How much payroll can the Reds afford?

[Vottomatic]

I was looking around the internet and came up with this site that shows revenue from 2009 for the Reds.

http://www.forbes.com/lists/2010/33/...ball_Rank.html

Shows revenue at $166M for 2009. Then it shows operating income at $17.8M.

I have a business, and my revenue is determined after subtracting operating costs.........soooooo.........that $17.8M has already been subtracted to get to the revenue of $166M.

Cardinals had revenue of $195M. Looking at Cot's baseball contracts, the Cardinals had a team payroll of around $89M in 2009.

Reds had revenue of $166M in 2009, and a team payroll of roughly $74M in 2009.

It makes you wonder why they can't increase payroll more. I mean, the Brewers revenue is $171M, and they had a team payroll in 2010 of $90M.

Winning = fan support. Not based on one season. But consistent winning. I think Castellini expected all the fans to come back in droves after one good season. Now a follow-up mediocre season has put doubt in the minds of the fans again, namely in terms of if management is willing to build a winner.

[IslandRed]

I think you're reading it wrong...

Originally Posted by Vottomatic

http://www.forbes.com/lists/2010/33/...ball_Rank.html

Shows revenue at $166M for 2009. Then it shows operating income at $17.8M.

I have a business, and my revenue is determined after subtracting operating costs.........soooooo.........that $17.8M has already been subtracted to get to the revenue of $166M.

Revenue is how much you bring in, not how much is left over after you subtract your operating costs. $166M is how much the Reds took in. From that, expenses are subtracted. $17.8M (operating income) is what was left before taxes, interest, amortization and depreciation.

Now, are the Reds spending as much as they possibly could? I highly doubt it. I don't know how much money the ownership group actually takes out of the team, but I'm reasonably certain they aren't interested in losing money. So it's an open question as to how much more they could increase it even if they were running the team in break-even mode.

[Vottomatic]

Originally Posted by IslandRed

I think you're reading it wrong...



Revenue is how much you bring in, not how much is left over after you subtract your operating costs. $166M is how much the Reds took in. From that, expenses are subtracted. $17.8M (operating income) is what was left before taxes, interest, amortization and depreciation.

Now, are the Reds spending as much as they possibly could? I highly doubt it. I don't know how much money the ownership group actually takes out of the team, but I'm reasonably certain they aren't interested in losing money. So it's an open question as to how much more they could increase it even if they were running the team in break-even mode.

Yeah, I had a momentary brain cramp. Net Income is what I have after deducting expenses.

So if the Reds revenue is $166M, and subtract nearly $18M in operating costs, that leaves $148M. Then deduct payroll and coaches salaries, etc. and you have Net Income. Sorry about that.

[IslandRed]

You're still confusing Operating Income on that chart with Operating Costs. What it's saying is that the Reds' revenue is roughly $166M, and since their Operating Income is roughly $18M, then we can deduce their expenses were about $148M. Those expenses include personnel, including players, and all other normal business expenses.

You can see from the footnote that Operating Income on the Forbes chart is "Earnings before interest, taxes, depreciation and amortization."

[REDREAD]

Another problem with these numbers is that clubs can easily play games with them.

Example is Carl Lindner charging his personal lobbying expenses to the Reds.
Really, there's no way any "expense" numbers can be trusted. The system is designed to prevent people from not overstating profit, as opposed to not overstating expenses.

Plus, I don't think ML clubs are under any obligation to tell the truth about their financial numbers to anyone other than the IRS (and their obligations under the CBA), as they are not a publicly traded company.

[Kc61]

Cordero got 12 million last year, he's off the books now.

Razor got 3 million last year, he's off the books now.

That's 15 million off last year's team.

I know the team has raises to give out, etc.

But if a combined $15 million of salary is coming off the books, a fan has the right to expect meaningful acquisitions.

[corkedbat]

Originally Posted by Kc61

Cordero got 12 million last year, he's off the books now.

Razor got 3 million last year, he's off the books now.

That's 15 million off last year's team.

I know the team has raises to give out, etc.

But if a combined $15 million of salary is coming off the books, a fan has the right to expect meaningful acquisitions.

I would think that $80-85M is what the Reds FO is "comfortable" with, but It wouldn't surprise me to see Castellini kick in an extra $5-10M if he felt a deal could put the team over the top.

IIRC, don't the Reds get a decent revenue bump from the new CBA also?

