Well, we've talked about it so much, I decided to pull some history I saved regarding annual profits/losses for the Marlins.

 

This was disclosed by John Henry back in 2001. He claims to have lost about 10MM in 2000, and here's the breakdown (all rounded to nearest MM):

 

Income:

 

Media 15MM

Gate 14MM

Sponsors 3MM

Con/Park 2MM

Other 34MM (includes rev sharing, merch, & national TV)

 

Expenses:

 

Players 24MM

Dev/Scout 18MM

Team 10MM (includes travel & FO salaries)

Mktg 7MM

NewPark 4MM (legal, lobbying, HOK design, etc)

G&A 4MM

StadOps 4MM

CapitalInv 3MM

ToHWH 2MM (contractual for stadium improvements)

Other 2MM

 

 

While I understand that some may doubt these figures, they seem reasonable to me on the surface. JH was a financial guy, and I have no reason to believe he wasn't being truthful as he sought to gain financial support from governmant for a new stadium circa 2000.

 

Of course, many of these numbers would be different today, but one cannot ignore the second expense (player development & scouting). So much of the budget is in that bucket that it cannot be ignored as we debate the current state of the team's finances.

 

I welcome anyone's attempt to update these numbers to 2007 reality.

2006 data (per Forbes):

==================

Revenue $122 mil

Operating Inc. $43.3 mil

Player Expenses $31 mil

Gate Receipts $16 mil

 

http://www.forbes.com/lists/2007/33/07mlb_...ins_336786.html

In terms of the "value of the franchise," all of these numbers fail to include the undisputable and increasingly upward appreciation that the Marlins experience just being a member franchise of MLB. The franchise can be sold now for more than Loria paid, which is more than Henry paid, which is more than Huizenga paid. We're not talking chump change either. MLB is not expanding anytime soon. If another owner wants to obtain a franchise, he'd have to buy out Loria and pony up the dough.

 

So, in my opinion, judging the franchise by its operating income (revenues/expenses) is a distortion of its value. Normal business need to earn a profit, because, if they don't, the company will not be able to fund its operations, obtain loans, pay down its rent, and the company will be worthless. the Marlins do not need to operate at a profit, because the Marlins appreciate as long as MLB appreciates. Loria could walk into any bank, and receive an interest free loan with the Marlins as collateral. Try doing that with your business.

The franchise can be sold now for more than Loria paid, which is more than Henry paid, which is more than Huizenga paid. We're not talking chump change either. MLB is not expanding anytime soon. If another owner wants to obtain a franchise, he'd have to buy out Loria and pony up the dough.

And deal with all the stress of making the team profitable. Sure, the owners can be spared a loss due to revenue sharing, but it's hard to see people banging down the door for the opportunity. Especially knowing they will be restrained by Huizenga, the fans, city, state and MLB on how they handle the critical questions of the franchise.

The franchise can be sold now for more than Loria paid, which is more than Henry paid, which is more than Huizenga paid. We're not talking chump change either. MLB is not expanding anytime soon. If another owner wants to obtain a franchise, he'd have to buy out Loria and pony up the dough.

And deal with all the stress of making the team profitable. Sure, the owners can be spared a loss due to revenue sharing, but it's hard to see people banging down the door for the opportunity. Especially knowing they will be restrained by Huizenga, the fans, city, state and MLB on how they handle the critical questions of the franchise.

What stress? Loria is proving that, under today's economics, you can field a bare bones payroll in a joke of a stadium (with horrendous lease terms) in front of nobody and turn a substantial profit. You don't even have to try to make money. Please don't tell me you think he endures *emotional* stress from the ownership of a MLB franchise...I should only be so lucky to endure such a hardship (even less so for him, since I actually live and spend 100% of my time in South Florida). And, even if the team is contracted, Loria is pretty much guaranteed to recoup every single penny he ever poured into the franchise, including any operating losses.

 

Also, you're implying that Loria would have to keep the team in South Florida under its current arrangement. MLB could care less if the team is in South Florida. They've done nothing to help the situation here, offered no financial assistance, and could care less where the team ends up so long as its in a stadium built by public funds. Loria is under no obligation to keep the team either...he could sell it if he wanted to, even to a owner out of state. Loria's refusal to sell the team, and his refusal to being more amenable to alternative sites and locations in South Florida (both his decisions) have not made the franchise itself any less valuable. He could turn around tomorrow and sell it for more than he bought it for, and recoup whatever claimed losses he's supposedly incurred. That's the reality when you own a MLB franchise, of which no more are being made available and several of them (Red Sox, Yanks, Angels, etc.) will not be available for sale anytime soon.

