Did the Twins Lose Money Last Year?

[Whitey333]

Very interesting article.  It's hard to know what to believe.  Neither the Twins nor Forbes can be taken at face value.  I think for the market size the Twins do a good job on payroll.  If they were so concerned about " losing money"  they wouldn't have paid 200 million guaranteed money for Correa to play shortstop on an otherwise average team.  

[Nick Nelson]

6 hours ago, raindog said:

You’re a rube if you believe this. Forbes is a joke of a publication. 

Care to elaborate? I'm not saying these are completely accurate, and certainly not sticking up for Forbes as a publication in general here, but the methodology seems pretty sound to me and the numbers jibe more or less with what I'd expect. It's not like the overall report paints some extremely rosy or favorable analysis of anyone -- they show most owners pocketing a ton of revenue. I'm less interested in specifically what money the Twins "lost" and more interested in how they're operating compared to other teams.

[Major League Ready]

16 minutes ago, Dman said:

I'm sure I don't completely understand the numbers but it seems like in years past most teams in our division tried to stay below the 130M threshold.  Even the Twins tried not to go over that number until recently. If they are 30M over where they need to be it sure seems like they might have painted themselves into a corner to some degree.  I mean they have the Correa and Buxton salaries tying up a good chunk of payroll the next 6 years or so.  Player salaries in Free agency appear to only be going up.  If the current level of payroll is not sustainable they are really gonna need the farm to produce.

I don’t think they have painted themselves into a corner, Doc.  Mahle / Gray / Gallo / Taylor / Pagan / Maeda / Solano come off next year.  That’s $44M.  They also have a team option with Kepler which would bring the total to $52.5M.  They are also likely to replace Polanco in the next year or two so we are up to $60M.  

The team has a good chance to be better for the next several years which would increase revenue and let’s hope they can increase TV revenue as well.     

Of the group leaving, only Gray and Mahle will be difficult to replace and you could even say Mahle has yet to contribute.  One of the pitching prospects needs to step up and they can use half of the $60M coming off to land a very good free agent SP.
 

[MMMordabito]

2 hours ago, Trov said:

As for those complaining about ticket prices, I get it, you want to go back tot he days where you could get lower level tickets for under 10 bucks.  Well that will never happen.  You can get to games for not that much, if you do not care how good the seats are.  Yes, if you want great seats, you need to pay a lot for them.  Generally attendance is not driven by ticket cost, but product on the field. Yes, the cost may keep some away, but people are more put off by a bad product.  I hate watching games where the team is striking out 15 times a game, getting 1 or 2 hits and losing by 5 plus runs.  This is not entertaining and I would not pay any money for that, if that is the expectation.  However, if I know there is a good chance of a good entertaining game, I will be willing to pay a little bit more for that, than a little less for a boring game. 

[Rosterman]

You don't lose money if your investment continues to increase in value.

But you do lose money if you have to pay interest on borrowed money that far exceeds your income for the year.

Also, 50% of $300 million is $150 million. When the Twins had a payroll of $100 million, how much different are the "operating costs" from that day compared to, say, today.

How does Kansas City get more TV money than...The Twins?

[Fire Dan Gladden]

This is all bookkeeping mumbo-jumbo.  Do you really think a public entity is going to know the internal mechanisms of a private company?

If the Dodgers and Yankees do not earn a net profit of at least $100m every year, I will eat my shoes.

[Mark G]

A question:  the Pohlads have a conglomerate of business'.......when one makes money, and another "loses" money, does it not become a tax write off in the overall conglomerate?  If the Twins lose money in any given year, are they the tax write off for the rest of the entity, while rising in value as a franchise?  Does it become useful to lose money on paper, while rising in value overall, to keep the overall conglomerate healthy?  

Or am I just remembering an old episode of WKRP in Cincinnati?  🤭

[Nick Nelson]

6 hours ago, Richie the Rally Goat said:

one of the other questions I have, beyond the validity of the estimates. Is what other Pohlad entities besides the Twins benefit in what ways because of the Twins?

even if the Twins themselves aren’t profitable or as profitable as the Pohlads would have historically liked them to be, how much revenue does the team drive to other ventures?

