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MLB Profit Margins

Hey guys, here's a question. I am trying to find information that shows what MLB teams profit margins are. Someone mentioned to me that their profits are usually less than they pay their highest paid player, but I find that highly unlikely.

 

Then again, what do I know? Does anyone have a good resource for this type of question? I'm curious and would like to know how to compare these types of things. Thanks guys.

0 recs | Comment 21 comments

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2007 Florida

Last year, when Florida’s entire payroll was about half that of A-Rod’s salary, the organization received more in revenue sharing (can’t remember the exact number, but close to $15M) than its entire payroll. In essence, mastermind Loria made money by being a cheap-ass and profited from the desire of larger-market teams to spend more. I know Florida’s payroll increased incrementally this past year, but they’ll definitely make more profit (if you count revenue sharing, which I’m sure Loria does) than their highest paid player (Kevin Gregg, $2.5M).

I know the suggestion would throw a wrench into daily operations just at its mentioning, but baseball seriously needs a salary cap. It’s the only major league sport that doesn’t operate with one and any budget system that encourages teams to spend less should be modified (on a more moderate stance, maybe the amount of revenue sharing a club can receive should be a percentage of one’s payroll).

by Grudyfan on Oct 10, 2008 3:03 PM EDT reply reply actions actions   0 recs

I wonder

I wonder if the person who mentioned this was saying that it’s just a rough estimate of the amount of profit? Not a hard and fast rule, but more a rule of thumb?

I was unable to find much on this (I only looked for a few minutes) but the Mariners claimed something like 17 million bucks of profit in 2007, which I believe is roughly what their highest paid player makes.

I’m not sure what this has to do with minor league baseball, but I suppose it’s an interesting discussion.

by whonichol on Oct 10, 2008 4:48 PM EDT reply reply actions actions   0 recs

Forbes

Forbes magazine has some good stuff, both on revenues and franchise value. It’s difficult to figure out the exact finances of the teams. Many will lose money on a year-to-year basis, but gain it in franchise appreciation. Also teams that have their own cable networks (ie Yankees – YES, Red Sox – NESN) can hide profits in those stations.

The Dodgers won't win a playoff series until the Cool-a-Coo returns.

by mckeeno on Oct 10, 2008 5:20 PM EDT reply reply actions actions   0 recs

Blue Jays

I know the Jays are known to hide their profits as they are owned by Rogers media which broadcasts the majority of their games on TV and all of their games on the radio.

"When a true genius appears in the world, you may know him by this sign, that the dunces are all in confederacy against him."
-Jonathan Swift

by King Billy Royal on Oct 10, 2008 5:23 PM EDT to parent up reply reply actions actions   0 recs

a huge % of tickets

are sold through “public officials”. Usually under face value but it’s blatantly obvious that they are working for the Jays. Otherwise no one would pay face value for what they’re charging. I think they take a huge portion under the table for that.

by achengy on Oct 11, 2008 12:58 AM EDT to parent up reply reply actions actions   0 recs

Salary Cap

What makes baseball run better without a salary cap than the other major sports run with their respective caps?

Should all major sports leagues have a salary cap(not a salary floor) at this point?

why?

Go Pirates!!!

by cool hand Charlie on Oct 12, 2008 9:58 AM EDT reply reply actions actions   0 recs

better run

i’d say financially, football is the best run…but it’s also the most strict and least kind to players….but it’s definitely the most “play for pay” league….the thing that bugs me often about baseball is contracts like what will happen this offseason….manny had an extraordinarily great season, even while switching leagues to a “tougher” pitching league (and tougher hitter’s park), and he’ll try (and likely get) four GUARANTEED years in his late 30s….not that he shouldn’t try for it if someone’s willing to give it to him, but it’s absurd the amount of guaranteed money thrown around….that said, i couldn’t imagine having an nba system….mid-level exceptions and light handed luxury taxes make their salary “cap” a joke….

Insanity is doing the same thing over and over expecting different results.

by biggentleben on Oct 12, 2008 4:56 PM EDT to parent up reply reply actions actions   0 recs

NHL

the NHL modeled their cap structure after the NFL’s, didn’t they? I admit I am 100% unfamiliar with the NBA cap, I just can’t watch it and therefore dont care how its structured.

