Dear Terry Ryan... Take a look at the AL Central and factor that in

[Mike Sixel]

 

I am not sure I understand point 1.  If you are somehow surmised my post suggested we not draft international FAs, you did not bother to look very close.  I merely pointed out the players receiving the largest bonuses of their time have had a poor track record and it would be interesting to compare results of the “Kepler type” signings or even the guys that got half of what Kepler got.  It was stated that I am curious if the return on one $4M guy on average has been a lot lower than investing it in let’s say ten $400K guys.

 

Which form of acquiring talent is being suggested be abandoned.  I assume this is from point one which you badly misinterpreted.

 

Point 3 - Are you suggesting that being a high revenue teams do not have an advantage and therefore measuring against the Twins revenue peers is not relevant or are you saying you want them to measure their success against the top revenue teams regardless of if they are at a disadvantage?

 

Ah, I did misunderstand your point. Thanks for clarifying.

 

Point 3: doesn't matter if teams have different advantages, the owners decided to play MLB, not something else. They should, imo, be compared to all 30 teams then. If they decided to invest in and own something else, I'd judge them on that. But, that's not what they did. 

[Major League Ready]

 

nobody is saying high revene teams don't have an advantage in signing top free agents. The big problem I am having is that you are drawing the revenue line directly above the Twins. As I see it, the only teams with an inherent advantage year after year are a half dozen or so top market teams, the Cubs, maybe another team or two that happens to be ascendant at the time. That's it.

If you are referring to the post I made a while back regarding FA SPs who commanded a 5 or 6 year contract, I simply reported the facts.  There has been one 6 year and one 5 year contracts since the turn of the century for teams outside the top 10 in revenue.  Of course, Arizona elected to spend part of their billion dollar TV contract on Grienke.  You can decide for yourself if they should be lumped in with the rest of the low revenue teams because they were in that category prior to their new TV deal.

 

I think we can say that the top 5 revenue teams have a decided advantage over even the next 5 but that top 10 group has completely dominated the large FA contracts for SPs.  If your point is that the top 10 do not have an advantage over the Twins, we will just have to agree to disagree.  If we take the closest 4 or 5 other teams in terms of revenue (above & below), have they signed this type of FA SP?  The answer is no.  You can argue they should but you can’t argue that the Twins have acted differently than the teams nearest them in terms of revenue.  Actually, I don’t know, but I would suspect the teams nearest the Twins have not signed 3 contracts equal to Mauer, Nolasco and Sanatana.

 

 

[Hosken Bombo Disco]

If you are referring to the post I made a while back regarding FA SPs who commanded a 5 or 6 year contract, I simply reported the facts.  There has been one 6 year and one 5 year contracts since the turn of the century for teams outside the top 10 in revenue.  Of course, Arizona elected to spend part of their billion dollar TV contract on Grienke.  You can decide for yourself if they should be lumped in with the rest of the low revenue teams because they were in that category prior to their new TV deal.

 

I think we can say that the top 5 revenue teams have a decided advantage over even the next 5 but that top 10 group has completely dominated the large FA contracts for SPs.  If your point is that the top 10 do not have an advantage over the Twins, we will just have to agree to disagree.  If we take the closest 4 or 5 other teams in terms of revenue (above & below), have they signed this type of FA SP?  The answer is no.  You can argue they should but you can’t argue that the Twins have acted differently than the teams nearest them in terms of revenue.  Actually, I don’t know, but I would suspect the teams nearest the Twins have not signed 3 contracts equal to Mauer, Nolasco and Sanatana.

I am assuming you are including Detroit in that top 10 but I don't know why you would. Other than what is assumed to be a better tv deal which is: first, a contract of the Twins own making, and second, a chicken and egg problem, win games and more people will watch. Otherwise I see the Twins and Tigers as basically in similar positions, similar markets, same division. Yet Detroit has signed Cabrera and Fielder and locked up Verlander for $28 million a year, also David Price even passed through Detroit in a trade. I think it's fair to question how the Santana, Nolasco, and Hughes extension contracts fits in with Ryan's plan to develop prospects.

[Major League Ready]

 

Ah, I did misunderstand your point. Thanks for clarifying.

 

Point 3: doesn't matter if teams have different advantages, the owners decided to play MLB, not something else. They should, imo, be compared to all 30 teams then. If they decided to invest in and own something else, I'd judge them on that. But, that's not what they did. 

