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November 23, 2009 at 10:30 pm ET
7 Comments
The Pirates, Stealing & Revenue Sharing Math

I don’t know if it’s just Yankee apologist backlash, but I seem to be hearing a lot lately of the argument that MLB teams at the lower end of the payroll scale are just cheap bastards who only care about making money.

The latest version of this was a Bill Madden Daily News column that I read on my way to the track on Sunday.  Madden says his sources say the Pirates made $75 million in 2009 before selling a ticket from revenue sharing and central fund monies (shared national TV, marketing, licensing, MLB Network and WEB site revenue).  Seems like a lot.

But Maddon also claims sources tell him that the Pirates made a profit of approximately $14 million last year.  Which, if we trust his numbers, means the Pirates would have lost $61 million if not for what little revenue sharing there is in baseball’s current rules.

Meanwhile, the Pirates were 62-99 last year and had their 17th straight losing season. So how are we supposed to feel about that $14 million profit?  Should losing teams not be allowed to make a profit?  And could that $14 million have made a difference?

Only the Padres and Marlins had 2009 Opening Day salaries lower than Pittsburgh’s $48.7 million.  Are there $14 million worth of players out there that would have gotten the Pirates 13 more wins and moved them out of last place?  At $62.7 million, the Pirates still would’ve been outspent by 25 other teams.  Just in their division the Cubs spent more than double that ($135M), and the 5th-place Astros spent a shocking $103M. The Cards won the division with an $88M payroll.  If the Pirates had operated at a $14 million loss, their payroll still would’ve been between Milwaukee ($80M) and the Reds ($71M), and have only been 18th highest in the bigs.  Does anybody think that it’s a good bet that with $28M more in salary the Pirates win the 29 more games they would’ve needed to get into a tie for a playoff spot?

Yes, we know it’s not impossible to win with what the Pirates spent in 2008.  The mighty Devil Rays made it to the World Series starting 2008 with only a $43.8M payroll.   But there’s a big difference between possible and probable. Clearly, the odds are stacked, the dice are loaded, and the playing field sure as hell ain’t even.

But it’s real fun to pretend we know better how to spend other people’s money and run their businesses.  Like when Bill Madden said the Yankees should cut ties with A-Rod and eat $270 million last February after the steroid admission. Fun.  Next to no basis in reality, but fun.

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7 Responses to “The Pirates, Stealing & Revenue Sharing Math”
  1. C.P. Christ says:

    The problem with revenue sharing is that it gives money to franchises to keep them down and non-competitive. Why should the owner of the Pirates attempt to place a good team on the field? By keeping salaries low, he is guaranteed a profit even before the first ticket is sold. Nutting must keep salaries low and continually have a salary dump every season in order to keep this “cash cow” going. That is his business model. As it stands now, if he was to attempt to field a good team, he would have to endure a number of season’s without making a profit. From a business standpoint that would be stupid. And you may ask what about backlash from the fans? Why would he care? Again, he has made his money before the first ticket is sold.

    Now, if the revenue sharing was cancelled, Pirates owner Nutting would be stuck. He would then be faced with having to field a winning team because his fortunes would be directly tied to the Pirate’s attendance gate. The more wins, the more fans he would attract. But in order to get more wins, you need better ball-players, players with higher salaries. Of course, Nutting is way too cheap to suffer terrible losses year after year for the amount of seasons it would take to grow the Pirates into a winner. No, he’s too smart a businessman for that. Instead, the morning revenue sharing is ended, Nutting wakes up and calls Mark Cuban for a quick sale. Nutting knows that without revenue sharing, he’ll never make another penney from the team, short of selling it. So why, he being the astute businessman he is, would he do anything else but liquidate?

    Revenue sharing only ensures and perpetuates a cheap owner like Nutting will never improve the team.

  2. MarkInDallas says:

    Christ says the Pirates need to spend more money on players like they can just go to the store and buy a few impact players. Let me show how difficult that would be to do.

    Of the 87 position players in 2009 that were 3+ WAR and above (all of the above average players in MLB), only 15 (17%) were signed as free agents with a club they did not break out with. All of the other 72 (83%) were drafted by their team or were obtained as prospects in a trade.

    Of the 32 very average players 2.5 – 3 WAR, only 11 (34%) were signed as free agents. 66% of these average players were with their original team.

    NO TEAM in any market under 4M people had even one position player on their roster that was signed as a free agent expected to perform at a level over 3 WAR and actually performed at that level or better.

