How the Marlins Did and Didn’t Mess Up

In a few hours, the Yankees will hold a press conference here in Orlando to officially welcome Giancarlo Stanton to their organization. They landed the reigning NL MVP just 24 hours after he vetoed trades to the Giants and Cardinals and said New York was one of just four destinations he would approve a trade to. Left with minimal leverage, Derek Jeter and Michael Hill engineered a trade with Jeter’s old club, sending Stanton to the Bronx for Starlin Castro and a couple of low-level prospects.

The reaction to the decision has been almost universally negative. The Marlins’ new ownership group began their tenure by behaving much like the old one, dumping their best player to cut payroll. Instead of hope and change, it looks like more of the same in south Florida.

But while Jeter has made a number of apparent missteps since taking over as the head of the organization, and made some mistakes with the Stanton negotiations specifically, I think it’s also worth pointing out that, on a pure baseball level, the Marlins seemed to come out okay here.

The outrage about the fact that this was viewed as a necessary move is entirely justified. It is unquestionably embarrassing for Major League Baseball that Jeffrey Loria was allowed to run the team in such a ridiculous way that the new ownership group had to assume $400 million worth of debt, the service of which is going to eat up such a significant amount of their cashflow that they couldn’t afford to keep a great player making $25 million per year.

In reality, Stanton’s current salary is well under market value for an elite player, and if the Marlins can’t even afford players at this level, it’s unclear how they’ll ever compete. Great players are now routinely pushing $20 million in their final few arbitration years, so if the Marlins can only field guys with 0-5 years of service, or guys who aren’t good enough to command big money in arbitration, putting a competitive team on the field just isn’t practical.

The damage a few terrible owners have done to baseball in Miami is a disaster for MLB. This should be one of the best baseball markets in the country, but the market was strip-mined for personal profit by a swindler. That the league allowed Loria to wildly enrich himself while leveraging the franchise because he couldn’t actually run a baseball team should be embarrassing for everyone involved.

But while the Marlins shouldn’t be in this position, that doesn’t change the fact that these are the ashes that Loria left. And if we just look at what the Marlins got for Stanton, given their lack of leverage, I don’t think the deal was actually all that bad for the franchise.

While it’s easy to look at Stanton for Castro and A-ball guys as a ridiculous heist for New York, this is yet another reminder that teams aren’t just trading players, but they’re trading contracts. And Stanton’s contract, with an opt-out after 2020 — or $295 million in committed salary if he doesn’t use it — isn’t all that attractive of an asset. There’s a reason Stanton cleared waivers back in August, and why every team negotiating with the Marlins wanted Miami to keep part of his post opt-out money on their books.

And while the Marlins mostly took Castro back in the deal to help the Yankees luxury tax calculation, he’s not an underwater contract, and they could move his remaining 2/$22M if they decide to keep dumping salary further. Once Stanton vetoed trades to STL and SF, I thought the Marlins might have to pay Stanton’s deal down into the $225M to $250M range, but they got the Yankees to pick up $265M of the contract without sticking them with any dead money coming back.

And while the two prospects they got in return aren’t close to the Majors, both look pretty interesting. Eric’s write-up is pretty encouraging for the few remaining Marlins fans who might want some long-term hope.

Jorge Guzman, specifically, looks like a Top 100 prospect, as a guy who throws 100 mph and put up video game numbers in the minors last year. As a 50 FV guy with plenty of upside if he keeps developing, we’d estimate that Guzman is probably worth something like $20 million in value by himself. Devers is too far away to put a ton of value on, but he’s probably worth at least a few million.

In other words, the two prospects the Marlins got are probably worth close to the amount of Stanton’s contract that the Marlins kept on the books. If they can move Castro without paying down his deal — which they should be able to do — then the deal won’t be all that different from if they just let Stanton go on waivers, except they were willing to use some cash to buy upside prospects, which is exactly what rebuilding teams should be doing.

Given that Stanton killed trades with the two most aggressive bidders and used his no-trade to limit the market to just four buyers, none of whom really needed Stanton, this is a pretty decent outcome for Jeter and his staff. If the organization had any credibility to say that the savings would be reinvested into acquiring other talented players, I think it’s possible the Marlins might actually come out ahead here, moving present value for future value at a time when they can’t really capitalize on present value.

But, of course, the Marlins aren’t going to reinvest the savings. And that’s the lousy part. Instead of this being a rational decision based on the ability to acquire more value by spreading the money around instead of concentrating it one high-risk asset, the reality is that the Stanton money will go towards paying down the debt accrued by Loria because he and his son-in-law ran the team like drunken sailors.

