OK, But Really: Why Did the Twins Openly Leak Their Payroll Drop?

[old nurse]

Complain about spending now as why did the leak it, or complain all winter that they are not signing anybody. No real difference between the two, except one offers a little transparency to the process.  I guess transparency is a bad thing.

a lot of eyelashes were batted when Berrios was traded because they couldn’t extend him

a lot of eyelashes were batted when Torii left

[Dawgzilla]

Because Calvin Griffith bought team again from the grave and will (again) play at the bottom of MLB team payrolls, meaning many more years of mediocrity and wishing just to make playoffs!😉

[arby58]

6 hours ago, Brian Kingfield said:

Embarrassing admission - this feeling didn’t quite sink in for me until Pagan left. I get the hate, but he is a solid and inexpensive arm.

I get that some of these paydays are maybe a bit higher than the player’s value, but to pass on them means we feel we can find better value elsewhere. Can we? I’m a little nervous that we’re going to keep waiting for the perfect, cost-effective deal only to watch all good options pass us by. This makes me think some pretty big trades are in the works. Hopefully there is a plan that we’re just not seeing yet.

Pagan was when it sunk in? OK, you lost me there. He was a relief pitcher who most people would have traded for a bag of balls after 2022. He was good in 2023, but the money the Reds played for him? The Twins have done well finding guys like Thielbar and Stewart - reclamation projects - that don't carry nearly the risk, salary-wise of Pagan.

[Doctor Wu]

13 hours ago, CRF said:

It's all a big smoke-screen. They're gonna spend money like a drunken sailor on FA's and make a slug of trades. WS here we come! If you believe that, I've got some ocean front property in Arizona that I want to talk to you about. 

I sure wish that was the case! I mean, we are coming off one of our best seasons and certainly our best playoff run in years/decades, and now they are going to cut back on payroll? Sure, I understand the revenue stream dilemma, but the Twins are in a great position to COMPETE and go even further in the playoffs this coming season. But barring a couple of trades or productive FA signings, I see us taking a step backwards this coming season.

[nclahammer]

Same old, same old cheap Pohlads talk.    It gets old really fast.   They are just saying what we all already know out loud.    And they have every right to move on from scouts from the old regime (Do we even know who they are?   Were they good at their jobs?  Were they even needed anymore?)  Kind of hard to call them "cheap" if you can't answer those questions.  As a fan, hopefully they are able to come up with some revenue from their broadcasts that comes even close to what they were making in previous years.

[dxpavelka]

Forgot the most obvious:  They're in charge and you're not.

[Riverbrian]

Sometimes in life. You are asked a question. Sometimes you answer that question honestly. 

Every single time... honest answers are punished by us. Once again, we don't disappoint with amazing consistency. 

Y'all want the truth. Y'all demand the truth so you can trash it and beat it to a bloody pulp... which of course leads to non-answer answers... actually it leads to lies and manipulation because that is what we are OK with. 

We have an article here that could have easily been titled. 

Why didn't they lie to us? 

Or

Twins front office was honest with us and just look at the damage. 

 

 

 

[Major League Ready]

You beat me to it by a minute RB.  Who here did not wonder what would happen to spending upon learning of the loss of TV revenue?  Isn’t it highly probable a reporter would happen to ask how this will impact spending?  Yet, the assumption is this was leaked.  

Even if they were not asked, perhaps they wanted the average fan to understand they would not be spending much on free agents because they are going to be losing a portion of a significant revenue stream.  The vast majority of people understanding record spending is going to be curtained a bit in such an instance so communicating this is the best way to deal with most of the fan base.

There is a small portion of the fan base that won’t be happy no matter how they handle it.  How many times have we seen people complain on this site that they make a politically correct statement instead of just saying what they are really thinking? They had record spending, and they are they are losing a large chunk of revenue.  There is no risk in revealing they will cut spending to anyone viewing this through a rational lens.  There is not a company on the planet that would not cut cost if they suddenly lost 10% of their revenue.  Let’s face it, some sports fans don’t always view these things through a rational lens.  

