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Brutus
07-14-2009, 04:10 PM
After months of beating around the bush, the Player's union took a stronger step today in accusations of collusion against the owners...

http://sports.espn.go.com/mlb/news/story?id=4326955

This is really amusing. It really is.

Is it too much to ask that common sense prevail? Perhaps no one wanted Barry Bonds because of steroids accusations and the fact he was potentially a convicted felon. Perhaps owners, oh I don't know, might be finally tired of paying for salaries? And lastly, maybe the 2008 free agent market was not very active because - shock - the economy is in the doldrums and teams were afraid to dish out money with the instability and uncertainty?

This is a tricky step for them. They run the risk of alienating themselves by accusing owners of colluding during such an unstable financial economy. People losing jobs all over the place and the Player's Union complaining that teams are conspiring to not throw money around? I've heard it all.

reds1869
07-14-2009, 04:26 PM
If there were truly collusion on the part of the owners, would the Reds have signed Will T to the contract they did? I mean, seriously? I lost my job in public education due to budget cuts. Does that mean the state government and school district colluded to get rid of us? No, it means they had to do what they did to meet economic realities. The players are looking for a fight and I fear major league baseball would never recover if they got one.

Brutus
07-14-2009, 04:43 PM
If there were truly collusion on the part of the owners, would the Reds have signed Will T to the contract they did? I mean, seriously? I lost my job in public education due to budget cuts. Does that mean the state government and school district colluded to get rid of us? No, it means they had to do what they did to meet economic realities. The players are looking for a fight and I fear major league baseball would never recover if they got one.

I agree on all accounts. That's the problem though... if the players are looking for a fight, they would be wise to pick their battles more carefully. This would be a major black eye if they pursue it more strongly, and if people left this time, many may never return.

With so many people out there, just like you, losing their jobs over budget cuts, it takes real stones to cry foul over making a few million less.

I'm not overly sensitive about the economy. However, this reeks for me. And Scott Boras has the nerve to say it's unfounded that the economy has effected baseball?

Always Red
07-14-2009, 07:59 PM
"Some of us, let me be as blunt as I can be, have to live in the real world, not in some make-believe little scenario that doesn't exist. And I mean that very, very sincerely," Selig said. "They can say whatever they want to say. I wouldn't even waste my time reacting to that."

That might be the best thing I have ever seen Bud say.

Little Scotty Boras didn't make as much money as he planned to this year. Boo hoo. Don't just look at the US economy- take a look around the world. And there are no green shoots, either. Looks to me like the owners are all going to decide again not to pony up big bucks for has-beens, ne'er do wells and steroid heads, and go with the young bucks again.

One man's collusion is another man's common sense.

1869, I hope you are teaching again this fall.

UKFlounder
07-14-2009, 08:04 PM
Is that quote from the same Bud Selig who makes like $17 million per year as a salary? What a "real world" that must be...


That might be the best thing I have ever seen Bud say.

Little Scotty Boras didn't make as much money as he planned to this year. Boo hoo. Don't just look at the US economy- take a look around the world. And there are no green shoots, either. Looks to me like the owners are all going to decide again not to pony up big bucks for has-beens, ne'er do wells and steroid heads, and go with the young bucks again.

One man's collusion is another man's common sense.

1869, I hope you are teaching again this fall.

Brutus
07-14-2009, 08:12 PM
Is that quote from the same Bud Selig who makes like $17 million per year as a salary? What a "real world" that must be...

What does that have to do with anything? No one is critiquing someone's salary, but rather responding to the ridiculous claims made by the union insinuating teams are colluding to refuse paying salaries.

It's not important that Bud, the players or anyone else is earning this money. The issue is having the nerve to accuse others of using the economy to their advantage.

hebroncougar
07-14-2009, 09:15 PM
Now might be the time for owners to bust the union wide open and go for a cap. With idiotic statements like this, public opinion would certainly be with the owners.

UKFlounder
07-14-2009, 09:16 PM
I thought it was wrong how he tried to paint a "them vs us" picture as being like "greed vs the real world" as though he is that much different than them. Perhaps I overracted to his choice of words or mis-interpreted them. My bad if so

Highlifeman21
07-14-2009, 09:23 PM
Another fine moment during Selig's legacy...

Brutus
07-14-2009, 09:25 PM
I thought it was wrong how he tried to paint a "them vs us" picture as being like "greed vs the real world" as though he is that much different than them. Perhaps I overracted to his choice of words or mis-interpreted them. My bad if so

Well, if that's what you took away from his quote, his salary would be relevant. So that does make sense.

However, I just took his response to mean that the union is living in a fantasy world if it thinks owners are colluding against the union and using the economy as leverage to do so.

Tony Cloninger
07-14-2009, 10:41 PM
How is this on Bud's legacy?.....it's way more on the players who have not lived in the real world since after the last strike.

Falls City Beer
07-14-2009, 10:47 PM
Remember when attendance was going to be down by 20% this year?

Tony Cloninger
07-14-2009, 10:49 PM
The union has always said..... don't complain about the salaries....if you don't like it....do not pay it. Then when they don't it has to be collusion. It was obvious back when Dawson gave the Cubs a blank check and fill in whatever $$.... now, if owners are smart....they do not sign bad players to big money contracts.

Scrap Irony
07-15-2009, 12:27 AM
It's going to be next to impossible to prove collusion this time, as the economy backs up owner's claims of tightening belts (as does the Texas situation). It's also going to be impossible to break the MLBPA. Too much money and, oddly, too much solidarity.

cincinnati chili
07-15-2009, 02:19 AM
I for one think the teams acted in concert to boycott Bonds. Love him or hate him, that's collusion.

TheNext44
07-15-2009, 05:33 AM
I seriously doubt that the Players Union goes ahead with this. They are simply in the "research" stage, probably just to keep the agents who are bringing this up happy.

And collusion is proved by showing communication between the owners on this subject. Just the fact that salaries went down, or that some players did not get offered contracts, would not stand up in court.

REDREAD
07-15-2009, 11:30 AM
The union has always said..... don't complain about the salaries....if you don't like it....do not pay it. Then when they don't it has to be collusion. It was obvious back when Dawson gave the Cubs a blank check and fill in whatever $$.... now, if owners are smart....they do not sign bad players to big money contracts.

I actually do think the owners are colluding. They are just being a lot smarter about it now. They are letting guys like Texeria and CC get the big contracts. You mentioned Dawson. IIRC, Lance Parrish, who was a premier FA catcher had to wait until spring training to get a sub million dollar contract.

Now the owners are being smart and not paying a huge amount of money for the non-superstars. Abreu is a good example. Burrell is another. The owners didn't get insanely stupid and offer only 1 million, they decided instead to only offer about 70-80% of what was expected.

I expect this squeeze to continue, even as the economy recovers.

Roy Tucker
07-15-2009, 01:47 PM
I for one think the teams acted in concert to boycott Bonds. Love him or hate him, that's collusion.

I'd think more that they somewhat independently all arrived at the same conclusion, i.e. signing Bonds would be a huge headache.

Has MLB seen a hit on attendence?

Falls City Beer
07-15-2009, 01:49 PM
Has MLB seen a hit on attendence?

About a 6% drop. Mostly a result of the NY ballparks.

Scrap Irony
07-15-2009, 02:37 PM
The owners didn't get insanely stupid and offer only 1 million, they decided instead to only offer about 70-80% of what was expected.

And the world economy dropped around 40%. Sounds like financial planning from an owner's perspective, not collusion.

Or at least that could be the argument owners take.

Yachtzee
07-15-2009, 03:57 PM
I would argue the global economic outlook has something to do with it, not just from a baseball perspective either. Just about all MLB owners are involved in businesses other than baseball. In good economic times, owners don't need to worry so much about their baseball revenues because they have ample income from other business interests. Now at least some of these owners have been feeling the pain.

Look at Tom Hicks. In the past he has been one of the owners more likely to sign players to big contracts. With the shift in the economy, he finds himself with a sever shortage of cash to service loans he and his partner took out to buy Liverpool and still remain competitive with the Rangers and Dallas Stars. His difficulties in refinancing those loans may mean he has to sell either Liverpool or the Rangers and Stars.

