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  • Where Should Payroll Sit in 2013?

    Since they moved into Target Field, the Twins have seen payroll rise and fall, from $96 million in the opening season, up to $112 million the following year, down to $94 million in 2012.

    The rise to $112 million last year was purportedly the result of a push to take the next step after falling short in the 2010 postseason. The subsequent scaling back by nearly $20 million was easy enough to figure; the Twins had lost 99 games which led to reduced revenue and also led to a lessened belief that contention in the next year would be possible.

    Revenues only dropped further here in 2012, as Target Field saw attendance fall by nearly 400,000. The Twins also lost 96 games. So the general belief is that next year's payroll will drop again, perhaps to $90 million or lower. Terry Ryan has backed up that notion by telling reporters that he doesn't plan to pursue high-profile free agents, which may either be a sign that he's uncomfortable giving big-money long-term deals to pitchers (justifiable) or that the club is simply unwilling to spend on the open market to address its issues (less justifiable).

    Can the Twins really afford to worry so much about what they can afford?

    A drop to $90 million or below might make sense based on the organization's typical structure, which calls for putting between 50-52 percent of revenue back into payroll, but it doesn't necessarily make sense for the long-term health of the franchise. If the Twins keep trimming the money they put into their roster, they risk further frustrating the fans and continuing this disturbing trend of attendance decline here in Year Four of their sparkling young ballpark.

    There's a snowball effect that comes into play here. If the team's performance keeps scuffling as the shiny newness of the stadium wears off, then attendance will keep dropping and so will revenue. Alas, adherence to the set payroll structure will result in an ongoing decline in spending, which will make it increasingly difficult to field a truly competitive team, particularly with $23 million every year owed to Joe Mauer, who is only getting older.

    It might require them to find money elsewhere and go above their normal percentage, but I believe the Twins should absolutely raise payroll above its current level rather than letting it drop for a second straight year. They don't necessarily need to get back into that $115 million range, but $100 million seems like a reasonable target.

    While additional spending hardly guarantees a winning team, it does demonstrate to fans a firm commitment to righting the ship, and the extra players brought aboard with that money are bound to generate excitement and sell some tickets.

    This is a pivotal offseason for the Twins, and one that could very well determine the course of the organization over the next several years. Will ownership play it safe at the risk of exacerbating a sense of apathy among the fan base, or will they green-light some bold moves to give their stagnating product a jolt?

    The latter option wouldn't be very Twins-like. But maybe that's a good thing.
    This article was originally published in blog: Where Should Payroll Sit in 2013? started by Nick Nelson
    Comments 41 Comments
    1. clutterheart's Avatar
      clutterheart -
      105+ MM USD is where I want it to be but really it doesn't matter. The Team needs to spend money smart and with a target approach. The whole point of the stadium was for the team to get extra revenue and use it to cover up mistakes that would have killed them when they were in the dome. The team needs to spend what it thinks will bring a team who won't embarrass the fans and a pitching staff that actually give the team a chance to win.

      Hopefully Ryan uses his scouting ability to find guys who can help the team, target them and spend the money needed. With their payroll they can afford just about anyone. There is no long term super stars on the roster who are going to need a huge pay raise in the next 3 years. So the team knows where they will be in the next 3-5 years salarywise.

      If he thinks Grienke can help the team, get Grieke, they have the money to do it.
      Same thing with about 3-4 other guys. Forget the money limits and find the guys who can stop this club from becoming an embarrassment. I am not asking for a team of all-stars...just a pitching staff that doesn't make me surprised when they go 5 innings and only let in 3 runs
    1. nick5253's Avatar
      nick5253 -
      I agree. The overall number doesn't really matter as much as fans like to think, it's what is done with the money. Going all out right now and adding an additional 50 mil to payroll would likely mean long term contracts that tie their own hands down the road. At best those deals are break-even and rarely, if ever, is there surpluss value. I would rather see the Twins do what they normally do - sign 2nd/3rd tier free agents to fill holes - but at a more exaggerated sense. IE if you think you need 2 free agent pitchers of that caliber, sign 3 or 4. Sign more depth across SP, bullpen & middle infielders. Contracts that are 1-2 years that don't hamstring you down the road and also give you guys you can 'flip' mid-season if things go terribly wrong again. The next wave of Twins talent is still 2-4 years away, so filling the gaps until then should be priority.
    1. JB_Iowa's Avatar
      JB_Iowa -
      I expect payroll to be at $91-$94 million (although I also expect Terry Ryan to cringe at spending that much). From a PR standpoint I just don't think that they are going to want to be seen as significantly cutting expenditures for next season.

