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Article: $200 Million is the New $100 Million

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#1 Jon Marthaler

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Posted 11 December 2014 - 09:05 AM

Forbes.com reported today that Major League Baseball league-wide revenues jumped from $8 billion in 2013 to $9 billion in 2014, mostly due to the league's new national TV contracts and revenue from MLB Advanced Media, the online streaming arm of MLB.

This continues a trend.A look back: In 2001, revenue was $3.6 billion; adjusted for inflation, $4.66 billion in today's dollars, according to Forbes. That year, three MLB teams had payrolls over $100 million; the Yankees led the way with just over $112 million. Sixteen more had more than $50 million in payroll that season.

Since then, revenue has doubled, more or less. The Dodgers had a $235 million payroll last year, and the Yankees nearly cleared the bar to $200 million as well. 14 other teams had payrolls of at least $100 million.

$200 million is the new $100 million, when it comes to payroll. $100 million is the new $50 million.

Since Target Field opened in 2010, the median MLB payroll has gone from $85 million to $107 million - right in line with revenue, which, just like the median payroll, has jumped 25% in that five-year span. During that same period, the Twins' payroll has declined, from $98 million to last year's $85 million. Don't let the Twins fool you; they will try to tell you that they've spent plenty of money. They haven't.

Remember this the next time Terry Ryan or Dave St. Peter talks about being "fiscally responsible." Remember this the next time your neighbor complains about Joe Mauer's contract being the problem with the Twins. Remember that MLB's revenue explosion, and the great gobs of taxpayer money that funded Target Field, mean that the Twins are making more money now than they ever have before - indeed more money than they could ever have dreamed of.

They're just pocketing it, instead of spending it on improving the team.

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#2 Twins Fan From Afar

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Posted 11 December 2014 - 09:22 AM

I rarely comment on articles anymore, but I actually logged in to my account just to say "well done."
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#3 BK432

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Posted 11 December 2014 - 09:48 AM

Great read. And very accurate. If the Twins aren't spending yet because they plan to add significantly once the kids are up, fine, then you have a plan. But they have the money - I don't want to read anything about "small markets" or "budgets tapped out". This team could afford a lot more salary.

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#4 spanman2

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Posted 11 December 2014 - 09:55 AM

Unfortunately for us as fans the Pohlad's have in past are in present and will continue to in the future operate this a "business".By that I meannot spending over 52% or so (whatever that magic number is)of revenue on payroll is paramount in their world.From time to time they may deviate from it but that seems to be their pet peeve.I am not saying they need to spend 175 million on payroll or anything like that.What I as a fan and former season ticket holder would like to see is a commitment to putting out a competitive ballclub.The last 2 years especially we knew going in that the seasons were a lost cause.That is disappointing.There is no reason why this organization can't be in the 125 or so range each season in my opinion.Draft/develop well sign your core guys to long term contracts and pick up a solid free agent from time to time.Is that too much to ask???

I WAS TOLD I WOULD NEVER MAKE IT BECAUSE I AM TOO SHORT. WELL, I'M STILL TOO SHORT. IT DOESN'T MATTER WHAT YOUR HEIGHT IS. IT'S WHAT'S IN YOUR HEART.

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#5 kab21

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Posted 11 December 2014 - 10:08 AM

One thread complains about not spending enough and the other complains about who they spent on.Confusing.

 

There's no reason that the Twins shouldn't be operating in the 125+M range.In the short term it's hard to spend that much money w/o overloading the roster with aging vets but the Twins have a massive amount of room to work with when it comes time to giving out big extensions to the arb eligible players in a few years.It shouldn't be a surprise that payroll is down so much since the Twins have not needed to give out any big extensions to these types in the last few years (Perkins is the exception). 

Is 2016 2017 2018 the year that a good pitching prospect is truly blocked by 5 good pitchers in the starting rotation? 

Offseason (noun) - a time to propose trades assuming opposing GM's can't do the same basic analysis


#6 Brock Beauchamp

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Posted 11 December 2014 - 10:12 AM

On a slightly-related note, MLBAM (Advanced Media) is becoming a real powerhouse in digital media and is going to make MLB a ton of money over the coming decade.

 

HBO is using MLBAM streaming tech for their new service that releases early next year. CBS uses it for a variety of things. ESPN uses it a ton.

