Tuesday, April 01, 2008

Sedano, Loria and Forbes

This morning I had an on-air debate with Jorge Sedano of 79o the ticket about the Marlins finances. He referenced an apparently recent Forbes article about the team's situation and claimed that Forbes reported the Marlins made $40 million during the 2007 season before selling a single ticket. I can't question the article because I haven't seen it (nor have I been able to find it). I do know however that Forbes does an annual analysis of the finances of Major League Baseball franchises.

THE HARD NUMBERS
Here's a compilation of what those analyses have shown over the last few seasons (through 2006 because the report for 2007 isn't out yet):

According to Forbes EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) for the 2006 season was $43.3 Million. A hefty sum, no doubt.

For the 2005 season the club's EBITDA was $-11.9 Million.

For the 2004 season the team's EBITDA was $3 Million.

For the 2003 season the EBITDA for the Marlins was $-11.6 Million

Over the 4-year period analyzed the Marlins total EBITDA was $22.8 Million. That averages to $5.7 million per year. To put that into perspective, Dontrelle Willis earned $6.45 Million last year for the Marlins.

Of course, this doesn't take into account last season's finances but for the sake of argument let's say the club earned the same during the 2007 as in 2006 ($43.3 Million, which would be in line with what Sedano quoted), the 5-year average would be $13.22 Million per year. In contrast, Miguel Cabrera just signed a 7-year deal with the Tigers that averages more than $20 Million a year.

MOTIVATIONS
The question is whether the Marlins ownership is getting rich at the expense of the fans and whether or not the ownership cares as much about winning as they do about making money.

I believe the ownership does want to win. I think what they have discovered is that in the current financial environment in baseball, that they simply don't have the resources to maintain a continuous quality product on field, that is to say one that competes on a year-in/year-out basis. I think they believe that they can win in cycles. In the down cycles, the team makes money and fields what the fans would consider an inferior product while accumulating building blocks for the next "run". The Marlins have found an area of opportunity in baseball's labor rules that allows clubs to maintain tight payrolls by filling their rosters with young players that have not yet achieved free agency. Even so a quality arbitration eligible player will command a salary in the multi-million dollar range.

Throw into the equation the financial deal that the Marlins are finalizing with the City of Miami and Miami-Dade County which includes a commitment to provide $152 Million dollars toward the project (some of which has to be provided up-front and some of which will be provided as rent payments) as well as any cost overruns that are incurred and you can understand why Loria is obsessed with keeping payroll down for the time being and putting money in the bank. He's going to need it later. It's no secret that Jeffrey Loria does not have the deep pockets that people usually associate with sports franchise owners. He had to borrow $38 million from MLB to buy the Marlins in the first place.

FANTASY AND REALITY
Would I prefer an owner that had big dollars and that didn't need to "work the system" like Loria does? Would I prefer an owner that didn't need to go through periods of fielding an inferior product in order to save money to create a window during which the Marlins can "make a run" at winning? Would I prefer an owner that didn't need to have a (mainly) publicly-financed stadium to compete effectively and one that could simply dip into his vast personal wealth to keep every good player the organization develops?

The answer to all of those questions is "OF COURSE I WOULD!" But I don't live in a fantasy land. Jeffrey Loria is the owner of the team for better or for worse. We need to accept the financial limitations that he has personally and the challenges that operating a franchise today pose. We should look deeper at the motivations for the decisions that are made rather than jumping to the conclusion that they are all based on greed. That's fine for talk radio but it's not substantive nor realistic.

Remember that with ALL OF THE MONEY the Marlins have made over the last 5 years, they still could not have signed Miguel Cabrera to the deal he signed with Detroit.

OBJECTIVE/ANALYTICAL VS. HYSTERICAL/REACTIONARY
As baseball fans, let's stop ripping the owner and instead support him in his quest to get the stadium deal finalized. When the Marlins are playing in their brand new stadium, we can judge more clearly whether Loria wants to win. If Forbes shows that the Marlins are making money over an extended period of time, in the new stadium, while consistently fielding a low-payroll inferior team THEN I will judge him to be a greedy cheapskate, but not before.

1 comment:

Ryan said...

yeah, well, sedano sucks at his job.