I appreciate where you are coming from but I still don’t think it is reasonable to compare the success of one organization to another with twice the resources or twice the revenue.  If I assign a project to one team and tell them I expect the same results as another team assigned the same project but given twice the budget, would that be reasonable?  Would you feel your boss was reasonable if you were responsible for the team with half the budget?

 

We also need to put this in context.  The owners went into this business to make money.  Some are more focused on winning than others but none of them would have hundreds of millions or more than a billion dollars of capital tied up in a business that was not going to turn a profit and every team turns a profit most years and team values continue to climb.  They don’t have to win as much as the large markets for their MLB team to be a good investment which is their first criteria.  The point being it would be perfectly reasonable for an owner to buy a franchise realizing they would not win the same percentage of games as a team in a top market when compared over a number of years.

 

One team, The A’s have won on a relatively equal basis to the top 9 markets.  One of the top 9 (cubs) has lost at a pace equal to the bottom revenue markets.  The results are quite clear.  Therefore, It is perfectly reasonable to want our team to win as much as the top revenue teams but it is not a reasonable expectation on a consistent basis, IMO.

[drjim]

 

I am assuming you are including Detroit in that top 10 but I don't know why you would. Other than what is assumed to be a better tv deal which is: first, a contract of the Twins own making, and second, a chicken and egg problem, win games and more people will watch. Otherwise I see the Twins and Tigers as basically in similar positions, similar markets, same division. Yet Detroit has signed Cabrera and Fielder and locked up Verlander for $28 million a year, also David Price even passed through Detroit in a trade. I think it's fair to question how the Santana, Nolasco, and Hughes extension contracts fits in with Ryan's plan to develop prospects.

 

Detroit has 4.2 mil, Twin Cities has 3.2 mil. Michigan has about 10 mil residents, Minnesota has about 5.5 mil, and adding Dakotas and other parts of "Twins Territory" don't make up the difference. Detroit, by any measure, is a bigger market by a pretty significant margin. This goes beyond just an individual owner willing to overspend the market.

 

So I would say the point still stands.

[Mike Sixel]

 

I appreciate where you are coming from but I still don’t think it is reasonable to compare the success of one organization to another with twice the resources or twice the revenue.  If I assign a project to one team and tell them I expect the same results as another team assigned the same project but given twice the budget, would that be reasonable?  Would you feel your boss was reasonable if you were responsible for the team with half the budget?

 

We also need to put this in context.  The owners went into this business to make money.  Some are more focused on winning than others but none of them would have hundreds of millions or more than a billion dollars of capital tied up in a business that was not going to turn a profit and every team turns a profit most years and team values continue to climb.  They don’t have to win as much as the large markets for their MLB team to be a good investment which is their first criteria.  The point being it would be perfectly reasonable for an owner to buy a franchise realizing they would not win the same percentage of games as a team in a top market when compared over a number of years.

 

One team, The A’s have won on a relatively equal basis to the top 9 markets.  One of the top 9 (cubs) has lost at a pace equal to the bottom revenue markets.  The results are quite clear.  Therefore, It is perfectly reasonable to want our team to win as much as the top revenue teams but it is not a reasonable expectation on a consistent basis, IMO.

 

so why should I pay the same ticket prices, then, or higher concession prices? I mean, if they don't expect to win very often, why should we pay for that? That seems completely unfair to me. 

 

If I gave two companies the right to make a product, and one consistently did better than the other, why should I keep supporting the crappy company?

[ashbury]

so why should I pay the same ticket prices, then, or higher concession prices?

You mean compared to big market teams? Do you think the prices are the same? You can't just look at top and bottom prices because they all try to offer a range for all fans, mainly for PR purposes, but the number of high priced seats are a lot greater in, say, Boston, or at least that's been my impression when trying to go to a game.

[sane09]

 

As Loosey said "Choose a path Twins! "Quit going halfway down the prospect path and then coming back and trying the bargain bin veteran path."

 

The half arse decision making, and filling the roster with clearance rack merchandise or basement bin shopping even if it is only the 24th or 25th spots,with clinging to their careers veterans practice needs to stop.

To whom are you referring from this year's MLB acquisitions when you label them as:
1)  "the bargain bin veteran"
2)  "clearance rack merchandise" or
3)  "basement bin shopping"
4)  filling "the 24th or 25th spots,with clinging to their careers veteran"

Are you referring to Byong Ho Park? JR Murphy? John Hicks?
All the other acquisitions are minor league signings who are currently not even on the 40-man roster, much filling  "the 24th or 25th spots.
Unless you think that no one without an MLB contract should be given a chance to win a roster spot on Spring Training performance plus past success.
That would be a creative policy change, which is seldom (never?) used by any MLB teams.