But for how easy it has been to make fun of the Marlins over the years, I think we should acknowledge that their two salary-dump trades so far haven’t been terrible baseball trades. Dee Gordon was moved for some legitimate prospects, and Stanton brought back at least one guy who could turn into something special. The Marlins are dumping salary, but these moves haven’t been just straight salary dumps.

And if they can make a few more decent trades, perhaps getting STL to overpay for Marcell Ozuna, the Marlins could potentially come out of this all okay. It’s not fun that they have to do this, and MLB should take steps to not let owners mismanage teams like Loria did, but the Stanton deal looks like a decent enough trade that I don’t think piling on Jeter and the current ownership group is entirely justified.





Dave is the Managing Editor of FanGraphs.

newest oldest most voted
mtsw
Member

It’s a little unclear to me why the massive debts couldn’t have been dealt with as part of the sale. The team sold for $1.2B. Why couldn’t the other 29 owners have stipulated that the debts would have to be paid off from the proceeds of the sale rather than inherited by the new owners?

The alternative, having a long-term financially-crippled franchise in a top 10 market, is going to be a disaster for everyone.

sadtrombone
Member
Member
sadtrombone

[Edit: See Dave below]

Because Jeter and his friends weren’t willing to wait for a better run franchise to go up for sale. And the other owners are probably not interested in hamstringing their own ability to get an extra hundred million dollars for their own sale down the line.

Dooduh
Member
Dooduh

It’s a travesty that MLB approved the sale to a group they knew couldn’t afford to operate the team.

Even if the reality is “more complicated” than that (debt left by previous ownership), it really doesn’t change the facts about the current situation. As DC points out, if they cannot even afford to carry one elite player salary, then what was the purpose of approving this new ownership group? Seems like this is going to continue being every bit the mess that it was under Loria.

JimmieFoXX
Member
JimmieFoXX

Did you notice that the name of the Cuban billionaire appears nowhere in the above article? Have you noticed that since the sale his name has been erased from all corporate MLB coverage everywhere?

We are living through the reason for why HE was not allowed to buy the Marlins.

jianadaren
Member
jianadaren

Because then the sale price would’ve been $1.6B

Paul22
Member
Paul22

The debts should be reflected in the sale price. Without debts the price paid would 400 million more. Thats how its usually done. Maybe they overpaid and are so leveraged themselves they simply cant afford to run the team. MLB didn’t do a great job in approving these paupers.

Its also possible they bought it hoping to wreck it and move elsewhere. Kind of like what John McGraw and the Giants did in Baltimore (for different readons) which ended up in the franchise being moved to NY (after taken over by the league) and eventually be named the Yankees. The AL President at the time had been pushing the Orioles to move before the wrecking and when he finally got them in NY pushed other owners to send them good players because it was important to have a good team in NY for the AL. Maybe Manfred is behind this for similar reasons. Be interesting to see if the Yankees get anymore steals from Miami

Dave T
Member
Dave T

“they simply cant afford to run the team”

@Paul – owners, with very rare exceptions such as Mike Ilitch in the years before his death, don’t run teams to put in cash to cover operating losses. They have a range of expectations about how much cash flow they expect to get out of owning a team in each year, but you don’t have a realistic perspective of what any purchaser would have done with the Marlins. The Marlins were going to lose on the order of $50 million per year – maybe tens of millions more than that – to bring back what looks likely exactly the same 77-win team that’s a fringe wild card contender at best and has a terrible farm system.

jdbolick
Member

You keep repeating yourself without acknowledging that there is a massive difference between selling off your best assets for top prospects and selling them off primarily for salary relief. It is beyond clear that this ownership group could not afford to purchase the Marlins outright and is cutting costs in order to pay off the debt they assumed as part of the purchase. For that reason, they absolutely never should have been allowed to take ownership by MLB.

Dave T
Member
Dave T

@jd – no ownership group was going to pay to fund big annual operating losses for this Marlins team. Other people keep repeating themselves that such a mythical group exists.

Spend some time looking at Forbes revenue estimates for teams (to which I lend more credence than the operating income numbers, which may be OK but are tougher to estimate from the outside). Then see how those line up with payroll, and tell me that there’s any evidence that a plausible owner of the Marlins would support a $130 million plus opening day payroll in 2018. ( https://www.forbes.com/mlb-valuations/list/#header:revenue_sortreverse:true )

I repeat it because people are apparently either financially illiterate or illogical in failing to grasp it. The Marlins’ estimated 2016 revenue per Forbes was $206 million. That’s second to the last to the Rays, who were $205 million. The freakin’ A’s, at $216 million, had higher revenue than the Marlins. Even what we think of as normal small-market teams, such as the Reds, Brewers, and Royals, generated $25 to $40 million more revenue in 2016 than the Marlins. From 2016 to 2017, the Marlins’ attendance actually dropped, by the way.