I suspect if you look into other owners' finances, you'll probably find others who are struggling to keep outside businesses afloat while also running a baseball team. Under those circumstances, its perfectly understandable that MLB teams might be willing to shell out money for players at the top of their game, but might be hesitant to blow money on guys with question marks.

Chip R
07-15-2009, 04:05 PM
Just because the economy is bad doesn't mean there wasn't collusion. That said, the MLBPA better have a lot more than Bonds not having a job to go on.

Highlifeman21
07-15-2009, 06:36 PM
How is this on Bud's legacy?.....it's way more on the players who have not lived in the real world since after the last strike.

This is happening during Bud's watch.

How is this not during Bud's legacy?

Brutus
07-15-2009, 06:44 PM
This is happening during Bud's watch.

How is this not during Bud's legacy?

If it passes without a shred of evidence, I would not lump that in as part of his legacy.

I can accuse you of murdering someone, but if it's baseless and nothing comes of it, should that be remembered as part of your "legacy?" I would not think so.

Falls City Beer
07-15-2009, 06:46 PM
I think MLB owners collude in the real world.

kpresidente
07-15-2009, 09:37 PM
And the world economy dropped around 40%.

40%! :confused:

REDREAD
07-16-2009, 02:17 AM
And the world economy dropped around 40%. Sounds like financial planning from an owner's perspective, not collusion.

Or at least that could be the argument owners take.

Yep, it's defensible. They were smart this time.

AtomicDumpling
07-16-2009, 03:34 AM
Given that almost every team in the league has made hundreds of millions of dollars in profit this decade I don't believe for a minute that lack of money is the reason for the salary freeze. When Forbes Magazine releases the numbers next year I am sure nearly every team will have made a huge profit again in 2009.

Personally I would rather see the money go to the players than into the pockets of the fat-cat, billionaire owners. For every Teixeira, Sabathia and A-Rod with a $100 million contract there a hundred guys like Keppinger, Rosales, Richar, and McDonald that have toiled for years in the minors and could use a few weeks of a major league salary in the family bank account. Those are the guys the MLBPA should be fighting for.

Always Red
07-16-2009, 08:01 AM
Given that almost every team in the league has made hundreds of millions of dollars in profit this decade I don't believe for a minute that lack of money is the reason for the salary freeze. When Forbes Magazine releases the numbers next year I am sure nearly every team will have made a huge profit again in 2009.

Personally I would rather see the money go to the players than into the pockets of the fat-cat, billionaire owners. For every Teixeira, Sabathia and A-Rod with a $100 million contract there a hundred guys like Keppinger, Rosales, Richar, and McDonald that have toiled for years in the minors and could use a few weeks of a major league salary in the family bank account. Those are the guys the MLBPA should be fighting for.

Baseball players have a great union; better than most. The union leaders and ballplayers themselves have the ability to make the plight of those guys in the minors better, if they wish to do so. They have chosen to enrich themselves. It's the nature of the beast.

I will never begrudge those "fat cat" owners their right to make a profit. It is only right that those who take the biggest risks get the biggest rewards. Socialism of any kind sounds like a great idea, until you run out of other people's money (Margaret Thatcher).

The road map is very clear to those guys who choose to play the game. The guys who make the Show get the dough. Those who do not join the real world with the rest of us. Everyone understands these ground rules prior to beginning their own Quest.

Not everyone can live in Disneyland for free. I am not in favor of paying even higher ticket prices so guys who play in Sarasota and Dayton can get paid more $. Because all costs are ultimately passed on to the consumer, one way or another. They really are.

bucksfan2
07-16-2009, 10:41 AM
Given that almost every team in the league has made hundreds of millions of dollars in profit this decade I don't believe for a minute that lack of money is the reason for the salary freeze. When Forbes Magazine releases the numbers next year I am sure nearly every team will have made a huge profit again in 2009.

Personally I would rather see the money go to the players than into the pockets of the fat-cat, billionaire owners. For every Teixeira, Sabathia and A-Rod with a $100 million contract there a hundred guys like Keppinger, Rosales, Richar, and McDonald that have toiled for years in the minors and could use a few weeks of a major league salary in the family bank account. Those are the guys the MLBPA should be fighting for.

I understand your point of view, I just couldn't disagree with it more. I guess I look at it differently because I am involved with a family owned business. The owners of major league franchises aren't in it to lose money. They aren't in business to be a charity, any of their businesses. They may have made millions of dollars over the past decade, but a lot of that is fake money. Forbes may value each individual franchise, but in reality that is like valuing your house. Until you sell it, your franchise doesn't have that value. It is worth the difference between your cash coming in vs. your cash going out.

The Owners as a whole were more susceptible to the market downfall than your average Joe fan. Very few people in this economic downturn took their money out of the market and put it in cash. The Mets owners lost millions in the Madoff Scam. Tom Hicks, the Rangers owner, is stretched way too much because of his interest in other venues.

The problem with the big contracts is that the owner takes all the risk. There is some reward, but with an unbalanced market, big contracts are huge risk for any team not named the Yankees. If the Reds had been players in the FA market and say they signed Texieria to the same type of contract the Yankees did. They would need max production from Tex in order to validate the contract. If Tex had spent any extended time on the DL then his contract would become an albatross to the Reds.

If the MLBPA wants to talk collusion the Owners should bring this to the forefront. They should jump all over this and take the argument into the public sector. Nothing is like a bunch of millionaires whining about not being paid enough when we are experiencing 10% unemployment. How are you going to explain that a $5M contract is not enough to a father of 3 who has had to take 2 weeks of non paid furlough this year? Its not a good time to be crying foul about your pay when there are people struggling to stay afloat in this economy.

AtomicDumpling
07-16-2009, 06:34 PM
I understand your point of view, I just couldn't disagree with it more. I guess I look at it differently because I am involved with a family owned business. The owners of major league franchises aren't in it to lose money. They aren't in business to be a charity, any of their businesses. They may have made millions of dollars over the past decade, but a lot of that is fake money. Forbes may value each individual franchise, but in reality that is like valuing your house. Until you sell it, your franchise doesn't have that value. It is worth the difference between your cash coming in vs. your cash going out.

The Owners as a whole were more susceptible to the market downfall than your average Joe fan. Very few people in this economic downturn took their money out of the market and put it in cash. The Mets owners lost millions in the Madoff Scam. Tom Hicks, the Rangers owner, is stretched way too much because of his interest in other venues.

The problem with the big contracts is that the owner takes all the risk. There is some reward, but with an unbalanced market, big contracts are huge risk for any team not named the Yankees. If the Reds had been players in the FA market and say they signed Texieria to the same type of contract the Yankees did. They would need max production from Tex in order to validate the contract. If Tex had spent any extended time on the DL then his contract would become an albatross to the Reds.

If the MLBPA wants to talk collusion the Owners should bring this to the forefront. They should jump all over this and take the argument into the public sector. Nothing is like a bunch of millionaires whining about not being paid enough when we are experiencing 10% unemployment. How are you going to explain that a $5M contract is not enough to a father of 3 who has had to take 2 weeks of non paid furlough this year? Its not a good time to be crying foul about your pay when there are people struggling to stay afloat in this economy.

If not for the anti-trust exemption granted to MLB player salaries would be much higher. Does your family business benefit from an anti-trust exemption? Nope. I am a business owner myself and I know exactly how hard it is to be successful. A baseball franchise and a family business have nothing in common.

Tom Hicks is an extremely wealthy man is a very poor example of economic hardship.

The fact you are ignoring is that all of the owners are making hundreds of millions of dollars on their teams. They are not losing money. None of them are losing money on their teams. Every team except the Yankees and the Tigers made a profit last year. Over the last decade every single team has made hundreds of millions in cash profit. In addition to the cash profit they also experienced a large rise in the value of the franchise.

There is absolutely no risk of losing money on a baseball team even if salaries went much higher. The published numbers speak for themselves. Owning a baseball team is a gravy train of epic proportions. So I don't feel sorry for the owners.