[Hosken Bombo Disco]

Detroit has 4.2 mil, Twin Cities has 3.2 mil. Michigan has about 10 mil residents, Minnesota has about 5.5 mil, and adding Dakotas and other parts of "Twins Territory" don't make up the difference. Detroit, by any measure, is a bigger market by a pretty significant margin. This goes beyond just an individual owner willing to overspend the market.

 

So I would say the point still stands.

Detroit is bigger, not arguing that, though someone might be able to cite some better figures on demographics, growth, whatever, and show that the gap is not as big as you present it.

 

What I'm saying is that it's more than fair to group Detroit and Minnesota together with the "everyone else" crowd. This is where I think your arguments fall short, MLR. The Tigers in my opinion do not have the same advantages as the typical NY or LA team any given year, even though the owner spends like he does.

[old nurse]

Average ticket price in Boston is in the $50 range, Twins closer to 30, San Diego was 16. Pittsburgh  $20    Baseball ticket prices are not based on the quality of the team but more on the optimization of revenue from the base.  If you do not want to pay their prices then your option is to not go. Traveling to another city does not lower your cost to see a game.

[Major League Ready]

 

so why should I pay the same ticket prices, then, or higher concession prices? I mean, if they don't expect to win very often, why should we pay for that? That seems completely unfair to me. 

 

If I gave two companies the right to make a product, and one consistently did better than the other, why should I keep supporting the crappy company?

I am not sure what they expect but I know that higher revenue teams can support a higher payroll which is advantageous to winning.  History is quite clear on this premise.   Therefore, I do not expect it just as I would not expect heads to come up more than 50% of the time if I flip a coin.  If win percentage is your primary criteria for supporting a team, you should support one or all of the highest revenue teams.   

 

BTW … the average cost for a day at the park is considerably higher in NY or Boston so their fans are paying more to produce a winning team.  

http://www.kshb.com/sports/baseball/mlb-average-ticket-price-fan-cost-index-for-all-30-baseball-teams

[magiklair]

There is no excuse for not adding additional payroll if needed.. Such as a FA reliever. They are making plenty with TV, radio, MLB.tv etc.

[SwainZag]

 

You mean compared to big market teams? Do you think the prices are the same? You can't just look at top and bottom prices because they all try to offer a range for all fans, mainly for PR purposes, but the number of high priced seats are a lot greater in, say, Boston, or at least that's been my impression when trying to go to a game.

 

I paid near twice as much to sit in the 200 OF level seats at Yankee Stadium than I paid to sit in the 100 level seats 10 rows behind the dugout at Target Field.

[DaveW]

I paid near twice as much to sit in the 200 OF level seats at Yankee Stadium than I paid to sit in the 100 level seats 10 rows behind the dugout at Target Field.

As someone who goes to about 20 Yankee games a year I must point out this is a poor example.

 

I have sat in the 100 level numerous times T Yankee stadium for less than $40.

 

I sat in the 300 level behind home plate for a game this summer for $3 a ticket ($4 each with service fee) I went to the wild card game and it was $60 a ticket for 200 level.

 

Rarely do any stadiums actually "sell out" these days, so ticket prices are basically a supply and demand situation. (I can't remember the last time I bought via the box office since stub hub etc usually has them cheaper 95% of the time) mostly it all comes down to how good a ram is doing and how much excitement they generate.

 

As far as the super premium seats go direct from the team, yes, Yankee tickets cost a lot more than the twins

[Mike Sixel]

I'm sorry I ever brought this up.......because people seem to be missing my point.

 

I was extending MLR's logic, that the poor, underfunded, MN Twins can't be compared to other MLB teams, because they don't have a chance to be competitive every year because they don't make enough revenue. We should only compare them to teams with less revenue (which seems really unfair to those teams, I mean, we should expect them to lose even more than the Twins, right?).

 

Obviously, the only fair thing is to compare each team only to itself. 

[Major League Ready]

Yes, we got off track.  Have the Twins put a crappy product on the field since the turn of the century?  Compared to the NY Yankees, yes.  Compared to the teams nearest them in revenue, no.  Here is the winning percentage of the teams closest to the Twins in terms of revenue.  The Twins are being compared on revenue since target field opened which is obviously unfair given that revenue was not present for two-thirds of the period being compared but it was the most objective comparison.  Any objective view of the facts would suggest the Twins have done a better job than any of these teams with the exception of the CWS who have a slightly higher win percentage.  Of course, they also have more revenue, especially prior to the opening of TF.