      It is about spending wisely. It is also about being able to conclude at least one (I'd prefer a couple) meaningful trade. I think Terry Ryan will do the former (Jason Marquis aside). The jury is definitely still out on the latter. We haven't seen a significant trade out of this organization in a long time -- all we've seen is a few gap-fillers or not much of anything trades at the deadline.
    1. mike wants wins's Avatar
      mike wants wins -
      Signing mediocre guys gives you mediocre guys.......if they really want to win next year, that budget will need to be at least 115. I expect it to be under 90, and for them to stink next year. Who cares if they have big contracts that handicap them if they never go out and spend money, it is not the contracts, but the philosophy that handicaps them.
    1. Brandon's Avatar
      Brandon -
      I think the best course from a PR standpoint is to bring in a starting pitcher with a name. Then bring in another one or preferably 2 that could be a low cost option incuding resigning scott baker. That gives the impression we are doing what we can to field a winner as then there would be numerous candidates for the rotation next year. Finding a solid SS wouldn't hurt either.
    1. jharaldson's Avatar
      jharaldson -
      Some payroll facts, if you take the Twins at their word and they spend %50 on payroll then we have some math trouble because in 2007 they spent $71.5 million on Payroll which equates to $143 million in revenue.

      http://www.baseballprospectus.com/co...ts/?page_id=80

      Earlier this year the FSN deal went from $12 million a year to $29 million a year bringing revenue up to $160 million.

      http://www.1500espn.com/sportswire/M...or_Twins010512

      Twins also have naming rights at another $5 million a year bringing revenue up to $165 million a year.

      http://images.businessweek.com/ss/09...s_deals/20.htm

      Plus the most recent national TV Deal will leave each team with $52 million a year ($12.4 Billion / 8 Years / 30 teams) brings Twins revenue up to $217 million a year leaving the Twins a payroll floor of $108.5 million without even accounting for the revenue generated from the stadium and its fluctuating attendance.

      http://mlb.mlb.com/news/article.jsp?...s_mlb&c_id=mlb

      They don't need to spend this all on free agents if they don't think the quality is there but they can increase their investment in the minor league system and if money is still left over they can pre-pay Mauer's contract so when they are in a position to make a run a few years from now they have more payroll flexibility.

      What is not acceptable is putting a mediocre product on the field around $85-90 million and pretending the resources are not in place for something more.
    1. Rosterman's Avatar
      Rosterman -
      Last year the Twins had a contract with Blackburn, were paying a disabled Baker, somehow was eating $$$ with Toshi, Marquis was a bust here and adequate elsewhere. Not to mention the expensive look at Zumaya. Then you had Capps and Pavano not making their salary. We are strapped with the Mauer contract which is 1/4 of payroll. Morneau is an expensive liability, Just need to spend wisely. The other $100 million, the Twins need to spend on drafting, besides paying down their own debt to make the team even more profitable. Sadly, attendance can take a hit in 2013, which also means concessions take a hit, et al. And with no big names, you don't sell more jerseys and such. Be interesting to see the TwinsFest buzz this season.
    1. tacky3's Avatar
      tacky3 -
      I do believe that this team could get younger and better if we traded Mourneau and Span and replaced them in house with Parmalee and Revere. Not only would this possibly give us pitching help (depending on what the twins fetch in return) but it would free up more money to go out and grab two or three good (Anibal Sanchez, Dan Haren, Edwin Jackson) free agents.
    1. beckmt's Avatar
      beckmt -
      Revere has very little market value. I also feel the clubs with excess young pitching have limited budgets(TB,Seattle, Oakland) Most of them would rather that a Span and a Parmalee than any of the bigger payroll players(Willingham is also an eoption, but this creates another hole). I agree that spending wisely is the key, not the amount of money spent.
    1. beckmt's Avatar
      beckmt -
      Was interesting to see what a writer thought the number was, it makes it harder for the Twins to justify not spending the money given that it was there.
    1. Jim Crikket's Avatar
      Jim Crikket -
      The problem with the Twins' philosophy is that they seem to expect fans to "prove" their loyalty first, before they increase their investment in talent. They want fans to show up in greater numbers to watch bad baseball and generate increased income before they'll increase payroll. What Nick suggests is that the Twins should invest first and trust that fans will show up in greater numbers to watch the improved product. That, however, would require that the Pohlads trust their baseball people (specifically GM and Manager) to spend the money wisely and manage the talent wisely enough to get those improved results on the field. I'm just not sure that trust exists right now. If we see a payroll in the $95-100 million range, we'll know it is. If payroll is cut back to $85-90 million, we'll also know what that means.
    1. Highabove's Avatar
      Highabove -

      The Twins will never talk about the years that they underpaid the payroll. In 2008-09, the payroll was not even close to 50% of revenue.
      As a result, the Twins pretax earnings were in the upper third of Baseball.