Go Pirates!!!

by cool hand Charlie on Oct 12, 2008 8:19 PM EDT to parent up reply reply actions actions   0 recs

NHL

i honestly couldn’t tell you the salary cap structure of the nhl….

Insanity is doing the same thing over and over expecting different results.

by biggentleben on Oct 12, 2008 8:46 PM EDT to parent up reply reply actions actions   0 recs

No

Salary caps do little to introduce parity, and more to drag down player salaries. A salary cap doesn’t help the Royals retain their players because they can’t (won’t?) spend money on a $70 million payroll. So there will always be teams that spend very little, and a bunch of teams that spend the maximum amount. How does that reduce disparity? All it does is limit salaries, which is preposterous since the players are the ones doing the work.

A better solution is more revenue sharing, but then you run into the problem of freeloaders like the Royals and Pirates.

Relive Royals History at royalsretro.blogspot.com

by RoyalsRetro on Oct 14, 2008 12:31 PM EDT to parent up reply reply actions actions   0 recs

Salary floor

That is why it salary caps need to be combined with salary floor. At least it guarantees that teams aren’t pocketing the money they receive from revenue sharing.

"When a true genius appears in the world, you may know him by this sign, that the dunces are all in confederacy against him."
-Jonathan Swift

by King Billy Royal on Oct 14, 2008 3:19 PM EDT to parent up reply reply actions actions   0 recs

what i would propose

for baseball, in order to balance things out financially….

1. all TV money and radio money is MLB money….and will be paid back to each team evenly..MLB’s national TV deal is wholistically inadequate and still favors large market teams….setting up a better national deal with local deals also under the league’s wing would allow for more equal distribution of wealth…tickets will remain under team control with shares going to opponents much as it is currently….

2. all teams will be required to maintain a salary floor equal to previous season’s league average individual salary for an entire 25-man roster’s worth of players….only players on the 40 man roster will be able to have their contract counted toward this floor….draft and international signing bonuses will come from an alotted team pool of 1/4 the total floor number each season….for instance if the average salary for the previous season was $1 million, the league’s floor would be $25 million, and the pot for draft bonuses and international bonuses would be $6.26 million for all teams….other than signing bonus, draftees’ and international signees’ contracts will not be part of the floor or cap number until they are placed on the 40-man roster….

3. Salary cap will be adjusted yearly as 3 times the average player salary for a full 40-man roster….using the $1 million number, the cap would be $120 million….this is a hard cap, with no luxury allowance….there will be exceptions given on resigning a player to his second contract with a team (not if a player is traded for in the middle of a contract and then resigned) of 80% of contract affecting salary cap ONLY when the player is on the same team….such exceptions are lost after any trade….

4. Minimum salary will rise by league profit percentage each season, ensuring that the bottom of the league is benefitting just as much from league profitability….

am i missing or overlooking anything?

Insanity is doing the same thing over and over expecting different results.

by biggentleben on Oct 12, 2008 9:08 PM EDT reply reply actions actions   0 recs

d'oh

i copied this off an old idea….one i found would still have the same problems in #3 and #4….so here’s the revisions to those:

3. Salary cap will be adjusted yearly as the entire salary of the 40 player roster at league average wage….using a $1 million number, that would be $60 million….

4. Minimum salary will rise by the same rate as average salary the previous season, never less than 15% of the average salary

using these, the 2009 floor would be $78,871,125….the cap would be $126,193,800…the league average salary from 2008 for those number is $3,154,845, making the minimum $477,273

these numbers look huge for some teams until you realize that the floor would have been the median salary last year WITHOUT the huge monetary benefit that shared TV money would create, and only 4 teams outspent the cap number….

Insanity is doing the same thing over and over expecting different results.

by biggentleben on Oct 12, 2008 9:38 PM EDT to parent up reply reply actions actions   0 recs

Problems

(1) MLB teams, unlike the other sports, derive a great bulk of their money from local TV and radio deals. While the NFL simply divides a national TV deal 32 ways, MLB has a national TV deal AND local TV deals that allow the Yankees to generate much more money than the Royals. If you are to put all that money into a big pot and split it 30 ways, you reduce the incentive to get the best TV deal you can and maximize profit. Plus, it is unfair to penalize the Yankees and Mets and Red Sox who have already invested millions in setting up their own sports television networks to then force them to share those profits with teams that have done nothing.