 

Twins ….. 0.503
Tigers …. 0.482
CWS …... 0.509
Nats …… 0.472
Jays …… 0.499
Mariners.. 0.492
Orioles ... 0.459
Astros .… 0.473
Dbacks … 0.490
Reds …… 0.481
Padres ….0.476
Brewers .. 0.471
Rockies  ... 0.462

 

It’s this simple, the odds are stacked in the favor of high revenue teams/markets.  They are going to have a better product if measured over 10+ years because they can afford to buy more talent.  If this reality or likelihood troubles someone as a fan, they should probably follow a high revenue team or teams rather than be dissatisfied because of the realities associated with following a lower revenue team.  

 

We can speak passionately as much as we like about wanting the best product but to expect or demand any lower revenue team to produce or spend on par with a high revenue team is not a product of object thought.  That type of thinking is a product of fanaticism, IMO. If you think you are being objective, just imagine your boss gives you $100K advertising budget and another team a $200K budget and tells you he/she expects equal results from your team.  What do you think of your boss?  I am pretty sure that at minimum, you think he is extremely unreasonable and he certainly did not come to this demand via objective thinking.

[Don Walcott]

It's interesting the different perspectives different fans have regarding their owners, how much their owners should spend on players, and how much their owners should expect to profit from their ownership.  In England, fans of soccer teams consider the teams to be part of the community, not a for-profit corporation.  The teams would NEVER move from their location.  They expect their owners to spend as much as they make, or as much as it takes to get results.  American ownership of certain teams, like Manchester United, Liverpool and Aston Villa has been severely criticized for practices that are generally accepted here, such as making a profit for the owners and leveraging the value of the team by taking on debt.  Fans have been more approving of wealthy owners who are willing to lose money to win, such as Manchester City and Chelsea.  However, even though these teams may lose money on a year-to-year basis, the value of the teams appreciates incredibly.

 

Our owners bought the team for $44 million in 1984.  The value of the team is closing in on $1 billion.  They have made a lot of money on this team, and even if they lost money, they could take that loss against taxes on one of their other businesses.  They would have to lose a lot of money for this to ever be a bad investment.  I would love to see this team spend like the Tigers do, especially when our farm system is starting to pay off and we have a window of opportunity.  However, it seems like a substantial amount of the fan base, as represented on this site, would prefer to have the owners make more money, thereby showing what a smart team and a smart business they are in terms of profits and losses.  Some fans even go so far as to seemingly blame players like Joe Mauer for making too much money, and financially hurting and even paralyzing our owners, explaining why they don't spend money to improve the team.  It's a very interesting difference of opinion.

 

If the Twins were publicly owned, like the Packers, would we all be encouraging the team to bank a bunch of money, rather than sign on of the four ace starters who were available this off-season?

[Linus]

I guess I don't worry about stuff like this. The Pohlads own the team so they get to decide. They've decided to spend about half their revenue on payroll which is probably sufficient when you farm system is producing while not being enough to buy your way out of down periods.

[Mike Sixel]

Links to both sides, and some interesting analysis of what correlations exist besides just payroll amount.

 

http://www.providencejournal.com/article/20140825/SPORTS/308259994

 

http://www.hardballtimes.com/money-and-wins/

 

http://www.fangraphs.com/blogs/relationship-between-spending-winning-remains-low/

 

http://fivethirtyeight.com/features/dont-be-fooled-by-baseballs-small-budget-success-stories/

 

http://www.antolin-davies.com/theses/higgins.pdf

 

 

 

[DaveW]

 

It's interesting the different perspectives different fans have regarding their owners, how much their owners should spend on players, and how much their owners should expect to profit from their ownership.  In England, fans of soccer teams consider the teams to be part of the community, not a for-profit corporation.  The teams would NEVER move from their location.  They expect their owners to spend as much as they make, or as much as it takes to get results.  American ownership of certain teams, like Manchester United, Liverpool and Aston Villa has been severely criticized for practices that are generally accepted here, such as making a profit for the owners and leveraging the value of the team by taking on debt.  Fans have been more approving of wealthy owners who are willing to lose money to win, such as Manchester City and Chelsea.  However, even though these teams may lose money on a year-to-year basis, the value of the teams appreciates incredibly.