The non-payroll costs of operating an MLB team – a front office, marketing, a minor league system, draft bonuses, etc. – vary a lot less than major league payroll. Where we see revenue differences show up most notably is the MLB payroll that a team’s revenue will support.

There is zero evidence from other MLB teams that a team with the Marlins’ revenue can do anything except lose its ass financially with a $130+ million Opening Day payroll. Other people are talking about them adding pitching – where the hell was it supposed to come from? They have a terrible farm system and a payroll that’s already too high for revenue.

As I’ve said elsewhere, debt service could be a factor if we see the Marlins take revenue down to something like $50 to $70 million rather than something like $90 million. It’s not, however, the underlying reason why there were going to be big cuts from the $130 million that was on the books for 2018 payroll before any trades.

jdbolick
Member

@jd – no ownership group was going to pay to fund big annual operating losses for this Marlins team. Other people keep repeating themselves that such a mythical group exists.

I guess you mean besides the many other ownership groups in professional sports that have chosen to lose large amounts of money in their first few years in order to compete and theoretically improve the long-term outlook of their investment? Someone please tell the Dodgers’ ownership group that ran huge deficits over their first three years that they are mythical creatures.

http://www.latimes.com/sports/dodgers/la-sp-dodgers-debt-payroll-20161126-story.html

For the four full seasons under Guggenheim, as the owners looked to jump-start the revitalization of the franchise, the Dodgers’ end-of-season payrolls have totaled $1.069 billion, with another $112 million in luxury taxes. That adds up to $1.181 billion, or an average of $295 million per season.

A significant portion of that expenditure — close to $100 million in 2015 alone — involved payments to players no longer on the roster. The Dodgers bit that financial bullet, they said, to accelerate the financial and roster flexibility that would allow them to lower their payroll while taking full advantage of a replenished minor league system.

Neither the league nor the team publicly discloses financial information. Forbes magazine estimated the Dodgers lost a total of $166 million from 2013-15, the first three full years of Guggenheim ownership — almost $100 million more than the Philadelphia Phillies, at $69 million.

I repeat it because people are apparently either financially illiterate or illogical in failing to grasp it.

It’s always amusing when someone like you adopts this condescending tone when you’re the one fundamentally missing the point. As I said: “there is a massive difference between selling off your best assets for top prospects and selling them off primarily for salary relief.”

edit:
Oh and by the way, the Forbes list you linked does not include revenue sharing, of which the Marlins are the league’s largest recipient. Estimates have suggested that the organization receives around $50 million annually from MLB.

abgb123
Member
abgb123

Nor does it include BAMTECH, nor does he acknowledge that this ownership group payed over 250 mil more then the same forbes evaluations he keeps so close to his heart, hard to argue that money isn’t coming directly out of payroll.

Dave T
Member
Dave T

I stand by what I said, because the Dodgers example ignores one key part of what I said: “for this Marlins team”.

The Dodgers are the more popular (i.e., higher revenue) team in the 2nd-largest market in the country. There’s simply far more upside in doing what Guggenheim did in that market, and far more light at the end of the tunnel to the Dodgers’ plan.

Taking the second point, the clear path for the Dodgers has been simply to let contracts run-off, dip down to a still high payroll level somewhere right around the luxury tax line, and then immediately be very profitable when that happened. That’s what they’ve been doing since their 40-man ending payroll peaked at $290 million in 2015.

Taking the first, this level of spending in L.A. was also tied to them signing a massive local cable deal, the 25-year / $8.35 billion deal signed in early 2013. Taking on so many contracts in the Gonzalez deal in mid-2012 and signing Greinke almost certainly helped maximize that deal. There may also be a cable carriage play in this spending to make sure that the team is good in the short-term. The details of the Dodgers’ cable deal look murky from the outside, because SportsNet L.A. is described as 50% owned by the team but then there are also references to Time Warner Cable (now Spectrum) losing up to $100 million per year on the contract due to limited carriage. Do the Dodgers also bear some reduction in their revenue from the cable deal if low carriage leads to lower revenue for SportsNet L.A., either immediately or after some start-up period? If they don’t, I don’t see how they “own” part of SportsNet L.A. in any meaningful sense of the word. So far that carriage play hasn’t worked very well, other than Charter/Spectrum buying Time Warner Cable to at least push the carriage rate higher after the two cable systems combined.

