Marlins revenue and operating expenses - some facts

[...]

There have been numerous false claims made all over many threads to the effect that due to revenue sharing and the central fund the Marlins have a profit "before they sell a ticket" and that therefore Loria has piles of money laying around to spend on payroll.

 

Before dealing with the figures for '12 and '13, let's go back to '09.

 

Before the leaked financials, I put together some rough guesstimates. I was about 20 mill low on expenses and 30 mill low on revenue, mainly because I didn't try to hang any numbers on "other stuff" other than a "+" sign, as in "108+."

 

Here are the ACTUAL numbers from the leaked '09 financials:

 

Revenue:

31.6 Central fund (Stark estimated 40, I used it)

44.0 Revenue share (Stark estimated 35)

16.7 Local radio/tv (Stark estimated 12)

21.5 Gate (Forbes estimated 21)

21.7 Other stuff (all actual numbers) -

Concessions 2.6

Advertising 1.5

Sponsors 3.3

Parking .5

Other .4

Merchandise 7.6

Joint venture 2.1

MLB media 2.9

MLB Network .8

135.5 Total actual revenue (I estimated 108+)

 

Expenses:

43.0 Player payroll (MLB estimated 36.8, I used it)

4.8 Interest on debt to acquire team (87 mill per Forbes, I assumed an 8% rate and estimated 7.0)

8.8 Advertising/promo (I estimated 5.0)

66.3 All other expenses (I estimated 53.6 made up of:

15.0 Player-development system (Manfred)

9.0 Cost of acquiring players through draft/internationally (Manfred)

4.4 Addition to sinking fund to retire debt to acquire team assuming 20 year term

5.0 MLB pension fund (Stark)

5.0 MLB operations fund (Stark)

2.7 Front office (1.5 Beinfest .2 Hill .5 Freddi, secretaries/support .5)

2.0 15 players on the 40-man roster who are not in MLB

1.5 Hotel and per diem for road games

1.2 Coaches: bench, hitting, pitching, 3B, 1B, bullpen, tot 6 at .2

1.1 Chartered airplane 10-12k/hr, 10 hrs flying time on 10 road trips

1.0 Lawyers/CPAs

1.0 General liability insurance

1.0 Ushers/security/ticket takers/misc ballpark expenses

0.7 1.45% medicare FICA on entire payroll (est 45 million)

0.6 6.2% on 106.8 social security FICA (est assuming 60 making 107K and 60 making 50K)

0.6 Health ins 5K@ for 120 employees

0.5 10 clubhouse/equipment/videotape guys

0.2 Office space for 100 employees

0.1 Baseballs, bats, uniforms

1.0 Miscellaneous junk I haven't thought of)

 

122.9 Total actual expenses (I estimated 102.4)

 

I was about 13 million light on "all other" expenses and think that was mostly made up about 4 mill in stadium rent and liability insurance and about 6 million for 80 non-player employees at 50K each plus benefits, as the Marlins have over 200 employees and I had assumed 120.

 

The remaining shortfall could be accounted for by benefits costing more than I assumed. The rest of the 20 million total discrepancy in my original guesstimates is accounted for by about 6 million of MLB player payroll and about 4 million of advertising, less about 2 million of debt interest.

 

However, the most important FACT to be gleaned from the ACTUAL '09 revenue and expense figures is this:

 

Expenses for everything other than the MLB player payroll were 79.9 million in '09.

 

Assuming 2% inflation, those expenses grew to about 84.8 million in '12. MLB player payroll was 102 million (Cot's) and total expenses in '12 were about 186.8 million.

 

What's happened to revenue since '09?

 

Gate-yield was up about 30 million.

 

Central fund (based on national TV deals) was apparently down about 8 million to 23.7 million (this will go up to about 50 mill/PER TEAM in '14 -- holy crap! Serious money!)

 

Revenue sharing averaged about 27 million/team in '12, so I'll use that, nobody outside the FO and MLB's FO and other FOs knows the real number.

 

Concessions - Advertising/sponsors - Merchandise, etc. were probably up about 10 million.