 

Our owners bought the team for $44 million in 1984.  The value of the team is closing in on $1 billion.  They have made a lot of money on this team, and even if they lost money, they could take that loss against taxes on one of their other businesses.  They would have to lose a lot of money for this to ever be a bad investment.  I would love to see this team spend like the Tigers do, especially when our farm system is starting to pay off and we have a window of opportunity.  However, it seems like a substantial amount of the fan base, as represented on this site, would prefer to have the owners make more money, thereby showing what a smart team and a smart business they are in terms of profits and losses.  Some fans even go so far as to seemingly blame players like Joe Mauer for making too much money, and financially hurting and even paralyzing our owners, explaining why they don't spend money to improve the team.  It's a very interesting difference of opinion.

 

If the Twins were publicly owned, like the Packers, would we all be encouraging the team to bank a bunch of money, rather than sign on of the four ace starters who were available this off-season?

Extremely well said.

 

Yeah, I agree, and how soon us Twins fans forget that old man Pohlad was actively working with Bud Selig to contract the Twins!

[howieramone2]

 

So perhaps we might learn from that mistake about how quickly we timeline things that are not so certain.

You can certainly timeline I didn't consider both Sano and Buxton were going to get hurt in 2014.

[TheLeviathan]

 

You can certainly timeline I didn't consider both Sano and Buxton were going to get hurt in 2014.

 

Injuries happen.  So do regressions.  And, most importantly, kids need time to adjust.  Thinking this team can just call everyone up and win a World Series is naive and, frankly, unfair to these kids we're hitching our wagon on to.

 

Let's be excited, but also patient and realistic.

[brvama]

 

 

 

... lHowever, it seems like a substantial amount of the fan base, as represented on this site, would prefer to have the owners make more money, thereby showing what a smart team and a smart business they are in terms of profits and losses.  Some fans even go so far as to seemingly blame players like Joe Mauer for making too much money, and financially hurting and even paralyzing our owners, explaining why they don't spend money to improve the team.  It's a very interesting difference of opinion.

 

 Don, I thought you had some very good points and I mostly agree.  However, the inference you make above shows how this discussion gets muddled.  I don't recall from the many posts I've read, that there is the sentiment of the fans on TD wanting the owners to make more money.  They do acknowledge that profit is justified for any business owner.   

 

You see, the difference between the two positions is that, one side seems to accept there are some inherent limitations to acquiring players for teams like the Twins, while the other side believes those limitations are not, or should not, be diabilitating for the Twins to acquire talent. 

 

 

Personally, I believe it's somewhere in between.  "Reasonable" creative thinking can overcome some of the limitations, but folllowing other teams isn't always the right thing for the Twins.

[Major League Ready]

 

It's interesting the different perspectives different fans have regarding their owners, how much their owners should spend on players, and how much their owners should expect to profit from their ownership.  In England, fans of soccer teams consider the teams to be part of the community, not a for-profit corporation.  The teams would NEVER move from their location.  They expect their owners to spend as much as they make, or as much as it takes to get results.  American ownership of certain teams, like Manchester United, Liverpool and Aston Villa has been severely criticized for practices that are generally accepted here, such as making a profit for the owners and leveraging the value of the team by taking on debt.  Fans have been more approving of wealthy owners who are willing to lose money to win, such as Manchester City and Chelsea.  However, even though these teams may lose money on a year-to-year basis, the value of the teams appreciates incredibly.

 

Our owners bought the team for $44 million in 1984.  The value of the team is closing in on $1 billion.  They have made a lot of money on this team, and even if they lost money, they could take that loss against taxes on one of their other businesses.  They would have to lose a lot of money for this to ever be a bad investment.  I would love to see this team spend like the Tigers do, especially when our farm system is starting to pay off and we have a window of opportunity.  However, it seems like a substantial amount of the fan base, as represented on this site, would prefer to have the owners make more money, thereby showing what a smart team and a smart business they are in terms of profits and losses.  Some fans even go so far as to seemingly blame players like Joe Mauer for making too much money, and financially hurting and even paralyzing our owners, explaining why they don't spend money to improve the team.  It's a very interesting difference of opinion.

 

If the Twins were publicly owned, like the Packers, would we all be encouraging the team to bank a bunch of money, rather than sign on of the four ace starters who were available this off-season?

