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

[Richie the Rally Goat]

4 hours ago, DJL44 said:

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.

1,000,000% agreed! 

[Richie the Rally Goat]

2 hours ago, Major League Ready said:

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.

The Twins already produce the broadcast, that’s not new cost. The MLB already distributes via streaming, that’s not entirely new cost. I admit, there might be some new distribution cost… but I don’t think new costs are very high. We don’t know the costs in the model, but Bally/Diamond only shouldered the cost of distribution in a cable tv network, and MLB shouldered the streaming distribution cost. No cable, no cable cost. Yes cable/broadcast, then there’s something, but wouldn’t you have a distribution partner for that who gets a cut? I guess I don’t really care what Bally’s costs were.

[howeda7]

21 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."

This would make sense if they were simply haggling with Bally's but there is no "TV company" to negotiate with. They will either be engaging in a long list of negotiations with individual cable/satellite/streaming companies to give them some % of what htey are currently paying for Bally's or they will take whatever Bally's is willing to offer them through bankruptcy proceedings. Either way, this is isn't likely to gain them much/any leverage.

[howeda7]

19 hours ago, Beast said:

I don’t think it’s a mystery.  They’re not playing 3D chess, here.  They’re trying to get out ahead of it now, hoping the bad taste it leaves fans and season ticket holder wears off by spring training.  Same reason why major negative news always gets dumped on Friday.  People have the attention span of a vegetable these days, and they know it.

They also need to align it as closely as possible with their “historic playoff run.”  Look at all the cover that’s run for them on this website alone.  “They’re not cheap and only concerned about the bottom line, it’s a genius organizational long game philosophy that’s won them absolutely nothing….but wait for it.  You wouldn’t understand unless you’re a true MN ball guy that faults ownership for nothing.”

Except this wasn't getting out in front of anything. If they had said nothing and just gone about the off-season the average fan wouldn't even know what the 2024 payroll is until it's mentioned in the Star Tribune around Opening Day. Sure some fans would have been mad when Gray signed elsewhere but that's about it.

[howeda7]

2 hours 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?

Conceptually, no. But I just don't think they would hit those #'s. They wont' get 250K people to pay $250. And you don't want your games only available in 250K homes. For all the "cable is dead" talk, Bally's was still in ~1.2 million homes in the 5 state area. 15 years ago it was in something like 2.5 million homes. That's what the Twins want to get back towards, not reduce it further.

So they will have to negotiate with the carriers that currently carry Bally's to get a cut of what they were currently paying. And they will make what they can from streaming (I don't see them charging more than $100/year or $20/month max). And they should also return to having a package of games on over the air TV. What will they net from all of that? Probably something in the $20-$30 million range to start. Not nothing but a lot less than $55 million.

[SteveLV]

Anyone know what the Twins receive from MLB for the out-of-market streaming rights on MLB network?

[Woof Bronzer]

23 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."

Interesting...my initial thought was that the Twins were negotiating against themselves by devaluing any future deal.  Like, they're saying they won't get $50mil again, but I've seen nothing to indicate that's an absurd number.  Any provider is now going to start any negotiation much lower than that.  But you might be on to something here.  

[DJL44]

1 hour ago, howeda7 said:

Conceptually, no. But I just don't think they would hit those #'s. They wont' get 250K people to pay $250. And you don't want your games only available in 250K homes. For all the "cable is dead" talk, Bally's was still in ~1.2 million homes in the 5 state area. 15 years ago it was in something like 2.5 million homes. That's what the Twins want to get back towards, not reduce it further.

So they will have to negotiate with the carriers that currently carry Bally's to get a cut of what they were currently paying. And they will make what they can from streaming (I don't see them charging more than $100/year or $20/month max). And they should also return to having a package of games on over the air TV. What will they net from all of that? Probably something in the $20-$30 million range to start. Not nothing but a lot less than $55 million.

You left out the ad money. Subscriber money should be the smaller piece of the pie.