[MikeS21]

The problem with the whole "Spend it and they will come" philosophy is that there is a point where a small market team comes to realize that someone will always out-spend you.

The Reds played in Riverfront Stadium and eventually persuaded the fans that "If you build us a new ballpark, we can bring in more revenue, which means increased payroll." GABP was built and payroll increased. Problem is that new ballparks also went up in Houston, Pittsburg, and Milwaukee at the same time. And St. Louis followed a few years later. Now the Reds are back at square one.

If the Reds raised their payroll to $90 million, I'd wager a bet the other teams would raise their payrolls as well. What do the Reds do then? Raise payroll again? At what point is enough, enough?

It's not about how much you spend. It's how you spend it. Look at how many teams have made it in to the post-season with payrolls less than the Reds.

If I were on Castelinni's shoes, on Day One, I would have taken a good portion of money I had earmarked for payroll, and would have spent it on scouting, drafting, and minor league development. I certainly would have kept my mouth shut and not made promises I could not keep. Spend some money on quality coaches and instructors. Find the best scouts, who have the knack for finding the best high school and college talent. Spend money in Latin America building baseball academies to bring in talent.

Had BobCast done that, I'm convinced the pipeline would be filled with top notch talent so that when Votto leaves, Jay Bruce leaves, Johnny Cueto leaves, we're not left wondering who we can sign or trade for to replace them. Certainly, LF, SS, 3B would not have question marks, and we'd probably have a couple top of the rotation guys almost ready.

Thing is, we have a decent pipeline of minor leaguers as it is. Just think if he had taken Arroyo's salary the last three years, and the money Gomes got, and spent it on scouting and development.

Here is my question: Would the Reds' top three draft picks from the last three drafts be different than the ones they picked, with improved scouting?

[corkedbat]

Originally Posted by MikeS21

Here is my question: Would the Reds' top three draft picks from the last three drafts be different than the ones they picked, with improved scouting?

I think Stephenson, Grandal and Leake were pretty decent picks considering the spots they were taken in round one. I don't think scouting is all that vital in round one (all though it is important). I'm just saying, where scouting really makes its bones, IMO, is later in the draft, particularily rounds 5-20.

[AtomicDumpling]

Originally Posted by REDREAD

Another problem with these numbers is that clubs can easily play games with them.

Example is Carl Lindner charging his personal lobbying expenses to the Reds.
Really, there's no way any "expense" numbers can be trusted. The system is designed to prevent people from not overstating profit, as opposed to not overstating expenses.

Plus, I don't think ML clubs are under any obligation to tell the truth about their financial numbers to anyone other than the IRS (and their obligations under the CBA), as they are not a publicly traded company.

This is all true, but keep in mind that 95% of a MLB teams' revenues and expenses are available as matters of public record. We don't need the Reds to tell us how much they received from revenue sharing, media deals, ticket revenue etc because we can get that information from other sources. The same goes for expenses, the vast majority of which is player contracts. 95% of the numbers are publicly available or can be easily calculated. The other 5% can be closely estimated based on experience and knowledge of other teams. The Forbes estimates are very, very accurate. However, these are not the numbers that will be on the tax return the Reds file with the IRS. The Forbes numbers are simply revenues minus expenses. If an owner chooses to mix his personal finances with the team finances like the Dodgers owner did or Carl Lindner may have done then that is another story. Most/all owners use the cash profit and the increase in franchise valuation as leverage to finance and help boost their other business interests as any wise investor would do.

[MikeS21]

Originally Posted by corkedbat

I think Stephenson, Grandal and Leake were pretty decent picks considering the spots they were taken in round one. I don't think scouting is all that vital in round one (all though it is important). I'm just saying, where scouting really makes its bones, IMO, is later in the draft, particularily rounds 5-20.

I dunno. Guys like Mike Trout and Chris Sale-both chosen later in the first rounds, cause me to wonder if scouting had been a little better, we may have had different results. But you are right. The later rounds would have been better, too.

[dougdirt]

Originally Posted by MikeS21

I dunno. Guys like Mike Trout and Chris Sale-both chosen later in the first rounds, cause me to wonder if scouting had been a little better, we may have had different results. But you are right. The later rounds would have been better, too.

Mike Trout went pretty late in the first round. We all know what he is now, but you have to wonder, why did so many teams miss on him if this is what someone thought he would be?

Still, I think that the Reds scouts do fine. They have consistently had top end farm systems for the last 4 years despite graduating plenty of quality major leaguers.