Comments on: In case you had any doubts: no, contraction isn’t happening

By: BC

BC — Mon, 07 Mar 2011 17:32:07 +0000

Contract the Mets. Put me out of my misery.

By: bigtrav425

bigtrav425 — Mon, 07 Mar 2011 14:03:09 +0000

That sucks…there def needs to be contraction of the Marlins and toronto and possibly arizona and tampa bay.I dont think MLB is in as dire need to contract as Basketball tho

By: heynerdlinger

heynerdlinger — Mon, 07 Mar 2011 13:33:10 +0000

The underlying math is the same, albeit off by a decimal place. $18M a year of profit is still nothing to sneeze at, and that’s the pessimistic return of 3%.

The point remains that these franchises are enormously valuable sources of revenue that would be extremely expensive to buy out and eliminate.

By: heynerdlinger

heynerdlinger — Mon, 07 Mar 2011 13:29:52 +0000

Yep, I’m an idiot for missing a decimal place. Sue me.

By: stairwayto7

stairwayto7 — Mon, 07 Mar 2011 04:11:32 +0000

If contraction is done you do it by the newest teams! Fla, Tampa, Az and Colorado. Then go by teams in 2 cities, Cubs and Mets are gone. Everyone knows the Cubs are the biggest joke in all of sports!

By: tomemos

tomemos — Sun, 06 Mar 2011 19:09:19 +0000

But why would MLB want to?

And as for changing the revenue sharing agreement: that’s done through the CBA, isn’t it? MLB can’t just change it unilaterally. Do you think the union is stupid enough to agree to a plan that would make two or more baseball teams unprofitable? They know where that would lead.

By: JBerardi

JBerardi — Sun, 06 Mar 2011 17:17:55 +0000

Dude, even Madoff never promised those kinds of returns. Please learn math.

By: lbehrendt

lbehrendt — Sun, 06 Mar 2011 17:00:19 +0000

Craig, I agree with what you’ve said here, and I may bring a small canister of gasoline with me to my next meeting over a conference table. But you should note that the figure you’ve cited in your link to bizofbaseball.com is for a single year, and is not cumulative for the 8 years we’ve had revenue sharing. The cumulative amount of revenue sharing paid during the life of the program is somewhere between $2 billion and $3 billion. Your point still holds, of course, because the total amount of revenue sharing paid to any single team is much less than the cost you’ve cited for contracting that team.

By: uyf1950

uyf1950 — Sun, 06 Mar 2011 15:58:47 +0000

Aren’t there other ways of forcing contraction if MLB really wanted to. For example change the formula for revenue sharing. Those border line teams that now profit from revenue sharing would no longer be able to count on the charity of others. Hence some would start to lose money and either be forced to relocate to better baseball cities or go bankrupt. I would think there is more ways to “skin the cat” so to speak then what everyone assumes to be the traditional method of contraction. Don’t get me wrong I don’t think it will happen in the foreseeable future, but never say never.

By: uyf1950

uyf1950 — Sun, 06 Mar 2011 15:52:05 +0000

I was just about to write the exact same thing.

By: PanchoHerreraFanClub

PanchoHerreraFanClub — Sun, 06 Mar 2011 15:45:45 +0000

3% of $600M = $18M

By: heynerdlinger

heynerdlinger — Sun, 06 Mar 2011 15:45:18 +0000

And really, where else but America do we get with one breath Ken Rosenthal floating a ridiculous idea where teams like the A’s and the Pirates get bought out by the other owners and eliminated, while in another breath we have the Wilpons claiming that they’ll be able to line up investors to drop $200M on a minority share of the Mets.

By: heynerdlinger

heynerdlinger — Sun, 06 Mar 2011 15:37:39 +0000

In other words, if I have access to $600M and can make $180M a year by investing in a relatively safe index fund, that baseball team better give me something more than $180M a year.

By: heynerdlinger

heynerdlinger — Sun, 06 Mar 2011 15:10:06 +0000

I think the only flaw in your argument is the piece about the up-front cost of the team being separate from the amount needed to replace the revenue stream. These guys understand that when they invest millions of dollars into their team, they have the option of investing those millions in other vehicles. If the current or future revenue from those investments isn’t as lucrative as what they could make from other vehicles, there has to be some other non-monetary reason for the investment.

I’m not saying that there’s zero value to this part of the evaluation, but it’s really the return on the investment that makes these owners pony up those millions. What this implies, of course, is that you can estimate how much revenue these teams make by taking a look at what the teams are selling for. The Rangers sale is complicated by the borrowed money, but they paid nearly $600M for that team. At a pessimistic 3% return on that cash, the equivalent yearly revenue is $180M. And that’s $180M of profit.

By: spookymilk

spookymilk — Sun, 06 Mar 2011 15:00:29 +0000

Thanks for this. I now have a place to point my paranoid, conspiracy-theorizing friends.