Wouldn't this be true of most owners/ownership groups? I know the Pohlads are on the wealthier end but they're all very rich and vested in multiple ventures. 

[Nick Nelson]

55 minutes ago, Fire Dan Gladden said:

This is all bookkeeping mumbo-jumbo.  Do you really think a public entity is going to know the internal mechanisms of a private company?

If the Dodgers and Yankees do not earn a net profit of at least $100m every year, I will eat my shoes.

This could very well be true but I found it enlightening at least because it gives me insight into the basis DSP and Twins officials are using when talk about payroll being "not commensurate with their revenues." 

And to be clear, I'm not arguing that the Twins are doing something special or noble here, by accepting an annual "operating loss" in the name of bettering the product. I'm saying it's what all teams should be doing. The Forbes data brings to light what we all know: most are not. And that's why I'm not inclined to brush it aside. 

[Richie the Rally Goat]

10 minutes ago, Nick Nelson said:

Wouldn't this be true of most owners/ownership groups? I know the Pohlads are on the wealthier end but they're all very rich and vested in multiple ventures. 

100%!
case in point, the Green Bay Packers as a publicly held team, with public financials were one of the more cash poor (I know…) NFL franchises. Then they bought up all the houses and retail around Lambeau and built up the Title Town district and the Atrium which turned things around quite a bit (along with less Covid angst).

this is the conundrum with the analysis. You have to scope the analysis to the question. But the impact to the owners (any owner, not just the Pohlads) is intertwined with many holdings. It’s beyond the scope of the question, but it’s not the reason the owner continues to own the team.

why do we care if the Twins turn a profit for the Pohlads?

For me, because if it ceases to be profitable they might sell or slash payroll. The devil I know is better than the devil I don’t.

how do I know the Twins turn a profit for the Pohlads? 

I don’t.

[Major League Ready]

6 hours ago, Richie the Rally Goat said:

Agreed, to an extent, that Forbes isn’t an objective source. Forbes is designed to make celebrities out of rich people. Forbes’ estimates are designed to make billionaires look as human and normal as possible while still flaunting their fabulous wealth. The Pohlads or their proxies may have even helped craft the message.

one of the other questions I have, beyond the validity of the estimates. Is what other Pohlad entities besides the Twins benefit in what ways because of the Twins?

even if the Twins themselves aren’t profitable or as profitable as the Pohlads would have historically liked them to be, how much revenue does the team drive to other ventures?

as hard as the op is to actually answer, it’s even harder when you consider the Pohlads own media and advertising firms, at one point they owned a stake in FSN that could still be the case w/ BSN. The benefits and costs go beyond the game on the field, and without GAAP audit, we’ll never really know.

so taking this with a huge grain of salt. Fun read, not news.

What forms of spending could be channeled to Pohlad owned companies?  60-65% of their spending is on players.  The next largest expense would be non-player personnel.  They don't appear to own hotels where the team stays?  They don't own the networks where advertising would appear.  The entire gain from owning an advertising firm would be the net gain from one account (the twins).  If that advertising firms has a 10% bottom line the net gain is 10% of the fees paid to manage their account not the entire spend.  I would assume they lease office space from United properties but that's not exactly an enormous expenditure relatively speaking.  Do you have any examples or is this just pulling this out of the air?

[DJL44]

This is where revenue sharing is broken. The way to sure profit in MLB is to field a minimum salary roster. No need to draw any fans at all to the ballpark.

[Richie the Rally Goat]

2 minutes ago, Major League Ready said:

What forms of spending could be channeled to Pohlad owned companies?  60-65% of their spending is on players.  The next largest expense would be non-player personnel.  They don't appear to own hotels where the team stays?  I would assume they lease office space from United properties but that's not exactly an enormous expenditure relatively speaking.  Do you have any examples or is this just an assumption you pulled out of the air?

