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Sports

Your Poor Baseball Team Owner Is Lying to You

The story goes that some small-market teams can't keep up with the big boys. This makes sense up until you remember that even small-market teams are crazy rich.
March 9, 2015, 2:25pm
Image via Denny Medley-USA TODAY Sports

Baseball has a problem. Too many people are making too much money, you see. Giancarlo Stanton's mega-deal-to-dwarf-all-mega-deals is just the latest example. It's not only the players though. Joe Maddon is out there pulling down $5 million a year, and Andrew Friedman is making 14 times the MLB minimum for players ($7 million). So baseball has a problem. At least that's what they'd have you believe.

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In reality the MLBPA, managers, coaches, and front office staff have the problem, and it's one of perception. There are people out there right now decrying Stanton's 13-year, $325 million contract (which includes a full no-trade clause and an opt-out after six seasons) as "bad for MLB" and "preposterous" and "owners getting drunk on local revenues." Actually, that was only one person who you can watch rant and rave in the link. But there are plenty more like him, and it's not difficult to understand why. And that is precisely the problem.

Read More: Baseball's Age of Reason Is Boring

$325 million dollars is an unfathomable amount of money to the vast majority of the country, and reasonably so, since virtually none of us are going to see even a modest percent of that figure in our lifetimes. The problem the above-mentioned groups are fighting is that the easiest thing in the world is to compare someone or something to is one's self. So when a player signs a nine-figure deal, it is such a foreign experience for most of us. We can't imagine that someone could possibly earn $100 million and be short-changed. The trick, though, is that we never get to see the owner's books and what they're making, and so we never get to experience that same alienation. Not to mention it's easy to relate to an owner on certain terms. We all have budgets that we can't exceed, even when we want something really badly—to the point of almost needing it. So when that star player asks for just a bit "too much," we understand that our poor team can't sign him because it would put them over budget.

This goes for executives and managers, too. One need only look to Tampa Bay and ruefully shake their head as they mourn the Rays' loss of manager Joe Maddon and President of Operations Andrew Friedman. What could the Rays have done! They can't compete with the Cubs and Dodgers of the world when it comes to spending money on their roster, much less on their managers and executives. These small-market clubs have to cut costs somewhere to compete, right? And just like that we're back to what's bad for baseball.

Joe Maddon donning the vestments of the ruling class. Image via Matt Marton-USA TODAY Sports

Of course the limitations of small-market clubs are quite different from what they tell their fans. First, revenue sharing has limited the advantages of the large market clubs in many respects—though certainly not all. Second, the strength of local and national television deals, combined with revenue sharing, often means clubs are making money prior to selling a single ticket. This can still work out as an advantage for large market teams, but it's worth remembering when any team is crying poor or hiking ticket prices.*

*This is a nice time to take a little aside to talk about how ticket prices and player salaries aren't related.

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Let's talk about those teams that cry poor, though. The Tampa Bays, Oaklands, Minnesotas, and Kansas Cities of the world. These are teams that, even with expanded budgets due to increased league-wide revenue, often find themselves on the outside looking in when it comes to major free agents who cost major dollars. It's gotten to the point that the fans of these clubs not only understand why this is, but are either proud of their ability to do more with less (reasonable) or come to resist the idea of taking on a large-salaried player because it's going affect the flexibility of the budget. And therein lies the rub. A baseball team's budget is determined by its owner, who has a reasonable idea of what the team is going to generate in revenue and also (and this is important) an idea of how much he or she wants to profit from their team. The budget is a number arrived at when weighing those factors, so it's not necessarily a number at which the team will suddenly be in the red. And even if the team does go into the red, MLB and our government has set it up so this won't necessarily harm owners—at least those who own other businesses, which is the vast majority since family money alone is hardly enough to purchase a team these days. If an MLB team can show a loss on its books, ownership is allowed to deduct those losses from the profits of their other business ventures for tax purposes.