Looking at Forbes valuations and profits it would appear the average return of equity for a MLB team is roughly 3-5%.  This is very low and the only explanation for ownership acceptance is that their valuations keep increasing.  Of course, valuations are determined in primarily from forecasted future profits.  If these profits were to cease, the team would be of no value and it would make absolutely no sense to run as slim on profit margin as is common practice today.  Therefore, the model you suggest would require that thirty individuals or thirty group would have to be willing to fund a couple hundred million in operating expense with no potential financial benefit. 

 

The implication is that an individual or group should invest hundreds of millions for no benefit of their own so that athletes can sign makes 10s or 100s of millions over their career.  As if this were not enough, the ownership should also invest their profits from other businesses.  This might be the most ridiculous premise I have ever seen on this site.

 

[USAFChief]

Looking at Forbes valuations and profits it would appear the average return of equity for a MLB team is roughly 3-5%. This is very low and the only explanation for ownership acceptance is that their valuations keep increasing. Of course, valuations are determined in primarily from forecasted future profits. If these profits were to cease, the team would be of no value and it would make absolutely no sense to run as slim on profit margin as is common practice today. Therefore, the model you suggest would require that thirty individuals or thirty group would have to be willing to fund a couple hundred million in operating expense with no potential financial benefit.

 

The implication is that an individual or group should invest hundreds of millions for no benefit of their own so that athletes can sign makes 10s or 100s of millions over their career. As if this were not enough, the ownership should also invest their profits from other businesses. This might be the most ridiculous premise I have ever seen on this site.

And yet franchise values keep going up, leading to one of two conclusions: owners are funding these operations with no expectations of profit (and new owners appear when teams are for sale), or owners are making acceptable profits.

 

With your vast business experience, which would you guess to be correct?

[Major League Ready]

 

And yet franchise values keep going up, leading to one of two conclusions: owners are funding these operations with no expectations of profit (and new owners appear when teams are for sale), or owners are making acceptable profits.

With your vast business experience, which would you guess to be correct?

Clearly the answer is the later but I don’t know why you would even ask.  You have cited what is known as the Current State.  The post that initiated this cited what is known as an Alternative State of Future State where MLB team owners apply all revenue beyond operating expenses to player payroll.  In other words, a break-even model.  Of course, when the team follows this model and underperforms on the field, losses should be expected (see 2014 Phillies) but the owner should write off those losses against the other businesses they own.

 

What my experience tells me is that you are asking the wrong question.  The right question is what happens under this suggested Future State.  In order to answer that question, we first must ask if all teams were to follow this proposed future state or just the Twins.  The easier of the two questions to answer is what if all teams were to follow this model.  In that case, there is no relative gain, at least not from a macro prospective.  All teams would spend more lending no advantage to the Twins given their profits are roughly league average.  http://www.forbes.com/mlb-valuations/list/

 

What if the the Twins were the only team or one of very few.  What would happen to their relative ability to compete for free agents.

 

1) The revenue gap between the Twins and the Yankees from roughly a $250M to $220-230M.
2) The gap with the Dodgers/Giants/Red Sox would shrink from roughly $175M to 140-150MBoston y would cut the revenue gap between the Twins and the Yankees from roughly a $250M to $220-230M.
3) The gap w/the Cubs/Cardinals/LLA/Phillies and Nationals would shrink from 60-70M to $35-50M. 
4) The gap between the Twins and Rangers/Mariners/Tigers and Orioles would be down to $15-20M

5) The gap between the Twins and lower revenue teams would increase by $20-$30M

 

Would this incremental revenue have a significant impact?  I really doubt it.  Would FA still have the challenges present because of players wanting to play in warmer climates and bigger markets with more exposure and endorsement potential?  Probably still be an issue.

 

What about from a business impact prospective.  Let’s remember that part of the post that initiated this tangent was about evaluation and writing off losses against other businesses.  The part about writing off losses is incorrect.  They can’t write off losses from one business to another in terms of getting a tax break.  So apparently, the expectation is that not only would the Twins not make a profit but they would spend profits from other businesses to fund losses from the Twins.  I would sure love to hear the reaction to this premise at the annual board meeting for the business doing the subsidizing. 

 

The interesting part is the valuation.  If the proposed future state was the expected norm, all teams would plummet to nearly no value.  Obviously, this is a ridiculous premise.   If the Twins were the lone or one of a very small group to practice a break-even model, the team’s valuation would theoretically not be impacted because a new owner could adjust their financial practices to make a profit.  The variable that might reduce the valuation would be the possibility that reverting to a profitable model would be poorly received by the community and revenue would decrease.  So, if you think that it is reasonable to expect our owner to be the only owner to make nothing from the $500M to $1B have in equity, then the Twins operating at break-even is a reasonable expectation.