 

A perfect example of this is the Seattle Supersonics. A joke of a sports town (although probably better than Miami), a horrible arena, pretty much no fanbase, and a roster with little proven talent. Yet, an ownership group from Oklahoma City paid through the nose to have it with the intention of moving it to Oklahoma City, and could care less if they make less money in Oklahoma City than in Seattle.

I'm implying that the costs of sending representatives to Talhassee every year, talking to the city, county and MLB every week, drafting plans, etc. for years with little to no progress and no end in sight. You think people want to jump into that situation? Not really. Maybe more than when there was no one talking about a new stadium and really no prospects of talks in sight.

 

Fact is the value of a team is tied to its revenue sources. While the league's central revenues (and therefore 1/30th to the Marlins) have risen, the Marlins' value is restrained by its stadium situation. While Loria will get back his money and then some, the rate of return on a hundred-million investment doesn't look so hot.

Part of the reason that there is no end in sight for stadium talks is the lack of funding committment by the current ownership.

 

The "stresses" you speak of to make the team "profitable" are mostly brought on by the ownership themselves and their crusade to get a stadium built FOR them as oppossed to BY them.

The problem is that the operating losses cited above are paid mostly with cash.

 

So, any investor has to be reasonably sure the franchise value run-up exceeds (by a good margin) the annual expenses. Thus, the need for deep pockets and available cash.

 

Loria's pockets are clearly shallow. But, remember that he got into the Expos for about 40MM, seized the franchise when the minority owners failed to deliver on a cash call, and now has an asset which (arguably) is worth 250-300MM. This is offset by his annual out-of-pocket (see cash) contributions for operating losses. It's an unusual (but not totally unheard of) way to finance the acquisition of a money-losing enterprise.

 

As witnessed in today's equity markets, run-up is unpredictible, and can easily deflate over short-to-moderate periods of time.

 

And, DelGOT, no one is offering Loria an interest free loan. An alternate way to raise that cash would be to take in a limited partner, which he clearly isn't going to do without increased pressure from MLB. I don't understand for the life of me why MLB doesn't force him to sell or take a partner.

It's not necessarily that Loria's pockets are shallow, it's that the team's pockets are shallow. They don't earn the revenues, liquid or otherwise, to cover costs until the revenue sharing check comes in. You could be Carl Pohlad, billionaire and owner of the Twins, and if one of your companies is operating at a loss, you'll want to consider how to make it profitable. This is 2007. Baseball is big business. Owners are in it to make money, not to grant 28 cities the opportunity to watch MLB baseball. Any egalitarian spirit that ever existed went away decades ago.

The problem is that the operating losses cited above are paid mostly with cash.

 

So, any investor has to be reasonably sure the franchise value run-up exceeds (by a good margin) the annual expenses. Thus, the need for deep pockets and available cash.

 

Loria's pockets are clearly shallow. But, remember that he got into the Expos for about 40MM, seized the franchise when the minority owners failed to deliver on a cash call, and now has an asset which (arguably) is worth 250-300MM. This is offset by his annual out-of-pocket (see cash) contributions for operating losses. It's an unusual (but not totally unheard of) way to finance the acquisition of a money-losing enterprise.

 

As witnessed in today's equity markets, run-up is unpredictible, and can easily deflate over short-to-moderate periods of time.

 

And, DelGOT, no one is offering Loria an interest free loan. An alternate way to raise that cash would be to take in a limited partner, which he clearly isn't going to do without increased pressure from MLB. I don't understand for the life of me why MLB doesn't force him to sell or take a partner.

Maybe I should have been more clear here...an interest free loan with a lien on the franchise as collateral. He'd have NO problem getting an interest free loan. Well, maybe not interest free, but damn close, probably less than municipal or government bonds or even student loans. You can't judge the market for MLB franchises the way you judge the equity markets. It is essentially a no risk investment. You receive proceeds from the league if you payroll is low, your interest is FREELY transferrable with only 30-some equivalents, of which MLB is not making anymore and half will never be sold anytime soon, and - worst case scenario - if you get contracted the league will be forced to buy you out for no less than your initial investment plus reasonable appreciation and recoup of out-of-pocket losses.