[Richie the Rally Goat]

I think Falvey’s statement of the payroll situation sounds just like an annual earnings projection for a publicly traded company.

The Street expects earnings to be 150M. The company expects earnings to be 145 to 150m, but if you deliver 147, the stock price will tank even though it’s only a 2% miss, so you sand bag it to 135 to 140 and try to spin looking like a hero at 147.

they have a revenue deficit now, have a clear line to recover it, but need to manage cash by reducing cost in the event revenue comes in lower than expected.

with the number of teams in the same boat, the optimism from Falvey’s side is that there will be a lot of high quality tier 2 free agents and trades available late in the offseason because not everyone will have buttoned up their TV contracts.

[Riverbrian]

10 minutes ago, Major League Ready said:

There is a small portion of the fan base that won’t be happy no matter how they handle it.

Other than this sentence... I agree with you.

Small Portion? LOL 😁

How shocking... the Twins have a financial guidelines to adhere to. 

If revenue wasn't a consideration... just go get Ohtani and Snell and Yamamoto. Go get them all. 😉    

[DJL44]

22 minutes ago, Major League Ready said:

You beat me to it by a minute RB.  Who here did not wonder what would happen to spending upon learning of the loss of TV revenue?  Isn’t it highly probable a reporter would happen to ask how this will impact spending?  Yet, the assumption is this was leaked.  

Even if they were not asked, perhaps they wanted the average fan to understand they would not be spending much on free agents because they are going to be losing a portion of a significant revenue stream.  The vast majority of people understanding record spending is going to be curtained a bit in such an instance so communicating this is the best way to deal with most of the fan base.

There is a small portion of the fan base that won’t be happy no matter how they handle it.  How many times have we seen people complain on this site that they make a politically correct statement instead of just saying what they are really thinking? They had record spending, and they are they are losing a large chunk of revenue.  There is no risk in revealing they will cut spending to anyone viewing this through a rational lens.  There is not a company on the planet that would not cut cost if they suddenly lost 10% of their revenue.  Let’s face it, some sports fans don’t always view these things through a rational lens.  

If they actually lose all of their TV revenue someone needs to be fired. That's gross incompetence for a professional sports franchise.

[DJL44]

21 minutes ago, Richie the Rally Goat said:

I think Falvey’s statement of the payroll situation sounds just like an annual earnings projection for a publicly traded company.

The Street expects earnings to be 150M. The company expects earnings to be 145 to 150m, but if you deliver 147, the stock price will tank even though it’s only a 2% miss, so you sand bag it to 135 to 140 and try to spin looking like a hero at 147.

they have a revenue deficit now, have a clear line to recover it, but need to manage cash by reducing cost in the event revenue comes in lower than expected.

with the number of teams in the same boat, the optimism from Falvey’s side is that there will be a lot of high quality tier 2 free agents and trades available late in the offseason because not everyone will have buttoned up their TV contracts.

Fans shouldn't be rooting for the Pohlads to exceed their earnings projections. They should be rooting for wins. Nobody wears a Dave St. Peter jersey to a game.

[terrydactyls]

17 hours ago, DJL44 said:

Another idea - this is the opening of negotiations for the TV contract. If they spend the estimated money in advance then the media company has leverage knowing the Twins need the money to make payroll. This incentivizes the TV company  to wait until the day before the first payroll check is due and force the Twins to settle. The Twins are saying "we can play this whole season without a TV contract at all and we aren't going to cave in."

Or, if the Twins do reduce payroll to $120M, the media companies tell the Twins that their product isn't worth a big TV contract.

[Johnny Ringo]

I really don't think there is a dark mystery to Falvey's comments.

I believe that replacing the $54 million revenue shortfall from the Bally exit will be much more difficult than people realize. There is not another network willing to step into the void that I am aware of. Cable television is dead, man. They just haven't told the relatives yet.

Ok just stream the game, you say. Well lets walk through those economics. The Twins have a rabid fan base but it's small. Will 250,000 people pay $200 a year to stream games? 500,00 @$100? That seems somewhere between formidable and pie-in-the-sky.  