[Woof Bronzer]

All this makes more sense if you open yourself up to the idea that the Pohlads simply aren't very smart businessmen.  The  decision to cut payroll after the year the team had, literally weeks after TF was electric with an energy it literally has never had before, is plain stupid.  No intelligent business would ever kill their own buzz that way.  No intelligent business would then ANNOUNCE that they are killing their own buzz.  Wouldn't the simplest explanation for all of this be that the Pohlads aren't that bright?  

[Major League Ready]

2 hours ago, Richie the Rally Goat said:

The Twins already produce the broadcast, that’s not new cost. The MLB already distributes via streaming, that’s not entirely new cost. I admit, there might be some new distribution cost… but I don’t think new costs are very high. We don’t know the costs in the model, but Bally/Diamond only shouldered the cost of distribution in a cable tv network, and MLB shouldered the streaming distribution cost. No cable, no cable cost. Yes cable/broadcast, then there’s something, but wouldn’t you have a distribution partner for that who gets a cut? I guess I don’t really care what Bally’s costs were.

How do we know who shoulders what costs in the agreement between Bally and a team?  I have no idea so I am not even remotely suggesting you're wrong.  I am just wondering if this is documented somewhere. 

[Woof Bronzer]

 

5 hours ago, Major League Ready said:

Who has ever suggested they will lose ALL of their TV revenue?    

The Twins!  The Twins are suggesting that.  "We used to get $50m, now we get $0, so we gotta cut payroll by $25-$30mil."  If they factor in the future deal the "spend 50% of revenue" math doesn't work.   

[ashbury]

22 hours ago, notoriousgod71 said:

This organization needs some serious public relations training.

Cheaper in the long run to just hire some mid-level FO person from Milwaukee or St Louis with 10 years' experience, and then listen carefully each time he or she says, "well, that's not how we did it back in...".

[Major League Ready]

5 minutes ago, Woof Bronzer said:

 

The Twins!  The Twins are suggesting that.  "We used to get $50m, now we get $0, so we gotta cut payroll by $25-$30mil."  If they factor in the future deal the "spend 50% of revenue" math doesn't work.   

What they have said is that they lost their contract.  That's very different than saying they expect to lose 100% of the revenue generated from TV.  Also, you are doing math that makes no sense.  They don't cling to this notion of 50% of revenue to payroll as you are doing here.  If they lose $50M in revenue, they have to cut $50M in cost to counteract the loss.   Show us a source that says they are assuming or projecting a total loss in TV revenue. 

[nicksaviking]

13 minutes ago, Woof Bronzer said:

 

The Twins!  The Twins are suggesting that.  "We used to get $50m, now we get $0, so we gotta cut payroll by $25-$30mil."  If they factor in the future deal the "spend 50% of revenue" math doesn't work.   

Just for fun, let's speculate the Twins will lose subscriber TV revenue because they plan on broadcasting the games to all fans over a free platform. 

What would everyone want then, Twins broadcasts at no charge, or 25M more in payroll?

[Woof Bronzer]

3 minutes ago, Major League Ready said:

What they have said is that they lost their contract.  That's very different than saying they expect to lose 100% of the revenue generated from TV.  Also, you are doing math that makes no sense.  They don't cling to this notion of 50% of revenue to payroll as you are doing here.  If they lose $50M in revenue, they have to cut $50M in cost to counteract the loss.   Show us a source that says they are assuming or projecting a total loss in TV revenue. 

The Twins have always said they spent 50% of revenue on payroll. (Like you I doubt they spend that much, but it's what they say.)  Losing $50mil in revenue would then equate to a $25mil loss in payroll.  They're cutting $25m-$30m so the only way the math works is if they're factoring nothing for the new deal.  

If they were figuring on a new deal worth $30 mil, or even the $40 ish mil that Bally offered a year ago but the Twins turned down, then what other lost revenue are they factoring in to arrive at a large cut?  Sure isn't from 2023 when they had 4 home playoff games!  

[Woof Bronzer]

5 minutes ago, nicksaviking said:

What would everyone want then, Twins broadcasts at no charge, or 25M more in payroll?

