A Snapshot of Team Finances: Bottom Tier

Here on the site, we’re currently doing a series called the Positional Power Rankings, going through each team’s strengths and weaknesses at each spot on the field. Well, this is also a positional power ranking of sorts. The position is each team’s financial health. The ranking? More like placing the teams in tiers: the teams most constrained by their finances; the teams in the middle; and the most financially-successful teams.

We can’t get to the same level of precision on team finances because we have to rely on publicly-available information that we haven’t generated, and that publicly-available information lacks the kind of details we’d need to really flesh out the small differences between franchises in the same tiers. However, we do have enough information to paint with broad strokes, so as part of our attempt to give an overview of where each team stands as 2013 begins, we’ll look at their access to monetary resources for the upcoming season.

Today we begin our look at the financial health of all thirty major-league teams, starting with the bottom ten. Tomorrow we will look at the middle ten and on Friday the top ten. We will focus on ticket-generated revenue (attendance), local TV revenue, and player payroll. That leaves some holes, to be sure, particularly where team owners are carrying significant debt. Some of that information is publicly-available, but not all, and even the publicly-available information may not accurate or verifiable. This isn’t precise, but hopefully, it’s still informative.

With those caveats, let’s begin.

In alphabetical order, by team name:

Houston Astros

2012 Attendance: 1,607,733
Local TV AAV: $80 million
Estimated 2013 Payroll: $20 million

Jim Crane purchased the Astros in 2011 for $610 million. The next year, the Astros and the Houston Rockets launched a new regional sports network called Comcast SportsNet Houston. The Astros own a 45% equity stake in the network and will receive $80 million per year for the next 25 years in local TV rights fees. So why are the Astros in the bottom tier of teams when it comes to financial health?

Debt, attendance and payroll.

Crane financed his purchase of the team, in part, with a $220 million loan from Bank of America and a $55 million loan from MLB’s facility fund. Crane can use a good chunk of the local TV money to service the debt, but that doesn’t leave much for team operations. That’s one reason the Astros traded away all of their high-priced players over the last two seasons and will enter the 2013 season with a player payroll hovering near $20 million. General Manager Jeff Luhnow has stripped the team to it’s bare essentials and plans to re-build the roster through scouting, drafts, data and player development.

But Luhnow’s plan will take time, and even then there are questions about its ultimate success. In the meantime, the Astros are likely to post several more losing seasons, which will, in turn, continue to drag down attendance. Ticket revenue fell dramatically in 2012 with attendance dropping nearly 460,000 from 2011, to 1,607,733. Only the Rays and Indians reported lower attendance last season.

Houston is the fourth largest city in America and tenth largest TV market, or  DMA (Demographic Metropolitan Area). The people and corporate base exist to support a successful baseball team. The question is how much the city will support what is essentially a Triple-A team, in the short term, and how long it will wait for a winning team to emerge in the long term.

Oakland Athletics

2012 Attendance: 1,679,013
Local TV AAV: $10 million – $15 million (estimated)
Estimated 2013 Payroll: $55 million

The A’s often find a way to more with less, because less is what they have. Maybe if the A’s are allowed to move to San Jose and build a state-of-the-art baseball-only ballpark, things will be different. But four years after Commissioner Selig appointed a blue-ribbon panel to analyze the A’s proposed move, the team is no closer to that ultimate goal. So they begin another season in the fourth-oldest ballpark in the majors but one that, unlike Fenway Park, Wrigley Field and Dodger Stadium, has no grand history, no charm and no modern amenities. The less-than-ideal baseball experience at O.co Coliseum may explain some of the A’s attendance woes. The A’s reported attendance last season was 1,679,013, an increase of 202,221 over 2011. The additional 200,000-plus fans pushed the A’s out of the cellar in major-league attendance, up from 30th to 27th. Much, if not all, of that increase is likely due to the A’s surprising run to the American League West title. Whether the A’s will be able to sustain those higher attendance numbers is anyone’s guess.

The A’s signed a new local TV deal with Comcast SportsNet Bay Area in 2009, just before local TV rights fees started to explode. The team hasn’t disclosed the details but given the A’s historically low TV ratings, I wouldn’t expect the rights fee to pay the A’s more than $10-15 million per year. The A’s can opt out of the TV deal after the 2023 season.