Early on, ad revenue will be light and expenses will be considerable.  Someone has to pay for the on-air talent, the trucks, the cameras, the travel. No doubt, advertisers will want proof of concept. (The MLB streaming service runs ad-free.) 

People yell "One year thing! CHEAP POHLADS!!!". I would calmly say back "Realistic Pohlads."   The new-gen Pohalds are good (not great) owners who expect the Twins business model to carry its own weight.  They are neither thieves (Oakland ) nor sailors on shore-leave spenders (Mets, Padres) and that is just fine.

Despite the well-known Bally issue, you had pundits like Gleeman and the Geek just a few days before the Falvey reveal talking about a 2024 payroll of $154 (Gleeman) and $170 (Bonnes) million. I had the laugh of the year when John said the players should expect to get a cost-of-living increase. (That math should be run past the following three entities: the Fed, the folks dishing out diplomas at Carlson and reason.)

One of Gleeman's many brags (he is becoming a drinking game) is that the FO listens to their podcast. So, I think Falvey was just trying to get ahead of those kind of expectations. To say "Hey, this Bally thing is a thing. Be a little patient. We are working on it."   

 

[terrydactyls]

14 hours ago, Schmoeman5 said:

Let the paying public know that you're lowering payroll, but don't tell them about extending the manager and giving a sizeable raise until well after the fact. 

Giving a"sizable raise" to a manager would be the same as paying a crappy relief pitcher for a couple months.

[DJL44]

15 minutes ago, terrydactyls said:

Or, if the Twins do reduce payroll to $120M, the media companies tell the Twins that their product isn't worth a big TV contract.

The Twins are coming off one of the worst TV contracts in MLB so that shouldn't be a surprise to the team.

[Trov]

I think one they wanted to bring up the TV deal situation, because it affects more than just the Twins, and several teams are in a similar boat.  I also think they wanted to come out to fans and let them know not to expect a big splash in FA.  We normally never expected it, but over last few years we have made some bigger signings than anyone expected.  

Some fans still want the Twins to spend like Padres, despite Padres needing to cut even more payroll and take out loans to cover payroll. 

[terrydactyls]

Here's some random thoughts.

1.  If the Twins reduce payroll by $35M, that's less than 1.5% of the current estimated value of the team.  Is it worth it?

2.  Many highly thought of business people became wealthy because they saw an opportunity and took a big risk.  Maybe now would be the time to go for a title instead of playing it safe?

3.  Is it possible that the lack of activity so far this off season is because they are hoping for a repeat of the Correa fiasco of last year?  They are just waiting for Ohtani and Yamamoto to fall into their laps?

Okay. #3 was an attempt at sarcasm. 

[Major League Ready]

54 minutes ago, DJL44 said:

If they actually lose all of their TV revenue someone needs to be fired. That's gross incompetence for a professional sports franchise.

Who has ever suggested they will lose ALL of their TV revenue?    This is not the kind of problem that is resolved quickly.  It's all together possible a distribution will develop that allows the twins and other effected teams to gain back 100% or more of their revenue but that model will have to be built and marketed before that happens.  It seems like you want to blame this on incompetence to make yourself feel better.  The problem here is not them.  It's the people who think anyone who can't reverse the impact of an industry changing event in a short period of time is "grossly incompetent".

[DJL44]

14 minutes ago, Major League Ready said:

Who has ever suggested they will lose ALL of their TV revenue?    This is not the kind of problem that is resolved quickly.  It's all together possible a distribution will develop that allows the twins and other effected teams to gain back 100% or more of their revenue but that model will have to be built and marketed before that happens.  It seems like you want to blame this on incompetence to make yourself feel better.  The problem here is not them.  It's the people who think anyone who can't reverse the impact of an industry changing event in a short period of time is "grossly incompetent".

Live sports command the highest advertising rates of all television programming. If the Twins are the only pro sports team who can't make money over television that is a serious problem with management. If they're putting money into a new long-term distribution model that will pay off later I would prefer that they didn't take all of the startup cost out of this season's budget.