 

So, revenue of 135.5 mill in '08 probably grew to about 150.5 mill in '12.

 

Forbes estimated revenue for '12 was 148 mill -- the lowest for any team. Sounds reasonable.

 

My current estimated loss for '12 is thus about 36.3 million. Using Forbes' revenue number, it's 38.8 million. The Marlins say the loss was about 40 million.

 

In '13, non-MLB player costs will inflate by about 2 mill to about 86.8 mill.

 

If they project an average '13 ticket price of 27 (down 10% from '12) with paid attendance of 1.8 million (down 20% from '12) 77% (typical yield to the home team) of that is 37 mill. So gate-yield will likely decline by about 14 million. Or more, if they are too optimistic about '13 sales.

 

Costs up 2 mill. Gate down 14 mill. Concessions and merchandise sales will also suffer by some not insignificant amount, say 2 million.

 

Revenue back down to around 134 mill, non-player expenses up to 87 mill -- that leaves 47 million for player payroll. Less if you assume they want to leave a little margin for error and/or try recoup some of the 35-40 mill they lost last year.

 

But, in '13 we owe 8.5 mill to TOR for Reyes, etc., 4 mill to AZI for Bell and 2.5 mill to Ozzie, total 15 million for guys who aren't here.

 

So, that leaves 32 million.

 

Nolasco: 11.5

Polanco: 2.75

Hechavarria: 1.75

Pierre: 1.6

Dobbs: 1.5

Mathis: 1.5

Turner: 1.5

Rauch: 1.0

Webb: 1.0

16 other guys @ ~.5: ~8

 

Total: ~32.1

 

And there you have it.

 

See? There is a method to their madness, but none of it has to do with "greed" or "thievery" or "screwing the fans." It's just a business. And there weren't enough fans (from whatever county) to justify continuing to lose with a big payroll. Those guys had to go. Simple as that.

 

The good news is that next year they will pick up something like a 26 mill increase in central fund TV revenues and they will only owe 6.5 mill for guys who aren't here, down from 15 mill this year. That's 34.5 mill they'll have to spend next year that they don't have this year. If they somehow manage to contend this year, that'll help the gate yield and concession and merchandise revenue.

 

-----

 

I'm adding the words "Loria is a crook" so I can easily find this the next time there is an outburst by those who want to lynch Loria for no good reason.

[YearOneMarlinFan]

There may still be good reasons for wanting to lynch Loria, but those who think he's a crook or making big profits ought to come up with a similar analysis when making that accusation. Otherwise it's just name-calling.

[YearOneMarlinFan]

And to "...", that analysis is much more credible without the words "morons" and "illiterati" attached to it. That's a better approach.

[Michael]

Usually, I skip through ...'s lengthy posts, but I read through this one, and I must say, well done. Good job on the research, and for completely backing up your argument with data provided.

 

I shall give you one like.

[...]

That analysis is much more credible without the words "morons" and "illiterati" attached to it. That's a better approach.

 

Well, that sentiment is nice, but I'm tired of morons and the financial illiterati propagating outright lies.

 

If someone wants to call Loria a thief they can certainly do so, but they also have to expect to be called on it. So I have. Repeatedly. And I really don't care whether anyone thinks I'm being rude or I take a "better approach" when I point out why they're full of it.

[...]

Not to mention not selling the naming rights

 

Yeah. I haven't figured out how that happened to this day. Maybe 5 million foregone. I have no idea how that happened. Maybe they have a new plan for this year and the future. Let's hope so.

[...]

Usually, I skip through ...'s lengthy posts, but I read through this one, and I must say, well done. Good job on the research, and for completely backing up your argument with data provided.

 

 

Thank you. I appreciate it.

 

Just be glad that I didn't garbage up the post with all of the links backing up what I said, it would have been much, much, much longer.

