Financial Data Of MLB Teams Leaked
ROBERT SIEGEL, host:
We got a rare inside look at the economics of baseball this week when the financial reports of six major league teams were leaked, and it gives us some idea of how even some of the worst teams in baseball make money.
And joining us now as he does most Fridays is sportswriter Stefan Fatsis. Hi, Stefan.
STEFAN FATSIS: Hi, Robert.
SIEGEL: And fill us in here. What were these documents that were leaked?
FATSIS: Well, they were two recent years apiece, 2007 and 2008 or 2008 and '09, of financial statements for the Pittsburgh Pirates, the Florida Marlins, the Texas Rangers, Los Angeles Angels, Tampa Bay Rays and Seattle Mariners.
And the Associated Press first reported on Pittsburgh's financials. Then the sports site, deadspin.com, posted the actual documents for all six of the teams, leaving analysis to others.
This is an unprecedented trove of documents that baseball teams don't even share with each other, and it was very targeted, too. There's a range of teams here in terms of the size of the market and the amount of revenue that they generate, but more important, a range in terms of how much teams have spent and how they've attempted to compete on the field. The leaker definitely was out to prove a point.
SIEGEL: And what point, if any, do these documents prove?
FATSIS: Well, first, that baseball is profitable. But more so that teams that have stunk it up or cried poor, namely the Pirates and the Marlins, posted big profits thanks to money diverted from baseball's wealthiest clubs to its supposedly neediest ones.
And that's the process of revenue sharing in baseball. The Marlins, for instance, got almost $92 million in revenue sharing in 2008 and '09 and reported $33 million in profits while spending less than $60 million on its big league payroll.
In other words, Marlins owners appear not to have been spending their revenue sharing money entirely on making a better baseball team.
SIEGEL: This is the moral hazard of revenue sharing in Major League Baseball. Have those teams offered any defense of their spending?
FATSIS: Yeah, they have. I mean, the first thing that they'll point out is that revenue-sharing recipients not required to spend the money on big-league payroll. And it's also arguable whether the amount of these profits, if they had been diverted to a few big league players, would have changed the teams' fortune.
But the contrast here is really stark. And as for the teams' defense, the Pirates are vehement that they have spent millions to lay the foundation for a better team through spending on draft choices, opening an academy in the Dominican Republic.
The Marlins' defense is a little shakier. They were reprimanded by Major League Baseball this past off-season for how they spent revenue-sharing money or how they didn't spend it.
The Marlins have said in the past that they were losing money. And the explanation now is that they needed income to pay debt and improve they financials so they would be able borrow money to contribute to the construction of a largely publicly financed ballpark in Miami.
SIEGEL: Well, the Marlins and the Pirates are small-market teams that get money from revenue sharing and have not done very well on the field. On the other hand, the Tampa Bay Rays are in a small market, and they're tied right now with the New York Yankees for the best record in baseball. They would be an argument that revenue sharing can work and does work.
FATSIS: Yeah, and their financials show that they're the counterpoint here. The Rays profits more modest than the other teams. In 2008, they made the World Series. And if it weren't for that, they would have lost money.
The Rays have increased their spending dramatically on their big league payroll, and that's yielded good results. Talent evaluation, combined with more money, can yield success regardless of your market size.
SIEGEL: So which kind of club do you think is going to be the poster child for revenue sharing, the Rays, who show it can work, or the Marlins, who raise big questions about it?
FATSIS: Look, big-money teams have never liked this, but the Rays are an example of why it needs to continue. So I think we're going to see changes here, thanks in part to the release of these documents.
We've seen the big flaw. So what's going to happen? Potentially less shared money, stronger rules, oversight and penalties for teams in terms of how they spend that money and a new system with maybe a payroll floor to make sure that some of this money is spent on big league payroll.
SIEGEL: Thank you, Stefan.
FATSIS: Thanks, Robert.
SIEGEL: Sportswriter Stefan Fatsis, who talks with us about sports and the business of sports on Fridays.
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