Estimating the Tigers financial situation
Posted by Bill Ferris on Sunday, December 6, 2009 at 9:45 pm
The Detroit Tigers are certainly one of the more interesting teams heading into the winter meetings. They are a team with a top 5 payroll in a region that is struggling economically. The Tigers also have holes to fill in the bullpen and at shortstop and limited means to address those issues with free agency and a farm system that can’t afford to surrender too many prospects. Dave Dombrowski has made some key players such as Edwin Jackson and Curtis Granderson available on the trade market leading to much speculation about a fire sale. But what really is the Tigers financial situation?
We will never really know the Tigers true financial situation but there is enough information available (thanks in part to the Scott Boras/Rob Manfred argument about revenue sharing) that we can make some educated guesses. We know that every MLB team receives $30 million from the central fund. We know that the Tigers have an annual $40 million television contract (h/t Kurt @ Mack Avenue Tigers) and that only 2 years into a 10 year contract that money isn’t going away anytime soon. The Tigers also probably get at least a couple million in radio rights as well meaning that they take in $75 million before they sell a ticket.
As for those tickets? The Tigers sold 2.5 million of them last year which if we estimate the value of a ticket to be $20 that is another $50 million meaning that the Tigers nearly covered their payroll with what we can reasonably ascertain in terms of their revenue.
But there is more money that the Tigers need to spend beyond payroll. Not even counting stadium debt, the Tigers need to pay for the front office personnel, stadium operations, player development, marketing, etc. I’ve seen that expense estimated at $30 million for big league teams meaning that for the Tigers to not lose money they’d need to take in $160-175 million.
Forbes estimated the Tigers 2008 revenues to be $186 million. The same report said that the Tigers lost $26 million. The $186 million puts the Tigers in the middle of the pack in terms of revenues which likely puts them close to the border for revenue sharing for last season.
Things are rougher for the Tigers this year than last though. They probably lost $13 million or so in gate revenue and additional revenue in terms of in-stadium sponsorship. The overall revenue drop will likely put them in position to receive revenue sharing money, which may mitigate things.
It’s not that bad
The Tigers likely lost money, or at least they didn’t make much money in 2009. Things will probably be tough in 2010 as well. Even with a competitive product I’d be surprised if the Tigers drew more than 2.3-2.4 million based on the empty seats we’re seeing at Red Wings and Pistons games.
But Mike Ilitch is interested in winning. Gutting the team and trading off top talents for prospects doesn’t help the team win and it would further decimate the attendance figures as the season ticket base would continue to dwindle.
Continuing a theme here, I just don’t see the Tigers going fire sale and the speculation is entirely overblown. The talk of a fire sale was a game of telephone that went awry (excellent piece by Tigstown). Things will be difficult and the Tigers may have to part with a player they don’t want to to fill multiple holes. But to go into a sell mode when a great deal of the payroll difficulties will resolve themselves in 12 months doesn’t make a lot of sense.
Bill Ferris is a contributing author at Baseball Daily Digest. His work can also be found at The Detroit Tigers Weblog, where this article originally appeared.
This is a helpful analysis. But it leaves out a critical element in the calculus by the ownership: getting to the playoffs. Had the Tigers won one more game at the end of the seaso they’d have been in the playoffs, and I think it’s been shown that this would have given them not just a lot of further revenue and media attention but also a boost in season ticket sales for 2010.
This is one reason why Nate Silver wrote about teams being in the “sweet spot” when they project to win, say, 85 games (either preseason or midseason), and they are are willing to go into the market to get over the hump to 88 or 90 games. The “return” to a team from the marginal added win is much higher if it takes them over the hump than if it moves them from, say, 78 wins to 81. And so they invest in talent.
In the Tigers’ case, they have to figure out whether they’re in that sweet spot now, and whether getting another key player would take them to 88-90 wins next season. If they’re not there, they cut salary, trade and rebuild for the future. If they’re there, the look for the key player or two who will get them over the hump. Losing Polanco will hurt this team, but his skills were clearly declining in the field, his K rate was up, and while they would rather have kept him in all probability, they’re probably better off looking for a new second sacker — and may have one lined up.
The question is, then, where does management think this team is located in terms of expected wins right now.