I don't feel sorry for the players either. They get paid huge money to play a kid's game.

I am not trying to defend the players nor the owners. I just thought it was odd that most people in this thread were aligned against the players and in favor of the owners. There is plenty of money to go around. They can fight over how it is distributed all they want and I won't care. Both sides are living in an alternate reality from the world the fans live in.

I refuse to be duped into believing the Reds can't afford to field a good team. The published facts prove the Reds can afford to raise payroll 50% to over $100 million and still make a profit. Yet the fans happily allow the Reds to field a cheap, bargain, losing team every year without even a whimper of protest.

jojo
07-16-2009, 06:37 PM
The published facts prove the Reds can afford to raise payroll 50% to over $100 million and still make a profit. Yet the fans happily allow the Reds to field a cheap, bargain, losing team every year without even a whimper of protest.

I'd like to see the "show the work" behind this statement.

Rojo
07-16-2009, 06:43 PM
Just because the economy is bad doesn't mean there wasn't collusion.

Good point. It doesn't help the owners that they constantly cry poverty

AtomicDumpling
07-16-2009, 06:51 PM
Baseball players have a great union; better than most. The union leaders and ballplayers themselves have the ability to make the plight of those guys in the minors better, if they wish to do so. They have chosen to enrich themselves. It's the nature of the beast.

I will never begrudge those "fat cat" owners their right to make a profit. It is only right that those who take the biggest risks get the biggest rewards. Socialism of any kind sounds like a great idea, until you run out of other people's money (Margaret Thatcher).

The road map is very clear to those guys who choose to play the game. The guys who make the Show get the dough. Those who do not join the real world with the rest of us. Everyone understands these ground rules prior to beginning their own Quest.

Not everyone can live in Disneyland for free. I am not in favor of paying even higher ticket prices so guys who play in Sarasota and Dayton can get paid more $. Because all costs are ultimately passed on to the consumer, one way or another. They really are.

Socialism? I never said anything about Socialism. They system in baseball is capitalism to the extreme. If it were Socialism the teams would be operated by the government and the players would all be paid the same.

Ticket prices are based on what fans are willing to pay, not on players' salaries. That is Marketing 101.

There is no financial risk in owning a major league baseball team. It is a gravy train even for the small market owners.

There are billions of dollars to be doled out amongst the owners and players every year. They can fight over the money all they want. I just find it odd that the fans support the billionaire owners over the millionaire players.

AtomicDumpling
07-16-2009, 06:54 PM
I'd like to see the "show the work" behind this statement.

http://www.bizofbaseball.com/index.php?option=com_wrapper&view=wrapper&Itemid=126

The numbers show the Reds have made about $37 million profit per year over the last five years. Their payroll is $73 million, so adding $27 million would make it $100 million while leaving a handsome profit of $10 million.

jojo
07-16-2009, 07:13 PM
http://www.bizofbaseball.com/index.php?option=com_wrapper&view=wrapper&Itemid=126

The numbers show the Reds have made about $37 million profit per year over the last five years. Their payroll is $73 million, so adding $27 million would make it $100 million while leaving a handsome profit of $10 million.

I'm still not seeing the $37M profit that should be reinvested in payroll.

Redsfaithful
07-16-2009, 07:18 PM
There's little to no risk in being an owner of a major league baseball team. It's a guaranteed cash machine.

Rojo
07-16-2009, 07:19 PM
Socialism? I never said anything about Socialism. They system in baseball is capitalism to the extreme. If it were Socialism the teams would be operated by the government and the players would all be paid the same.

The irony with baseball is that the union has been the party calling for a free market. The owners want a "command and control" model.

IslandRed
07-16-2009, 07:54 PM
I'm still not seeing the $37M profit that should be reinvested in payroll.

He's including the increase in franchise evaluation. Of course, the only way to tap that equity to bump up player payroll -- assuming a banker can be found who agrees with the math -- is to borrow against it. On an annual basis, apparently. But really, who's going to reverse-mortgage a ballclub if they can help it?

AtomicDumpling
07-16-2009, 08:06 PM
He's including the increase in franchise evaluation. Of course, the only way to tap that equity to bump up player payroll -- assuming a banker can be found who agrees with the math -- is to borrow against it. On an annual basis, apparently. But really, who's going to reverse-mortgage a ballclub if they can help it?

That is not entirely correct. The Yankees do it every year. So do the Red Sox most years. Many teams do it. It is an easy thing to do and it works very well. Especially when you consider that fielding a competitive team increases revenue in the short term and the long term. There are many creative and lucrative ways to tap that franchise value. Of course you have to want to win rather than just make a profit. The Reds under Castellini or Lindner have not shown that desire. They are content to maximize their profit.

IslandRed
07-16-2009, 08:20 PM
That is not entirely correct. The Yankees do it every year. So do the Red Sox most years. Many teams do it. It is an easy thing to do and it works very well. Especially when you consider that fielding a competitive team increases revenue in the short term and the long term. There are many creative and lucrative ways to tap that franchise value. Of course you have to want to win rather than just make a profit. The Reds under Castellini or Lindner have not shown that desire. They are content to maximize their profit.

By tossing out the numbers as what the Reds could/should have done over the past several years, you were implying -- even if you didn't intend to -- that the team should be operating at break-even mode and then chewing up their equity on top of that. That's an entirely different argument than "spend money to make money."

jojo
07-16-2009, 08:24 PM
By tossing out the numbers as what the Reds could/should have done over the past several years, you were implying -- even if you didn't intend to -- that the team should be operating at break-even mode and then chewing up their equity on top of that. That's an entirely different argument than "spend money to make money."

I don't see how a team could remain viable if pursuing such a strategy.

AtomicDumpling
07-16-2009, 08:30 PM
By tossing out the numbers as what the Reds could/should have done over the past several years, you were implying -- even if you didn't intend to -- that the team should be operating at break-even mode and then chewing up their equity on top of that. That's an entirely different argument than "spend money to make money."

Nope. That is not correct at all.

The equity of the team is a form of profit. You can choose to keep it or you can choose to spend it in an effort to win. It is no different than cash in that respect.

The point is the Reds have the resources to field a competitive team. They choose not to. They would rather distribute the money to the owners' bank accounts than win baseball games. It is a factual observation.

You can squabble over the dollar amounts but the fact remains the same. They are making a huge profit while fielding losing teams. They have the resources readily available to improve the team signficicantly. All they have to do is spend more of the money that they have in abundance. Hopefully they would spend it wisely.

Why are you so willing to defend their approach of maximizing profit over winning?

As a fan I want to win. If the owner doesn't want to win then I wish he would sell the team to someone that does want to win.

AtomicDumpling
07-16-2009, 08:32 PM
I don't see how a team could remain viable if pursuing such a strategy.

But some teams do see how to do it. Just ask the Yankees and the Red Sox. They do it.

Their owners want to win. Their management has the brains to make it happen.

WMR
07-16-2009, 08:37 PM
I am with you 100% AD. It's a shame that we don't have an owner with the chutzpah to make it happen. Castellini was guaranteed to make out like a bandit from the moment he bought the team. That's the nature of owning a professional baseball team, plain and simple. He could easily do what AD lays out here and make a tidy profit with the much greater potential of the huge windfall that would accompany a deep playoff run, WS appearance, or WS victory. Such a run could change the entire culture of the Reds and how they are perceived as a professional sports franchise.

M2
07-16-2009, 08:44 PM
I'll give you a real simple way to figure out how this is going end up: if the MLBPA files a formal lawsuit, they'll win.

Weiner's not going to make his first act as head of the players' association a speculative legal action. Rest assured, he'll have the owners dead to rights before he does anything official. If he can't produce a smoking gun, he won't file.

WMR
07-16-2009, 08:45 PM
See that's one thing that I think it's important to add: Castellini could still approach such a strategy with the ulterior goal being to make the maximum amount of dollars overall. I wonder what sort of percentage one could attach to the growth of a storied franchise like the Reds' overall worth were they to become real players again in MLB and win a World Series?