So, summarizing:
(1) there’s simply a lot more juice and upside from bearing some sizable early losses in the L.A. market
(2) there was a clear and controllable path in L.A. to turn the losses into big annual profits just by running off contracts to get near the luxury tax line while still having a really good team
(3) the Dodgers’ roughly $50 million of annual operating losses paying for really good teams are what the Marlins lose – and maybe even less than the Marlins’ losses – just to bring back the players on 2017’s 77 win team that drew under 1.6 million people. If they had a bunch of elite prospects that could push that win expectation 6 or 8 wins higher without more payroll, maybe it’s a good gamble that a winner would grow revenue both short-term and long-term. Their farm system, however, is the except opposite of that.
(4) so what’s your suggested business plan for the Marlins, and how much are the losses in the short-term? Buying enough free agent pitchers to move the Marlins’ win expectation up to the zone of a true wild card contender costs at least another $40 to $50 million per year of salary on multi-year deals, and that’s just to add 2-3 names on the tier of Alex Cobb and Lance Lynn. So then the Marlins are almost definitely bleeding far more than the Dodgers if success on the field doesn’t follow, and probably lose more money than the Dodgers for 1-2 years even if the plan does lead to a winning playoff team.

jdbolick
Member

(1) there’s simply a lot more juice and upside from bearing some sizable early losses in the L.A. market

Sure, but the Dodgers are far from the only example, they’re just the biggest example since they ran up more debt than anyone else in their first three years of ownership. You insisted that new owners don’t do that sort of thing when it’s actually pretty common in sports franchises, precisely because cutting costs after taking ownership makes a terrible impression and threatens your long-term relationship with the fanbase.

(2) there was a clear and controllable path in L.A. to turn the losses into big annual profits just by running off contracts

I’m not sure what you mean by this, but Los Angeles dramatically increased spending across the board under the new ownership. Their debt didn’t simply come from keeping existing contracts.

(3) the Dodgers’ roughly $50 million of annual operating losses paying for really good teams are what the Marlins lose – and maybe even less than the Marlins’ losses

*sigh* It is absolutely not true that the Marlins were losing $50+ million annually, primarily because they were receiving ~$50 million annually from MLB to cover their admittedly poor revenue stream. I understand that you thought the Marlins were losing large amounts of money and that you thought new owners didn’t put up with that sort of thing, but you know now that both of things are incorrect, so you need to stop repeating discredited arguments. Everyone makes mistakes, the important thing is to recognize when they occur and to pivot accordingly.

(4) so what’s your suggested business plan for the Marlins, and how much are the losses in the short-term?

If I represent Major League Baseball, I absolutely do not let the Bruce Sherman group assume control of the Marlins if they cannot handle the team’s existing debt without gutting the roster. I’m not really sure if there was any hope for developing a positive relationship with the Miami community after the previous firesales and the bad blood over public financing of the stadium, yet because of that my highest priority would be not doing anything to further alienate and antagonize them. After this, Miami is done. There is no coming back from this. The Marlins are going to remain in the bottom five for attendance and they’re going to have one of the worst media deals even when the existing ones are replaced. Heck, the previous roster teardowns at least returned top prospects. This didn’t. This was all about cutting costs at the expense of everything else. The change in ownership was a rare opportunity to convince potential fans that the Loria era was over and that they could invest not only their money but also their hopes in the future of the team. That’s all gone now.

Dave T
Member
Dave T

Your claim that MLB revenue sharing payments aren’t in the Forbes revenue numbers is contradicted by Forbes’ own description of its methodology:

“Revenue is net of annual stadium debt service for which the team is responsible, as well as money teams receive, or pay, as part of the league’s local revenue-sharing system.”
https://www.forbes.com/sites/forbespr/2016/03/23/forbes-releases-19th-annual-mlb-team-valuations/#493b510a20af

“Net of” means that revenue for each team is calculated AFTER taking into account amounts either paid in revenue sharing, or received from revenue sharing.

I agree with you that everyone sometimes makes mistakes, but your claim on this point is mistaken.

jdbolick
Member

Your claim that MLB revenue sharing payments aren’t in the Forbes revenue numbers is contradicted by Forbes’ own description of its methodology

That is a different link from a different year than the one you initially presented, but since they’re both from Forbes I will assume that they used the same methodology and concede the point. The problem for you is that the link also proves you definitively wrong regarding your repeated claims that the Marlins were hemorrhaging money, as the Forbes link states that the organization lost only $2.2 million in 2017. So you still have absolutely no basis for your position and are arguing something that does not appear to have any validity whatsoever.

