As my friend Metsiac often reminds me, we are not privy to
the internal machinations of the front office, the bookkeeping records or the
business models embraced by the Wilpon organization. All of that is true, but certain public
information certainly calls to mind the old cliché about if it walks like a
duck, and quacks like a duck…
According to published reports the SNY network grossed over
$400 million last year. Now anyone with
a modicum of understanding of business knows that the revenue figures exist
before expenses are factored in. That’s
an important distinction since Met fans are focusing on one aspect of expenses
in their frustration with the owners – the size of the payroll for the baseball
team.
Speaking of the team itself, the Wilpons earned a cool
$175,000,000 from ticket sales in 2017 based upon the statista.com estimate of
an average ticket price of just over $69 for the 2.5 million who attended
games. This figure does not take into account
other sources of revenue by people who attend ballgames, including parking,
concessions and souvenirs. If we assume
the average person pays an additional $20 (which is quite conservative) for
other things while attending the game, that would represent an additional $50,000,000
in stadium revenue. This total doesn’t
include more sources of revenue such as the program and yearbook advertising,
the signage at the stadium as well.
What other sources of revenue exist for the Mets? Well, Citibank kicks in a cool $20 million for
the naming rights to Citifield.
Then there are the broadcast revenues -- $20 million from
WPIX for the local games, $51 million from MLB for ESPN/Fox Sports/TBS, and
this year another $50 million from Disney World. Radio contributes another $10 million as
well. That’s a total of $131 million.
Now if you do the math you have $776 million or more in revenues. So an increase in say $50 million in payroll
would represent 6.4% of this total.
However, unlike spending $50 million on things like parking lot
resurfacing, painting, swapping the office furniture or installing new toilets,
improving the quality of the product could increase the attendance which
represents nearly $90 per person, increase the rates for signage, advertising,
broadcast rights and the like. It is an
investment. It is for this reason and
the inertia of the front office to do ANYTHING to add to the roster that fans
are in revolt. Of course, once the crack
of the bat happens, the likelihood of anyone’s boycott tendencies amounting to
anything is pretty much nil. That’s a
shame.
Consider what the team sold for the first time it changed ownership (I do not know the answer, but I do know it was not much). Look what the team is worth now. They're just...not...selling an asset (the team) whose compounded annual rate of return is so exceptional.
ReplyDeleteThat said, getting a few top tier free agents could push the Mets into clear playoff contender status coming out of spring training - and THAT would bring in tons of incremental revenue.
And that makes dollars and sense.
Spending money this year and filling all our holes will keep us from revolting and also keep ownership out of next year’s free agency free for all spending. So it would be wise to spend now and not overspend even more next year.
ReplyDeleteI still say trade for both Realmuto and Yelich. Give them Smith, Peterson, Giminez,Nido, D’arnaud, Gsellman, Dunn and Lyndsey. That doesn’t raise your payroll too much.
Then pickup Hosmer for 8years $160 or pickup Duda on the cheap to platoon with Flores at 1st.
Trade Cabrera for whatever you can get and sign Howie Kendrick
That would raise your payroll about $30 million but it would sell out Citi field for the next few years.
Zozo, interesting out-of-the-box strategizing.
ReplyDeleteA must listen is the latest talking meta podcast with Mike Silva .. he has Howard Megdal on who gives his best educated guess on the state of the Mets finance & some of the possibilities why Sandy reupped with the team
ReplyDeleteall this money and we can not sign anyone... pitiful
ReplyDeleteEd,
ReplyDeleteThanks for the recommendation, I will certainly check into that.
I suspect that a lot of this Wilpon poverty mentality on the internet is fictional based on muddied and/or misinterpreted information in the public forum. Yes, the Wilpons were hurt by the Madoff scandal, but that was very overblown. Their net clawback payments were around $60 million, and the supposed $500 million "lost" was mostly paper money made up of fake earnings. Not fun, but not exactly the same as giving someone $500 million that disappears.