You can approach it as an aggressive businessman like some franchises (Red Sox) or like a fearful shop keeper (Bengals). I know which way the Reds are heading right now. Regardless, the franchise will continue to gain value, as baseball franchises have in the past and will continue to do in the future.

jojo
07-16-2009, 08:47 PM
But some teams do see how to do it. Just ask the Yankees and the Red Sox. They do it.

Their owners want to win. Their management has the brains to make it happen.

The Yanks and BoSox have huge networks that they leverage-they can approach things differently.

Equity is a form of profit, I won't quibble with that characterization. But it's a form of profit that can only be realized by selling or by borrowing against it. Borrowing against it isn't free.... it needs repaid and with interest.

What you are suggesting the Reds do is a recipe for them eventually being owned by mlb and likely moved to Mexico City.

IslandRed
07-16-2009, 09:05 PM
Why are you so willing to defend their approach of maximizing profit over winning?

I don't have the moral right to ask anyone on God's green earth to risk a financial bloodbath so I can feed my sense of reflected glory.

I also don't have the moral obligation to patronize a business that's not trying to succeed.

Over the years, the Reds have definitely caused me conflict on those scores.

Falls City Beer
07-16-2009, 09:16 PM
What you are suggesting the Reds do is a recipe for them eventually being owned by mlb and likely moved to Mexico City.

That's an exaggeration. No one's recommending foolhardiness. Just breaking the inertia of failure as "good enough."

jojo
07-16-2009, 09:52 PM
That's an exaggeration. No one's recommending foolhardiness. Just breaking the inertia of failure as "good enough."

But it's been suggested in this thread that borrowing against equity every year is something that should done.

Falls City Beer
07-16-2009, 10:40 PM
But it's been suggested in this thread that borrowing against equity every year is something that should done.

Yeah, I haven't read the whole thread. Probably should. Or maybe I shouldn't. It's not going to happen regardless.

AtomicDumpling
07-16-2009, 10:54 PM
The Yanks and BoSox have huge networks that they leverage-they can approach things differently.

Equity is a form of profit, I won't quibble with that characterization. But it's a form of profit that can only be realized by selling or by borrowing against it. Borrowing against it isn't free.... it needs repaid and with interest.

What you are suggesting the Reds do is a recipe for them eventually being owned by mlb and likely moved to Mexico City.

Why do I bother to respond to you? That is not at all what I am suggesting. You intentionally distort the posts of others.

My scenario left the Reds with a $10 million dollar profit. How is that risky? How is that a sell-off or a bad loan? How will that make them bankrupt or moved to Mexico City? :rolleyes:

The point is the Reds can drastically increase the payroll and still make a profit. Do you understand that?

Even if the Reds pocket all of their equity they can still raise the payroll $20 million, which would put them at $93 million. That is a big boost.

Do you prefer the Reds to make a huge profit while fielding pathetic teams? Don't you want them to win?

There is no reason to jettison players like Harang or Cordero in order to afford to upgrade other areas. They can keep all their good players and bring in good players from outside the organization and still make a very nice profit. Right now they only make the profit.

jojo
07-16-2009, 11:01 PM
Why do I bother to respond to you? That is not at all what I am suggesting. You intentionally distort the posts of others.

My scenario left the Reds with a $10 million dollar profit. How is that risky? How is that a sell-off or a bad loan? How will that make them bankrupt or moved to Mexico City? :rolleyes:

The point is the Reds can drastically increase the payroll and still make a profit. Do you understand that?

Even if the Reds pocket all of their equity they can still raise the payroll $20 million, which would put them at $93 million. That is a big boost.

Do you prefer the Reds to make a huge profit while fielding pathetic teams? Don't you want them to win?

There is no reason to jettison players like Harang or Cordero in order to afford to upgrade other areas. They can keep all their good players and bring in good players from outside the organization and still make a very nice profit. Right now they only make the profit.

I am honestly not trying to distort anything. Equity can't be treated as cash flow the way you're suggesting. Banks don't just give out blocks of money for nothing. In my mind that's not a trivial detail.

AtomicDumpling
07-16-2009, 11:28 PM
I am honestly not trying to distort anything. Equity can't be treated as cash flow the way you're suggesting. Banks don't just give out blocks of money for nothing. In my mind that's not a trivial detail.

There are plenty of ways to leverage equity. Companies, landholders, and baseball teams do it every day.

Anyway, the equity is merely a very minor aspect of the issue. The fact remains that the Reds have the resources (cash, revenue and equity) to make a major increase in the player payroll.

My goal in this thread was to dispel the widespread notion among Reds fans that the team does not have the financial resources to field a competitive team. It is simply not true.

Every time we discuss how to improve the team there are folks that say we need to shed some salaries in order to spend that money elsewhere. The truth of the matter is the Reds have the money to bring in good players while keeping all their current good players. You don't have to dump Harang or Cordero for example to make it possible to upgrade the offense.

jojo
07-17-2009, 04:22 AM
There are plenty of ways to leverage equity. Companies, landholders, and baseball teams do it every day.

Anyway, the equity is merely a very minor aspect of the issue. The fact remains that the Reds have the resources (cash, revenue and equity) to make a major increase in the player payroll.

My goal in this thread was to dispel the widespread notion among Reds fans that the team does not have the financial resources to field a competitive team. It is simply not true.

Every time we discuss how to improve the team there are folks that say we need to shed some salaries in order to spend that money elsewhere. The truth of the matter is the Reds have the money to bring in good players while keeping all their current good players. You don't have to dump Harang or Cordero for example to make it possible to upgrade the offense.

It's not a de facto given that the Reds need to raise payroll to field a competitive team.

It's just as likely that raising payroll significantly could hamstring their ability to be competitive depending upon how the money was spent.

Ltlabner
07-17-2009, 08:51 AM
It's just as likely that raising payroll significantly could hamstring their ability to be competitive depending upon how the money was spent.

So they shouldn't raise payroll because they might make a mistake a not every last new trade will work out? If they are that scared to make a move for fear of it not working out they ought to sell the franchise right now and get into a different line of work.

I think it's a given that Atomic's "raise payroll" plan is predicated on them spending the money wisely. It's rather pedantic to point out that it won't help if they spend the dough to sign Juan Castro and Eric Milton.

jojo
07-17-2009, 09:10 AM
So they shouldn't raise payroll because they might make a mistake a not every last new trade will work out? If they are that scared to make a move for fear of it not working out they ought to sell the franchise right now and get into a different line of work.

I think it's a given that Atomic's "raise payroll" plan is predicated on them spending the money wisely. It's rather pedantic to point out that it won't help if they spend the dough to sign Juan Castro and Eric Milton.

It's not pendantic but rather, given the thesis, it's necessary to point out that the following conclusions beg the question: 1) the Reds can't be competitive at a similar payroll as they've had recently, and 2) that increasing payroll is the ticket to becoming more competitive.

Ltlabner
07-17-2009, 09:28 AM
I agree with AD that they could (on paper anyway) spend more money on payroll if they so chose. They have more room to maneuver than the current payroll indicates. Heck, I argued back in the off-season that it was the time to make a big splash and really market the Reds as an escape from the fears of the current times, etc. From a business standpoint I think that approach could lead to more long-term revenues than shrinking back and playing it safe.

That said, I totally disagree they should somehow borrow against their equity. There's really not a good time (usually) to get your company highly leveraged, and during an economic slowdown with no end in sight is really not the time to do it. Borrowing big sums of cash just to break even is simply not a good business practice for the long-term.

But I'm also conflicted. Unlike some here, I don't think profit is a dirty word and do not begrudge the owners for trying to maximize their profits. It's only rational to try to increase your share of the pie. As consumers we can vote with our feet if the owner goes too far and fields a subpar product, but in general I don't begrudge someone wanting to increase their wealth.

Ltlabner
07-17-2009, 09:31 AM
It's not pendantic but rather, given the thesis, it's necessary to point out that the following conclusions beg the question: 1) the Reds can't be competitive at a similar payroll as they've had recently, and 2) that increasing payroll is the ticket to becoming more competitive.