    So the Pirates are trying to obtain valuable players in the only realistic way possible, which is to draft them and obtain them as prospects through trades.

    CP Christ’s answer is just more of the same drivel that people spout off without understanding how good teams are built and what makes a team like the Pirates bad.

    The Pirates are bad because of one reason – they drafted very poorly for a very long time, and didn’t sign any impact foreign amateurs either. If the Pirates had drafted like the Twins or the Phillies or the Marlins, then the Pirates would be good right now and wouldn’t have had to trade off the decent players they did have for prospects that might increase in value for the next go round.

    • C.P. Christ says:

      Mark in Dallas — with all due respect, either you didn’t read my post or you totally missed my point — I want the end to revenue sharing as it stands today. I am not advocating having the Pirates start buying players willy nilly. That’s plain stupid. I never said that or advocated it.

      UNfortunately, Nutting loves people like you. You believe he wants to win. But your plan to grow a Pirates team from scatch is a smoke and mirrors pipe dream. Unless you can draft an entire championship team in a short span, the Pirates will never amount to anything under your plan. Nutting would love that to happen, because then he gets a championship on the cheap. But he doesn’t care about fielding a cometitive team. He cares about money.

      You see, the Pirates will sell off all of their good players as soon as they are become eligible for a large salary. You can say this is not true, but I have 17 years of data to refute that. Nutting knows he’s in a small market and that a small market will never support a payrole like that of the NY teams. But there is cash to be made in a small market — and plenty of it if you keep costs down — way down.

      The Pirates drafted poorly as part of a plan. The plan was to draft middling players that would not cost them much money. They have been up front about this all along. The only exception was last year when they drafted Alvarez. And for all I know that was a reaction to being questioned by MLB and being leaned on by the other teams for solely pocketing the revenue sharing checks and not puting anything into the team. The Yankees front office criticizes the Prates for this quite a bit. So nowadays Nutting has to be a little less apparent about keeping the revenue money. He can’t keep all of it anymore — he must keep up appearances. Now he only keeps 20% of it. That’s still a pretty good dividend to collect on his property.

      The Pirates have no plan to field a good team. They only have plans to field a team that will attract enough fans to maximize their benefit to cost ratio. Nutting is no dummy. He knows that since he still has to play the games after getting his revenue share check, he must field just enough talent and “hope” to maximize the amount of paying fans. His cost of operations is basically a fixed cost, one he pays regardless of the gate receipts. The balance he strikes is to pay just enough in yearly player salary — his $25-40 mill per year — that will bring in enough to cover that expense and as many of his other operations costs as he can.

      As long as Nutting is the owner, the Pirates will never have a contending team. And as long as you have Revenue Sharing, you’ll always have the Nutting family in charge.

  3. MarkInDallas says:

    CP Christ. Thanks for that response. You sound like someone who doesn’t like reason and prefers conspiracy theories over logical answers. So I won’t waste too much on you.

    Regardless of the fact that no respected baseball man like Coonelly or Huntington would take a job that required him to fail, your “theory” ignores the fact that being successful would bring Nutting much more money than failure would.

    The Marlins, Rays, Rockies, Brewers and Twins all fielded competitive teams with payrolls that were modest.

    The Brewers – playing in a smaller market than Pittsburgh – took in $50M more in ticket sales and concessions, yet spent only $30M more on payroll.

    The Marlins, with the same attendance as the Pirates, spent $12M less on payroll, yet competed for the playoffs.

    The Twins are estimated to have made $11M more profit than the Pirates – as their success on the field means the Twins have a considerably higher attendance and revenue, yet their payroll was proportionally less than the Pirates compared to their attendance.

    A better theory is found in Hanlon’s Razor: Do not attribute to malice what you can explain with incompetence.

  4. Lino Donoso says:

    Hey Mark: Taking advantage of an easier way (no avatar required) to tell you how much I enjoy your posts, and to encourage you to go for your own blog, as you’ve indicated you might do. I never fail to learn something from your posts.

    As for CP Christ, let’s direct him to the PG blog. He can hook up with NutHo, Demery, Daquido Bazzini, et al, who are obsessed with Bob Nutting’s wallet. He will be happy there.

    • MarkInDallas says:

      Ha-ha! Thanks Lino. I appreciate the compliment. I’ll post something in enemy territory when I get something set up. ;-)

  5. Gonzo says:

    Good stuff by Chalk and by Mark in Dallas.

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