I rarely agree with Boras, but I suspect he is correct when he alleges that the Wilpons elect to suppress payroll, as opposed to being forced. They were forced 5-8 years ago, but they most certainly made a profit in 2015 and 2016, and last year's final payroll expense was well under that opening day $155 million due to trades and insurance reimbursements. I am not claiming they can spend like the Dodgers, Yankees, and Red Sox, but it is extremely hard to believe that a playoff contending Met team cannot make at least a modest profit with a $155-$160 million payroll, and for 2018 that is close to what it will take if they want to fill the holds without depleting an already thin system.
They may be feeding the poverty stories to the media:
ReplyDeleteA. To deflect criticism for them for the inertia
B. To lower expectations so that ANYTHING is seen as a positive
C. They simply don't care what people think
Of course, there are lots of other costs - wages, from Alderson on down to the hot dog vendors, minor league personnel and operating costs that likely do not break even, etc. Wouldn't it be great to see an annual financial statement of the entirety of the club's baseball operations? Rather than speculate?
ReplyDeleteIn the broadcast rights, sorry if I missed it, but didn't see anything about SNY, which I'd guess would bring in another $100M. Also, not familiar with the new Disney $50M.
ReplyDelete@Jon Messinger -- http://awfulannouncing.com/mlb/mlb-teams-make-50-million-disney-purchase-bamtech.html
ReplyDeleteI didn't split out what SNY paid for the rights to the game since that's money out of one pocket and into the other as it's all under the same umbrella.
don't know if you mentioned it as part of any of the other broadcast payouts...but Did you include the $50 Mil that each team receives from BAMTech? BAMTech is apparently related to the revenue generated from mlb.tv and MLB Extra Innings...
ReplyDeleteThe BAMtech money is the Disney money.
ReplyDeleteZozo,
ReplyDeleteYou're going to give away the farm for good players who are not difference makers?
The combination of d'Arnaud / Plawecki gave the Mets 21 hrs, 70rbi's, 252/328/421 to Realmuto 17hrs, 65 rbi's 278/332/451. Obviously he is better but you're not getting a huge difference in performance.
Yelich? yes, he is good, but not a difference maker type of player especially if he is playing CF for the Mets where he has a minus rating.
Lorenzo Cain would make a big difference on the Mets and would be a better fit than Yelich in my opinion.
The Mets cannot trade the few prospects they have. They need to spend.
Sign Frazier and Cain and go with that. If they are too cheap to at least do that, or equivalent, stay away from the park. I know I will.
If they cry they don’t have any money, this is a way to keep the payroll close to where they want and still have a bit leftover to spend this winter.
DeleteAlso i am tired of D’arnaud and our unstable catching situation. Realmuto is one of the best on both sides of the ball in MLB.
Yellich is in my opinion a very much so difference maker. I believe so is Realmuto. We get control of them for the next 4 and 3 years for each of them. Which gives us enough time to rebuild our farm system around Vientos, Alonso, Molina, Szapucki and this year’s number 1 pick.
If they go over their comfort level and sign Hosmer as well you have an awesome lineup for the next 3-4 years
Rosario
Yellich
Hosmer
Cespedes
Conforto
Realmuto
Cabrera/ Flores/ TJ
Guillorme
Defense and offense are set
Zozo, I like your thinking, but not your trade chips. IMO, you are giving too much. Some of those players could be the Mets future. I would try to construct a package of valuable players that don't cripple the team's future, and possibly take back Castro and/or Prado to give the Marlins the salary relief they value so highly. My thinking was Wheeler, Dunn, Molina, Oswalt, Cecchini, Nimmo, d'Arnaud, Callahan, and Ramos. (to give us some salary relief too) Hmmm, on second thought, maybe I am giving away too much too.
ReplyDeleteViper, you are right. Frazier and Cain would be difference makers. But I hate the idea of losing that #6 pick in the 2nd round. How about this; sign Frazier and trade for McCutchen. When Cutch walks after 2018, let the Yankees get Machado and outbid everyone else for Bryce Harper. LOL
Few things from publicly available data:
ReplyDeleteedibta is this case is important, bc the Mets are a high debt organization, both stadium debt (850 mm probably down to 650mm at this point), long term debt (at least whatever they paid doubleday) and mezzanine debt that they use as a way to pay for ongoing things, ie the money mlb lent them. And they are a payers into revenue sharing. Their revenue is certainly under strain, given those factors.
