The Royals Problem: Just How Much Are You Willing to Give Up to Win a World Series?

I didn’t say that any owners of MLB teams dig into their own pockets for payroll. Just saying that it wouldn’t hurt them if they did. The value in the investment alone far exceeds concerns over operating costs. It could be viewed like a real estate investment, where you don’t make any money, and you spend a lot on development, until you sell the project. And there are a lot of examples of businesses in which owners make investment with an eye towards building value, rather than short-term profit.

When fans defend the owners not spending money on players salaries based on some kind of financial necessity, it seems naive to me. No owner of any MLB team has ever lost money by overpaying players. All owners can afford a high payroll roster, whether you own the Twins or the Yankees. Some simply are willing to spend more than others at the risk of making less money in any given year.

How about then, when FO keeps salaries down one season and they make bank? Yet the next season, that extra income isn't invested? Does that count? Or does that money disappear as soon as the season ends? 

 

It's quite OK, to take a hit for a season or two if you have banked up enough the prior few in order to try and win a championship. This ownership has never done that though. If they had, there would be more folks that defend them.

Do you think the Pohlads have made 175 million in profit? That is what they put into the building of Target Field? 

Who has said a team should shoot for sustained mediocrity? It certainly wasn't me. I said a team should shoot for sustained contention for the postseason.

 

And BTW the Twins lost the ALCS to the eventual WS champs in 2002. The BJ's did it in 2015, an interval of 13 years. Is 13 almost 30?

Toronto pushed KC to 6 games; MN lost in 5 games. Last I checked 2 wins is closer than 1.....

The Twins were 0-7 in the postseason this decade. They were 6-18 in the previous decade with only one series victory. Is that "sustained contention?" Runs of contention are cyclical. What the Twins did, and continue to do, doesn't work. Teams that are in desperate need of a talent boost, and allow fear to hold them back from achieving said boost, lest they lose out on a potential early playoff exit down the road, is the epitome of shooting for mediocrity. 

First, I never said that the Twins could spend as much as the Yankees. To imply that i did is insulting. If your argument comes down to "the Yankees can spend more than the Twins because they have more revenues," you're knocking down a straw man that has never been argued on this site by anyone . . . ever.

 

You obviously did not get my point in using the Yankees as a contrast to the Twins, and that EVEN the owners of the Twins can afford a high payroll. They can, even using conservative numbers. And people who argue that paying players more money will handicap the team going forward are naive to think that, in my opinion. People have been blaming Mauer for years, unjustly, for how much he was paid, claiming that it prevented the owners from getting other players that would help our team. Now, it's a hypothetical expensive pitcher who is going to prevent us from getting other players that would help our team in future years. I think that is incorrect.

 

As far as how much goes to charity? I'd trust the players to use a much higher percentage of any "$50 or $100 million" that is up for debate towards charitable causes than I would the owners. So I think that's a terrible argument in favor of advocating stinginess by the owners. Although, I did just watch A Christmas Carol, so it's never too late . . . .

You need to rethink this argument. My position was/is that if they were going to take $100M out of their pockets, I prefer they gave it to a charity. In that scenario 100% of the $100M goes to charity. Your contention is that a higher percentage would go to charity if they gave it to the players. How does that work? This statement is yet another demonstration  of how the wild biased of fanaticism interprets something this straight forward in a manner that has zero logical basis. You do understand that the players would have to give away 100% of the money to equal the scenario.

Toronto pushed KC to 6 games; MN lost in 5 games. Last I checked 2 wins is closer than 1.....

 

Your point is well taken. I have to admit that the 2015 Toronto team came about 1% closer than the 2002 Twins team.

Do you think the Pohlads have made 175 million in profit? That is what they put into the building of Target Field? 

42.

You need to rethink this argument. My position was/is that if they were going to take $100M out of their pockets, I prefer they gave it to a charity. In that scenario 100% of the $100M goes to charity. Your contention is that a higher percentage would go to charity if they gave it to the players. How does that work? This statement is yet another demonstration  of how the wild biased of fanaticism interprets something this straight forward in a manner that has zero logical basis. You do understand that the players would have to give away 100% of the money to equal the scenario.