So let's go back to Tampa Bay, Oakland, Minnesota, and Kansas City for a moment. Understanding that it is entirely within an owner's right to determine what level of profit they want to make in a given season, and that they set their budgets with that profit in mind, let's look at whether they can actually afford to spend more or if they're as poor as they cry. Keep in mind that because of their ability to deduct losses from other company profits for tax purposes, it can actually be an incentive for an owner to go into the red, in some cases.

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Tampa Bay: Owned by Stuart Sternberg (48 percent), Vincent Naimoli (15 percent), and limited partners (37 percent).

Sternberg made his money by investing and becoming a partner at Spear, Leeds & Kellogg before moving to Goldman Sachs, where he retired as a partner in 2002. According to the New York Times, Sternberg walked away with a reported $400 million. Given that he doesn't have ownership of another profit-generating company, and the controlling interest he purchased cost him $200 million, it's fair to say the Rays really do work on a limited budget—at least compared to the rest of MLB.

Oakland: Owned by Lewis Wolff and John Fisher.

Most people know who Wolff is, as he's the public figure for ownership and the one who speaks up when they request public money to fix the coliseum or request to move to San Jose. Fisher you might not know about, but you probably should.

Fisher is the majority owner, and is the son of Don Fisher and Doris Feigenbaum, co-founders of Gap, Inc. He's worth an estimated $2.8 billion and has investments in the San Jose Earthquakes of the MLS and the Scottish soccer team Glasgow Celtic.

So the next time the A's have plumbing issues, remember that somewhere along the line, a choice is being made not to fix it by someone worth $2.8 billion.

Oakland's coliseum looks fine to me. Image via Ed Szczepanski-USA TODAY Sports

Minnesota: Owned by Jim Pohlad.

Jim inherited the team when his father Carl Pohlad passed away in 2009. Carl bought the club for $44 million in 1984, and they're now worth an estimated $605 million. Carl made his money in banking following the Great Depression, and was worth an estimated $3.6 billion at the time of his death.

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Kansas City: Owned by David Glass

Glass made his money as the CEO of Wal-Mart from 1988-2000, and is rumored to be one of the wealthier sports owners, with some pegging him as worth $1.8 billion, though that couldn't be confirmed. Even if he isn't worth that much money, it's worth noting that Glass bought the Royals for $95 million in 2000 and Forbes valued them at $490 million in March of 2014, and as generating a positive operating income from 2005-2013, making Glass money as his asset appreciated in value. Suffice it to say, there's money in the coffers, Glass has chosen not to spend it.

All of this is to say, owners who say they can't afford to upgrade their stadium, their rosters, or pay the people in place more money are often lying. They choose not to, which is their decision to make, but not one that should turn the tide of public opinion against the player/manager/executive who wants to maximize his value. And more to the point, it's not bad for baseball for anyone who isn't an owner to be making more money. At least not yet, not while the money is flowing in and franchise values are appreciating at the rate they are.

So the Dodgers are assembling a massive front office full of respected baseball minds, hiring Andrew Friedman away from Tampa Bay and Farhan Zaidi away from Oakland. They also pilfered Billy Gasparino from San Diego, Gabe Kapler from FoxSports1, and added former general manager (twice over) Josh Byrnes. This type of spending on front-office brains (or talent) has some worried that this is just another market where the large-market teams have an advantage over the small-market clubs. Of course this "advantage" is as much of a ruse as the others. It's another way for teams to claim imbalance, when it's actually about preventing themselves from cutting into their own profits. Just like the draft was originally. Just like the newer draft allotments with corresponding penalties for overspending. Just like the luxury tax, and just like international spending caps. Parity or competitive balance is to these measures as funding education is to the lottery. It's a great way to sell the product, when the actual reason is to keep money in the hands of those in power.

Escalating prices in salary for players, managers, and executives aren't bad for baseball. It's a sign the game is healthy, and teams are competitive. It's also a sign that owners who continually get their avenues for spending money restricted are finding creative ways to spend it. What will be bad for baseball is if they ever stop.