The mets SNY deal is below market bc of when it was signed so according to fangraphs its about 65mm a year that escalates to about 100mm at the end. SNY is 65% owned by sterling equities.
My guess is the Ny Mets as owned by sterling whatever llc carry about a 1.2 billion dollar debt load. We know this bc they pushed up against the limit of ownership debt rules for mlb at basically 40% of value, when they asked for a mlb loan. Given the mets were valued at the time somewhere around 1.8 billion this is up to ~750 mm. The cost of the debt on the stadium is deductible from their revenue sharing obligation (same with the yankees) even with the municipal bonds (low cost) they received for construction assume thats about 40mm per year. But Im confident in saying they are carrying at least a 25 million per year debt service charge for outstanding loans.
My point is they have large cash flows (good for mezzanine debt), a profitable network (that they get 2/3 of) but they are more than house poor. Basically they are house poor on two houses they own. If they arent able to carry a 150 payroll + 15 mm in pension etc liabilities its because their debt to equity ratio is too high. They really should sell 20-40% of the team to lower that. Or sell the whole thing to someone who can afford it. BTW the sny partners have a right to buy any available portion of the network should they sell making it worth less and the team worth less to anyone else. Basically they cant sell they're portion of the network to a new owner theyd have to sell a portion of the company that owns that and thats a bigger problem.
Robb,
ReplyDeleteMy understanding is that the Mets don't hold the debt on Citifield, those bonds are held by an agency under the control of NYC. The Mets have a long term lease with this agency for the use of the stadium at about $44 million a year, called PILOT, payment in lieu of taxes. This essentially fixes their "rent" at a set fee for decades, and on top of that, they get $20 million/year for the naming rights before even beginning operation. I consider that very low cost at a fixed rate for a beautiful facility.
Regarding their debt on SNY and the Met franchise, even if your debt projections are accurate, these assets are worth at least $4 billion and likely $5 billion or more. The Marlins just sold at 25-30% more than the latest Forbes valuation, and they are a lousy franchise in a lousy market with a terrible local TV deal. The Wilpons own vast majorities of these entities, so even if they are "house poor", they can easily take in partners, pay off 100% of the debt, and still own controlling interests. So, why should the fans pay top dollar for a mediocre on the field product so these guys can be multi-billionaires? This doesn't even take into consideration their other multi-billion dollar real estate holdings. All they need to do is put a product on the field consistent with the prices they charge their customers...in 2018, given the weakness of the farm system, most reasonable fans and baseball people think that would take a $155-$160 million payroll.
Agreed.....you have to spend money to make money, right?
ReplyDeleteFred! Invest in the product you are putting on the field and "they will come".
In turn, that leads to a better profit (which is clearly what seems to motivate the current ownership). As a side benefit, the team will likely compete for a playoff berth, so the fans will also get something out of it.
A win-win, so to speak.
TP, nice breakdown. They simply need to spend more.
ReplyDeleteTP. youre right about the pilots. Simply put it appears the mets (related mets entities) are paying between 130 - 175 mm per year on the pilots, debts and debt service. banks dont hand out 750mm loans at good terms think 6% over 10 years (about 85mm per year), especially when you've already used the asset as collateral before. plus the sny loans. That doesnt include stadium op costs (30 mm) or team G&A (30 mm). Pilots are such a good deal for the team the yankees agreed to pick up cost overruns with theirs.
ReplyDeletemets have yearly negatives of approx $200-250 mm a year in negatives before they even get to playing for the players, travel or minor league teams. Thats a lot of cash. nearly 400 mm if they have a 140 mm payroll, each team owes an additional like 10-15 mm plus to pensions and crap going out. whatever cotts lists.
I still think they need to bring on a partner if they intend to retain control or sell to someone who can afford the team properly.
ugh sorry, its about 100mm per year on the loan over a ten year term of 750mm at 6%
ReplyDeletemaths are hard.