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Formula to calculate Twins revenue in relation to winning %?

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8 replies to this topic

#1 nokomismod

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Posted 15 August 2012 - 10:28 AM

Hey All,
I might be in the minority here that think the Twins team currently has a decent owner. They are local, committed, and consistent. That being said they are also running a business and they are good business people. I have to think they are looking at the current situation of two bad seasons and fan discontentment seriously. I am wondering if they might be looking at a formula to calculate the team's winning percentage for upcoming seasons in relation to revenue. This could be really interesting if you have a model that not only predicts for current year, but how it relates/carries over for the next 2-5 years after. For example if a team wins a World Series, there is residual revenue that the team will continue to see for years after. Just like if a team loses 90 plus games 3 years in a row, it will take longer to rebound and regain revenue (brand has been tarnished and some fans will be slow to return).
It may make sense for TR and ownership to be bold and sign two big free agent pitchers even if it means overspending short term just to restore revenue for the upcoming 2-5 years.

#2 Thrylos

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Posted 15 August 2012 - 10:43 AM

Hey All,
I might be in the minority here that think the Twins team currently has a decent owner. They are local, committed, and consistent. That being said they are also running a business and they are good business people. I have to think they are looking at the current situation of two bad seasons and fan discontentment seriously. I am wondering if they might be looking at a formula to calculate the team's winning percentage for upcoming seasons in relation to revenue. This could be really interesting if you have a model that not only predicts for current year, but how it relates/carries over for the next 2-5 years after. For example if a team wins a World Series, there is residual revenue that the team will continue to see for years after. Just like if a team loses 90 plus games 3 years in a row, it will take longer to rebound and regain revenue (brand has been tarnished and some fans will be slow to return).
It may make sense for TR and ownership to be bold and sign two big free agent pitchers even if it means overspending short term just to restore revenue for the upcoming 2-5 years.



This is called revenue forecasting and I suspect that they are doing it, as do most of the large businesses.
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#3 Ultima Ratio

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Posted 15 August 2012 - 10:45 AM

The problem with the front office payroll philosophy of using ~50% of revenue is a mathematical one: If the team sucks in consecutive years, lowering revenues, then payroll also decreases making it more difficult to pay for and keep players that will turn it around. Let's say 200 million in revenue in year one, therefore a 100 M payroll in year two. If that year two team sucks, then may fall to 160 M, therefore creating an 80 M payroll in year three. You can see that if the team doesn't begin to win and revenues increase, using this formula alone is absurd because it would lead to a negligible payroll. There must be a baseline (I'd say 80 M) where spending beyond is proportional to revenue, but anything less means you have a payroll/plan for continued failure and decreased revenue coming back.
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#4 Thrylos

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Posted 15 August 2012 - 10:53 AM

There must be a baseline (I'd say 80 M) where spending beyond is proportional to revenue, but anything less means you have a payroll/plan for continued failure and decreased revenue coming back.


Not really. If you look at the Tampa Bay model (of pretty much continuous rebuilding) you do not need a high budget (or a high revenue - their revenue is awful) to compete. But it means making some unpopular decisions in trading and letting go "star players" and getting young stars in trades and the draft. Part of their success was built on the previous free agent compensation model. It will be interesting to see how this will go ahead with the CBA changes.
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#5 Ultima Ratio

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Posted 15 August 2012 - 10:59 AM

There must be a baseline (I'd say 80 M) where spending beyond is proportional to revenue, but anything less means you have a payroll/plan for continued failure and decreased revenue coming back.


Not really. If you look at the Tampa Bay model (of pretty much continuous rebuilding) you do not need a high budget (or a high revenue - their revenue is awful) to compete. But it means making some unpopular decisions in trading and letting go "star players" and getting young stars in trades and the draft. Part of their success was built on the previous free agent compensation model. It will be interesting to see how this will go ahead with the CBA changes.


I agree with you that it's possible for other teams right now, but I was talking about the Twins specifically, with big contracts to a couple guys. The major point, though, is that there must be some baseline ~50-60 M if one wants to even try to field a competitive team, for any team.
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#6 nokomismod

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Posted 15 August 2012 - 11:15 AM

What about "overspending" to reverse a decreasing revenue trend like what the Twins are experiencing? My company might spend more than we budgeted to hire new Sales reps with the hopes of creating greater revenue in years 3, 4, and 5 (after losing money for years 1 and 2).

#7 Thrylos

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Posted 15 August 2012 - 12:20 PM

What about "overspending" to reverse a decreasing revenue trend like what the Twins are experiencing? My company might spend more than we budgeted to hire new Sales reps with the hopes of creating greater revenue in years 3, 4, and 5 (after losing money for years 1 and 2).


It's tricky in baseball... Arguably they overspent in 2011 and the result was the second worst record in the Majors. I think spending smart money and building a great pipeline in the minors is the key to long sustained success, unless you are talking Yankee level or Florida Marlins level at their WS championship seasons overspending... But I do not see the Twins spending $250 million in any way possible :) I think they are better off investing well and building a pipeline (which will probably mean trading some folks with higher contracts for some younger talent next season)
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#8 nokomismod

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Posted 15 August 2012 - 12:37 PM

I agree with you that ideally you build from within and don't go the free agent route to heal your weaknesses. I kind of feel like right now it's a special situation because of two factors:
1. The new stadium and the perception that "the ownership got a handout to build the stadium, and here they are putting a crappy product on the field".
2. You have a core of players (Mauer, Morneau, Willingham, Span, Doumit) that could all be pretty good offensively for the next couple of years (minus possibly Morneau), and if you want to win with these guys, you can't wait to go with young starting pitchers.

#9 Thrylos

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Posted 15 August 2012 - 12:49 PM

2. You have a core of players (Mauer, Morneau, Willingham, Span, Doumit) that could all be pretty good offensively for the next couple of years (minus possibly Morneau), and if you want to win with these guys, you can't wait to go with young starting pitchers.


Well, then there is door number 3 (And I think that the Twins need at least 2 and maybe 3 top level pitchers to be competitive in 2013) : You trade your top prospects to supplement veteran lineup with veteran pitching. Like trading Sano, Hicks and Hendriks for Roy Halladay (let's say) and three more top prospects for another pitcher at that level (Benson, Gibson and Rosario) and then sign a top free agent to give them 3 top starters.
But they will never do that (thankfully)... And because they will not give free agent pitchers 4 and 5 year contracts (while other teams will do), the Twins will have to build within their system. So they got to break that core and get young pitching to compete when Sano and Rosario and Arcia and Hicks will be here with Plouffe and Mauer and Revere etc...
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