Thursday, October 07, 2004

Looking Forward to Next Year

So where do the Mariners go next year? The first of many questions you have to answer in order to come to any conclusion to that Big Question is how much money will the Mariners have to spend?

Well, first we need to figure out how much they have already committed. According to Dugout Dollars, as near as I can tell the M's have about $55.5M in salary committed for next year (Boone $9M, Cabrera $1M, Franklin $2.4M, Wiki Gonzalez $2.25M, guardado $4.5M, Hasegawa $3M, Ibanez $3.75M, Jarvis $500K buyout, Moyer about $7M with all earned incentives, Pineiro $4.2M, Spiezio $3.1M, Ichiro about $11M with earned incentives, and Winn $3.75M). Benefits (which the Mariners do count when the quote us payroll figures) are about $7.5M. Gil Meche will make a minimum of $3M in his first year of arbitration-eligibility. They have to pay non-arbitration-eligible players on the 25-man roster about $350K, and "optioned" players who are on the 40-man roster generally earn a pittance of about $50K. Being generous with salaries and those who will be kept around, I would add about another $9M to that (Atchison $400K, Bloomquist $400K, Bucky $400K, Blackley $50K, Choo $50K, Dobbs $50K, Leone $50K, Lopez $400K, Madritsch $400K, Mateo $400K, Meche $3M, Nageotte $50K, Olivo $500K, Putz $400K, Santiago $50K, Snelling $50K, Soriano $400K, Strong $50K, Taylor $400K, Thornton $400K, Reed $400K, Sherrill $400K, and some extra just because). This is generous, because not all these guys will be here, many I've counted as making the major league roster won't, and most of those who do will make the minimum rather than $400K. Add to this $5M for contingencies and unexpected incentives met, and the Mariners have "committed" $77M.

Now, Howard Lincoln claimed yesterday that the M's ownership group is willing to sustain "an operating loss in the many millions of dollars" in order to turn things around. What does that mean? Well, Howard Lincoln just said on KJR that it means they will keep payroll right where it is (which isn't "top ten," Howard). I guess that means they think they will lose money based solely on attendance losses, which doesn't add up.

In 2001, based on figures that Major League Baseball itself released, the Mariners were the most profitable team in baseball by a wide margin ($14.8M after revenue-sharing, based on gros revenues of over $202M; that's more than $6M more in profit than the Yankees made). Components of Mariners' revenue reported there that can only have remained steady or, more likely, increased since then are: $38M in local radio, TV, and cable contracts; shared national TV/media/licensing revenue of $24M; and "other" local revenues (things like parking, concessions, naming rights, etc.) of $56M. "Game receipts" or ticket revenue, can vary. The Mariners reported $77M in game receipts for 2001 (a figure some $3M less than what the Team Marketing Report average ticket price and attendance figures would indicate, by about $4M, BTW), but since then average ticket prices have increased by over $2 a ticket, so even though the 2004 Mariners drew roughly 600,000 fewer fans in 2004 than they did in 2001, the net loss in ticket revenue is only about $6M from what they reported in 2001. That figure is very likely made up by increases in local and national revenues (the latest radio contract, from the 2003 move to KOMO, covers most of this alone). The other variables are player payroll (up), revenue sharing (up), and national and local expenses (way down, due to retirement of debt after the 2002 season, and the fact that they counted the $13M they paid to Orix for the right to negotiate with Ichiro in that figure).

In 2002, MLB made no convenient financial disclosures, but we know that Forbes estimated the Mariners profit was $23M (and Forbes' figures were on the money -- even a bit low -- in 2001, when MLB released audited figures) and the Mariners made a big stink about that, insisting they made "only" $10.7M while also retiring debt and reducing their cumulative losses by $36M. I don't know what the Mariners' claims were for the 2003 season, but despite a $10M increase in revenue-sharing expenditures, Forbes still concluded the Mariners made a $17M profit last year. So, I think it is safe to say that revenues and profit are increasing at a greater rate than is payroll, and the Mariners are very likely to make money this year, even under their own accounting, which is often at odds with independent analysis.

If -- as Mr. Lincoln just said -- ticket prices stay the same ($24.01 on average), even if attendance decreases by 15% (which would be about 2.5M fans), it is very difficult to see how the Mariners will lose money by maintaining payroll at the same level, or even a figure that would allow them to move into the top ten (like, say, $100M including benefits and full 40-man roster expenses). So, taking Lincoln at his word, I think the M's may spend (or claim to spend) $100M on payroll next year.

That means the M's have $23-$25M to spend next year. If they want to spend enough to actually jeopardize profitability, even by their own accounting practices, they could probably spend $30-$35M. Given their need to make a big splash, I will use $23-$33M as a working figure for what the Mariners have to spend this offseason.

Now . . . on to where to spend it.


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