Dave T
Member
Dave T

Thank you for agreeing on that point.

As I said in a comment above, the number is for 2016 (Forbes puts out these rankings in April). Here’s the the trend of Marlins’ Opening Day payroll per Cot’s: $74 million in 2016, $115 million in 2017, and (before the trades) a bit over $130 million in 2018. Some of that is backloading of contracts and deferrals, some of it was free agent signings that haven’t worked out well like Volquez, Prado, Ziegler, and Tazawa.

Yes, revenue naturally increases some amount each year for an MLB team, but the Marlins have a relatively low revenue base and had lower attendance in 2017 than in 2016. Assume something like 5% per year revenue growth – which might be aggressive with falling attendance – and the situation for 2018 is about $40 million worse than for 2016.

And the other various operating expenses for running an MLB team – from player benefits to draft signing bonuses to salaries for scouts, instructors, and coaches to business-type expenses such as office space and marketing – also grow every year. If anything, given how cheap Loria was, a smart new ownership group may need to ramp up spending on things like amateur scouting and spending to sign international amateurs, much like the Astros did. They don’t need to pay Jeter $5 million per year, which is too much and also a terrible look for PR, but the sad fact is that Jeter’s $5 million isn’t making or breaking why the team’s financial condition looks really bad at $130 million in payroll.

Dave T
Member
Dave T

You have presented a sample size of one for an ownership group willing to do this – Guggenheim Partners with the Dodgers. I have responded why I see this example as an unusual business situation, and the very article that you linked about this example refers to their spending “raising eyebrows throughout the industry”, implying that it’s well outside the norm.

Let’s look at other recent sales.

There’s no evidence that the Padres’ new owners were willing to incur operating losses after buying the team in 2012.

The Cubs’ owners, the Ricketts, bought the team in a transaction in 2009 whose very structure as a leveraged partnership required the club to generate substantial operating income – http://www.bleachernation.com/2014/03/19/the-chicago-cubs-financial-story-the-payroll-the-debt-and-the-syncing-of-baseball-and-business-plans/ . Tom Ricketts called the pre-sale payrolls “unsustainable”, and the Cubs payroll did drop below pre-sale levels after 2010-11 as contracts expired and players were traded.

There’s no evidence that the Astros incurred operating losses in their first years under new ownership after 2011, except perhaps by mistake when the new RSN of which they owned a big chunk (and which was planned prior to the sale) flopped miserably and went into bankruptcy in 2013. They famously took the major league Opening Day payroll all the way down to $26 million in 2013 as part of their rebuilding plan.

The Rangers, sold in 2010, appear to have incurred some modest operating losses a few years after the sale (in 2013/14) if we believe Forbes numbers. Those operating losses were on the order of $5 to $10 million per year and were less than operating profits generated in 2011 and 2012.

TLDR: Guggenheim Partners followed a business strategy with the Dodgers, with an attitude toward operating losses, that’s completely different than for the four other most recent sales of MLB teams. It’s an outlier, and I offered my thoughts on the business reasons why that’s the case.

jdbolick
Member

the very article that you linked about this example refers to their spending “raising eyebrows throughout the industry”, implying that it’s well outside the norm.

As I already said: “Sure, but the Dodgers are far from the only example, they’re just the biggest example since they ran up more debt than anyone else in their first three years of ownership. You insisted that new owners don’t do that sort of thing when it’s actually pretty common in sports franchises.” For instance:

There’s no evidence that the Padres’ new owners were willing to incur operating losses after buying the team in 2012.

The Padres’ ownership increased their opening day payroll by $11.9 million the first season, then an additional $23 million increase the following season, then another $10.6 million increase, then yet another $12.2 million increase.

The Rangers, sold in 2010, appear to have incurred some modest operating losses a few years after the sale (in 2013/14) if we believe Forbes numbers.

Under the new ownership, Texas increased its opening payroll by a staggering $37 million the first season and another $28.2 million the following season.

TLDR: In recent MLB ownership changes, there are more examples of what you claimed never happens than what you claimed always happens. I genuinely don’t understand why you’re still trying to argue this when I have conclusively proven that you don’t know what you’re talking about. It is not at all uncommon for new ownership groups to increase spending even if it means incurring losses, and the Marlins were not enduring massive losses in recent seasons thanks to revenue sharing.

Dave T
Member
Dave T

The direction of payroll doesn’t really indicate much. The key point is whether or not the team’s revenue covers it without the team generating big operating losses.