 

People buy property all the time with the expectation that they will lose money renting it out (say condos for example where the mortgage and maintenance exceeds the rent the owner receives), with the expectation that the actual property will appeciate in value. Some years, with much higher appreciation that others. I see no reason why you can't look at a MLB franchise the same way, when MLB is raking in historical profits, and the alleged values for these franchises are at all time highs. Operating revenues are necessary to continue the process, but with MLB's payroll revenue sharing and pooled merchandising and media revenue, an owner can go millions in the red and more than make up for it on the re-sale of the franchise. I understand that takes someone with deep pockets if non-operational funds are necessary to keep the franchise afloat, but Loria just donated $20 million to Yale. He's got the funds, but chooses to operate the franchise like a subway franchise, rather than a MLB franchise. And, if the recent financial rumors are true, he is operating the franchise right now at a substantial profit. Rather than reinvesting these operating revenues into the franchise to further increase the appreciation, he pockets the money to pay himself back (supposedly) to recoup alleged operating losses from previous seasons.

It's not necessarily that Loria's pockets are shallow, it's that the team's pockets are shallow. They don't earn the revenues, liquid or otherwise, to cover costs until the revenue sharing check comes in. You could be Carl Pohlad, billionaire and owner of the Twins, and if one of your companies is operating at a loss, you'll want to consider how to make it profitable. This is 2007. Baseball is big business. Owners are in it to make money, not to grant 28 cities the opportunity to watch MLB baseball. Any egalitarian spirit that ever existed went away decades ago.

So, you're saying the Marlins couldn't get an instititional loan, or perhaps a line of credit, to pay for operating expenses with the agreement that the "revenue sharing checks" would go to the bank? C'mon RFerry. This is not an under the table cash business. This is big business.

The Marlins probably could get a line of credit easily. I'm addressing the myth that an owner's personal finances has anything to do with operations of a team. You could be Carl Pohlad or Jeffrey Loria, owning the Marlins or Yankees, assuming costs out of pocket or through credit, and you'd care if one of your companies was unprofitable.

Except by all indications the Marlins are no where near as "unprofitable" as you would like people to believe rFerry.

Nice try. The Marlins, MLB officials and Forbes estimates all point to the team routinely losing money if not for MLB welfare (revenue sharing).

I highly doubt that. But, in any case, revenue sharing is part of the team's business model. You can't divorce the team from that.

I'm staying out of this for my own sanity but a few things.

 

There is no such thing as an interest free loan. Were it to happen the IRS would impute the interest so you pay one way or the other. Besides why would you loan money at zero when you can make 5% on it, not good business.

 

The problem with taking on a limited partner is three-fold. 1. The existing minority shareholders will not want to be further diluted. 2. The existing minority shareholders may very well have language in their agreement that protects them from being captives, that they have the first right to be bought out at the same price the new investor would be willing to pay so the new investor's money goes in one door and out the other (which often how partnerships work) and winds up providing very little relief to the franchise and 3. no one comes into a situation like this as a new minority partner without being able to exert his or her control over operations, in effect becoming a minority partner with General Partner control and that's not good for anyone. This is a vulture situation. With the stadium in flux, with the worst lease in sports and existing dissident partners, you would demand (and get) alot to put your money into this organization right now.

 

Carry on.

I highly doubt that. But, in any case, revenue sharing is part of the team's business model. You can't divorce the team from that.

You can listen to Loria and Samson, or check MLB's 2001 numbers, or check Forbes' estimates. All claim the Marlins operating at a loss without revenue sharing.

You can't include it to say the Marlins are profitable. They aren't. The rest of the league is. And if people stop showing up in New York and Los Angeles, that money isn't being replaced.

To me, the bottom line is a failure of local government to do as much for the Marlins as is necssary to keep them here as a community asset. Certainly they are at least as valuable to the community as a $500 million performing arts center, or an I forget how many million AA Arena. Both of those received government subsidy and are in ideal downtown locations.

 

Loria is, after all, a businessman, a private individual managing his investment. Clearly he has the right to operate as he sees fit, and it is not unreasonable for him to expect a subsidy equal to or greater than the one the Rays are seeking in Tampa/St. Pete. It is also not unreasonable to insist on a site that works, financially, for the business. Reading about Tampa Bay, it is my impression that MLB is being very aggressive in finding new ways, other than direct subsidy, to help small market teams find the revenues that, along with revenue sharing and the ever increasing equally-divided internet take, will help well managed small market teams compete against the Yankees, Red Sox, etc.

 

We may not all agree with what MLB or a particular team is asking in each town, but I believe they have a strategy that is intended to benefit the game, and make it more successful in the long run. So, if we want to see the Marlins and baseball be successful, we need to focus on urging local government to get it done, to reopen the downtown location scenario, etc. There is no way that Loria will allow himself to (or that the MLB will force him to ) accept a less-than-ideal situation from the point of view of the team and the league.

 

Loria and MLB are looking at the long term health of the franchise and the sport, and I agree with them on that.