My bad, I thought you were arguing for the owners keeping $100 million from payroll.

If what you are saying is that you would prefer that the owners donate $100 million to charitable causes, then that's a very fine sentiment. I'm not sure who you're arguing against on that one, though.

The Pohlads didn't put a penny into the building of Target Field.

 

They borrowed the money (from their own banks, earning interest), and are using revenues from Target Field to pay off the debt. 

 

That's the reason they haven't come close to "50 percent of revenue to payroll," and explains why the operating expenses doubled when they moved from the dome.

 

The actually made money (from the interest on the loans to themselves), rather than helped pay for Target FIeld.

According to this article they no longer have an ownership interest in any banks. Regardless, you did not give to much thought to your conclusion on "operating cost doubling".  The annual interest on $225M is 12-13M. That's a fraction of their total operating cost.  Did you mean the portion of operating costs directly associated with Target Field?

http://www.startribune.com/pohlad-family-ends-direct-ownership-of-banks/285895611/

High being subjective, obviously the Royals could not keep their team together if it meant having a $200 million payroll. That said, they also didn't have to collapse as much as they did. They made some poor choices in the aftermath of the World Series win. The Twins don't have to follow a Royals/Marlins model to win a WS. They can follow a Cardinals model.

The only players worth keeping was Perez and Cain. They could have traded off Hosmer and Moose and Gordon they wouldn't have been worse off.

Your point is well taken. I have to admit that the 2015 Toronto team came about 1% closer than the 2002 Twins team.

I'm not sure why you've latched onto the win total debate when the idea of my OP was clear, but then yes, 2 wins > 1, and we're looking at nearly 30 years, not 17.

The Pohlads didn't put a penny into the building of Target Field.

 

They borrowed the money (from their own banks, earning interest), and are using revenues from Target Field to pay off the debt. 

 

That's the reason they haven't come close to "50 percent of revenue to payroll," and explains why the operating expenses doubled when they moved from the dome.

 

The actually made money (from the interest on the loans to themselves), rather than helped pay for Target FIeld.

Source versus biased opinion.

The Pohlads also sold of the banks quite a few years ago

42.

So you basically do not have an answer. 

So you basically do not have an answer. 

You asked the wrong question.

However, I'm sure that the owners have made more than $175 million between the team, the rental of the facility for concerts and other events. They were also given the adjoining properties to develop. But profits and losses are not particularly relevant to the purchase price of the stadium.

They paid $175 million for a stadium that cost $600 million to develop. Depending on its market value, it is likely that they more than doubled their money the minute they made the deal.

The only relevance of the $175 million (and amounts spent on any other substantial improvements to the property) is their basis in the property for tax purposes. They should be able to depreciate the value they paid for the property and count the depreciation against profits to reduce any taxable income in a given year. And if and when they ever sell the stadium, their basis does not count toward their long-term capital gains tax on the amount they receive for the property.

And the owners are sophisticated bankers. It would not surprise me, given their assets and the value of the stadium as collateral, that they borrowed at least $175 million towards the development of the property at a very low interest rate, and have been paying off the debt on the property with profits from the operation of the property. Remember, they developed the adjoining land, from which they profit. They have the Twins. Every time they have 40,000 people at a concert they probably make a couple million between the gate and concessions. So they have a lot of income to pay off a loan every year, rather than come out of pocket at all. Meanwhile, they have more than $400 million in equity in the property.

But even if they came out of pocket, they have certainly far exceeded that $175 million investment in income from the properties. The Twins profits alone would have exceeded that in 10 years, and I remember they received $50 million one year from MLBTR. And if they have no debt, they have a $600 million asset free and clear. So even if they did come out of pocket, I wouldn't worry about them recouping the investment.

To me, you have to plant the seeds to make the money. The way you lay it out, their revenue will remain flat. 