Those increases you cite for the Padres are (I think) relative to a 2012 Opening Day payroll of $55 million. Looking at Forbes estimated numbers, it was only about 1/3 of revenue that year. Best estimate (see above) is that the Marlins were going to be at about a 60% ratio in 2018 before cuts. That probably understates the magnitude of the problem, because other costs of running an MLB team vary a lot less than MLB payroll, at least if teams are smart and employing good scouts, instructors, and analytics people, spending up to their draft slot limits on bonuses, spending on IFA’s, etc. The Padres also had a new local TV deal in 2012, and 2014 is when new national MLB TV deals kicked in with increased rights fees distributed among all teams.

The Rangers could spend because they were coming off two straight appearances in the World Series, which got their attendance up to 3+ million in 2012 and 2013. In part due to their TV contract, they’re still a solidly mid-revenue team (around $300 million estimated in 2016) even with attendance back down around 2.7 million.

jdbolick
Member

The direction of payroll doesn’t really indicate much.

*sigh* Of course it does, particularly when each of those payroll increases total more than fifty million dollars.

The key point is whether or not the team’s revenue covers it without the team generating big operating losses.

According to your own Forbes link, the Marlins have not been “generating big operating losses.”

Dave T
Member
Dave T

Please look at the history of Forbes estimates for the Padres every year – https://www.forbes.com/teams/san-diego-padres/

Is there an estimate that the Padres lost money on an operating income basis in any year? No.

As I also explained, the revenue increases are easily explainable by TV contracts plus whatever typical annual increases most MLB teams realize. They did see some attendance pop in 2015 when they had the bizarre series of trades for players including Kimbrel, Upton, and Kemp, but it wasn’t a story of higher attendance for the most part – https://www.baseball-reference.com/teams/SDP/attend.shtml

The Padres also then tore it all down, dropped major league payroll by a lot, and pursued a rebuild (including lots of IFA spending) when it was clear that the 2015 strategy wasn’t going anywhere.

Dave T
Member
Dave T

“According to your own Forbes link, the Marlins have not been ‘generating big operating losses’ ”

I already walked through the math of how Opening Day payroll for 2018, before any cuts, would have been about $60 million higher than the year (2016 season) of those financial estimates.

I have also already noted that 5% annual revenue increases for the Marlins would imply revenue increasing by only about $20 million over the same period, while also noting that attendance was in fact down in 2017 vs. 2016.

This is epitomizing why I earlier used the terms financially illiterate and illogical.

BTW, the period you’ve picked for the Padres is one during which there was an anomalously large jump in each team’s national TV revenue money due to new contracts, on the order of $25 million per year from 2013 to 2014 ( https://www.fangraphs.com/blogs/the-new-national-tv-contracts-and-2014-payrolls/ ). Maybe a bit less, say $20 million, if those 8 year contracts have annual escalators rather than flat AAV’s. If we back the old national TV money out of 2012 ($25 million, the new contract doubled it), then the Padres had about $139 million of revenue that year per Forbes estimates. Increasing that by 5% for 3 years would give us an extra $20 million of revenue. So, between the national TV contract and 5% annual revenue growth for other sources, we can pretty easily arrive at $40-$45 million more of revenue that almost covers the $50 million increase in payroll. Forbes estimates the Padres’ revenue went up $60 million over that 3-year period, so they apparently did somewhat better than that.

jdbolick
Member

This is epitomizing why I earlier used the terms financially illiterate and illogical.

No, the actual reason you used that language is because you arrogantly want to pretend that you know what you’re talking about despite being repeatedly proven wrong, which is why you keep changing standards depending upon what you’re arguing. For instance, you rely on Forbes to say that the Padres were not running losses but then ignore that Forbes says that the Marlins had a net operating income of +$29 million over the last three years combined: https://www.forbes.com/teams/miami-marlins/

Dave T
Member
Dave T

“but then ignore that Forbes says that the Marlins had a net operating income of +$29 million over the last three years combined: https://www.forbes.com/teams/miami-marlins/

@jd – the 3 years combined in question are the years with 2014, 2015, and 2016 payrolls, as I already pointed out.

It’s readily apparent that’s the case if we look at the “2013” column, which shows a big increase in “player expenses”. That’s obviously the 2012 season, when the Marlins increased payroll and opened their new ballpark, before subsequent payroll cuts – http://legacy.baseballprospectus.com/compensation/cots/national-league/miami-marlins/ . That’s how Forbes (somewhat confusingly labels these columns), as the April when their report was published and not as the baseball season to which the numbers apply.

