Did the Twins Lose Money Last Year?

The high payrolls are the reasons why they’re losing money!! The higher the payroll the more they charge the fans. It’s getting to the point where the middle class families can no longer afford to go to the games.

1 hour ago, ToriiRules!! said:

The high payrolls are the reasons why they’re losing money!! The higher the payroll the more they charge the fans. It’s getting to the point where the middle class families can no longer afford to go to the games.

So wait, you're saying that spending less and putting a worse product on the field is somehow going to lower ticket costs and bring in more fans to somehow raise revenue?

I understand the point of sporting events getting more and more expensive. Trust me, I live in the Fargo-Moorhead area and a trip to Target Field ends up costing hundreds of dollars before I even see the first pitch. However I feel the logic here is extremely flawed.

Winning brings in new fans and brings back casual and fair weather fans.

Ticket sales aren't nearly the largest factor in team revenues.

That said, if they wanted to make money, they could slash payroll, put a cheap AAA team on the major league field and pocket the revenue sharing and media deal money to profit. That's how the A's made the Top 5 Profit in the image above in Nick's story.

I, for one, am extremely glad they aren't doing that. I certainly don't want to see a Twins team with a $60M payroll. Imagine last September EVERY MONTH of the season. Jake Cave and Mark Contreras playing every day certainly isn't going to bring in more fans or sell more tickets.

Fully agree with ToriiRules! The average working person with a family of 4 or 5 is not going to able to take in many games if any! That will hurt overall attendance which will cause advertiser to start pulling back! All players have to realize the fans pay their salaries, the owners just handle the money. Some players are very friendly with fans and some are jerks who should be working at WalMart.

I will believe which teams are profitable and which arent when said teams open their books and are judged on stanard recognized  accounting.  The kind where if you fudge the numbers you are open to prosecution.  Until then shut up.

17 minutes ago, chpettit19 said:

Payrolls aren't driving ticket prices. The Oakland As host the Diamondbacks Monday May 15th. Their available ticket prices for that game range from $10-$365. The Twins host the Giants Monday May 22nd. Their available ticket prices for that game range from $15-$116. The key numbers there being the 10 and 15. It costs $5 more for the cheapest ticket at Target field and the Twins payroll is $100 million more than the As. 

Exactly! Great comparison.

I cannot understand the perspective of "spend less, put a worse team on the field to get more fans"

Baseball already has a dwindling and aging fanbase. The fact that they're making rule changes to create more action and shorten each game is evidence that even the league recognizes it.

Lowering payroll will only hurt a franchise and it's fans.

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

To generate more revenue, they must generate more interest. In this market that means a winning team. IMO, the Twins management has provided the pieces to win, at least above .500%. Now where I am a bit concerned is, do they have a field management team capable of putting those pieces together to exceed the expectations? So far not, so lets see if that changes this season. Otherwise, it is probably time for a change.

8 hours ago, chpettit19 said:

Payrolls aren't driving ticket prices. The Oakland As host the Diamondbacks Monday May 15th. Their available ticket prices for that game range from $10-$365. The Twins host the Giants Monday May 22nd. Their available ticket prices for that game range from $15-$116. The key numbers there being the 10 and 15. It costs $5 more for the cheapest ticket at Target field and the Twins payroll is $100 million more than the As. 

I hear what you are saying, but your ticket prices are horribly misleading(for the games on the 15th). For example sections 1-3 and and 13-17 for the twins games (lower level behind first base and 3rd ) is between $102 - $116 per ticket.

Similar seats for that A's game run between $40 and $78 (I understand the seats down first and 3rd are a bit different at the Coliseum)

For a family of 4 to go to each game and have good seats is probably twice as much for the Twins game as the A's.

Plus the only seats I found more expensive than $78 at the Coliseum are the $365 diamond level.

I am 50 plus and am not going to pay to watch a game in the upper deck so the cheapest tickets aren't really relevant to me. I would much rather go to bar and watch on TV (can't watch at home with no streaming) I have said it on here before if me and my son are going to go to a game and spend hundred of dollars we check the morning box score to see who is playing/pitching. We skipped games because Bundy or Archer were pitching and a weekend game where Buxton and Correa were not in the starting lineup.

