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Rays' title chase in 2008 added fans, cut into profits

ST. PETERSBURG — Filling Tropicana Field with screaming fans and cowbells during their 2008 World Series run earned the Tampa Bay Rays an extra $11 million. But financial statements leaked by a website Monday show that the hapless Rays of the previous year were more profitable.

The Rays held baseball's worst record in 2007. Yet that year, because of baseball's revenue-sharing rules, they cleared $21 million in operating income and netted $11 million after interest payments and other accounting deductions.

The playoff run of 2008 put about 400,000 more fans in the seats, swilling Budweiser at jacked-up prices. But higher player salaries more than gobbled up any financial benefit.

That year, the Rays earned about $14 million in operating income and netted $4 million after interest payments and other deductions.

These numbers, plus similar ones from the Pittsburgh Pirates and the Florida Marlins, confirm what many baseball observers have suspected for years: In some markets, holding down player salaries can be profitable — even when your hitters strike out, your shortstop has no range and your starting pitchers can't get out of the fourth inning.

"In a relatively smallish market and attendance on the lower end, if I increase expenditure on players, the quality goes up and attendance goes up, but revenues can drop,'' says sports economist Craig Depkin II of the University of North Carolina at Charlotte. "This is what small market teams face. If they have a $150 million payroll, they would go broke.''

The Rays declined to comment on the statements, published on the website Deadspin.com.

The statements end in 2008, so they don't reveal how much the Rays made or lost last year or this year.

But they may lend some support to owner Stuart Sternberg's contention that he is now losing money, a frequent beef as he pushes for a new stadium to replace the Trop.

For starters, the Rays consider their "net income'' as the money they make from operations, minus interest payments and other deductions that come into play outside of the operating balance. It's how much cash they have at the end of the year.

That net income was either $4 million or $218,509 in 2008, depending on which line on the financial statement you use.

Since 2008, player salaries have risen $17 million. The team also made an extra $11 million in 2008 by reaching the playoffs, a boost they didn't enjoy in 2009.

"That's a $28 million swing,'' said Sembler executive Craig Sher, who sat on the ABC Coalition, a community group that has advocated for a new stadium. "Say you don't make the playoffs this year, then you have a massive swing and that puts you in a loss category.''

Scher also noted that the Rays' balance sheet includes $115 million in long-term debt, which accounts for the $8 million in interest payments that are not part of operations. "That's a real expense,'' he said. "That's cash you have to pay out of your pocket.''

The website listed financial statements of five teams in great detail — the Rays, Florida Marlins, Pittsburgh Pirates, Los Angeles Angels and Seattle Mariners — leading economist Depkin to speculate that the leak came from within Major League Baseball.

Team financial information is a closely held secret, he said. "This is the best data I've seen'' in 12 years studying the sport.

The Associated Press published similar statements, but only for the Pirates, provoking a statement from the team that indicated the numbers were authentic.

"Someone with access to the club's financial statements has breached his/her fiduciary obligations,'' the Pirates said.

Items of note in the Rays' financial statement include:

• Revenue in 2008 reached $161 million, up 20 percent from $134 million the year before. Expenses were $147 million, up 31 percent from $112 million the year before.

• The team had $63 million in revenue sharing in 2008, national TV and merchandising from Major League Baseball. This is why small-market teams can make money by keeping salaries low.

• The Rays reported $23 million in sales and marketing expenses in 2008, compared with $9.8 million for the Angels, $8.8 million for the Marlins and $9.8 million for the Mariners. This bears out the Rays' contention that they must spend more than other teams on concerts and other promotions to bring in fans. The Pirates did not list a separate marketing line item.

• The Rays had $13.4 million in local broadcast income in 2008, compared with $64.3 million for the Mariners, $43 million for the Angels, $15.9 million for the Marlins and $39 million for the Pirates. After the 2009 season the Rays renegotiated their television deal with Fox for an undisclosed amount.

• The team listed $9.5 million in parking and concession income in 2008, up from $3.4 million the year before.

• The Rays reported $22 million in scouting, player development and minor league costs in 2008, which was up about $2 million from the previous year.

More fans, less profit

The Tampa Bay Rays' playoff run in 2008 put more people in the seats, but higher salaries for players meant a reduction in net income.

2007 2008
Tickets $28M $39M
Suites $2.9M $2.9M
Concessions/parking $3.4M $9.6M
Total
revenues
$134M $161M
Salaries $35.6M $56M
Total
expenses
$112M $147M
Operating income $21.7M $14.2M
Net income $11.1M $4M

Source: deadspin.com

Comparing numbers

How do the Rays' financial figures compare with those of four other Major League Baseball franchises? 7A

Rays' title chase in 2008 added fans, cut into profits 08/24/10 [Last modified: Tuesday, August 24, 2010 11:10am]
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