 

:lol

[Admin]

I thought they lost closer to 30 mil just on quick in my head calculations from the 09 leaks. Its definitely worse. They are dumb. They really truly banked the 2012 season on every game selling out AND making at least the playoffs to turn a decent profit. Wow. This isn't the right sport to do that in. Not to mention not selling the naming rights and other advertising space inside the park. I wouldn't even call 2012 a miscalculation. They must have been high.

 

It sounds like they expected 34,500/game on average. It's pretty idiotic to construct payroll around that projection when it's pretty obvious that Miami sucks as a baseball town.

 

If they were banking on 2012 playoff revenue, they are even more dumb. That team was a fringe contender on paper at best.

[Hotcorner]

Personally I don't use the word crook with Loria. I just think he does a crappy job as the owner of a major league baseball team.

 

He deserves plenty of the blame for the situation he's in. It's not the worst thing in the world to dump a lot of bloated contracts and "hit the reset button" or whatever he wants to call it. But in the context of this team with this history and this new stadium, you can't do it and not expect the sh*t to hit the fan.

 

I'd give him more credit if he just admitted they probably misjudged in spending more than they should have, instead of this stuff about oh we weren't winning so I'm selling off everyone after 1 year, even though many of the guys we sold off weren't the problem. Josh Johnson, Jose Reyes, and Mark Buehrle while not all-stars were not the reason that team lost every game. And Bell was his own dumb idea, it's rumored that the John Buck contract was too. No sympathy. Their total 2012 record is irrelevant since the lineup by August & September wasn't even remotely the same team.

 

Let's say everything went roses and they got their projected 2.8 million fans - that would've been what, an extra 14 million revenue then? 36 million in losses is unsustainable but 22 would've been fine? That's what smells here, the notion that "see we wouldn't have needed to do this if Reyes and Buehrle just played better." They're the ones who failed to land a stadium sponsor and blew their projections. They're the ones who spent it all before they had a single season to see what kind of turnout the stadium would bring. No sympathy here.

 

thanks for the numbers though ..... nice to have it all together.

[YearOneMarlinFan]

Personally I don't use the word crook with Loria. I just think he does a crappy job as the owner of a major league baseball team.

 

He deserves plenty of the blame for the situation he's in. It's not the worst thing in the world to dump a lot of bloated contracts and "hit the reset button" or whatever he wants to call it. But in the context of this team with this history and this new stadium, you can't do it and not expect the sh*t to hit the fan.

 

I'd give him more credit if he just admitted they probably misjudged in spending more than they should have, instead of this stuff about oh we weren't winning so I'm selling off everyone after 1 year, even though many of the guys we sold off weren't the problem. Josh Johnson, Jose Reyes, and Mark Buehrle while not all-stars were not the reason that team lost every game. And Bell was his own dumb idea, it's rumored that the John Buck contract was too. No sympathy. Their total 2012 record is irrelevant since the lineup by August & September wasn't even remotely the same team.

 

Let's say everything went roses and they got their projected 2.8 million fans - that would've been what, an extra 14 million revenue then? 36 million in losses is unsustainable but 22 would've been fine? That's what smells here, the notion that "see we wouldn't have needed to do this if Reyes and Buehrle just played better." They're the ones who failed to land a stadium sponsor and blew their projections. They're the ones who spent it all before they had a single season to see what kind of turnout the stadium would bring. No sympathy here.

 

thanks for the numbers though ..... nice to have it all together.

 

This, exactly.

[Piazza31]

I appreciate you taking the time to break this down. I saw somewhere you said you had the background to break this down as well professionally, what profession was that and you should add that in your first post to add even more credibility to your facts showing your qualified to break them down as well.

 

Nice post, I underestimated how far in depth you'd go Wednesday when you mentioned you'd do this.

[Anonymous]

This just proves that Loria should not be running this baseball team.

 

As for the extra 35 million for next season, we'll see if he will use it rather than pocket it.

[Mr. Man]

I don't care about the finances. I care about him making baseball decisions. Let someone else have the last say on baseball decisions. Get the best baseball people to make baseball decisions for the franchise and step aside.