Oakland will enter the 2013 season with a player payroll in the $55 million range. The A’s highest-paid player will be Chris Young, who was obtained from the Diamondbacks in an off-season trade, and is projected as the team’s fourth outfielder. Yoenis Cespedes, Coco Crisp, and Brett Anderson are the only other players, in addition to Young, who will earn more than $5 million this season.

Milwaukee Brewers

2012 Attendance: 2,831,385
Local TV AAV: $21 million
Estimated 2013 Payroll: $71 million

Unlike the A’s and the Astros — who play in highly-populated metropolitan areas — the Brewers are constrained by Milwaukee’s demographics. The city itself has under 600,000 residents and the five-country county metropolitan area pushes that up to only 1.7 million. Nielsen ranks Milwaukee as the 34th-largest TV market. Only Cincinnati is ranked lower among cities with major league teams.

Even in that market, the Brewers did negotiate an increase in their local TV rights fees, from $12 million to $21 million per year, but that pales in comparison to what many MLB teams see from their local TV partners. A sub-par season on the field led to lower attendance at Miller Park, down to 2,831,385 from 3,071,373 in 2011.

The tight-squeeze in TV revenue and the drop in attendance has led the Brewers to lower payroll in 2013 to just over $71 million. That’s the lowest figure for Milwaukee since the 2007 season. The most expensive player on the Brewers’ roster? Not Ryan Braun. He’s the fourth highest at $9.5 million this season. It’s Rickie Weeks, who will be paid $11 million in the third year of his four-year deal. Braun’s big money doesn’t kick in until 2016, when he’ll earn $20 million.

Cleveland Indians

2012 Attendance: 1,603,596
Local TV AAV: $40 million
Estimated 2013 Payroll: $75 million

When Progressive (nee Jacobs) Field opened in 1994, the Indians couldn’t print tickets fast enough. Starting in 1995, the Tribe had seven consecutive winning seasons, going to the postseason every year but one. Fans loved the team and the new ballpark and nearly every game was a sellout. Since 2001, the Indians have had only two winning seasons and played in the postseason only once. With Cleveland hit hard by the recession, and with losing seasons piling up, fans drifted away. The Indians reported attendance in 2012 was only 1,603,596, a drop from 1,840,835 in 2011. Only the Rays reported a lower attendance figure.

But things are looking up for the Indians, principally in terms of local TV money. The Dolan family, which owns the team, sold SportsTimeOhio to Fox Sports earlier this year. The Indians then negotiated a new ten-year deal with Fox worth approximately $400 million. The new deal ups the Indians’ yearly TV rights fee from $33 million to $40 million.

The new local TV money may explain why Cleveland spent more than expected on free agents this offseason. The Indians’ opening day payroll will be in the $75 million range with the additions of Nick Swisher and Michael Bourn. That’s a $10 million increase over 2012. Now let’s see if fans flock to Progressive Field again, like they did in the 1990’s.

Miami Marlins

2012 Attendance: 2,219,444
Local TV AAV: $18 million
Estimated 2013 Payroll: $40 million

The Marlins are in the bust part of their latest trip through the boom-bust cycle. One year after christening the new, publicly-financed Marlins Ballpark with $100 million worth of players, the Marlins enter the 2013 season with the second-lowest player payroll in the majors at just about $40 million. Jeffrey Loria said he made a mistake trying to buy a winning team for the new ballpark and has reversed course.

Miami baseball fans look like they will reverse course, too. The Marlins reported attendance hit 2,219,444 last season, a steep increase from 2011, when only 1,520,562 fans showed up in the farewell season at Land Shark Stadium. But attendance was well below Loria’s projections and dropped precipitously in the second half. Now, the Marlins are offering a “buy one get one free” deal for opening day tickets, just to get fans in the seats. At least Loria will still count on his $18 million a year in local TV rights fees, even if no one watches the Marlins on TV.

San Diego Padres

2012 Attendance: 2,123,721
Local TV AAV: $60 million
Estimated 2013 Payroll: $61 million

The Padres sold last August for $800 million and are in the second year of a 20-year/$1.2 billion local TV deal with the new Fox Sports San Diego. Without knowing more, you’d think the Padres had finally moved into the second-tier of major league teams, at least in terms of finances.

