Realistic MLB Financials - Forbes vs Selig

[UKRedsFan]

I have been looking at ways of implementing realistic financials once someone releases an MLB 2006 roster set. Based on what I've seen in my own leagues I don't think the game will be able to accurately model the financial positions of the real MLB teams without some help.

For each club I've taken Forbes' estimate of expenses for 2005, and subtracted the actual 2005 payroll, to get a "off-field expenses" figure. I added $5m to each payroll to reflect the staff costs which are incurred on OOTP2006.

By subtracting this from Forbes' estimate of revenues, I get a maximum budget for the club to use on OOTP.

For example, Forbes estimates the Reds' expenses at $119m. Subtract the 2005 payroll ($62m + $5m staff costs) = $52m off-field expenses.

Reds' revenues were estimated at $137m, less off-field expenses = $84m.

So, we have a budget for players & staff of $84m. Reds' actual payroll for 2006 is $66m ($61m + $5m staff costs), giving them $18m surplus.

So do I believe Forbes, which tells me the Reds (and 24 other clubs) make a healthy profit each year and the owners are pocketing most of it? Or do I believe Bud Selig, who says Forbes' figures are rubbish and assume that the Reds are already at their maximum payroll?

[CBL-Commish]

I'm sure Forbes isn't perfect, but it's ceratinly a lot closer to the truth than Bud's numbers. The clubs have a vested interest in underreporting their revenues - it lowers their contribution to the revenue sharing pool. It's pretty clear that many teams report lower revenues than they really get, and many teams that are owned by larger corporations are quite good at hiding revenues in other companies under the larger corporate umbrella.

For example, the Tribune Corp that owns the Cubs also owns a company called (IIRC) Wrigley Field Premium Seats, which gets tickets from the Cubs and sells them at a substantial markup. Clearly the Tribune folks are making all kinds of money that's attributed to WFPS, but is only possible because of the Cubs. Many teams do this kind of thing, making it very difficult to get really accurate financials.

[Sn0wman]

Originally Posted by CBL-Commish

For example, the Tribune Corp that owns the Cubs also owns a company called (IIRC) Wrigley Field Premium Seats, which gets tickets from the Cubs and sells them at a substantial markup. Clearly the Tribune folks are making all kinds of money that's attributed to WFPS, but is only possible because of the Cubs. Many teams do this kind of thing, making it very difficult to get really accurate financials.

Bingo. It's also standard practice for the Cubs, Braves, and other teams who also own the television superstation that broadcasts the majority of their games to sign the TV deals at a rate that is far, far below market value, thus shifting those profits on paper from the team to the superstation.

[Commissioner Bud Selig]

Originally Posted by UKRedsFan

So do I believe Forbes, which tells me the Reds (and 24 other clubs) make a healthy profit each year and the owners are pocketing most of it? Or do I believe Bud Selig, who says Forbes' figures are rubbish and assume that the Reds are already at their maximum payroll?

Who would you believe, the custodian of a national trust, or a reporter from a magazine chain?

Part of the problem of OOTP is that there are many small market clubs playing in old stadiums that lack revenue opportunities that clubs like Seattle and Baltimore have.

Many of your simmed towns need to step up to the plate and build new virtual stadiums in order to keep clubs in a competitive mode.

[cdheer]

Originally Posted by Sn0wman

Bingo. It's also standard practice for the Cubs, Braves, and other teams who also own the television superstation that broadcasts the majority of their games to sign the TV deals at a rate that is far, far below market value, thus shifting those profits on paper from the team to the superstation.

Or they may well value them reasonably (if on the low side)...it really doesn't matter, since to Tribune Corp it's just a journal entry. (On the other hand, the Cubs deal with Comcast SportsNet for part of the games is real money.)

Same with WGN radio -- and Tribune only releases a consolidated balance sheet, so there's no way to know (other than guesstimate) what the true revenues/expenses are.