[Admin]

Heavily backloaded contracts, players like stanton hitting arbitration...even in a best case scenario, would they have been able to afford the team through 2013-2016? That's my issue.

 

I think that deep down everyone knew that the spending spree last offseason was too good to be true even with the new "revenue stream" provided by the ballpark.

 

I admit that I was excited to some extent that the Marlins were finally spending money for once, but deep down I realized that the Marlins were spending money recklessly and that they weren't going to field a contender despite having a massive payroll.

[Admin]

I don't care about the finances. I care about him making baseball decisions. Let someone else have the last say on baseball decisions. Get the best baseball people to make baseball decisions for the franchise and step aside.

 

This is why I'm upset with Jeffrey Loria. I'm not one of the people calling him a crook or exploiting the revenue sharing system.

 

It's clear to me that both Loria and Samson are not qualified to be involved with baseball operations and yet they have a major influence in this area. This influence is detrimental. They also refuse to hold accountable the people who are in charge of baseball operations (Beinfest and Hill) who both have done a pretty disappointing job in recent years.

 

I'd warm up to Loria if he simply brought in new baseball people with new philosophy and if Loria himself stayed the hell out of baseball decisions.

 

In other words, the issue isn't so much Loria being a "crook." It's about the people making the baseball decisions being incompetent at doing so.

[Anonymous]

You would think he's learned his lesson by now in terms of not making any baseball decisions. Then he comes out and says he won't offer Stanton a contract extension this year. Doesn't seem like he will ever stay out of baseball decisions.

 

And FWIW, after reading the thread, I admit I may have been wrong on calling Loria a crook. He might spend again one day but he's still a very bad owner.

[Entendu]

It seems like he's just trying to go against people. Why the hell would you not offer Stanton a contract this year? There's no plausible explanation for that...

[...]

I appreciate you taking the time to break this down. I saw somewhere you said you had the background to break this down as well professionally, what profession was that and you should add that in your first post to add even more credibility to your facts showing your qualified to break them down as well.

 

Nice post, I underestimated how far in depth you'd go Wednesday when you mentioned you'd do this.

 

I have a finance/economics/accounting background. Long ago retired from managing money in the futures markets. I just trade for myself now. And dig through financials and compose long baseball-related posts when I have nothing better to do.

 

:lol

[...]

Let's say everything went roses and they got their projected 2.8 million fans - that would've been what, an extra 14 million revenue then? 36 million in losses is unsustainable but 22 would've been fine? That's what smells here, the notion that "see we wouldn't have needed to do this if Reyes and Buehrle just played better." They're the ones who failed to land a stadium sponsor and blew their projections.

 

You're correct on the paid gate thing -- 2.8 paid versus 2.2 paid at 29.62 (or whatever it was) at 77% yield to the home team is about 14 million.

 

But, because turnstile clicks were only 1.4 mill, that would imply an additional 1.4 million projected bodies who weren't there to buy food, liquor, merchandise and parking.

 

Team Marketing's Fan Cost Index (ignoring ticket costs) for 4 people (assumed to be a family) includes (using Marlins prices):

2 draft beers: 16

4 soft drinks: 18

4 hot dogs: 24

parking: 15

2 programs: 10

2 adjustable caps: 40

 

Total food, liquor, merchandise and parking: 123.

 

Which is about 31/head. At profit margins to the Marlins of around 90%. Most of the stuff is closer to 95%. The food here, most of which isn't 30 cent-cost hot dogs is much less profitable. So, call it 28/head. Or, to be conservative, let's call it 25/head, about an 80% net margin overall.

 

1.4 million missing heads at 25 bucks each is 35 mill of missing net revenue.

 

If 2.8 mill turnstile clicks happen, -22 mill turns into +13 mill and everyone is happy.

 

Like I said, I have no clue why a stadium naming rights deal didn't get done. Citi Field brought the Mutts 20 million per year for 20 years, so "Marlins Park" ought to be good for at least 5 mill/yr. The Twins/Target Park deal is estimated to be 5 or 6 mill/yr. Similar sized market, similar sized stadium.