I don’t see how the national deal favors large market teams. I believe it is split 30 ways – do you have evidence to the contrary? It is the local deals (YES and NESN vs. Fox Sports Kansas City) that is the cause of the disparity, not the national deals with FOX, ESPN and TBS.

2. A salary floor makes a good deal of sense. I don’t think it should be year-to-year though, some teams will want to “go young” once in awhile, so maybe make it an average of three seasons.

3. I don’t see how a salary cap helps at all for the reasons I outlined above. The problem is revenues. Teams like the Royals aren’t going to spend anywhere near the maximum. So you still have major disparity issues and all you’ve done is dragged player salaries, unfairly to players.

4. Makes a good deal of sense.

Relive Royals History at royalsretro.blogspot.com

by RoyalsRetro on Oct 14, 2008 12:37 PM EDT to parent up reply reply actions actions   0 recs

um....

the tv comments don’t make sense….my point was that all tv becomes league tv….local, regional, national….all league, and then all split evenly….the giants and jets could make a ton of money if they sold all their games locally as well as having them picked up nationally (actually, more regional unless it’s sunday or monday night), but they sacrificed that for the good of their league….and they’ve both had very good seasons since the cap and revenue sharing was put in place…remember that ticket sales are all still team controlled, so large market teams will stll have an advantage in available seats to put in the stands….

Insanity is doing the same thing over and over expecting different results.

by biggentleben on Oct 14, 2008 8:49 PM EDT to parent up reply reply actions actions   0 recs

a few things

1) I am not sold that salary really has anything to do with this…. everyone focus’ on the yankees.. but the Rangers, mets/dodgers, tigers and others all spent a ton of money in recent years and have all struggled to make the playoffs at times.

2) The well managed teams have been in compeitition or the playoffs on a regular basis despite having low cap numbers. Brewers recently, Rays this year, A’s, Twins of course.

3) I am not sure that the NFL is as successful in terms of parity as people say. THe PATS basically have dominated the league since 2000. I think there have been less of a variety of playoff teams and superbowl champions in the NFL playoffs despite the fact that 12 of 32 make it instead of 8 of 30.

And despite all of this… the fact is the MLB players union will never agree to it because its basically putting a cap on their individual salarys as well.

Check out my baseball analysis blog FANalytics

by jbluestone on Oct 13, 2008 6:59 PM EDT reply reply actions actions   0 recs

not exactly

a few points that seem more off the hip than well researched….salary cap proposals as a whole INCREASE average salaries and especially help those players just starting their careers….

and some info on parity in the NFL, just fyi…while you (and media types who don’t feel like researching) say the patriots have “dominated” since 2000, they’ve simply done a minor version of what the steelers, niners, and cowboys did in different eras of the league….but what is different than those eras is that there have been 12 different franchises play in the Super Bowl since 2000….and EVERY team in the league has had at least one .500 or better season since 2000….no other sport can say that….

Insanity is doing the same thing over and over expecting different results.

by biggentleben on Oct 13, 2008 7:19 PM EDT to parent up reply reply actions actions   0 recs

I'd like to see the evidence on that

I seriously doubt salary cap proposals increase salaries more than without a salary cap. It doesn’t make any intuitive sense.

Relive Royals History at royalsretro.blogspot.com

by RoyalsRetro on Oct 14, 2008 12:38 PM EDT to parent up reply reply actions actions   0 recs

average

it limits the top end salaries, of course….but the average salary is higher, mainly because the bottom end guy gets brought up more in his salary in a cap system because average salaries owners are willing to pay are higher when they don’t have to pay as much to stars….i used to have an awesome mathematical study on the benefit to average salaries done by a math PHD i knew in college as his doctoral study linked on my computer, but that was about 3 computers ago, and i’ve lost it over the years….but it is true that average salary does rise in a cap system

Insanity is doing the same thing over and over expecting different results.

by biggentleben on Oct 14, 2008 8:53 PM EDT to parent up reply reply actions actions   0 recs

Royals

I’ll look into the Royals and try and post if i can find anything.

by RoyalsFan4Life on Oct 13, 2008 11:01 PM EDT reply reply actions actions   0 recs

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