 

MLBAM's revenue has gone from $300m per year in 2006 to $620m in 2012. I think it's going to keep doubling every few years for the foreseeable future.


#7 amjgt

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Posted 11 December 2014 - 10:18 AM

What were pre-arbitration salaries back in the early 2000s?


#8 Mike Sixel

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Posted 11 December 2014 - 10:31 AM

Since TR has never been turned down for money......I think this is about Ryan, not the owners. That's what they all say, every time money comes up.

It's been a fun year so far, GO Twins. 


#9 Trevor0333

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Posted 11 December 2014 - 10:32 AM

Great article! The Twins lack of payroll given their revenue combined with their roster building methods have completely crippled the team from success.

Spending 20% of the payroll on the Corriea, Pelfrey & Duensing's of the world doesn't lead to success on the field.

#10 Parker Hageman

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Posted 11 December 2014 - 10:39 AM

MLBAM's revenue capabilities is downright breathtaking. It truly is.

 

I posted this comment originally over at Jon's blog post but here is a re-post:

 

if accurate, the Twins should be making an estimated $86M on TV revenue (their own + MLBAM revenue sharing) in 2015. That would have covered their 2014 payroll. There is definitely money to spend this year. Depending on what their estimates are for revenue at Target Field this year, there should definitely be room for a payroll of $100-$130M without flinching.

 

 

That's JUST TV REVENUE, not Target Field revenue.

 

Here's the link to the 2013 article: http://awfulannounci...tv-dollars.html

 

Are the Pohlads just pocketing money?

 

The one thing I do agree with the Twins on is avoiding long contracts. Those have a tendency of souring. I'd rather they overpay three times over for 2-3 year contract than try to sign a Jon Lester to a six-year deal.

In the end, the Twins probably are in the situation where they may leave payroll money on the table that goes back to ownership. It is unappetizing but I do not think it is malicious or a money grab.

 

 

I don't think it is as malicious of a money-grab as some commentors like to believe.  Dave St. Peter addressed some of this issue on our podcast a few weeks ago -- http://twinsdaily.co...-st-peter-r3169. I should also add that he is attending our second Twins Daily Winter Meltdown as a speaker again so you will be able to ask him payroll questions in person.

 

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#11 spycake

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Posted 11 December 2014 - 10:50 AM

What were pre-arbitration salaries back in the early 2000s?

$300k in 2003, compared to $500k in 2014:

 

http://www.statista....eague-baseball/


#12 jharaldson

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Posted 11 December 2014 - 11:03 AM

Are the Pohlads just pocketing money?

 

I don't think it is as malicious of a money-grab as some commentors like to believe.  Dave St. Peter addressed some of this issue on our podcast a few weeks ago -- http://twinsdaily.co...-st-peter-r3169. I should also add that he is attending our second Twins Daily Winter Meltdown as a speaker again so you will be able to ask him payroll questions in person.

 

My recollection of the interview is that Dave St. Peter confirmed that revenue was going towards the debt servicing the Pohlads assumed when they paid for their part of Target Field.  In simpler terms, the Pohlads are not paying anything towards Target field, they are using the extra revenue to pay it off.  The other part of the extra revenue is going towards incremental improvements to Target Field and to Minor League operations.

 

While I wouldn't call it evil or malicious I certainly don't think the Pohlads publicized prior to Target Field that their net contribution was actually going to be $0 and instead of directing all revenue to the team they would divert a good chunk to the mortgage.


#13 Jon Marthaler

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Posted 11 December 2014 - 11:07 AM

Follow-up, now that I'm a little less peevish today.

 

I get that the Twins don't want to give out ridiculous Jon Lester-style contracts. There are a ton of examples of terrible long-term deals out there, and giving somebody an eight-year, $200 million contract and then watching him stink from years 3-8 is not great business. And I get that youth development is probably much, much more important than free agent signings.

 

All I'm asking is for the Twins brass to be honest. Tell us that you didn't see the value of the big signing. Tell us that the plan is to have money available for up-and-coming youngsters that you think are going to break out. Tell us that there's a plan.

 

Just don't piss on our heads and tell us it's raining. "We made competitive offers, but so and so wanted to sign with a contender." Well, I don't see the Cubs and White Sox struggling to give away money. And worst of all, please don't cite Josh Willingham, Kendrys Morales, or - now - Torii Hunter as evidence that the team is really breaking the bank. Quit trying to tell us that money is actually being spent and "boy, we had a really competitive payroll." It's not. It's really not.