Nice try. The Marlins, MLB officials and Forbes estimates all point to the team routinely losing money if not for MLB welfare (revenue sharing).

 

Waaaaaaaaaaaaiiiiiiiiiiiiiiiiiiit, so what you are doing here, is.......... saying that the are not profitable, SAVE FOR ALL THE f***ING MONEY THEY RECEIVE?!?!?!?!

I highly doubt that. But, in any case, revenue sharing is part of the team's business model. You can't divorce the team from that.

You can listen to Loria and Samson, or check MLB's 2001 numbers, or check Forbes' estimates. All claim the Marlins operating at a loss without revenue sharing.

You can't include it to say the Marlins are profitable. They aren't. The rest of the league is. And if people stop showing up in New York and Los Angeles, that money isn't being replaced.

 

Revenue sharing is part of the business model. Sorry.

I highly doubt that. But, in any case, revenue sharing is part of the team's business model. You can't divorce the team from that.

You can listen to Loria and Samson, or check MLB's 2001 numbers, or check Forbes' estimates. All claim the Marlins operating at a loss without revenue sharing.

You can't include it to say the Marlins are profitable. They aren't. The rest of the league is. And if people stop showing up in New York and Los Angeles, that money isn't being replaced.

 

Revenue sharing is part of the business model. Sorry.

 

Why are you not rooting for more money in Loria's pockets?

 

Terrible fan ALERT!

12 mil payroll or less = 12 mil local right bonus 18 national right and 30 rev sharing not including t shirt tickets etc ya i would say they are a little profitable :ban

I highly doubt that. But, in any case, revenue sharing is part of the team's business model. You can't divorce the team from that.

You can listen to Loria and Samson, or check MLB's 2001 numbers, or check Forbes' estimates. All claim the Marlins operating at a loss without revenue sharing.

You can't include it to say the Marlins are profitable. They aren't. The rest of the league is. And if people stop showing up in New York and Los Angeles, that money isn't being replaced.

 

Revenue sharing is part of the business model. Sorry.

Well, according to some of you, Loria's personal assets and those of any minority owners are as well.

 

OK, revenue sharing would be if the Marlins were playing in Miami or somewhere else. That doesn't mean an owner shouldn't be concerned one of his companies is underperforming. In business, managers tend to protect themselves from the potential loss of a major revenue source.

I highly doubt that. But, in any case, revenue sharing is part of the team's business model. You can't divorce the team from that.

You can listen to Loria and Samson, or check MLB's 2001 numbers, or check Forbes' estimates. All claim the Marlins operating at a loss without revenue sharing.

You can't include it to say the Marlins are profitable. They aren't. The rest of the league is. And if people stop showing up in New York and Los Angeles, that money isn't being replaced.

 

Revenue sharing is part of the business model. Sorry.

Well, according to some of you, Loria's personal assets and those of any minority owners are as well.

 

OK, revenue sharing would be if the Marlins were playing in Miami or somewhere else. That doesn't mean an owner shouldn't be concerned one of his companies is underperforming. In business, managers tend to protect themselves from the potential loss of a major revenue source.

I have not seen it, but since you suggest that the marlins will be losing the revenue sharing as a source of revenue, where has this been reported? The potential loss means what? That something could happen? When? 5 yrs, 10yrs, never?

Otherwise, managers can milk an organization by not spending in order to extend their own source of revenue, their own pockets being fulfilled, but not improving the company's chances for long term success, thereby creating the very scenario they are prophesizing, only making it take longer. In business, those type of managers would be categorized as weak. Only interested in their own self preservation. But this is not about managers of a hypothetical company, this is about the owner of a company who can take some of the excess profits and in a show a integrity, use the revenue source, as well as retaining a portion of the profit for future endeavors, to improve their product substantially. There is a balance not shown by our owner that is the cause of much frustration. Most other teams forsake full profit maximization for a lesser profit by funnelling the revenue back into their product because that is the basic business concept and the engine that makes a profit system work.

I didn't suggest it so much as relate it to common business practices. Because revenue sharing allows the team to operate near bare minimum doesn't mean the club shouldn't be concerned about improving underperforming operations (i.e., stadium revenue, broadcast rights) or seek out new revenue streams (luxury boxes). They should be deftly concerned, because those underperforming segments will restrain or halt the very investments us fans desire of any financial benefit.

When attendance will suck with A-Rod and Cabrera, stadium revenues will suck at full capacity and the negotiations for a new stadium offer terms little different from the present situation, self-preservation is necessary. Like I said, it's a shame there's no quick fix and every year must be played out. Because every year brings more crap.