I agree that those are the questions, however, you keep saying in different discussions that "just because they spend more doesn't mean they'll have a better team". The pedantic part is that most of us understand that if they spend another $40 mil on crappy players it won't help. It's a given that the assumption is the money must be spent wisely to have a positive effect on winning more games. I don't think there is anyone on RZ who doesn't grasp that.

If you take the argument further to: "Well, they could spend more money but still fail" then that's the fear part I referenced. If you feel they shouldn't spend more because they might screw it up that's nothing more than fear. They should never operate from a position of fear. If they are going to be scared they should get out of the business and stick to selling green peppers.

jojo
07-17-2009, 09:45 AM
I agree that those are the questions, however, you keep saying in different discussions that "just because they spend more doesn't mean they'll have a better team". The pedantic part is that most of us understand that if they spend another $40 mil on crappy players it won't help. It's a given that the assumption is the money must be spent wisely to have a positive effect on winning more games. I don't think there is anyone on RZ who doesn't grasp that.

Further, if you take the argument further to: "Well, they could spend more money but still fail" then that's the fear part I referenced. If you feel they shouldn't spend more because they might screw it up that's nothing more than fear. They should never operate from a position of fear. If they are going to be scared they should get out of the business and stick to selling green peppers.

Does arguing that the the Reds could win more if they increase payroll to $100M with the caveat that the $100M must be spent wisely really offer any insight? Given the assumption of making sound moves, how is it any different than suggesting the Reds could win more if they scored more than their opponents more often?

Hence the point- it's begging the question that spending more money is the key unless of course the assumption is that the money will be spent on moves that work..... But doesn't that assumption beg the question? Heck even wise moves fail.

It's not hard to envision how increasing the payroll to $100M could do more to cripple the Reds chances of being chronically competitive than it would help through effects both on the field and on the ledger sheet.

bucksfan2
07-17-2009, 09:47 AM
There are plenty of ways to leverage equity. Companies, landholders, and baseball teams do it every day.

Anyway, the equity is merely a very minor aspect of the issue. The fact remains that the Reds have the resources (cash, revenue and equity) to make a major increase in the player payroll.

My goal in this thread was to dispel the widespread notion among Reds fans that the team does not have the financial resources to field a competitive team. It is simply not true.

Every time we discuss how to improve the team there are folks that say we need to shed some salaries in order to spend that money elsewhere. The truth of the matter is the Reds have the money to bring in good players while keeping all their current good players. You don't have to dump Harang or Cordero for example to make it possible to upgrade the offense.

Leveraging your equity is the primary reason we got in this economic mess. The only true revenue the Reds have is the amount of income coming in vs the amount of money going out. To be honest I don't think we even could make an educated guess at what that figure is. If Bob wants to levearge the Reds and borrow more he would also have to go through the minority owners which would be an even more difficult sell.

Sure the Reds could spend more money, but it would also be predicated upon bring more money into the organization. MLB payroll isn't the only expense that a given team has. Could you imagine what the travel expenses are for a team like the Reds?

It has been proven over the past 5-10 years that the way to win a world series isn't though buying free agents. Take the Phillies last year as an example. Rollins, Howard, Utley, Myers, Hamels and Burrell were all home grown. Victorino was a Rule V pick and Lidge was acquired in a trade. You build the team from the inside with good drafting and trading for your needs, and then sign FA's to fill in the rest. Guys like Feliz and Werth were brought in to fill a void, but didn't break the bank.

jojo
07-17-2009, 09:51 AM
Leveraging your equity is the primary reason we got in this economic mess. The only true revenue the Reds have is the amount of income coming in vs the amount of money going out.

Leveraging equity on payroll is kind of like taking out a loan on the equity in your house in order to finance a vehicle. I doubt many would counsel their kids that such a move is wise...

Ltlabner
07-17-2009, 09:51 AM
Hence the point- it's begging the question that spending more money is the key unless of course the assumption is that the money will be spent on moves that work..... But doesn't that assumption beg the question? Heck even wise moves fail.

Well in that case they should sell the team. I mean they might fail ya know. Hell, the stadium could collapse tonight and result in a huge lawsuit. But doesn't that beg the question that the Reds were negligent in stadium construction?

You can go around and around and around and around forever with your esoteric discussions and question begging. The fact remains the Reds are not going anywhere with the talent currently on the roster. If they can figure out a way to infuse a ton more talent without spending a dime, by all means, go for it! But the reality in the world is better talent often costs something and that cost often includes the green salad of salvation.

jojo
07-17-2009, 09:59 AM
Well in that case they should sell the team. I mean they might fail ya know. Hell, the stadium could collapse tonight and result in a huge lawsuit. But doesn't that beg the question that the Reds were negligent?

You can go around and around and around and around forever with your esoteric discussions and question begging. The fact remains the Reds are not going anywhere with the talent currently on the roster. If they can figure out a way to infuse a ton more talent without spending a dime, by all means, go for it! But the reality in the world is better talent often costs something and that cost often includes the green salad of salvation.

There is absolutely nothing esoteric about questioning the foundation of an argument.

The devil is always in the details...

jojo
07-17-2009, 10:01 AM
Hell, the stadium could collapse tonight and result in a huge lawsuit. But doesn't that beg the question that the Reds were negligent in stadium construction?

Actually, no. Assuming they were negligent begs the question.

BCubb2003
07-17-2009, 10:21 AM
Is the argument that the Reds have lots of profit that they could be using to increase payroll but it's going into the pockets of Castellini and partners? Or is it that Castellini should spend more than is coming in and a winning team will boost the revenue enough to cover it?

IslandRed
07-17-2009, 10:34 AM
Is the argument that the Reds have lots of profit that they could be using to increase payroll but it's going into the pockets of Castellini and partners? Or is it that Castellini should spend more than is coming in and a winning team will boost the revenue enough to cover it?

Neither, either or both, depending on who's doing the arguing. :cool:

I don't expect any businessman with a lick of sense to treat the ballclub's equity like a credit card to be maxed out, but it wouldn't hurt my feelings at all if they chose to spend every available penny on ballplayers and didn't take any profits out of the team. Alas, the team is not a non-profit public trust. As long as individuals own the teams and, these days, have to borrow nine figures to get in the game, they're going to want some ROI before they sell the club or die. It's just the reality of the deal.

Scrap Irony
07-17-2009, 12:15 PM
That is not entirely correct. The Yankees do it every year. So do the Red Sox most years. Many teams do it. It is an easy thing to do and it works very well.

Not true. Boston has NESN and the Yanks have the YES Network, both of which funnel tons of cash into their respective teams. Others you might mention would be the mid 90's Braves (TBS Network) and the perhaps the Cubs (WGN). Again, regional cable deals.

Each of these cable deals allow their respective team owners not to borrow on equity, but to use those advertising expenditures and, in some cases, customer payments, as monies for payroll. The Yankees' and Red Sox's total team value (or "name equity") is far more than their yearly payroll.

AtomicDumpling
07-17-2009, 02:34 PM
Not true. Boston has NESN and the Yanks have the YES Network, both of which funnel tons of cash into their respective teams. Others you might mention would be the mid 90's Braves (TBS Network) and the perhaps the Cubs (WGN). Again, regional cable deals.

Each of these cable deals allow their respective team owners not to borrow on equity, but to use those advertising expenditures and, in some cases, customer payments, as monies for payroll. The Yankees' and Red Sox's total team value (or "name equity") is far more than their yearly payroll.

Those network dollars have already been factored into the equation under revenue.

The Yankees and Red Sox leverage their equity almost every year. So do other teams some years. It is all a matter of public record.

When the value of your team goes up by $150 million per year like the Yankees have for the last five years you can afford to leverage some of that windfall. It is irresponsible not to. That equity is a resource that you can utilize to make more money. It takes money to make money. If you have a resource (equity) that you can leverage to make more money then it is a financial mistake not to do it.

The same applies to the Reds on a lesser scale.

You can take that money and re-invest it in your business, or you can sit on it as a profit. The Reds choose to maximize their profit -- at the expense of winning.