      Payroll Revenue
      2008: $57 million $158 million
      2009: $65 million $162 million
      2010: $97 million $213 million

      Pretax earnings
      2008 6th 27.2 million

      2009 9th 25 million


    1. iastfan112's Avatar
      iastfan112 -
      Quote Originally Posted by jharaldson View Post
      Some payroll facts, if you take the Twins at their word and they spend %50 on payroll then we have some math trouble because in 2007 they spent $71.5 million on Payroll which equates to $143 million in revenue.

      http://www.baseballprospectus.com/co...ts/?page_id=80

      Earlier this year the FSN deal went from $12 million a year to $29 million a year bringing revenue up to $160 million.

      http://www.1500espn.com/sportswire/M...or_Twins010512

      Twins also have naming rights at another $5 million a year bringing revenue up to $165 million a year.

      http://images.businessweek.com/ss/09...s_deals/20.htm

      Plus the most recent national TV Deal will leave each team with $52 million a year ($12.4 Billion / 8 Years / 30 teams) brings Twins revenue up to $217 million a year leaving the Twins a payroll floor of $108.5 million without even accounting for the revenue generated from the stadium and its fluctuating attendance.

      http://mlb.mlb.com/news/article.jsp?...s_mlb&c_id=mlb

      They don't need to spend this all on free agents if they don't think the quality is there but they can increase their investment in the minor league system and if money is still left over they can pre-pay Mauer's contract so when they are in a position to make a run a few years from now they have more payroll flexibility.

      What is not acceptable is putting a mediocre product on the field around $85-90 million and pretending the resources are not in place for something more.
      Read comprehension not your forte? The new contract doesn't kick in until 2014 as stated in the article thus that isn't realized revenue. Not only that, but, you failed to account for the old contract as well when doing math. Since the article said it was "An over 100% increase", lets keep the math simple and halve that 52 million a year. So 17(increase FSN deal)+5(stadium)+26(Increase mlb deal)= 48 million. Add that to 143 divide by two you get 95.5 million as a base in 2014.

      Now lets extrapolate at bit. Lets try to find out how much more value Target Field adds per year. Take our base (143+5+17)/2=82.5. Last years payroll was 100 million. Subtract the 82.5 from the 100 x2= ~35 million more in revenue yearly than the Metrodome did in 2007. Seems about right to me.
      That said, still think the Polhad's are money grubbing cheapskates. I truly doubt that with every corresponding increase in revenue that background costs are doubling as well. Percentage wise they probably are making about the same but I'd be willing to be they're banking significantly more than they were just a few years ago.
    1. Winston Smith's Avatar
      Winston Smith -
      They should spend whatever it takes to give us a good team. They are the richest owners in pro sports, if they lose a few million it's like most of us getting that big gas bill in Jan. It puts a dent in the wallet but you get by.

      Target field is a cash cow and the fans spending the cash and helping pay off the field deserve better than what we've had the last 2 years.
    1. jharaldson's Avatar
      jharaldson -
      Quote Originally Posted by iastfan112 View Post
      Read comprehension not your forte? The new contract doesn't kick in until 2014 as stated in the article thus that isn't realized revenue. Not only that, but, you failed to account for the old contract as well when doing math. Since the article said it was "An over 100% increase", lets keep the math simple and halve that 52 million a year. So 17(increase FSN deal)+5(stadium)+26(Increase mlb deal)= 48 million. Add that to 143 divide by two you get 95.5 million as a base in 2014.

      Now lets extrapolate at bit. Lets try to find out how much more value Target Field adds per year. Take our base (143+5+17)/2=82.5. Last years payroll was 100 million. Subtract the 82.5 from the 100 x2= ~35 million more in revenue yearly than the Metrodome did in 2007. Seems about right to me.
      The old contract was worth $23.7 million a year leaving the net growth at $28 million which you have correctly, if in somewhat of a rude manner, pointed out should be counted in 2014.

      http://www.sportsbusinessdaily.com/J...ies/MLBTV.aspx

      If you build in for basic inflation the $143 million base goes up to $159 million.

      http://146.142.4.24/cgi-bin/cpicalc....007&year2=2012

      159 (Base w/ inflation) + 5 (Stadium) + 17 (FSN) = $181 Million / 2 = $90 Million payroll Metrodome could have supported.