The Pohlads own  Go 96.3 and B96 radio stations, quit their contract with AM1500 to air the Twins radio broadcasts on their own radio station which then brought in premium advertising revenue. That advertising revenue would not have been on the Twins’ books. I have no idea how much, but that was something that happened until they closed down the station.

The Pohlads also owned Victory Sports One Network and aired Twins games there and received Ad revenue and cable network fees as a result.

they owned a share of FSN (which was born out of the victory sports stuff) which may have brought them some ad revenue, I’m not sure how a minor ownership stake works in that case. It is unclear, but I wonder if they still own the minor stake in BSN today. I can’t find a reference.

the Pohlads own dozens of companies, some of which do advertising and media, like Bring Me The News.

Pohlad companies are a privately held, so they don’t have to publicly report earnings, so it’s hard to know where all their earnings come from, but they have in the past earned monetarily from the team. It makes sense to assume they continue to.

[Fire Dan Gladden]

47 minutes ago, Nick Nelson said:

This could very well be true but I found it enlightening at least because it gives me insight into the basis DSP and Twins officials are using when talk about payroll being "not commensurate with their revenues." 

And to be clear, I'm not arguing that the Twins are doing something special or noble here, by accepting an annual "operating loss" in the name of bettering the product. I'm saying it's what all teams should be doing. The Forbes data brings to light what we all know: most are not. And that's why I'm not inclined to brush it aside. 

My comments were not meant to be made as a reflection on your article, more a marketing ploy made by MLB and the owners.  Owners will publicly make things look as dire as possible to either make themselves look like martyrs to the fans or poor to the players looking for more money.

I do agree that based on relatively known information, such as media contracts, revenue sharing, ticket prices, and memorabilia sales, we have an idea on the where the Twins fit in the grand scheme of things (small market).  But profitability is a whole different beast that is easy to manipulate

[Jocko87]

7 hours ago, Major League Ready said:

It’s not that hard to come up with a relatively accurate P&L for a MLB team.

1)    We have a very good revenue estimate.  The only major form of revenue not reported by the league is major sponsors and that can be likely be found in reporting from the sponsor organization.

2)    We have a very accurate account of payroll / domestic draft bonuses and international bonuses.  I am sure Forbes has an accurate estimates of player benefits. The only thing I could find estimated player benefits at 11.5% of payroll.  This includes medical and retirement.  

3)    Let’s use $140M payroll.  Add $14M for draft bonuses and $16M in player benefits and you have $170M.  The Twins had $268M in revenue in 2021.  Therefore, we have a very accurate estimate of nearly two-thirds of expenses and an even more accurate revenue estimate.

4)    The other third of expenses are comprised of operating costs.  It’s not that hard to get a list of employees.  Their salaries / benefits can be estimated with a fair degree of accuracy.  Office space, technology, travel, etc can all be estimated with 10%.  Given this portion of the expense represents one-third of total operating expense (excluding player expense) , which represents one-third of revenue and the variance is 3-4% of revenue.
 

The problem is that each of these estimates can be off 10-20%+- and by the time you add variations on all the categories you can be anywhere from out in left to right field, say 40-50% off.  Its just a guess by Forbes.  The most accurate item we have to estimate is payroll but we only know the top line number.  What do you think the insurance premium on the Correa/Buxton contracts cost?  The CPA  in the thread laid out a good group of variables.  All profit and loss is different on paper vs in pocket.

That said, even though this is a clickbait article by a dog **** publication its probably directionally correct in that we have to assume they use the same methodology for each team.  I could believe that they were 30m off last year with the late Correa contract and lower attendance but they had already budgeted the Correa money for Donaldson.  The loss leader was probably the tanking record and AAA roster the last two months.  Adding this depth isn't just good for the team, the bottom line benefits too.  Hard to say. 

As for the Mets, that number makes sense too.  However, I will scream it from the rooftops again and again-do not look at the Mets as a sporting team, look at them as a hedge fund manager would.  That -180m is not a loss, its a capital expenditure that will probably be depreciated somehow.   Everything Steve Cohen is doing follows the hedge fund takeover model where they will spend heavy up front to make the business what they want as quickly as possible.  For example, buying players saves prospects and preserves future value.  Its strategic.  Love it or hate it, having operating capital opens doors that aren't available for other businesses.