[Riverbrian]

48 minutes ago, Johnny Ringo said:

I really don't think there is a dark mystery to Falvey's comments.

I believe that replacing the $54 million revenue shortfall from the Bally exit will be much more difficult than people realize. There is not another network willing to step into the void that I am aware of. Cable television is dead, man. They just haven't told the relatives yet.

Ok just stream the game, you say. Well lets walk through those economics. The Twins have a rabid fan base but it's small. Will 250,000 people pay $200 a year to stream games? 500,00 @$100? That seems somewhere between formidable and pie-in-the-sky.  

Early on, ad revenue will be light and expenses will be considerable.  Someone has to pay for the on-air talent, the trucks, the cameras, the travel. No doubt, advertisers will want proof of concept. (The MLB streaming service runs ad-free.) 

 

 

Great Post

I don't believe most people understand the churn that is going to take place. You clearly do. 

 

 

[Major League Ready]

2 minutes ago, DJL44 said:

Live sports command the highest advertising rates of all television programming. If the Twins are the only pro sports team who can't make money over television that is a serious problem with management. If they're putting money into a new long-term distribution model that will pay off later I would prefer that they didn't take all of the startup cost out of this season's budget.

You are trying very hard to manipulate the facts to satisfying yourself.  Even if there were zero start-up costs or they applied none, revenue will still be down significantly so your point about start-up costs are speculative and self-serving.

[Major League Ready]

1 hour ago, Johnny Ringo said:

I really don't think there is a dark mystery to Falvey's comments.

I believe that replacing the $54 million revenue shortfall from the Bally exit will be much more difficult than people realize. There is not another network willing to step into the void that I am aware of. Cable television is dead, man. They just haven't told the relatives yet.

Ok just stream the game, you say. Well lets walk through those economics. The Twins have a rabid fan base but it's small. Will 250,000 people pay $200 a year to stream games? 500,00 @$100? That seems somewhere between formidable and pie-in-the-sky.  

Early on, ad revenue will be light and expenses will be considerable.  Someone has to pay for the on-air talent, the trucks, the cameras, the travel. No doubt, advertisers will want proof of concept. (The MLB streaming service runs ad-free.) 

People yell "One year thing! CHEAP POHLADS!!!". I would calmly say back "Realistic Pohlads."   The new-gen Pohalds are good (not great) owners who expect the Twins business model to carry its own weight.  They are neither thieves (Oakland ) nor sailors on shore-leave spenders (Mets, Padres) and that is just fine.

Despite the well-known Bally issue, you had pundits like Gleeman and the Geek just a few days before the Falvey reveal talking about a 2024 payroll of $154 (Gleeman) and $170 (Bonnes) million. I had the laugh of the year when John said the players should expect to get a cost-of-living increase. (That math should be run past the following three entities: the Fed, the folks dishing out diplomas at Carlson and reason.)

One of Gleeman's many brags (he is becoming a drinking game) is that the FO listens to their podcast. So, I think Falvey was just trying to get ahead of those kind of expectations. To say "Hey, this Bally thing is a thing. Be a little patient. We are working on it."   

 

Great post.  I highlighted the cost portion because we often see people do the math without any idea of the production costs.  There is so much we don't including what the group MLB hired to address the problem has come up with.  It seems reasonable, MLB will want to develop a model where the teams and the league control distribution.

[DJL44]

18 minutes ago, Major League Ready said:

You are trying very hard to manipulate the facts to satisfying yourself.  Even if there were zero start-up costs or they applied none, revenue will still be down significantly so your point about start-up costs are speculative and self-serving.

The Twins have not disclosed any facts so all we have is speculation based on them lowering payroll because they can't make money off television.

[Major League Ready]

1 hour ago, DJL44 said:

The Twins have not disclosed any facts so all we have is speculation based on them lowering payroll because they can't make money off television.

