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This week in “Last Week in BizBall, the Mets financial woes, issues in the upcoming CBA negotiations, Yankees’ investments in international free agents, Bob Bowman on Android vs. Apple and Cubs ask suite-holders if they want to pay for renovations.
The Mets were late, in comparison to many of their peers in MLB, but eventually they did follow the textbook model on how to build a financially successful MLB franchise in this era. In 09, they moved into a brand new ballpark with reduced seating capacity (scarcity of tickets = higher prices), seats closer to the field, fewer seats “upstairs” and the long requisite premium seating/amenities, all which would result in a big spike in revenues. They even sold the naming rights for $400 million. Three years prior they successfully launched their own RSN, SportsNet New York. As cable operators see sports programming as the key to preventing “cord cutting” (Comcast & TWC are the Mets‘ partners in SNY), a team owned RSN provides lucrative, locked-in/long-term guaranteed revenue. In addition, teams frequently undervalue the rights fees they receive from their own RSN (see dispute in sale of Cubs to Ricketts family), all the better to limit their exposure in MLB’s revenue sharing scheme. Save for the RSN, things haven’t unfolded as planned for the Mets. LWIB, Richard Sandomir and Ken Belson detailed how the Wilpon’s best laid plans were wrecked by two vital, and unpredictable factors, the economy and fielding a winning baseball team:
…revenue from about 10,600 club seats and suites and from advertising and concessions dedicated to paying off the Mets’ new $800 million home, Citi Field, fell tens of millions of dollars short of forecasts made just two months before the season began in 2009. That was followed by a nearly 20 percent decline in attendance in 2010 and a resulting slide in revenue that was compounded by an increase in stadium bond payments.
AND
In February 2009, two months before opening day, the team estimated in a financial disclosure document that Citi Field would generate $224 million — mainly from luxury boxes, parking, club seats and advertising — money that would be more than enough to cover their bond payments.
Yet the recession; ticket prices as high as $500, which alienated some longtime fans; and the Mets’ fourth-place finish caused revenue in 2009 to come in well short, at $180.4 million, according to audited team financial statements.
The report also details the Mets well documented debt servicing challenges. There are escalating payments on the bonds issued to finance the construction of Citi Field. They have reportedly maxed out their credit with MLB ($100 million from a loan and credit facility combined). Last year, SNY borrowed $450 million and the Mets refinanced $375 million of debt associate with the ballclub (see here). Plus, coming off a 79 win season, they Mets have further discounted tickets for 11. Oh, I almost forgot, Irving Picard also wants about $1 billion from the Wilpons. Oy.
SELECT READ MORE TO SEE DETAILS ON: The upcoming CBA, Yankees’ investments in international free agents, Bob Bowman on Android vs. Apple and Cubs ask suite-holders if they want to pay for renovation
- Prior to LWIB I had never read, or been aware of, The Yankee Analysts blog. But, thanks to Darren Heitner, I surfed on to William J.’s analysis of the upcoming CBA negotiations in MLB. This is as an informative, cogent and comprehensive examination as you will likely find. J. lists the CBA items important to the owners as, 1. Intl draft, 2. Slotting, 3. Expanded playoffs, 4. Drug Testing, 5. CBT, 6. “Super Two". On the players side, he sees the important issues as, 1. Salary Floor, 2. FA compensation, 3. Club debt threshold, 4. Minimum Salary. Of particular note to me were his comments regarding the possible implementation of an international draft. While I understand MLB’s motives in wanting an international draft (controlling escalating signing bonuses), I am more interested in the possible long-term impact on the baseball player “labour market”. (see here ) J. shares my concerns, “Of all the potential changes that could come as a result of a new CBA, an international draft would be the most disastrous. As I’ve argued previously, baseball’s immense investment in foreign countries has resulted in a golden age of talent. If owners are given an incentive to cease this investment, the overall talent pool is likely to suffer as a result.”
- The Yankees have been very aggressive in recent years in signing international free agents. Last year they doled out the second highest amount (just over $5 million) of signing bonuses to international free agents, behind only the Mariners. It appears the Yanks are getting a good return on their investments with C Jesus Montero (Venezuela) and P Manny Banuelos (Mexico) expected to soon play key roles on the big league team. In 09, the Yankees awarded C Gary Sanchez (Dominican Republic) a $3 million signing bonus. This off season, Baseball America ranked Sanchez as the Yankees #2 prospect, behind Montero. LWIB, the Yankees awarded a signing bonus of slightly more than $1 million to Dominican RH Juan Carlos Paniagua. Paniagua is 20 and likely would have signed earlier had he not been previously suspended for a year by MLB over age and identity fraud. Paniagua’s case is the most recent example of the success that MLB is having in cracking down on the decades old problem of age and identity fraud amongst prospects in the Dominican Republic. Ben Badler’s report also notes that RH Carlos Martinez, who the Red Sox awarded $1.5 million last April, had also been previously suspended for a year. Badler also notes that the Yankees are on the verge of finalizing a deal with RH Jose Rafael DePaula, subsequent to his serving of a one year suspension.
- I often think that I am one of the few remaining people (if we exclude persons under the age of 12) in North America without a cell phone. Many of you might be surprised to know that pay phones remain in existence, although they are increasingly difficult to find. But being a curious sort, I do occasionally read about the battle between Google and Apple for global domination. On that note, in this article , MLBAM head honcho Bob Bowman discusses the difficulties that his company encounters selling apps to Android users, as opposed to Apple. I think I understand the difference between “open” and “closed” and this seems to be at the crux of BAM’s challenges in selling Android apps. Apps infected with malware, “phony” apps pretending to be BAM products, folks “hacking” BAM apps and redistributing them…ultimately is it a result of Google’s ad supported business model vs. Apple’s retail model? I probably got all of this wrong, so you should read the piece.
- The Cubs have offered to renovate suites at Wrigley Field, if the suite-holder is willing to pay the tab of $11,000 - $15,000. At a quick glance, it makes the Cubs look kind of cheap and greedy. But Ed Sherman asked for both sides of the story and there is a reasonable explanation.
Last Week in BizBall will return March 28.
Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.
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Pete Toms 
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