Thursday, September 2, 2010
The Bottom Line of Bottoming Out
Last week, Deadspin.com unearthed financial documents for several MLB teams. Some of the teams, such as Seattle, showed a pattern of making money one season and correspondingly beefing up payroll the next. Others, such as Pittsburgh, cleared profits while maintaining basement payroll levels.
For many fans, columnists, and talking heads, this represents the ultimate affront. It is one thing to cry poor and not compete. It is another to cry poor, not compete, and turn a profit, they argue.
And they could not be more wrong.
For a country that cherishes its capitalist soul, our sports are shockingly socialist. Salary caps, revenue sharing, and luxury taxes all penalize the highest performers and bravest risk takers. The willingest spenders like the Yankees and Red Sox receive mixed messages from their sports: Try to win as much as you can, but you better not use all of your resources to do it.
But for the teams at the top of the revenue pile, these progressive penalties are only the cost of doing their very lucrative business. For every dollar perennial contenders have to surrender for trying too hard, they make back several in the spoils of winning. It is the teams at the bottom who have a tougher decision to weigh.
The Pittsburgh Pirates have not been a factor in the National League in nearly two decades. Since Barry Bonds' exodus to San Francisco, few Pirates have inspired any enthusiasm from Pittsburgh baseball fans. And meanwhile, ownership has recorded profits by balancing payroll and reaping its loser's take of MLB's revenue sharing funds.
To many baseball fans, this is an outrage. To summarize their anger, it seems like the Pirates do not care about winning. After all, if those cheap misers would just spend more money, they would certainly win more games, right?
Unfortunately, baseball economics are not that simple. In today's market, there are two ways to acquire major league talent: grow it in the farm system or pay for it on the open market. The problem for lower revenue teams like the Pirates, Royals, and Astros is that competing for a pennant takes a lot of talent. And when a proven high talent player becomes available to the entire market through trade or free agency, his value is a secret to no one.
But more importantly, the Pirates, Royals, Astros, and their cellar brethren are much farther away from the level of talent needed to win big. For teams on the cusp of contention, spending $10 million on a starting pitcher might be the difference in winning 92 games instead of 89. This might sound insignificant, but that jump in wins very easily could be the difference in making the playoffs or not, earning playoff revenue or not, and winning the World Series or not. On the other hand, the 3 extra wins that pitcher brings to a 70-win team are virtually meaningless. At best, that might be the edge in not finishing last in a division.
And this is why I have a hard time mustering any anger toward Pirates' ownership for not reinvesting a few dozen millions at this point. Maybe Pittsburgh could have budgeted a few million more toward the draft and international signings, but those are not the areas where most critics want to see the Pirates bleed green.
What good would it do the Pirates to dump $10 or $20 million per year into veterans that will not be part of their long-term success? Lower revenue teams have to play boom-and-bust franchise construction. They cannot replenish their major league talent through free agent bidding wars, so they have to collect cheap assets in hopes that they peak in a competitive window of opportunity.
So spare me the arguments about civic duty. Major league franchises are not charities or non-profits. And I do not care that MLB owners by nature had to be rich in the first place to buy their teams. When teams take major losses (as many are in all major sports), where are their safety nets?
When teams perform poorly year-in, year-out, fan suffering is inevitable. But during those dry spells, there is no reason the team's finances should be obligated to suffer annually along with them.
Corrie Trouw is the founder of Pisgkinology.com.