So let’s look at those Opening Day payrolls for the Marlins, per Cot’s:

2014 – $45.8 million
2015 -$69.0 million
2016 – $74.4 million

So there’s evidence, if we believe Forbes’ income estimates, that at those payroll levels the Marlins can generate a modest operating profit (about $15 million per year) or have a small operating loss of a couple million dollars.

I have already explained – at least twice – the math of how it does not at all show that Marlins revenue would support $130+ million of 2018 Opening Day payroll without big losses. My best estimate, based on assumed growth of revenue and other expenses, is operating losses on the order of $40 to $50 million.

I will walk through again, however, the estimate.

I estimate that 2018 Marlins revenue should be about $20 million higher than 2016, give or take. That’s growing a bit over $200 million of revenue at about $10 million per year (about 5%), even though 2017 attendance was lower than 2016.

Payroll is up about $60 million from 2016 to 2018 if it’s at $130+ million plus. Also assume some amount of increases in the other non-MLB payroll costs of running a major league team.

We start from basically break-even in 2016 ($2 million loss). $20 million more revenue, less $60 million more of player payroll costs, is about a $42 million loss. Add to that loss however much expenses other than player payroll also increase.

And that is why I used the terms “financially illiterate and illogical”. I’ll acknowledge that it’s not especially polite to do so, and maybe I should be less harsh and more civil.

But I’ve now laid out the financially literate math of this estimate multiple times.

And the other point, of logic, is that the comparable revenue MLB teams are the Rays and A’s, and nobody is surprised that they don’t run payrolls close to what the Marlins had committed for 2018 Opening Day payroll.

jdbolick
Member

According to your own link, the Marlins ended the 2016 season having paid $123,574,388 to their 40 man roster. I do appreciate that you keep presenting links that prove your own arguments wrong, but what I can’t understand is why you continue to argue after having been proven wrong. You earlier ignored that the Marlins are by far the biggest recipients of revenue sharing, and every link thus far provided contradicts your claim that the Marlins would be running massive losses without slashing payroll. Basically, everything you have posted has been wrong but because you began your very first comment with smug condescension you can’t bring yourself to admit that you had no idea what you were talking about.

Dave T
Member
Dave T

“there is a massive difference between selling off your best assets for top prospects and selling them off primarily for salary relief”

Hard disagree when the salary relief is nothing more than the player’s own contract. A commenter below makes a great point that the Stanton deal can be evaluated essentially a free agency signing.

It would be hardly be surprising for a team in the Marlins’ revenue situation to let its best player leave as a free agent rather than re-sign him to a 10 year / $265 million contract with a player opt-out after 3 years, and that’s the same as what the Marlins did here except for the terminology of “trade” vs. “free agency”.

jdbolick
Member

It wasn’t a free agency signing and multiple teams were interested in Stanton’s services. Obviously his no trade clause significantly complicated matters, but a responsible ownership group interested in building a relationship with the Miami community would have been willing to eat more of the outgoing salary in order to acquire better prospects in return. If they didn’t have the money available to do that, they shouldn’t have been allowed to take ownership in the first place.

Dave T
Member
Dave T

It sure looks like the equivalent of a free agent signing when every team offering to acquire Stanton was reportedly taking back less than his full contract in order to send the Marlins any return at all.

In theory, any player who is traded with a sizable contract could be paid down to net a better return, so treating Stanton differently makes little sense. Stanton – plus his contract – was in fact not really much if anything of a trade asset.

jdbolick
Member

*facepalm* It isn’t the equivalent of a free agent signing because the Marlins owned Stanton’s rights. They did not have to trade him at all, and if they did decide to trade him then they (along with Stanton himself) had control over where he would end up and for what. A free agent would be able to sign with anyone and the Marlins could do nothing about it. Obviously the organization did receive some things in return despite the opt-out clause negatively impacting his trade value, and the Marlins won’t be paying any of Stanton’s salary unless he decides against opting out following the 2020 season. The point, which you know but refuse to admit, is that Miami could have received much more in return had they been willing to pay part of Stanton’s salary. They didn’t because this deal was primarily about cutting costs, not improving their organization.

Dave T
Member
Dave T

“The point, which you know but refuse to admit, is that Miami could have received much more in return had they been willing to pay part of Stanton’s salary.”

I of course fully admit that. My point is that an “asset” for which I can get something by agreeing to send $100 million of money along with the “asset”, even when over time and conditional on his opt out, isn’t really much of an asset. That’s not an “asset” in any normal sense of the word. It’s something of no value to which I attach $100 million of cash in order to get back something else worth $100 million.