As far as the Twins making or losing money, you have to spend/invent money to make money, I think it is pretty obvious with no TV deal and a bad team means little fans at Target field.

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.
 

So, if we accept at face value the numbers given, then how much did they lose in '20 and '21, if they lost 30mil in '22?  I assume it must be more, maybe a lot more.  Does that mean the team has lost a considerable amount the last 3 years running?  And they still upped the payroll this year?  

Truth be told, I assumed there would be a pull back until things got back to financial health.  Instead, we are spending more, trying to bring the fans back.  I will take my crow medium rare, please.  😌

And kudos to the team for trying.  

Losing money is a relative thing.  At 45% tax rate, every buck "lost" is only .55 cents -- if one has enough money that is making money in financial instruments.

The way that club owners make money is the value of the franchise, which at a value of $1 billion, an increase of 5% a year would make them $50 million on paper.

Sure, you roll the dice on trying to make a playoff run, which would bring in significant revenues, but otherwise, you take your paper losses in stride and wait for the ultimate payoff of selling the franchise.

In any case, you don't get into owning a sports franchise without having several hundreds of millions in spare cash. 

Don't feel sorry for these people.  They make out well no matter what.

I don’t know how close the number is to reality but it does seem reasonable to believe that the Twins push the payroll limits more than most.

I think those complaining about high payrolls and high ticket prices have a point. Money in sports is out of hand overall. $30 plus for a beer and a sandwich? A family of 4 can sit in middling seats and easily drop over $400 for a few hours of entertainment. Licensing fees, huge TV contacts, corporate suites, skyrocketing payrolls and salary caps, year round personal nutritionists and hyperbolic chambers. The money in sports today is totally crazy and out of hand. The owners, the players, the super agents, it has changed drastically over time and is undeniably more expensive for the average fan. Vast numbers of the populous are priced out of attending games live. 

I live in Duluth and don't get to many games. When we do go, we splurge and act like gluttonous fools, lol. If we lived in town we would go to many more games and part of that would be budgeting. 

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.

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. 

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. 

25 minutes ago, chpettit19 said:

I choose not to sit in the upper deck either, but that doesn't mean those tickets aren't available. Games are getting much more expensive and it's absolutely harder for a family to go to a game for a decent price. But we can't refuse to buy the cheap tickets and then claim the Twins payroll is too high because the tickets we do choose to buy are more expensive. There are $15 seats available. If money spent is your #1 decision making driver you can go to a Twins game for $5 more than you could go to an As game. Pointing at the payroll and saying it's driving significantly higher prices is ignoring the facts. Tickets to a Monday May game in Cleveland also start at $15. You can get a ticket to see the Guardians for the same price you get a ticket to see the Twins. Their payrolls aren't even close to each other. The narrative those other posters were pushing simply isn't true.

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.

6 hours ago, raindog said:

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

It's the only information we have to go on for this subject.

Not defending Forbes in any way, and maybe the discussion isn't super useful in the grand scheme, but it was an interesting article by Nick IMO 

I’m not too enthusiastic about the future of baseball and the Twins if they are losing money, BSN is losing money, and attendance keeps dropping.  Unless the rule changes gets the younger generations interested in the game the sport is doomed.

A couple of observations:

1. Yes, it’s very possible that the Twins, as a stand-alone business entity, lose money on a GAAP basis and on a cash basis. It is not clear how the Twins P&L impacts the rest of the Pohlads’ business interests or the overall EV of either the franchise or their other operations.

2. Going to a Twins game is not a Giffen Good (it’s possible that in the insane NYC or LA worlds, the highest priced seats might actually exhibit some Giffen Goods characteristics). Like standard goods and services, as Twins prices rise, consumption falls.  However, on offset to this standard economic theory is that with a winning, competing for the playoffs team comes an added value to the consumer - which both flattens and shifts the demand curve for Twins tickets. The A’s have capitulated on this point; the Twins are shooting for it. 

3. The Pohlads are decent owners, and, yes, have likely been investing capital each year since COVID to produce better fan experiences - from the team on the field to the ballpark. There is a lot that goes into their capital allocation decisions across their many businesses, including the Twins. At the moment, as it relates to the Twins, there appears to be a good, healthy mix between rational ROI analysis, ego for a winner, and we live in this community too.