[Richie the Rally Goat]

1 hour ago, Jocko87 said:

The problem is that each of these estimates can be off 10-20%+- and by the time you add variations on all the categories you can be anywhere from out in left to right field, say 40-50% off.  Its just a guess by Forbes.  The most accurate item we have to estimate is payroll but we only know the top line number.  What do you think the insurance premium on the Correa/Buxton contracts cost?  The CPA  in the thread laid out a good group of variables.  All profit and loss is different on paper vs in pocket.

That said, even though this is a clickbait article by a dog **** publication its probably directionally correct in that we have to assume they use the same methodology for each team.  I could believe that they were 30m off last year with the late Correa contract and lower attendance but they had already budgeted the Correa money for Donaldson.  The loss leader was probably the tanking record and AAA roster the last two months.  Adding this depth isn't just good for the team, the bottom line benefits too.  Hard to say. 

As for the Mets, that number makes sense too.  However, I will scream it from the rooftops again and again-do not look at the Mets as a sporting team, look at them as a hedge fund manager would.  That -180m is not a loss, its a capital expenditure that will probably be depreciated somehow.   Everything Steve Cohen is doing follows the hedge fund takeover model where they will spend heavy up front to make the business what they want as quickly as possible.  For example, buying players saves prospects and preserves future value.  Its strategic.  Love it or hate it, having operating capital opens doors that aren't available for other businesses.

That and last year’s record is the best predictor of ticket sales.

[Major League Ready]

2 hours ago, Jocko87 said:

The problem is that each of these estimates can be off 10-20%+- and by the time you add variations on all the categories you can be anywhere from out in left to right field, say 40-50% off.  Its just a guess by Forbes.  The most accurate item we have to estimate is payroll but we only know the top line number.  What do you think the insurance premium on the Correa/Buxton contracts cost?  The CPA  in the thread laid out a good group of variables.  All profit and loss is different on paper vs in pocket.

That said, even though this is a clickbait article by a dog **** publication its probably directionally correct in that we have to assume they use the same methodology for each team.  I could believe that they were 30m off last year with the late Correa contract and lower attendance but they had already budgeted the Correa money for Donaldson.  The loss leader was probably the tanking record and AAA roster the last two months.  Adding this depth isn't just good for the team, the bottom line benefits too.  Hard to say. 

As for the Mets, that number makes sense too.  However, I will scream it from the rooftops again and again-do not look at the Mets as a sporting team, look at them as a hedge fund manager would.  That -180m is not a loss, its a capital expenditure that will probably be depreciated somehow.   Everything Steve Cohen is doing follows the hedge fund takeover model where they will spend heavy up front to make the business what they want as quickly as possible.  For example, buying players saves prospects and preserves future value.  Its strategic.  Love it or hate it, having operating capital opens doors that aren't available for other businesses.

Sorry, that's not how it works.  These variations are not cumulative.  If you are off 15% of travel cost and off 15% on facilities cost you don't add them together.  If travel cost is 10 of total operating cost your estimate would be off by 1.5%.  If you are off on every estimate by 15% you are off 15% in total,  Given we know the exact amount for player payroll and draft bonuses.  There is zero variation on over 50% of total cost.  Therefore, if we were of 15% on everything else, we would be off by a total of 7.5%.

[Blyleven2011]

The pohlads should have had higher payrolls when they were more profitable and they wouldn't have lost so many fans  in the stands ...

Now they are losing money says Forbes  and now have a high payroll to try and gain the fans back with a better product ,,,

This really should have happened when target field opened or shortly after ,  after all the revenue they earned from the new stadium  we should have had a better product years ago   ....

If Forbes is right ....

[Jocko87]

3 hours ago, Major League Ready said:

Sorry, that's not how it works.  These variations are not cumulative.  If you are off 15% of travel cost and off 15% on facilities cost you don't add them together.  If travel cost is 10 of total operating cost your estimate would be off by 1.5%.  If you are off on every estimate by 15% you are off 15% in total,  Given we know the exact amount for player payroll and draft bonuses.  There is zero variation on over 50% of total cost.  Therefore, if we were of 15% on everything else, we would be off by a total of 7.5%.