Excellent hypothetical!  I'll take the payroll since I'm primarily a radio listener :)  

Where would you land?

[DJL44]

12 minutes ago, Major League Ready said:

If they lose $50M in revenue, they have to cut $50M in cost to counteract the loss.

They  don't. That $50M was 50% shared with the rest of MLB anyway so at most they're down $25M and that's if the new number is $0.

[nicksaviking]

8 minutes ago, Woof Bronzer said:

Excellent hypothetical!  I'll take the payroll since I'm primarily a radio listener :)  

Where would you land?

There's only three free agent hitters I have any interest in, and I want them to trade for a young starter instead of signing an old one. So the payroll in my scenario was going to be low anyway, I'll take the free broadcasts.

And re-evaluate next year.

[DJL44]

11 minutes ago, nicksaviking said:

Just for fun, let's speculate the Twins will lose subscriber TV revenue because they plan on broadcasting the games to all fans over a free platform. 

What would everyone want then, Twins broadcasts at no charge, or 25M more in payroll?

If they offered games for free the ad revenue would skyrocket. Twins baseball would be the #1 rated show on TV locally all summer long. They can probably offer games for free and have nearly the same payroll. Vikings games get a share around 80. The Twins should be able to get a share of at least 30.

[Richie the Rally Goat]

28 minutes ago, nicksaviking said:

Just for fun, let's speculate the Twins will lose subscriber TV revenue because they plan on broadcasting the games to all fans over a free platform. 

What would everyone want then, Twins broadcasts at no charge, or 25M more in payroll?

Broadcast TV would still pay the Twins to broadcast the games. The owners of Judge Judy get paid to air the program in syndicate.

the question is what’s the Twins worth to whatever Tv station that wants to air them. Half the difference should be the payroll difference (up or down)

[Richie the Rally Goat]

18 minutes ago, DJL44 said:

If they offered games for free the ad revenue would skyrocket. Twins baseball would be the #1 rated show on TV locally all summer long. They can probably offer games for free and have nearly the same payroll. Vikings games get a share around 80. The Twins should be able to get a share of at least 30.

A 30 share of 5 nights a week for 27 weeks, plus 1 day per week for 27 weeks. That’s lotta eyeballs. No matter what, their revenue isn’t dropping $50m, and they know it.

[Major League Ready]

17 minutes ago, DJL44 said:

They  don't. That $50M was 50% shared with the rest of MLB anyway so at most they're down $25M and that's if the new number is $0.

My bad.  I did not realize local TV revenue is shared. 

[Richie the Rally Goat]

1 hour ago, Major League Ready said:

How do we know who shoulders what costs in the agreement between Bally and a team?  I have no idea so I am not even remotely suggesting you're wrong.  I am just wondering if this is documented somewhere. 

Agreed, I have no idea either. That’s why cost is so hard to discuss like this.

[Wizard11]

In addition to the many insightful comments I considered the following.

One tangential issue I was struck by as I read thru comments….  The Twins effectively had a $133M payroll last year if you subtract the unforced errors of Gallo $11M and Vázquez $10M.  
 

Ownership may have looked at the rather dismal FO history with middle market FA signings and said no mas`.  Last years complementary player acquisitions were largely successful as well as typical of this FO.  Farmer and Taylor as trades, Castro via waivers, and Solano from the bargain bin of FAs.  Falvine seems to be fairly good at finding excess value in these channels.  They have also been fairly successful in most of their major trades such as Odorizzi, Maeda, Gray, Lopez, Ryan, and probably Paddock and Pagan to name a few. Mahle stands out as an exception.  They have a good record with finding future major leaguers in the draft and International free agency.
 

Mid and upper market FA spending has brought them “gems” like Gallo, Vazquez, Bundy, Colome, and Odorizzi on a qualifying offer just to name a few.  Their 2 mega contracts have been Correa and Buxton which have not been disasters but would be stretch to call successful thus far.   It would not have been unreasonable for the Pohlads to take stock of their FO and simply directed them to stick to their core skills rather than blow $15-$25M per winter on ineffective FAs.  
 

