season (the Yankees led baseball with $98 million), made a profit because of nearly $16 million in revenue sharing, the report said.
The report paints a picture of worsening finances. Revenues of $3.5 billion were offset by expenses of $3.8 billion. The operating loss, $232.2 million, rises to $344.7 million after interest expenses.
The loss widens to $518.9 million after amortization costs, which reflect how much owners paid to buy their teams. The report does not break down each team's amortization. It also shows that industry debt has nearly tripled since 1996, to $3.1 billion from $1.1 billion. The figure does not count deferred compensation to players.
The report has not been audited by baseball's accounting firms and is based on team figures that have not all been audited. A baseball official said it was too soon after the season to have audited all the numbers.
The report, which Conyers provided to The New York Times, details the sport's financial woes at a time when Selig is seeking to eliminate two teams. He has not identified the clubs, but they are believed to be the Montreal Expos and the Minnesota Twins.
Despite the wealth of data provided by baseball, Conyers said it was inadequate because it lacked specifics on stadium debt, salaries and fees paid to owners, and "related-party transactions" (the movement of money between divisions of companies that own teams).
"It's games like these that require Congress to repeal baseball's antitrust exemption," said Conyers, who in 1998 was co-sponsor of a law that overturned the part of the exemption regarding labor relations.
Sandy Alderson, executive vice president of baseball operations for Major League Baseball, said the industry exposes itself to criticism when it releases its financial figures, primarily over whether the disclosures are complete.
"You can argue about accounting principles around the edges, but the thrust of the numbers is clear," he said. "The industry is losing a lot of money. Many of the teams are on the way to financial bankruptcy. It doesn't bode well for the game."
Yet one leading expert on sports finance, Prof. Mark Rosentraub of Cleveland State University, said baseball's profits and losses, even properly audited, were irrelevant to whether the sport deserved its continued exemption from antitrust law. "What baseball is doing is framing the argument around losing money, but the real question is, how is this industry performing and what is it doing to deserve protection from free market forces?" he said.
Rosentraub said that if the antitrust exemption were fully repealed, "nothing would change unless Congress forced them to break into separate American and National Leagues that would compete with each other, so that if the American League contracted Minnesota, it wouldn't prevent the National League from going into Minnesota."
Among the witnesses today, besides Selig, will be Jerry Bell, the Twins' president, and Jesse Ventura, the governor of Minnesota, who has argued against public subsidies for a new Twins stadium. Steve Fehr, a player agent, will speak on behalf of the players association.
The report shows that the Twins lost $3.8 million last season but would have lost substantially more without $19 million from revenue sharing. Minnesota's $58.3 million in revenue was baseball's second lowest total, after Montreal's $34.1 million.
Montreal's finances provide a picture of failure: only $6.4 million in gate receipts, $536,000 in media revenue and sales from marketing, and other areas of only $2.8 million. It lost $10 million even after receiving $28.5 million in revenue sharing.
The Dodgers are a fascinating case, given their successful business history under the O'Malley family before their sale to Rupert Murdoch's Fox empire for $311 million in 1998.
The team produced $143.6 million in revenue last season (including $27.3 million in media payments, largely for the sale of its cable television rights to its owner, Fox), but had $116 million in player salary and benefit costs, second to the Yankees' $117.9 million.
Tom Powers in the St. Paul Pioneer Press said it best: Democrats vote for Democrats, Republicans for Republicans and blunderers vote for blunderers.
Oh Yea, God Bless Bill Mazeroski, Jerry Luncy, Hal Smith and all of the others that beat the Yankees in the greates series of all time..........1960.
$250 million.
Sorry, I'm a product of the public schools system.
The players and owners, alike, have done everything imaginable to ruin this game and the fans have not forgotten.
If you want to make money, as in money, own an anti glamour company, like a toxic waste dump.
My question is, if all these teams are losing all this money, why aren't the 'poor' owners unloading these moneypits?
James R. McClure Jr.
Anti-Federalist Democrat
For example, a team could charge an average of $1000 a ticket. They'd likely have only 100 fans at the game for a given night, and only collect $100,000 dollars.
If they charged $1 a ticket, the stadium would be full, but they'd only collect $45,000 that night.
Somewhere in-between the above two, there's a ticket price point where they maximize revenue in terms of (ticket price) x (number of fans) = (revenue.) THIS IS THE ONLY CONSIDERATION IN SETTING TICKET PRICES. Ticket prices are based ENTIRELY on what people are willing to pay.
As are concession prices. Concessions are complete monopolies. The price of a hot dog is set at the point where they make the most money; the price of a baseball stadium hot dog is NOT set based on the cost of meat and buns. There are enough people willing to buy a $5 hot dog that those high prices maximize revenue. They could sell more hot dogs at a lower price, but make less money, or charge even higher prices for hot dogs and sell fewer, and make less money.
Owners do NOT say "well, we are paying X dollars in salaries, we need to charge X amount per ticket to pay for those salaries."
Though when a team raises ticket prices, they like to put out press releases where they claim it's necessary because they re-signed Joe Blow to a huge new contract...this is simply a blatant, out and out lie to fool gullible and naive sportwriters and fans who don't have the slightest idea of baseball economics.
If some federal law was passed limiting the maximum baseball player salary to $100,000 dollars a year next year...the owners wouldn't cut ticket prices at all. Why should they? If an owner has 90% of tickets sold at a given price in a year, then he has 1/10th the player salary expenses the next year, what possible motivation does he have to lower ticket prices? Absolutely none. All that would happen is the Owners would pocket the money "saved" by lower player salaries.
Too bad the Expos are going under, I had heard the Indians were going to play them next year and I was planning a trip to Montreal. Oh well, Toronto's closer.
I've heard of one pending big announcement, something about Jason Giambi signing with the Yankees, but that's not really related to the subject at hand.
No. Do you? Share it with us.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.