You guys are fixating on the equity issue and missing the larger point. The Reds can raise payroll by $20 million per year without even touching their huge equity windfall. They are averaging a $20 million cash profit in addition to the $17 million average gain in equity.

The Reds make a huge profit every year, then complain about not being able to afford to bring in good free agents, absorb salaries in trade or keep their good players. Money has been a barrier to improving this team for the last several years while the owners have made hundreds of millions of dollars in profit. Yet the fans don't complain about this. They would in a city with a winning attitude. We are so accustomed to being losers that we don't even expect the team to do what it takes to win.

AtomicDumpling
07-17-2009, 02:39 PM
Is the argument that the Reds have lots of profit that they could be using to increase payroll but it's going into the pockets of Castellini and partners? Or is it that Castellini should spend more than is coming in and a winning team will boost the revenue enough to cover it?

The bold part is what I am showing people. Most people are unaware how lucrative the team is for its owners. We have been led to believe the Reds are on the edge of financial stability, which is blatantly untrue. The Reds are a cash cow.

The Reds are making huge profits. They could spend some of that money to dramatically improve the team. As fans we should encourage them to do that.

But there are a lot of people in this thread that are arguing for the Reds to make a huge profit instead of trying to win.

WMR
07-17-2009, 02:39 PM
Those network dollars have already been factored into the equation under revenue.

The Yankees and Red Sox leverage their equity almost every year. So do other teams some years. It is all a matter of public record.

When the value of your team goes up by $150 million per year like the Yankees have for the last five years you can afford to leverage some of that windfall. It is irresponsible not to. That equity is a resource that you can utilize to make more money. It takes money to make money. If you have a resource (equity) that you can leverage to make more money then it is a financial mistake not to do it.

The same applies to the Reds on a lesser scale.

You can take that money and re-invest it in your business, or you can sit on it as a profit. The Reds choose to maximize their profit -- at the expense of winning.

You guys are fixating on the equity issue and missing the larger point. The Reds can raise payroll by $20 million per year without even touching their huge equity windfall. They are averaging a $20 million cash profit in addition to the $17 million average gain in equity.

The Reds make a huge profit every year, then complain about not being able to afford to bring in good free agents, absorb salaries in trade or keep their good players. Money has been a barrier to improving this team for the last several years while the owners have made hundreds of millions of dollars in profit. Yet the fans don't complain about this. They would in a city with a winning attitude. We are so accustomed to being losers that we don't even expect the team to do what it takes to win.

:clap:

The equity argument was never really instructive to this discussion. They could easily hit 90-95 million and I don't think anyone would complain at such a payroll.

WMR
07-17-2009, 02:41 PM
The bold part is what I am showing people. Most people are unaware how lucrative the team is for its owners. We have been led to believe the Reds are on the edge of financial stability, which is blatantly untrue. The Reds are a cash cow.

The Reds are making huge profits. They could spend some of that money to dramatically improve the team. As fans we should encourage them to do that.

But there are a lot of people in this thread that are arguing for the Reds to make a huge profit instead of trying to win.

Like I typed earlier, they're going for the short money instead of the long money. I think that's an important thing to note. It's not like we're asking for Cast to not make money on his investment. He's just going about it now in the most cowardly way possible.

AtomicDumpling
07-17-2009, 02:50 PM
Leveraging equity on payroll is kind of like taking out a loan on the equity in your house in order to finance a vehicle. I doubt many would counsel their kids that such a move is wise...

Very poor analogy.

Does buying a car improve the value of your house? Does your house generate income?

The Reds are a business not a home. When running a business you need to re-invest some or all of the profits to grow the business and make more money in the long term. But this is not a normal business. This is also a competitive sport in which the goal is to win championships. The owner of a sports franchise is expected to do what it takes to win the championship. Here in Cincinnati we don't seem to have that expectation anymore. We are content merely to have a team. We don't expect to win. We would be pleasantly surprised to win. We having a long tradition of losing in this town and that is all we know. We have a losing attitude. We don't have the drive and determination it takes to win.

Some owners want to win. Some owners want to maximize profits. The records show Castellini is a profits-oriented owner. He is not a winner. We as Reds fans should encourage him to place more emphasis on winning. But we don't. Because we expect to lose.

bucksfan2
07-17-2009, 03:02 PM
So you are asking the Reds to borrow against their equity to improve the team. They can borrow against their equity because the value of the team continues to increase every year. Really? Sounds a lot like the primary reason for the housing bubble burst over the past few years.

AtomicDumpling
07-17-2009, 03:03 PM
Leveraging your equity is the primary reason we got in this economic mess. The only true revenue the Reds have is the amount of income coming in vs the amount of money going out. To be honest I don't think we even could make an educated guess at what that figure is. If Bob wants to levearge the Reds and borrow more he would also have to go through the minority owners which would be an even more difficult sell.

Sure the Reds could spend more money, but it would also be predicated upon bring more money into the organization. MLB payroll isn't the only expense that a given team has. Could you imagine what the travel expenses are for a team like the Reds?

It has been proven over the past 5-10 years that the way to win a world series isn't though buying free agents. Take the Phillies last year as an example. Rollins, Howard, Utley, Myers, Hamels and Burrell were all home grown. Victorino was a Rule V pick and Lidge was acquired in a trade. You build the team from the inside with good drafting and trading for your needs, and then sign FA's to fill in the rest. Guys like Feliz and Werth were brought in to fill a void, but didn't break the bank.

You don't have to guess at the revenues and expenses because they are a matter of public record. They are published by Forbes every year. The Reds have averaged a profit of $20 million per year since the new stadium opened. That profit is after all expenses are accounted for -- not just player payroll. In addition to the cash profit the value of the team has risen by an average of $17 million per year.

The Phillies last year had a $113 million payroll, which was $40 million more than the Reds spent. The Phillies would not have been able to afford to keep all those superstars together if they had the Reds' artificially low payroll. Yes, you need to build a team through the draft, but you also need to spend the money to keep them once they become good enough to help you win. Are the Reds going to jettison Votto, Cueto, Bruce, Volquez etc when their salaries get big? The current philosophy of profit over winning says Yes.

AtomicDumpling
07-17-2009, 03:06 PM
So you are asking the Reds to borrow against their equity to improve the team. They can borrow against their equity because the value of the team continues to increase every year. Really? Sounds a lot like the primary reason for the housing bubble burst over the past few years.

Did you bother to read the previous posts? Are you a minority owner of the Reds?

Are the Reds loaning money to people with a long history of failing to repay loans? No. So it has nothing to do with the housing bubble.

The Reds have a huge cash profit every year. They could re-invest that in the team by trying to win.

The Reds also have a huge boost in equity every year, they could leverage some of that to re-invest in the business and boost their chances of winning.

Brutus
07-17-2009, 03:19 PM
You don't have to guess at the revenues and expenses because they are a matter of public record. They are published by Forbes every year. The Reds have averaged a profit of $20 million per year since the new stadium opened. That profit is after all expenses are accounted for -- not just player payroll. In addition to the cash profit the value of the team has risen by an average of $17 million per year.

The Phillies last year had a $113 million payroll, which was $40 million more than the Reds spent. The Phillies would not have been able to afford to keep all those superstars together if they had the Reds' artificially low payroll. Yes, you need to build a team through the draft, but you also need to spend the money to keep them once they become good enough to help you win. Are the Reds going to jettison Votto, Cueto, Bruce, Volquez etc when their salaries get big? The current philosophy of profit over winning says Yes.

Actually they are not public record as even Forbes issues disclaimers that they do not have access to the Reds' books and their figures are estimates.

No one knows for sure how much the Reds are actually making in profit. Revenue estimates are just that - estimates. One of the big caveats in these published payroll and revenue reports is simply that teams (or any business for that matter) can fudge the numbers to make things look a certain way. Accordingly, there's no way to absolutely verify what the organization is truly earning.

bucksfan2
07-17-2009, 03:46 PM
Did you bother to read the previous posts? Are you a minority owner of the Reds?

Are the Reds loaning money to people with a long history of failing to repay loans? No. So it has nothing to do with the housing bubble.

