Last night, sensitive financial information from 2007 and 2008 was leaked regarding the Pittsburgh Pirates detailing how MLB’s club with the lowest payroll has profited, its revenue-sharing figures, and details around television, concession, ticket revenues, and more.

But that was just the tip of the iceberg.

Today, Deadspin released, not only the Pirates documents, but the financials from Rays, Marlins, Angels, and Mariners (separate posting) painting a picture that shows clubs at the low and middle level of player payroll spending are, for the most part, pulling a profit.

The documents that detail 2007 and 2008 for the Pirates, Mariners, Rays, Pirates and 2008, 2009 for the Marlins and Angels are, simply by volume, the largest collection of sensitive financial documents that have ever been released to the public during the Selig tenure; maybe ever. Another club’s information is also in-hand, but due to it not being in PDF format, the details are slated to be released separately.

With the exceptional amount of information within each club’s document, The Biz of Baseball will be dedicating several articles – one for each club’s documents – over the course of the next few days. This initial report will detail key like revenues that are rarely available.

For every year in the documents, Operating Income (sometimes called Operating Profit), a form of earnings before tax and interest, for each of the clubs, with the Mariners in 2008 the lone exception, shows them running in the black. It should be noted that this figure does not show a true level of profit as there are long-term liabilities and investments, but it is a solid measure. The club with the most operating income has also been one of MLB’s longest running receiver of revenue-sharing, the Florida Marlins. The club, which received $47,982,000 in revenue-sharing in 2008 is shown to have an operating income of $39,214,000 (the following year dips dramatically due to new stadium investment).

Below is the Operating Income for each year and club in the available documents released today:

Digging deeper, Net Income , which calculates  revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other expenses, and therefore, gives more weight to "true profit" (minus long term debt) breaks down as follows:

Based on the revenue sharing system, 3 of the 5 clubs in the Deadspin document release were receivers (payees) of revenue-sharing (Marlins, Pirates, Rays), while the Mariners and Angels were payors. Below is a breakdown of the revenue-sharing figures:

Since the Angels and the Rays both made the playoffs during the period of the documents, a rare look at how much clubs can make is outlined. It should be noted that how much a club makes is not based on revenues for each postseason game played at the home team’s ballpark. The following shows revenues that go to the players are broken out for postseason play (see the Major League Rule for added details):

• Sixty percent of the total gate receipts from the first four World Series games;
• Sixty percent of the total gate receipts from the first four games of each League Championship Series; and
• Sixty percent of the total gate receipts from the first three games of each Division Series.
• Based upon this, ownership profits are 100 percent for any games after that are “deciding”.

Television and radio revenues are also within the documents, and with it, how MLB’s television territories are defined (see the map here) has a large bearing on the amounts that a club can pull in with rights contracts. Based on the TV territories map, notice the size of the area that the Mariners claim, then look at the listing below, and it’s obvious why the club pulls in the largest amount of the clubs in the Deadspin documents.

There’s always been a conversation by fans that concessions must be a cash cow for clubs given the cost to fans, but in looking at the Deadspin financial docs, that does not seem to be the case. With clubs hiring concessionaires, such as ARAMARK to handle equipment and associated costs, clubs get a cut of the profits. While averaging total attendance against total revenues is not a perfect method of showing per cap, it does allow an “apples to apples” comparison of the clubs. The most interesting aspect? Look at the bounce the Rays got in 2008:

* Includes parking revenue

Finally, the way that the CBA is structured, clubs receiving revenue-sharing do not have to allocate all of what is received and use it against Major League payroll. The clause within the Agreement is designed to have flexibility for funneling some (or presumably, all) of it towards player development . So, how do the Marlins, Rays, and Pirates stack up against the Mariners and Angels? The answer is, it’s not easy to completely define. Remember, while the Deadspin documents show an incredible amount of information, the manner in which clubs classify costs isn’t always described, or itemized the same. As an example, the Angels breakout Minor League Operations and Scouting. The Marlins have “Baseball Operations and Administration” with amateur draft bonuses broken out. For the Rays, “Scouting, Player Development, and operation of farm clubs” is all rolled into one. So, those looking at the table below may see something that should be added or subtracted. We’ll see if any clubs (or the league) contacts us over them. If so, adjustments could be made. But, based on the initial question around whether low revenue makers invest more in player development, the answer appears to be, yes.

There is certainly more to these docs. As mentioned, there is enough for articles for each one (e.g. how much did the Marlins get to write off on stadium development in 2009? $6,055,000). Of more interest will be how the league reacts to the documents becoming public. This story will have far reaching implications. For now, here are the documents, minus the Mariners. Here is a separate post for the Mariners, with another club forthcoming.

RELATED CONTENT:

• Pirates' finances show losses kept to the field (Pittsburgh Tribune-Review)

Maury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey, as well as a contributor to FanGraphs and Forbes SportsMoney. He is available for hire or freelance. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network.

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Comments (8)

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thanks
written by Jason Collette, August 23, 2010

Thanks for outlining this against the other teams. The difference in TV and concession dollars between the FL teams and the others is rather surprising, even with attendance issues put in play. I'm most shocked by the lack of TV revenue. I wonder if Tampa Bay has a projected revenue model for what they could pull in for concession if they moved the stadium to the other side of the bay; I don't think the TV money would be affected in the slightest.

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Concessions
written by Will Carroll, August 23, 2010

I have a hard time buying the concession revenue. It can't be as simple as revenue -- are we sure they're not reporting PROFIT rather than revenue? In Pittsburgh last month, I bought about $30 in food and beverages, plus a hat. I watched a concessionaire sell 100 bottles of water in my section alone on a hot day. I just have a hard time imagining that revenue is $10 pp, let alone $5 pp, let alone less. I can believe that the profit margin is thinner than we believed, but even then ...

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Concession II
written by Mitch, August 23, 2010

I think it probably is a function of the agreement with Aramark (or Centerplate, or whoever). The concessionaire covers their costs, and then splits the remainder based on some percentage. So it's technically revenue, but it also has no offsetting cost.

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Concession III
written by Bruc, August 23, 2010

It's also possible that some of the concessions revenue would turn up elsewhere. For instance, the vendor might pay a fee upfront for the exclusive rights, which would be recorded one place in the financial data. In that case, the shared revenue from sales would be recorded in another place, would have no offsetting expenses, and would be only a portion of the total generated by concessions.

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Minor Point
written by Shoeless, August 23, 2010

Operating income reflects the "cost" of doing business (salaries, stadium upkeep, etc, etc).

To help non-finance types, you may be better served when defining Net Income to change the word "cost" to "financing" -- which broadly includes everything you mention (ie depreciation, interest, taxes, and other expenses which are usually defined as unusual and extraordinary).

Very sad day to learn the poor (losing teams) get richer by taking $$ from the teams trying to compete.

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Deadspin
written by bigtrojaned, August 24, 2010

They mentioned that salary can actually be written off, how do they do that? Is it considered a capital a*set and they write off the depreciation?

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small type
written by batpig, August 24, 2010

Maury - great stuff, but I noticed an error in the first chart. You accidentally used the 2008 Pirates Net Income for the table on Operating Income. 2008 Pirates Operating Income was $21,790,402.

You can definitely see why other owners are pissed at the Marlins!

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I looked at the Marlin's information
written by Maija, August 25, 2010

The Marlin's financial information says that the Partners who own the Marlins have a deficient capital of $61.4 million... I'm not an accountant or into finance, but doesn't that mean that the Marlins, in the long run, owe more than they are worth?

Also, it appears that the financing for the Marlin's new stadium is being included in their accounting.

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