 

By investing more in the team, and putting a real title contender on the field, you ignite a fan base. I am a huge Twins fan in large part because I was nine when they won the World Series. I was hooked and have stuck around through two truly awful decades (90s and 2010s) because I remember that feeling. 

 

If they invested more money on the team and take a short term loss in the process, you increase attendance. You increase jersey sales. Concession sales. Sponsorships. TV broadcast deals. All the things that come with having a very popular team. 

 

Sure, it might "hurt" them for a year or two, but the return would be massive if they broke through and won the whole thing.  

 

The other thing I think is relevant is the fact that sports are entertainment. Part of the deal is providing the fans a product that they want to consume. We don't care how many millions (or billions) of dollars in profit the owner makes, I want to know why I should spend $100-200 per game to take my family to the ballpark. Hint: It isn't to watch Homer Bailey pitch. 

This is actually more than a theory. Studies show a bump of 10% in revenue after a team makes the playoffs after being out of it for a while. And there's more of a bump for winning the World Series for the first time in a long time.

This seems like a particularly good strategy when our "window is open" and we are "projected to win the division," at which point we will be "ready to put our foot on someone's throat."

I'm withholding judgment on the moves and lack of moves this off season. I don't care how much money they spend on players, nor if they don't spend on players, so long as the team is good. 2019 was a great season, and the FO should get credit for that (although I would have liked a trade for a starter before the trade deadline).

The FO's success or failure should not be judged on how much money they spend or don't spend on players. They have plenty of money to spend, and a team that appears to be ready to compete for a pennant and a WS. If we save the owners a lot of money in the short term and fail to get results on the field, I'll be disappointed. Revenues, market size and the ability to pay for the best players will not be an adequate excuse, in my opinion.

You asked the wrong question.

 

However, I'm sure that the owners have made more than $175 million between the team, the rental of the facility for concerts and other events. They were also given the adjoining properties to develop. But profits and losses are not particularly relevant to the purchase price of the stadium.

 

They paid $175 million for a stadium that cost $600 million to develop. Depending on its market value, it is likely that they more than doubled their money the minute they made the deal.

 

The only relevance of the $175 million (and amounts spent on any other substantial improvements to the property) is their basis in the property for tax purposes. They should be able to depreciate the value they paid for the property and count the depreciation against profits to reduce any taxable income in a given year. And if and when they ever sell the stadium, their basis does not count toward their long-term capital gains tax on the amount they receive for the property.

 

And the owners are sophisticated bankers. It would not surprise me, given their assets and the value of the stadium as collateral, that they borrowed at least $175 million towards the development of the property at a very low interest rate, and have been paying off the debt on the property with profits from the operation of the property. Remember, they developed the adjoining land, from which they profit. They have the Twins. Every time they have 40,000 people at a concert they probably make a couple million between the gate and concessions. So they have a lot of income to pay off a loan every year, rather than come out of pocket at all. Meanwhile, they have more than $400 million in equity in the property.

 

But even if they came out of pocket, they have certainly far exceeded that $175 million investment in income from the properties. The Twins profits alone would have exceeded that in 10 years, and I remember they received $50 million one year from MLBTR. And if they have no debt, they have a $600 million asset free and clear. So even if they did come out of pocket, I wouldn't worry about them recouping the investment.

They would make $50 off every person attending a concert.  No way would that be possible for a 2 million profit for the host. They are not doing the promotion of the tour

How about the Tigers? 

From ESPN: 

"I think I proved that," Ilitch said when asked about his willingness to open the purse strings. "I've been in baseball for a lot of years. I didn't care about spending money. They get the players, and I spend, and I don't worry about it because they have good judgment."

His message to Avila this winter?

"I don't care about the money," he said. "I want the best players."

In fact, Ilitch admitted he'd be open to crossing the luxury tax threshold if the payroll continued to escalate and the market required such a commitment.

"Well, I'm supposed to be a good boy and not go over it, but again, if I'm gonna get certain players that can help us a lot, I'm going to go over it," he said before conceding this strategy was frowned upon. "Oops, I shouldn't have said that."

Revenue versus payroll and expenses. The Tigers were never close