 

Personally, I think If the Twins are willing to operate as a non-profit, I would prefer the extra 20-30M go into homeless shelters, helping veterans and battered women or any number of good causes.  I would prefer that to signing one more high priced free agent.

[Platoon]

There is only a slight difference between these numbers.

Twins ….. 0.503

Tigers …. 0.482

CWS …... 0.509

Nats …… 0.472

Jays …… 0.499

Mariners.. 0.492

Orioles ... 0.459

Astros .… 0.473

Dbacks … 0.490

Reds …… 0.481

Padres ….0.476

Brewers .. 0.471

Rockies... 0.462

Slight enough that management and luck can also be considered in their analysis. Which brings me to this point. Since the financial template is set, that leaves only management as a practical tool to improve the winning %. And since teams with more money will always have the advantage, they will always have an overall higher winning %. All pro sports teams go through cycles, the cycles are determined by more than the spending of available revenue. The Yankees and Boston are proof that regardless of your spending, you are going to lose. To me the importance lies in what you do to shorten the losing cycle. Do you maximize your talent resources? Is your orginisation innovative? Are your minor league teams well funded, and well managed? Do you make your own luck? But to me the biggest factor is this. Do you try to out the best team on the field your financial resources and current talent structure allow? Making decisions that have a reward. Or do you go with an approach that in reality simple a sporting version of "CYA"? Nothing ventured, nothing gained, is nothing won.

[Eris]

 

A couple of things:

"Plouffe arguably the 2nd best bat on the team, yet you want to jettison him."
 

This is a problem don't you think? Plouffe's defense is above average, and is the reason his value is high on the team. His bat, however, is absolutely average. If he's the 2nd best bat on the team, we have much bigger problems. 
 

 

 

Plouffe's numbers are quite good and many teams are in a similar situation as the Twins.  I looked at only RBI totals and compared Plouffe's 86 RBIs to how that would rank on other teams.   The data is from Fangraphs.  I have included the Twins.  For ties, I gave the higher number. 

 

Rank   Teams

1            9

2          15

3            5

4            1

 

Plouffe's 86 RBI's would have ranked 1st on 9 teams (including the Cardinals and the Mets)

The worst comparison would be with the Blue Jays were he would be ranked 4th in RBIs.  

 

Therefore with Sano and Plouffe, with Sano hopefully projecting to have a 100 RBI season, and if Plouffe maintains production (he had 80 RBIs in 2014) the Twins will have better production from their 2nd best bat than 24 other teams.  I think peoples expectations are a little bit unrealistic.  There are only 6 teams (Angels, Blue Jays, Cubs, Reds, Rockies, and Royals), where 86 RBIs was not at least the 2nd best RBI production on the team.

 

Edited from Original post:  There is a different way to look at the numbers I have provided.  Looking at only the 2015 numbers (without projecting Sano for 2016), 21 teams had better production from their top RBI man than the Twins.  This was a problem.  For 2016, if Sano delivers 100 RBIs and Plouffe maintains his current production, the Twins will have a very competitive 1,2 RBI machine.  

[Platoon]

Plouffe. What was his ranking for causing his team mates to start looking for their gloves and caps, getting ready to return to the field on defense? AKA GIDP. While I doubt their is an accurate statistic for it, if Plouffe is the second scariest bat you have to face in a lineup, then your lineup has problems offensively! Don't get my take wrong here, Plouffe is an acceptable MLB player. But if he is apparently one of your "immovable" players, your talent level is not that high. If on the other hand the orginisation viewed him as a valuable piece, but tradeable for value, especially considering the glut at a position, then your orginisation would be considered, IMHO, to have a realistic view of their talent. As of this writing, I think that view has been expressed loudly and clearly!

[Don Walcott]

 

Clearly the answer is the later but I don’t know why you would even ask.  You have cited what is known as the Current State.  The post that initiated this cited what is known as an Alternative State of Future State where MLB team owners apply all revenue beyond operating expenses to player payroll.  In other words, a break-even model.  Of course, when the team follows this model and underperforms on the field, losses should be expected (see 2014 Phillies) but the owner should write off those losses against the other businesses they own.