      The $10 million dollar gap between the Metrodome possible amount and the Target Field Payroll of $100 million equals around ~$20 million revenue jump at Target Field which I don't buy, especially when estimates were $50-$70 million.

      http://minnesota.publicradio.org/dis...lpark-finance/
    1. TwinsMusings's Avatar
      TwinsMusings -
      I have trouble getting very excited about payroll discussions because the public information on total revenue of the Twins (a private corporation) is not complete and not knowing how much the total revenue is makes it difficult to project what "50-52%" really is. For example, I have trouble believing the Twins actually spent 50% of total revenue on payroll in 2010. No responsible business would BUDGET for 100% attendance. Their budget may have projected 50% based on expected revenue, but I'd be very surprised if income did not greatly exceed budget expectations in 2010.

      For 2013, I expect the Twins management will project lower revenue from attendance, but that does not mean overall revenue will be lower. We will never know all of the rest of the revenue.

      Based on what Pohlad and Ryan have been reported as saying publicly, I expect the 2013 payroll to be whatever Terry Ryan decides it should be. They may have a target number, but philosophy, longer term projections, and availability of players to fit the philosophy and projections will have more to do with the final number than any hard and fast budget decision.

      If I had to guess right now, I'd say somewhere between $90 and $100 million will be where he ends up projecting around opening day.
    1. jorgenswest's Avatar
      jorgenswest -
      The payroll this year ranked about where you expect to find a midmarket team.

      Payroll is also a difficult target. Is 94 million the final number for this year? Did it include Nishioka, Marquis ( who I think we paid over a full season, Zumaya, Baker and Liriano savings. Shouldn't it include any buyouts (Nathan?)? Those must be accounted for somewhere. How does the increased money spent on higher draft picks fit in?

      If we cared, we should really seek the amount of money put back in the organization. How do we rank in money spent developing prospects? The medical staff? Scouting? Front office?

      I am all for dropping payroll and going younger next year if it means that money saved could be spent wisely developing our farm system, getting the best scouts and monitoring the health of our players.
    1. darin617's Avatar
      darin617 -
      Quote Originally Posted by jharaldson View Post
      Some payroll facts, if you take the Twins at their word and they spend %50 on payroll then we have some math trouble because in 2007 they spent $71.5 million on Payroll which equates to $143 million in revenue.

      http://www.baseballprospectus.com/co...ts/?page_id=80

      Earlier this year the FSN deal went from $12 million a year to $29 million a year bringing revenue up to $160 million.

      http://www.1500espn.com/sportswire/M...or_Twins010512

      Twins also have naming rights at another $5 million a year bringing revenue up to $165 million a year.

      http://images.businessweek.com/ss/09...s_deals/20.htm

      Plus the most recent national TV Deal will leave each team with $52 million a year ($12.4 Billion / 8 Years / 30 teams) brings Twins revenue up to $217 million a year leaving the Twins a payroll floor of $108.5 million without even accounting for the revenue generated from the stadium and its fluctuating attendance.

      http://mlb.mlb.com/news/article.jsp?...s_mlb&c_id=mlb

      They don't need to spend this all on free agents if they don't think the quality is there but they can increase their investment in the minor league system and if money is still left over they can pre-pay Mauer's contract so when they are in a position to make a run a few years from now they have more payroll flexibility.

      What is not acceptable is putting a mediocre product on the field around $85-90 million and pretending the resources are not in place for something more.
      They would never pull something like that now would they? You could also factor in the increased value of the team thanks to their great stadium deal that they barely paid half of the cost. You could go on and on with added things. That is why they are rich because they keep changing their numbers and don't really have to answer to anyone on how they decide how much to spend on payroll...
    1. Jack Torse's Avatar
      Jack Torse -
      Jim Pohlad said last off season that he had a difficult time investing more money into a 99 loss team. I doubt 96 losses changes his thinking much. I think we know where next season's payroll is headed. Looks like two nights of golf league next summer.
    1. glunn's Avatar
      glunn -
      I wonder whether an additional $1 million per year spent on better scouts and minor league coaching might eventually save $10 million on having to pick up free agents to cover holes in the lineup. If there were good pitching prospects coming up next year, then no one would be thinking much about Greinke and other mega-expensive free agents. The Twins pitching prospect list is weak, and it seems to me that this should be blamed on poor scouting and/or mistakes by the front office, and that the best way to spend more money may be on improving the selection of prospects.
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