This not articulated as well as I would have liked but hopefully conveys the point

Edited December 1, 2023 by Wizard11
Clarity

[DJL44]

3 minutes ago, Wizard11 said:

It would not have been unreasonable for the Pohlads to take stock of their FO and simply directed them to stick to their core skills rather than blow $15-$25M per winter on ineffective FAs.  

If I didn't trust my POBO to buy free agents I would FIRE him.

[howeda7]

3 hours ago, DJL44 said:

You left out the ad money. Subscriber money should be the smaller piece of the pie.

I'm not leaving it out, but how much ad revenue can you generate if your maximum audience is 500K people (assume 2 per home on average)? And even if you lower the subscription fee to $100/year, I'm not convinced you would 250K to sign up for it. You will still need to be available on OTA/Cable/streaming services in some form to as many people as possible. Otherwise you are going in the wrong direction on getting the games available more people.

[Major League Ready]

6 minutes ago, howeda7 said:

I'm not leaving it out, but how much ad revenue can you generate if your maximum audience is 500K people (assume 2 per home on average)? And even if you lower the subscription fee to $100/year, I'm not convinced you would 250K to sign up for it. You will still need to be available on OTA/Cable/streaming services in some form to as many people as possible. Otherwise you are going in the wrong direction on getting the games available more people.

Someone suggested that Bally's does not pay for any of the production cost.  If that's true, and they were willing to pay $50M for broadcast rights, they forecasted add revenues of $50M + their operating costs and profit.

[howeda7]

10 minutes ago, Major League Ready said:

Someone suggested that Bally's does not pay for any of the production cost.  If that's true, and they were willing to pay $50M for broadcast rights, they forecasted add revenues of $50M + their operating costs and profit.

I'm not sure I follow you on this. Bally's gets a monthly amount per subscriber from every cable/satellite subscriber in the Twins territory that carries them (DirecTV/Comcast etc.) The last # I saw was there still 1.2 million homes with Bally Sports North, though I'm sure it's lower by now. They get anywhere from $5-10/month I've heard (DirecTV adds like $7 to my bill so I assume they get at least that much). That is the biggest chunk of their revenue (and the Twins make up about 40% of that value with the rest the Wolves/Wild/Other). The ad revenue from Twins games is a much smaller slice.

Also, while Dick Bremer and Morneau etc. were/are paid by the Twins, I believe BSN was bearing the cost of equipment, camera crews, producers etc. I'm not 100% sure on that though.

 

 

[Whitey333]

The payroll reduction is a slap in the face of sorts to Twins fans.  The fact that they also axed a few veteran long term scouts is even more interesting in cost reduction.  To me this ownership group and Front Office are not that great at planning.  This Bally Sports RN has been brewing for over two years.  This is not a new phenomenon.  So why did they commit 33 mil pee year to Correa and 17 million a year to the oft injured Buxton.  That will make up nearly 40% of payroll for the next 5 years or so.  Very strange.  

[JD-TWINS]

On 11/30/2023 at 3:40 PM, Reptevia said:

They were trying to reduce expectations to soften the blow when it ends up being $120M. I think that may be the ceiling. I know I’m in the minority on here, but we’ll see…

Sure, I agree, they were just lowering expectations so they can justify a lack of activity. W/o announcing they look pretty foolish not making any moves.

A 15% reduction in payroll would be pretty steep and that takes us down to $132M total. If we move Polanco we’re presently at a level of $114M……….this leaves room for a FA starter in the $13M range. Lugo seems lowest risk - best value to me.

For about the 10th time in last month, I gotta suggest trading with Milwaukee for Devin Williams. Their set-up guy could close for them & they want controllable prospects & salary reduction. Their rookie 2B was not great last year…….let them try Gordon there and in LF as needed. Gordon - Rodriguez - Festa for Williams & our Pen is elite for next 2 years. Varland focuses on being depth guy for rotation.