 

What my experience tells me is that you are asking the wrong question.  The right question is what happens under this suggested Future State.  In order to answer that question, we first must ask if all teams were to follow this proposed future state or just the Twins.  The easier of the two questions to answer is what if all teams were to follow this model.  In that case, there is no relative gain, at least not from a macro prospective.  All teams would spend more lending no advantage to the Twins given their profits are roughly league average.  http://www.forbes.com/mlb-valuations/list/

 

What if the the Twins were the only team or one of very few.  What would happen to their relative ability to compete for free agents.

 

1) The revenue gap between the Twins and the Yankees from roughly a $250M to $220-230M.
2) The gap with the Dodgers/Giants/Red Sox would shrink from roughly $175M to 140-150MBoston y would cut the revenue gap between the Twins and the Yankees from roughly a $250M to $220-230M.
3) The gap w/the Cubs/Cardinals/LLA/Phillies and Nationals would shrink from 60-70M to $35-50M. 
4) The gap between the Twins and Rangers/Mariners/Tigers and Orioles would be down to $15-20M

5) The gap between the Twins and lower revenue teams would increase by $20-$30M

 

Would this incremental revenue have a significant impact?  I really doubt it.  Would FA still have the challenges present because of players wanting to play in warmer climates and bigger markets with more exposure and endorsement potential?  Probably still be an issue.

 

What about from a business impact prospective.  Let’s remember that part of the post that initiated this tangent was about evaluation and writing off losses against other businesses.  The part about writing off losses is incorrect.  They can’t write off losses from one business to another in terms of getting a tax break.  So apparently, the expectation is that not only would the Twins not make a profit but they would spend profits from other businesses to fund losses from the Twins.  I would sure love to hear the reaction to this premise at the annual board meeting for the business doing the subsidizing. 

 

The interesting part is the valuation.  If the proposed future state was the expected norm, all teams would plummet to nearly no value.  Obviously, this is a ridiculous premise.   If the Twins were the lone or one of a very small group to practice a break-even model, the team’s valuation would theoretically not be impacted because a new owner could adjust their financial practices to make a profit.  The variable that might reduce the valuation would be the possibility that reverting to a profitable model would be poorly received by the community and revenue would decrease.  So, if you think that it is reasonable to expect our owner to be the only owner to make nothing from the $500M to $1B have in equity, then the Twins operating at break-even is a reasonable expectation.

 

Personally, I think If the Twins are willing to operate as a non-profit, I would prefer the extra 20-30M go into homeless shelters, helping veterans and battered women or any number of good causes.  I would prefer that to signing one more high priced free agent.

For my statement regarding writing off losses against profits from other businesses, I trusted information I read on a Vice Sports article:

 

https://sports.vice.com/en_us/article/your-poor-baseball-team-owner-is-lying-to-you

 

I'm not a tax attorney, so if you know something I don't, that's fine.  However, I read another article in the LA Times that discussed the ability of sports franchise owners to take tax deductions as being one reason Steve Ballmer buying the LA Clippers.

 

http://www.latimes.com/sports/clippers/la-sp-ballmer-clippers-taxes-20141117-story.html

 

Anyway, it's beside the point since owners aren't losing money.  In fact, the players' share of revenues has been steadily decreasing since 2002, when it was 56%, down to 40% today.  So the owners are actually making a lot higher percentage of much better revenues.  Additionally, all owners share profits in MLBAM, the on-line streaming company.  The owners are probably making $50-100 million per year from this business whose revenues are expected to be $1 billion in 2016.  So the owners aren't anywhere close to taking a deduction on losses from this investment, and we shouldn't be fooled into thinking they can't afford a few big free agent signings.

 

As I said above, I'd prefer if our owners used some of the money they are banking to make this team competitive now, which is a good time to take advantage of all of our homegrown, young and inexpensive talent.  This is not just what I think would be wise in a business sense, but would make me happy as a fan.

 

You may have some expertise that I don't regarding business appraisals, but the last time I was involved in one (last year), income is not the only method of valuation (and actually it's revenue and not income that is used).  There are also the asset approach and the market approach.  Of particular relevance to the valuation of MLB franchises is the market approach.  Baseball franchises are local monopolies, and there are a limited number of these available.  Again, the Twins' owners bought the franchise for $44 million, it's value is closing in on $1 billion this year, and it will continue to appreciate in value.  So there's no reason to worry too much about the value of the franchise.

 

As for wanting the money from the operation of these businesses to be used for more worthy causes than paying the talent, I don't think we're going to be able, legally, to require anyone to donate the profits they make in this industry.  However, I suspect that it would be more likely that the money ends up being donated to worthy causes after it's paid out to players, as opposed to being banked by owners.