The Reds have a huge cash profit every year. They could re-invest that in the team by trying to win.

The Reds also have a huge boost in equity every year, they could leverage some of that to re-invest in the business and boost their chances of winning.

Aren't you saying that the Reds should use that equity as leverage in order increase payroll. Leveraging your equity comes with risk. It is like borrowing against your house to do a $20,000 kitchen redo. That may be a good thing, but if the $20,000 kitchen redo only increases the value of your house by $10,000 its not necessarily a good thing.

They Reds could leverage their equity to sign a big name free agent. But if that big name free agent doesn't produce the Reds may end up losing money.

As for Brutus post I had always thought that. Privately held companies have no reason to make their books open to the public. Their only obligation is to the shareholders in the company.

IslandRed
07-17-2009, 04:49 PM
Those network dollars have already been factored into the equation under revenue.

Yes, but it's not the whole picture. The rights fees show up on the club's revenue sheet, but the TV network's profits don't. But they have the same owners, so it just goes into a different pocket. When they need or want extra cash, they have it.


The Yankees and Red Sox leverage their equity almost every year. So do other teams some years. It is all a matter of public record.

Borrowing against equity is not the same as leveraging other assets (see above). Using Forbes' numbers, there's no evidence the Red Sox or Yankees need to borrow money to support their payroll. The Yankees have crazy paper debt right now but that's stadium-related and they fully expect to recoup it.


You don't have to guess at the revenues and expenses because they are a matter of public record. They are published by Forbes every year. The Reds have averaged a profit of $20 million per year since the new stadium opened. That profit is after all expenses are accounted for -- not just player payroll.

As Brutus noted, it's an estimate, not public record. However, I trust Forbes' numbers better than what the clubs will admit to, so let's go with that. But the operating income figure is before taxes and interest. "Interest" is kind of nebulous; it seems clear enough that stadium-construction debt is included in Forbes' expense estimates, but it's not clear if they're including debt service on things like buying the team in the first place. I'd be interested to know where they're putting that, if anywhere.

AtomicDumpling
07-17-2009, 06:20 PM
Talk about quibbling over minor details. :eek:

None of you have changed the fact the Reds choose to take a tremendous profit every year while fielding a very poor team. They have the resources to greatly improve the team. We as fans need to stop making excuses for them and instead encourage them to place more emphasis on winning.

jojo
07-17-2009, 06:35 PM
There hasn't been a compelling case made that the Reds aren't acting in a way that they believe gives them the best chance to win.

Certainly, there hasn't been a compelling case that the Reds could sustain a $100M payroll and remain a viable franchise.

Falls City Beer
07-17-2009, 06:38 PM
There hasn't been a compelling case made that the Reds aren't acting in a way that they believe gives them the best chance to win.

I'm not sure what this means. It seems like a circular argument. But maybe there's a word missing.

M2
07-17-2009, 06:40 PM
There hasn't been a compelling case made that the Reds aren't acting in a way that they believe gives them the best chance to win.

Without getting into matters of payroll, that's an argument for them adopting a new belief system.

jojo
07-17-2009, 06:46 PM
I'm not sure what this means. It seems like a circular argument. But maybe there's a word missing.

We've heard that the Reds emphasize profit over winning and that is the primary reason they haven’t won during their current drought. I'm suggesting there is no compelling case yet made that the Reds budget reflects blatant profiteering rather than an honest attempt to build a sustainable, successful ball club.

Every team should try to make a profit. That in and of itself isn't proof that the FO/ownership is emphasizing profit rather than trying it's best to win.

jojo
07-17-2009, 06:47 PM
Without getting into matters of payroll, that's an argument for them adopting a new belief system.

Arguing incompetence is different than arguing greed. Frankly, if it's incompetence, thankfully, payroll isn't higher.....

IslandRed
07-17-2009, 06:47 PM
Talk about quibbling over minor details. :eek:

None of you have changed the fact the Reds choose to take a tremendous profit every year while fielding a very poor team. They have the resources to greatly improve the team. We as fans need to stop making excuses for them and instead encourage them to place more emphasis on winning.

They're only minor details when it's someone else's money. :p:

Again, it won't hurt my feelings if they operate the way you want, but I'm not holding my breath. Unless the club is taken over by a non-profit public trust that cares about neither profit nor reaping rewards from a sale, we're stuck with businessmen.

Scrap Irony
07-17-2009, 06:54 PM
I realize, DA, this is your raison d'etre, but, really, they're businessmen and they have the money. If it was as bad as Carl Pohland during his late 90s Minnesota run, I'd be right there with you, but I really think Castellini is the best Red owner of the past 25 years and generally runs the team responsibly.

I don't begrudge him a profit as long as the Reds are fairly competitive in terms of salary. They are.

M2
07-17-2009, 07:01 PM
Arguing incompetence is different than arguing greed. Frankly, if it's incompetence, thankfully, payroll isn't higher.....

Or it could just be perpetual vision failure. We could probably diagnose it a dozen different ways, though my take is they've got a far more cynical attitude (e.g. when have they done just enough to maybe have things go right).

BCubb2003
07-17-2009, 07:50 PM
I'd concentrate on the $20 million profit. If that's accurate, then challenge Castellini on it. Is that $20 million going back into the team, or going to Castellini and partners? The Reds' structure is pretty straightforward compared to some teams. There aren't a lot of places to hide profits unless Castellini and partners all get huge management or consultant contracts.

So if you want Matt Holliday or Roy Halladay, I'd spend some of the $20 million profits. The equity is different, isn't it? I wouldn't buy free agents with money that someone thinks another Carl Lindner will pay for the Reds someday.

backbencher
07-17-2009, 10:40 PM
Talk about quibbling over minor details. :eek:

None of you have changed the fact the Reds choose to take a tremendous profit every year while fielding a very poor team. They have the resources to greatly improve the team. We as fans need to stop making excuses for them and instead encourage them to place more emphasis on winning.

What you are dismissing as "minor details" are the key pieces of the financial picture. As BCubb indicated, the first question is whether the Forbes number is accurate.

And it almost certainly is not, at least in any meaningful sense. There are three big issues with the Forbes numbers, and one more with thinking that team ownership is like any other investment:

1. Forbes almost certainly lacks accurate numbers for club operation. The Reds are not publicly traded. Hence, any numbers derived from either revenue (non-public) or operating expenses (non-public) are projection at best, pure speculation at worst.

2. The operating profit numbers that you cite are EBITDA. That is, they do not represent cash in the owners' pocket. For example, the Forbes authors themselves believe that the Reds are carrying debt of 12% of the team's value - about $41MM. Assuming that is accurate - and it probably is, at least to the extent that it represents stadium debt, which could be accessed through public agreements with the county - the team has to service it. I think that it is safe to assume that the Reds also pay their taxes.

3. As IslandRed pointed out, the Forbes calculations appear to exclude the debt used by the Castellini group to acquire the team. According to this article:

http://cincinnati.bizjournals.com/cincinnati/stories/2006/03/20/tidbits1.html

the Castellini group's leverage was $100 MM - which, if accurate, clearly is in addition to the $41 MM in stadium debt and other debt carried by the club. You may not care - the owners are, according to Forbes, paying off the purchase price of an appreciating asset - but it certainly matters to the folks who are doing the paying. I'd also note that this is entirely customary for the purchase of large assets, particularly sports franchises. And if one or more of the owners' other business are in disadvantaged condition, and they likely are, then the owners need the team cash flow to service the acquisition debt. There is no other option.

4. Contrary to the beliefs of those of us who don't have millions of dollars lying around in our seat cushions, those who do are not likely to fork it over without a return. Think about the terms of investing in a ML team, particularly for someone who is not the controlling partner. The minority partners get the ego boost of claiming that they are a part-owner of the Reds and a potential up-side gain upon a sale, but with it they also get the risk of capital calls, the risk of operational loss, and, almost certainly, a near-complete inability to transfer or sell their interest at a time of their choosing (that is, almost certainly the other owners and/or MLB have to approve any sale). How much are you willing to hand over under those conditions? Something, certainly - I have my name on a brick outside GAB, so far be it from me to dispute the ego boost of reflected glory from a sports team - but if you are putting substantial coin there, you no doubt want something in return. You certainly don't want capital calls or deficit spending on an ownership interest that you can't sell. (And keep in mind that the ownership group includes a lot of folks that Castellini would not want to upset.)