But questions remain about how much the new owners can or will invest in the day-to-day operations of the team. The Padres made no significant moves in the offseason. No trades. No free agent signings. They head into the 2013 with a $61 million payroll, about $5.5 million more than in 2012. Most of that increase is attributable to the higher salary owed Chase Headley.

Petco Park will celebrate its tenth anniversary this season. Attendance topped 3 million that first year but has steadily declined since then. The Padres have hovered in the 2.1 million attendance range for the last few seasons. That’s respectable in a city the size of San Diego, but it’s certainly not enough to inspire the new owners to spend more, at least in the short term.

Pittsburgh Pirates

2012 Attendance: 2,091,918
Local TV AAV: $18 million
Estimated 2013 Payroll: $57 million

Pittsburgh is a small-market city with a small-market local TV contract and a small-market payroll. It’s been this way for a long while, and will likely be this way into the foreseeable future. The Pirates made a bit of a splash this winter, “stealing” Russell Martin away from the Yankees on a two-year/$17 million contract. Otherwise, the roster is pretty much the same as in 2012, when the Pirates raced out to a winning record in the first half, only to fall apart after the the All-Star break.

Attendance is on the upswing. Last year, the Pirates drew more than 2 million fans to PNC Park for the first time since 2001. Hopefully, fan interest remains high this season, and leads to greater financial flexibility for a team that’s been running in place for a long, long time.

Tampa Bay Rays

2012 Attendance: 1,559,681
Local TV AAV: $10 million – $15 million (estimated)
Estimated 2013 Payroll: $60 million

Winning baseball. Untenable ballpark situation. Dismal attendance. Paltry local TV rights fees. The A’s situation, but worse, as the possibility of a new ballpark is many more years away.

The Rays have posted winning records each of the last five seasons, with postseason berths in three of those five years. Tampa Bay’s poured resources into the amateur draft, international scouting, player development, and stats-driven analysis in lieu of big-ticket contracts. The payroll did reach $72 million in 2010, but is back down to $60 million this year. The formula’s worked on the field, but not at the ticket office. After reaching 1.87 million fans in 2010, the Rays’ attendance hasn’t reach 1.6 million fans either of the last two years. Unless something changes the calculus for fans, the Rays are likely to find themselves financially-challenged for the near future.

Colorado Rockies

2012 Attendance: 2,630,458
Local TV AAV: $20 million
Estimated 2013 Payroll: $70 million

The Rockies lost their way on the field in recent years and it appears to have affected the team’s finances. After reaching the postseason in 2007 and 2009, the Rockies have posted three consecutive losing seasons. Last year’s 64-98 record was the worst in the team’s history. since 1994.

The fans didn’t like what they saw. After peaking at 2.9 million fans in 2011, attendance dropped back to 2.6 million in 2012, the lowest figure since 2007. And that’s led to a cut in payroll to a level not seen since the 2008 season. The Rockies spent more than $80 million on players each of the last three seasons, and they were close in 2009, when they spent $75 million. But the opening day roster will top out at just about $70 million, a significant drop when you factor in salary inflation.

The Rockies’ local TV contract with ROOT Sports pays them $20 million per year, but that deal is set to expire after the 2014 season. Colorado is hoping the local TV rights bubble doesn’t burst until after they’ve negotiated a new deal.

Kansas City Royals

2012 Attendance: 1,739,859
Local TV AAV: $18 million (estimated)
Estimated 2013 Payroll: $80 million

The Royals are much like the Pirates, sitting in a small-market city with a small-market local TV contract and small-market attendance figures. Neither team has had a winning season in a very long time, thereby testing the limits of fan loyalty. But the teams differ in one material respect. The Royals have significantly increased player payroll heading into 2013, with salaries expected near $80 million on opening day.

There’s much to argue with how the Royals have spent money for this season, with $13 million owed to Ervin Santana, $6.75 owed to Jeff Francoeur, and $5 million owed to Jeremy Guthrie in the first year of a three-year/$25 million deal. There’s also the $10.25 million owed to James Shields, who is likely worth that price, but Shields arrived in a trade that sent the Royals top prospect, Wil Myers, to the Rays.

If the Royals don’t succeed on the field, and fans continue to stay away, owner David Glass may slash payroll in 2014, just like he did in 2011. Such is the cycle for a small-market teams in major league baseball.

Next up: Team Financials in A Snapshot: The Middle Tier