But which direction are they off?  They certainly can be cumulative.  I’ve seen a lot of managers look really good because their errors in plan netted out.  Profit and loss is like batting average, it’s a good number but doesn’t tell you much of the story. 
 

They obviously don’t add up by percentage, we would need raw number to tie back to a percentage. You can’t claim 1.5 or 7.5% without a whole lot of information I haven’t seen either.  I thought it was an obvious exaggeration to make point, sorry.  
 

I promise we don’t have an exact number for payroll, even of players.  Like I asked earlier, what is the insurance premiums on Correas contract.  Payroll is the only thing we can get close on, other than maybe tv money but we don’t know what cut of advertising they get.  

 

[Richie the Rally Goat]

17 hours ago, Blyleven2011 said:

The pohlads should have had higher payrolls when they were more profitable and they wouldn't have lost so many fans  in the stands ...

Now they are losing money says Forbes  and now have a high payroll to try and gain the fans back with a better product ,,,

This really should have happened when target field opened or shortly after ,  after all the revenue they earned from the new stadium  we should have had a better product years ago   ....

If Forbes is right ....

THIS! If Forbes is accurate, it’s as much an indicator of past on the field product as it is the current year, if not more. Winning begets winning

[Squirrel]

5 minutes ago, Richie the Rally Goat said:

THIS! If Forbes is accurate, it’s as much an indicator of past on the field product as it is the current year, if not more. Winning begets winning

The old adage comes to mind … you have to spend money to make money. (And before some posters take offense, I’m not suggesting spending wildly just to spend, but you still need a quality product to keep fans in the stands.)

[Major League Ready]

On 3/24/2023 at 1:59 PM, Richie the Rally Goat said:

The Pohlads own  Go 96.3 and B96 radio stations, quit their contract with AM1500 to air the Twins radio broadcasts on their own radio station which then brought in premium advertising revenue. That advertising revenue would not have been on the Twins’ books. I have no idea how much, but that was something that happened until they closed down the station.

The Pohlads also owned Victory Sports One Network and aired Twins games there and received Ad revenue and cable network fees as a result.

they owned a share of FSN (which was born out of the victory sports stuff) which may have brought them some ad revenue, I’m not sure how a minor ownership stake works in that case. It is unclear, but I wonder if they still own the minor stake in BSN today. I can’t find a reference.

the Pohlads own dozens of companies, some of which do advertising and media, like Bring Me The News.

Pohlad companies are a privately held, so they don’t have to publicly report earnings, so it’s hard to know where all their earnings come from, but they have in the past earned monetarily from the team. It makes sense to assume they continue to.

Failed ventures are your example of the twins benefiting?  You are really reaching.

[howeda7]

On 3/24/2023 at 8:15 AM, Trov said:

For the people saying they do not trust the numbers and no way team is losing money, I believe that owners can lose on owing the team, but use that loss to counter the tax liability for other business.  So it is fully possible they are losing money, but using the loss to offset profits in other businesses. I could be wrong about the ability to do that in taxes, but I think that is how it works. 

They are certainly offsetting profits in other businesses with losses on the Twins for tax purposes, but that doesn't mean that they WANT to lose $ on the Twins or are somehow better off overall financially for having done so. Some people believe this and they're simply wrong.

Also, I find the idea that they lost that much fairly believable. The attendance was down substantially and their TV contract is pathetic relative to most other teams. They can afford $140 million payroll if they're drawing 30K/game. They can't if they're drawing 20K.

That doesn't mean anyone needs to feel sorry for them. They're rich and they'll remain rich losing a bit of $$ on the Twins. But I think the "They're lying!" takes are way overblown. It's not like they put out a press release. It's a Forbes estimated, but it's probably pretty close.

[howeda7]

On 3/24/2023 at 8:14 AM, Beast said:

Well, as a CPA that leaves with me a bunch of questions.