 

That 5 mill would've turned +13 into +18, a low but reasonable return on investment.

 

But, +18 (or even +13) turned out to be -35 to -40. No surprise that the '12 team was trashed.

 

Even if Marlins fans on average are real cheapskates and the Fan Cost Index components are off by half and the Marlins knew it (say, based on actual experience and knowledge of purchasing patterns at the old digs,) there was still 17.5 mill of missing revenue. In that case, with naming rights sold for 5 mill, '12 would have been about break-even and the changes probably less drastic.

 

It's all about the warm bodies actually showing up and spending money. The yield from food, liquor, merchandise and parking is almost certainly higher than the gate yield on a per-head basis for those who actually show up.

[BroncoBob27]

Not to mention not selling the naming rights

 

Yeah. I haven't figured out how that happened to this day. Maybe 5 million foregone. I have no idea how that happened. Maybe they have a new plan for this year and the future. Let's hope so.

 

They did say a couple of times they were close to sealing a deal on naming rights. I wouldn't be surprised if corporations were slow on pulling the trigger because mostly of the org's reputation and, to some extent, the fan base's reluctance to attend games. Of course it may also be that the org was demanding some kind of astronomical price and/or contract demands.

 

Now it's going to be an even harder sell. I think it will be called Marlins Park for quite some time.

[...]

They did say a couple of times they were close to sealing a deal on naming rights. I wouldn't be surprised if corporations were slow on pulling the trigger because mostly of the org's reputation and, to some extent, the fan base's reluctance to attend games. Of course it may also be that the org was demanding some kind of astronomical price and/or contract demands.

 

Now it's going to be an even harder sell. I think it will be called Marlins Park for quite some time.

Yes, they did. I was expecting it to get done. And then -- nothing, month after month.

 

Very strange. No idea what happened. How could a deal not get done? The Twins/Target deal at a rumored 5-6 mill set the market, even though the actual terms of that deal weren't published.

 

Maybe they were being low-balled at 2-3 million and just refused to do it.

 

They did get the interior section sponsorships sold and sold a fair amount of outfield fence ads. Maybe in '14.

 

Now, if they could just get the idiots at the City of Miami to relinquish the rights to lease the empty parking lot ground-floor retail spaces ...

[Admin]

Great breakdown .., thank you for the time and effort you put in.

[The_Punisher]

So to sum this all up. In other words, LORIA NEEEDS TO SELL THIS TEAM!!!

[AeroFishOne]

They haven't sold the other two quadrants inside the park have they?

[hardw0od]

Here's my take on this situation.

 

 

I appreciate all of what was written about the team's finances and what actual revenues were.

 

 

My desire for wanting Jeffrey Loria out has nothing to do with finances, rather it has to do with the fact that the man simplay cannot afford to have a baseball team. While he is wealthier than you and I, he simply does not have the funds to take financial hits when they arise.

 

I have never met a businessman who keeps his money in an investment that continually loses him money. It makes no business sense whatsoever. If a 5 million or 10 million dollar loss has you hitting the panic button, then you are in the wrong business. Jeffrey Loria is not Micky Arison or Stephen ross who scoff at losing 10 million dollars, Jeffrey Loria shrivels at the mere thought of losing that money. Although, I still strongly believe that at the end of the day he is making money out of this deal, because like I said no businessman is stupid enough to be in a losing venture for a decade. Maybe he keeps the team as a sort of social status thing, but he ain't fooling anyone.

 

Micky Arison lost money with the Heat year-after-year and his remedy was to go and add the best player in the world and invest more in the team. Why? Because he can weather through the bad times until profits come. Now, the Miami Heat are the envy of the NBA and have the most marketable team on the planet, with the best player on the planet. They sell out EVERY game. Mind you, the Heat also have a crappy TV contract and have many of the same expenses that the Marlins do.

 

Bottom line: If you can't afford to lose some money on the road to success, then you're better off getting rid of the team. Jeffrey Loria cannot afford to keep the team and we cannot afford to have the man as the owner any longer.