And by doing that they also very well could have found themselves, in the 2020’s, hindering their ability to make moves to supplement their roster, after a hopefully successful rebuild, because they’re still paying about $15 million per year of Stanton’s salary after he doesn’t opt-out. Every team has some payroll budget, whatever the level, and that’s $15 million that could be spent on something else.

Dave T
Member
Dave T

“They did not have to trade him at all, and if they did decide to trade him then they (along with Stanton himself) had control over where he would end up and for what. A free agent would be able to sign with anyone and the Marlins could do nothing about it.”

That’s true in one sense, but not in the sense of how to evaluate Stanton plus his contract. If Stanton were a free agent, and told the Marlins that he would sign (or re-sign) with them for his current remaining contract, my point is that the Marlins should definitely say “no” given their situation of low revenue and a slightly below .500 near-term outlook even with Stanton. That’s how writers here analyze things all the time about whether a team signing a player makes sense for them. The fact that a poor decision was already made in the past shouldn’t really move the needle on deciding the best path forward.

jdbolick
Member

The Marlins received Starlin Castro and two prospects in exchange for Stanton while contributing exactly zero to cover Stanton’s existing contract unless he does not exercise his opt-out clause. That confirms that Stanton is perceived by teams to have positive value on his current contract, so for you to pretend that was “a poor decision” simply because you want to act like he was a free agent instead of being under team control is just bizarre.

Dave T
Member
Dave T

By standard surplus value math, the value of Castro plus those two prospects is pretty darn close to $30 million, or almost exactly the amount of money that they’ll conditionally eat.

As for a good decision, the revenue context of the team matters. Based on reports, the Cardinals were offering about the value of the contract ($250 million of it plus 2 50-ish FV pitchers in Alcantara and Flaherty) and the Giants were offering less than that ($230 million plus a lesser prospect package in Beede and Aramis Garcia). Plus the Yankees package, which was also around the value of the contract.

When three of the top ten revenue teams in the majors are that hesitant to take on a big contract for a star player, then it’s realistically not a good contract for a really low revenue team to try to carry.

jdbolick
Member

Earlier you insisted that “Stanton – plus his contract – was in fact not really much if anything of a trade asset” because you wanted to pretend that Stanton was the equivalent of a free agent. Now you’re admitting that at least three different teams offered prospect value in exchange for that contract, undermining your own assertion. Your stubborn insistence upon acting like Stanton was a free agent instead of under Marlins control is all about you wanting to defend your initial position even though you undoubtedly realize at this point that it was completely wrong.

Dave T
Member
Dave T

“Now you’re admitting that at least three different teams offered prospect value in exchange for that contract, undermining your own assertion.”

They offered prospect value in exchange for that contract if the Marlins would agree to pay part of the money due under that contract. If you’re missing that the words after that “if” are meaningful, then you have a strange view of the world that certainly isn’t how any businessperson looks at the world.

I mean, if the Yankees agree to pay almost all of the rest of Jacoby Ellsbury’s salary, I’m sure that someone would trade something to take him. But nobody talks about Ellsbury as a “trade asset”, at least not at Fangraphs.

jdbolick
Member

They offered prospect value in exchange for that contract if the Marlins would agree to pay part of the money due under that contract.

The Marlins do not pay any of Stanton’s salary unless he declines to exercise his opt-out after 2020. Your stubborn insistence on treating Stanton as a “free agent” has nothing to do with facts, and actually flies in the face of them. It’s all about you needed to make excuses for your discredited position.

Dave T
Member
Dave T

Of course the money was post opt-out.

Everyone agrees that if Stanton is good enough to opt-out then his next 3 years at 3/$77 will be seen as great value for a team in retrospect. Stanton on a 3/$77 contract would have almost certainly returned some sort of pretty prospect return. Not a Chris Sale package, but better than the actual trade package.

Stanton’s “current contract” includes the potential tail years and his right to opt-out, as well as the next three years. A team can’t separate one from the other, just like it can’t separate Stanon the player from his contract.

Paul22
Member
Paul22

They had a playoff caliber lineup. Just needed some pitching. Jeter could have convinced CC to join him. Hire Girardi and add another pitcher.

I dont know how much cash is needed to keep them afloat. Accountants use fuzzy math. Depreciation and many other expenses don’t affect cash flow although they inflate losses. Anyways, with hood enough credit you borrow the money to compete, money is cheap, and you inflate revenue by winning.

Stanton was opting out in 3 yrs. A once in a generation player for most teams. They had a 3 yr window. This is either dumb or by design to force a move

piratepete7
Member
piratepete7

I understand your point in avoiding having a club with such debt but the solution presented would have just adjusted the purchase price up the amount of the debt and the team would be looking to recoup that amount anyway.