Yet, without any real knowledge of the situation you have determined they are grossly incompetent.  You also continue to suggest they are representing this as a total loss "can't make any money" from broadcasts.  That has never been their representation just your interpretation.  The fact is they don't have any broadcast partner for 2023 and it's hardly unwarranted to forecast a decrease in revenue.  Incompetence would be for them to develop a budget assuming no loss in revenue.

[SteveLV]

NFL streaming on YouTube was about $350 for, arguably, 17 games.  (I am sure many folks watch more than their home team, e.g., gamblers and fantasy football folks).

I would gladly pay $250 for 162 regular season games and a handful of ST games.  That is $1.50 a game.  Heck, a large Coke at McDonald's is way more than that nowadays.

If 250,000 fans pay that is $62.5M gross revenue, and they could pay production costs and on-air talent and be close to the Bally contract, and that would be ad-free!

If they sell advertisement, they could sell it for something like $99, and then there would be no excuse not to purchase it for 90% of fans.  That is less than the cost of attending one game in person, a total bargain.

Conceptually, I see no reason why they can't profit and flourish with a streaming model.  Am I missing anything?

[tony&rodney]

My take is Falvey didn't need to make any comments. I'm not and have never been on the blame owner/front office wagons. In fact I'm also opposed to those posts and comments that condemn(ed) past ownerships and front offices. MLB is a corporate world. It has been decades since there have been any family business ideals.

As a fan I goof around, like most of us, with thinking about this and that which may create an improved team for each following. Why worry about what one has no control over.

I made my first offseason roster at $125 million and then boosted it to fit the TD Tool at $150M.  I did chuckle at Bonnes' $170 million figure, but also am aware that he and others may know quite a bit more than I do about the inner workings of the Twins. My reaction to $150-170M was .... that's good, more room for additions and less concerns on mistakes ..... but also heavy doubt about the numbers due to the media issues.

The entire media deal is troublesome for MLB. I cannot know what will happen but it sure will not be some automatically smooth transfer from one channel to the next. While I follow the updates on what is happening, I can only hope that there is a way for all Twins or other team's fans to have some reasonable way to access watching the games at reasonable prices. We have to at least acknowledge that media money matters to the bottom line and subsequently influences organizational decisions. 

One thing that does bring in money is consistently high attendance. Finding a path back to drawing three million fans per season plus going on some playoff runs is always good for the budgets.

[DJL44]

10 minutes ago, SteveLV said:

NFL streaming on YouTube was about $350 for, arguably, 17 games.  (I am sure many folks watch more than their home team, e.g., gamblers and fantasy football folks).

I would gladly pay $250 for 162 regular season games and a handful of ST games.  That is $1.50 a game.  Heck, a large Coke at McDonald's is way more than that nowadays.

If 250,000 fans pay that is $62.5M gross revenue, and they could pay production costs and on-air talent and be close to the Bally contract, and that would be ad-free!

If they sell advertisement, they could sell it for something like $99, and then there would be no excuse not to purchase it for 90% of fans.  That is less than the cost of attending one game in person, a total bargain.

Conceptually, I see no reason why they can't profit and flourish with a streaming model.  Am I missing anything?

MLB.tv was $150 a year for out of market games. If they made it $162 a year ($1 per game) and you get in-market games I think they'll do very well. They should be able to sell the same package as an adder to cable or satellite for people who don't stream their TV. Bundle it with 4 upper deck tickets for $200 a year.

[DJL44]

2 minutes ago, tony&rodney said:

One thing that does bring in money is consistently high attendance. Finding a path back to drawing three million fans per season plus going on some playoff runs is always good for the budgets.

I think making it easier to access games on TV will drive increased attendance. The best advertisement for attending a Twins game in person is watching one on television.

[Schmoeman5]

3 hours ago, terrydactyls said:

Giving a"sizable raise" to a manager would be the same as paying a crappy relief pitcher for a couple months.

That's not the point. And are you disputing that Roccos contract was not a substantial pay raise? The point was they pick and choose what they release and when they do it. Which is their prerogative. Some might prefer to give a "crappy relief pitcher" a going rate contract over a push button manager.