”Higher than revenues suggest it should be.”  What does that mean?  He needs to define a couple of terms there.  What revenue?  Total revenue?  Operating revenue?

Our payroll is very middle or the road, and we suffered one of the biggest losses?  That sounds like a revenue generation problem, not a payroll being too high problem.

Who the hell can’t figure out how to make money off of a professional sports team over there?  You have a state of the art facility, some highly marketable players, you have a massive geographical region covering 4 states with multiple highly populated areas (Minneapolis/St. Paul, Duluth, Rochester, St, Cloud, Mankato, Fargo, Sioux Falls, multiple cities in Iowa, etc.) that are completely devoid of competition.

Another point: There are a lot of ways to make it look like you lost money on paper.  Depreciation and Amortization - what’s that number?  How much did the Pohlads draw from equity?  How are they recognizing certain revenues (deferring, etc.)?  Do they recognize the unrealized appreciation on the value of the team?  Carl bought the team for $44 million in 1984.  It’s worth $1.5 billion now.  It went up 5% last year.  You have the audacity to tell your fans, who paid for your stadium, that you’re losing money?

At the end of they day - it’s your fault you can’t sustain a middle of the road MLB payroll without losing money (which is disingenuous).  Do your job better.  If the team hadn’t been godawful for the last 15 years, maybe you wouldn’t be “losing money” on a $130M payroll.

You need to sell me the product.  Would Ford motors come out and say, “sorry guys, you just have to accept a worse car than our competitors - were actually putting way more into making them than we should be! - you’re welcome!”  What an incompetent.  If I were a Pohlad I’d have half a mind to have his office cleaned out before he got in this morning.  What a disastrous things to say PR wise.  Things were going fine on the “cheap Pohlad” front, and he just reopened the can.

I'm not sure what depreciation or how much they draw in equity has to do with the accuracy of this estimate. Depreciation is a legitimate operating expense, as they did contribute more than $100 million towards the stadium and still pay rent for it on top of it.

[howeda7]

On 3/24/2023 at 1:59 PM, Richie the Rally Goat said:

The Pohlads own  Go 96.3 and B96 radio stations, quit their contract with AM1500 to air the Twins radio broadcasts on their own radio station which then brought in premium advertising revenue. That advertising revenue would not have been on the Twins’ books. I have no idea how much, but that was something that happened until they closed down the station.

The Pohlads also owned Victory Sports One Network and aired Twins games there and received Ad revenue and cable network fees as a result.

they owned a share of FSN (which was born out of the victory sports stuff) which may have brought them some ad revenue, I’m not sure how a minor ownership stake works in that case. It is unclear, but I wonder if they still own the minor stake in BSN today. I can’t find a reference.

the Pohlads own dozens of companies, some of which do advertising and media, like Bring Me The News.

Pohlad companies are a privately held, so they don’t have to publicly report earnings, so it’s hard to know where all their earnings come from, but they have in the past earned monetarily from the team. It makes sense to assume they continue to.

Victory Sports was 20 years ago and flopped. They don't own any stake in BSN and as far as I know, they never owned any stake in Fox Sports North. Certainly they could have manipulated things a tad on the radio side by giving their stations a cheap deal, but that's also been over for years, and radio rights are a drop in the bucket of overall revenue anyway.

[Melissa]

On 3/24/2023 at 8:35 AM, TwinsDr2021 said:

Sorry I wasn't trying to say anything about payroll and ticket prices, just that while the low end tickets are similiar in price the mid level tickets aren't, that's it. IMO there is a huge difference bringing a family to the A's game and sitting down first/third and comparable tickets for the Twins.

I get the frustration, but sitting that close to the infield is a very different experience at Target Field than at the Oakland Coliseum (or whatever its name is this year).
I went to quite a few A’s games way back in 1987 while living in the Bay Area, and the place was already something of a dump. I never paid more than $10 (1987 dollars, to be sure) for a “prime”  low level infield seat from some season ticket holder in the parking lot. This was before the now infamous sewage backups …

Target Field is a much better experience even discounting the quality of play.