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#14 James

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Posted 11 December 2014 - 11:40 AM

Ahh.  A good payroll conversation again, huh?  

 

There are arguments for both sides, spend or don't spend.  I agree that I would like the Twins to me a bit more open and honest about contracts, but there are some things they can't say in public, because they still do need to maintain a relationship with other GMs, so I can see why they tend not to say much about other deals.

 

The argument that I hate to hear is, "The Twins don't spend money and that's why they're losing".  We all know this isn't the reason they are losing, because if all it took was to spend money, we would have seen a Dodgers vs Yankees world series last year, and the Phillies wouldn't have spent almost $100 million dollars more than the Twins to win 3 more games.  I'm not saying that I agree with the way that the Twins have been spending their money, I'm saying that they payroll isn't the main cause of the Twins problems.

 

The one argument that is not valid at all is people complaining that "The Pohlads are operating the Twins as a business."  I really hate to break this to those people, but the Twins are, in fact, a business.  In fact, all 30 MLB teams are, in fact, businesses.  If you expect the owners to run their teams as anything other than a business, then your setting yourself up to be disappointed. 

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#15 Parker Hageman

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Posted 11 December 2014 - 11:41 AM

My recollection of the interview is that Dave St. Peter confirmed that revenue was going towards the debt servicing the Pohlads assumed when they paid for their part of Target Field.In simpler terms, the Pohlads are not paying anything towards Target field, they are using the extra revenue to pay it off.

 

 

I guess I'd prefer that to what is happening in Milwaukee with their debt service repayment program: http://www.jsonline....-282365821.html

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#16 TheLeviathan

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Posted 11 December 2014 - 11:42 AM

The one argument that is not valid at all is people complaining that "The Pohlads are operating the Twins as a business."  I really hate to break this to those people, but the Twins are, in fact, a business.  In fact, all 30 MLB teams are, in fact, businesses.  If you expect the owners to run their teams as anything other than a business, then your setting yourself up to be disappointed. 

 

I would suggest it's bad for business to essentially pocket money from your shareholders.


#17 DaveW

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Posted 11 December 2014 - 11:50 AM

I would suggest it's bad for business to essentially pocket money from your shareholders.

I'm not sure why all of my prior posts are being deleted for pointing out that this is nothing new from the Pohlad family.

 

Anyways, fans aren't shareholders, the Twins will continue to make millions upon millions from the TV deal alone, yes attendance and all that helps, but the real money just like the other leagues comes from the massive TV deals.

 

At least it isn't a Marlins situation (previous to this year at least). It still IMHO is very possible to compete with a 90-100 mil payroll in this day of age. While I blame the Pohlads for being cheap, the Twins shouldn't use this as an excuse for their pathetic results the past 3 or 4 years.

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<p>Aaron Hicks 2017 stats so far (5/17/17): .326 BA .464 OBP .616 SLG 1.080 OPS 7 HR 19 RBI 6 SB 22 BBs 1.8WAR

#18 James

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Posted 11 December 2014 - 12:00 PM

I would suggest it's bad for business to essentially pocket money from your shareholders.

Vodka Dave is right.  The fans aren't shareholders.  They're customers.  Pocketing money from customers is exactly what businesses do.  

 

My point was payroll isn't the biggest reason for the Twins losing in recent years.  I also agree that the Twins management shouldn't be avoiding free agents just because payroll doesn't win games.  

You can come up with statistics to prove anything. Forty percent of all people know that.


#19 diehardtwinsfan

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Posted 11 December 2014 - 12:03 PM

I think it comes down to the fact that there's a public subsidy that people in the state paid regardless of fandom. In that aspect of things, I get where Levi is coming from. I don't have too much problems with the Pohlads using extra revenue to aggressively paying down debt, that's not bad for the long term of the business. Payroll won't win games. It can help. I'm a huge advocate of smart payroll moves.

#20 DaveW

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Posted 11 December 2014 - 12:03 PM

Vodka Dave is right.  The fans aren't shareholders.  They're customers.  Pocketing money from customers is exactly what businesses do.  

 

 

See: Jet Blue

<p>Aaron Hicks 2017 stats so far (5/17/17): .326 BA .464 OBP .616 SLG 1.080 OPS 7 HR 19 RBI 6 SB 22 BBs 1.8WAR



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