And now add this - despite having a bottom-three market and bottom-three revenues, the Reds have the #19 payroll. That doesn't make the ownership group heroes, but it does give more than a little bit of credence to the idea that their spending is well in line with what the team actually can support.

corkedbat
07-17-2009, 10:43 PM
Collusion? It's not like budbert's out there trying to tell teams waht to pay their draft pcik or anything.

AtomicDumpling
07-17-2009, 11:02 PM
What you are dismissing as "minor details" are the key pieces of the financial picture. As BCubb indicated, the first question is whether the Forbes number is accurate.

And it almost certainly is not, at least in any meaningful sense. There are three big issues with the Forbes numbers, and one more with thinking that team ownership is like any other investment:

1. Forbes almost certainly lacks accurate numbers for club operation. The Reds are not publicly traded. Hence, any numbers derived from either revenue (non-public) or operating expenses (non-public) are projection at best, pure speculation at worst.

2. The operating profit numbers that you cite are EBITDA. That is, they do not represent cash in the owners' pocket. For example, the Forbes authors themselves believe that the Reds are carrying debt of 12% of the team's value - about $41MM. Assuming that is accurate - and it probably is, at least to the extent that it represents stadium debt, which could be accessed through public agreements with the county - the team has to service it. I think that it is safe to assume that the Reds also pay their taxes.

3. As IslandRed pointed out, the Forbes calculations appear to exclude the debt used by the Castellini group to acquire the team. According to this article:

http://cincinnati.bizjournals.com/cincinnati/stories/2006/03/20/tidbits1.html

the Castellini group's leverage was $100 MM - which, if accurate, clearly is in addition to the $41 MM in stadium debt and other debt carried by the club. You may not care - the owners are, according to Forbes, paying off the purchase price of an appreciating asset - but it certainly matters to the folks who are doing the paying. I'd also note that this is entirely customary for the purchase of large assets, particularly sports franchises. And if one or more of the owners' other business are in disadvantaged condition, and they likely are, then the owners need the team cash flow to service the acquisition debt. There is no other option.

4. Contrary to the beliefs of those of us who don't have millions of dollars lying around in our seat cushions, those who do are not likely to fork it over without a return. Think about the terms of investing in a ML team, particularly for someone who is not the controlling partner. The minority partners get the ego boost of claiming that they are a part-owner of the Reds and a potential up-side gain upon a sale, but with it they also get the risk of capital calls, the risk of operational loss, and, almost certainly, a near-complete inability to transfer or sell their interest at a time of their choosing (that is, almost certainly the other owners and/or MLB have to approve any sale). How much are you willing to hand over under those conditions? Something, certainly - I have my name on a brick outside GAB, so far be it from me to dispute the ego boost of reflected glory from a sports team - but if you are putting substantial coin there, you no doubt want something in return. You certainly don't want capital calls or deficit spending on an ownership interest that you can't sell. (And keep in mind that the ownership group includes a lot of folks that Castellini would not want to upset.)

And now add this - despite having a bottom-three market and bottom-three revenues, the Reds have the #19 payroll. That doesn't make the ownership group heroes, but it does give more than a little bit of credence to the idea that their spending is well in line with what the team actually can support.

That is all well and good, but also misses the heart of the debate completely.

The minor details don't change the big picture -- Winning is subsidiary to profit to the Reds.

There is no risk in owning an MLB team. Just look at the Forbes numbers and you can see that every single team is making huge profits and has been for a long time. So enough about the risk. The interest on the debt is miniscule compared to the rapid gains in profit and equity. The owners use the team's profits to pay their debts from other ventures, not the other way around.

The numbers are accurate enough to prove beyond any reasonable doubt that the Reds make a huge profit every year. There is simply no debate about that fact. Your post boils down to a long list of hollow excuses for a losing attitude by Reds ownership.

The Reds can afford to raise the payroll. That much is clear to any objective person. We can quibble over how much higher they can go, but it is very obvious they can go higher.

There are many other owners that do value winning. Many owners of sports teams want to win badly enough to spend what it takes. Many owners view their team as a passion or a toy to satisfy their competitive urge rather than merely as an investment. I want one of those owners. Most of them are billionaires or at least hundred-millionaires, so it is not like they are depending on the team for their livelihood.

Reds fans seem content to root for a losing team without even the slightest complaint about an ownership group that does not place winning at the top of the list. Fans in other towns would not be so passive. Fans in other towns want to win more than we do. We have a losing attitude in Cincinnati.

jojo
07-17-2009, 11:52 PM
Forbes is estimating $17M in operating income for the Reds in '09 before interest, taxes, depreciation and amortization.

How much is left over for payroll increases after interest, taxes, depreciation and amortization?

Enough to bump payroll up to $100M and still have enough left over for the greedy ones?

IslandRed
07-18-2009, 12:10 AM
There is no risk in owning an MLB team. Just look at the Forbes numbers and you can see that every single team is making huge profits and has been for a long time. So enough about the risk.

Baseball is not a no-risk game. Owners are perfectly free to go overboard and spend like crazy and lose millions if they wish. The Forbes numbers merely prove they're largely choosing to live within their means. No-risk is owning an NFL team, where the large degree of revenue sharing and the salary cap makes it all but mathematically impossible to lose money.


Many owners view their team as a passion or a toy to satisfy their competitive urge rather than merely as an investment. I want one of those owners.

Nothing wrong with that wish whatsoever.

AtomicDumpling
07-18-2009, 12:11 AM
Forbes is estimating $17M in operating income for the Reds in '09 before interest, taxes, depreciation and amortization.

How much is left over for payroll increases after interest, taxes, depreciation and amortization?

Enough to bump payroll up to $100M and still have enough left over for the greedy ones?

Sounds like they are going to make a huge profit again this year then.

You don't have to pay taxes on the amount you spend for salaries. That is an expense and would actually help them reduce the amount of tax they pay. Increasing the payroll means you have less profit and therefore pay less tax. Amortization and depreciation are tax deductions. Many kinds of interest can also be deducted. So their profit will likely end up around $20 million again as usual.

Combine that huge $17 million profit with the large gain in equity that is likely and it is another great year for the Reds owners.

Sure would be nice if they could use that windfall to help the team win some games.

Brutus
07-18-2009, 12:25 AM
Sounds like they are going to make a huge profit again this year then.

You don't have to pay taxes on the amount you spend for salaries. That is an expense and would actually help them reduce the amount of tax they pay. Increasing the payroll means you have less profit and therefore pay less tax. Amortization and depreciation are tax deductions. Many kinds of interest can also be deducted. So their profit will likely end up around $20 million again as usual.

Combine that huge $17 million profit with the large gain in equity that is likely and it is another great year for the Reds owners.

Sure would be nice if they could use that windfall to help the team win some games.

Out of curiosity, do you have any idea how many shareholders actually own stock in the Reds? Let's assume for one second that your $20 mil profit figure is accurate (and I am willing to bet after it's all said and done, that is on the high end), do you realize how much of that in dividends most of the ownership actually receives? It's probably a great deal less than you envision.

Instead of going after business owners (and remember that's exactly what they are) for making sound business decisions, as any business is supposed to do, how about railing on Major League baseball for not setting up a salary cap to allow business owners to spend capital without having to purposely put themselves in the red.

There's a large discrepancy to what Forbes reports and what the owners report. Now, I do not believe the owners' figures, but while I do find Forbes to be very reputable, I've heard good sources on the matter suggest there are some things Forbes does not take into account with their figures (i.e. asset repayment, etc.). So these figures are truthfully probably in the middle. Add it all up, and I'm sure the Reds are making a few bucks, but not as much as you're suggesting and not any more than a reasonable mind could expect them to try and stay competitive yet make money at the same time.