SBD/Issue 237/Leagues & Governing Bodies

MLB Investigating Source Of Leaked Team Financial Reports

While Having Suffered 18 Straight Losing Seasons,
The Pirates Made A $29.4M Profit In '07 and '08

MLB is "narrowing down the search for who was behind the leaks of team financial reports that reveal how profitable" the Pirates are and how much they, the Marlins and Rays "receive in revenue-sharing from wealthier clubs," according to a source cited by Richard Sandomir of the N.Y. TIMES. The AP detailed the Pirates' financial statements on Sunday, and Deadspin.com yesterday posted similar data of the Marlins, Rays, Mariners and Angels. Marlins President David Samson yesterday said the release of those documents is a "breach of fiduciary obligation and duty by the leaking party." Samson: "It’s a crime, and it will be followed up intensely by Major League Baseball and its member clubs." Sandomir notes MLB teams "do not see one another’s financial reports, but receive a general accounting of where they rank compared with the other 29 clubs in profitability." The documents offer "various glimpses into the generally rosy financial state of five teams, regardless of their records." The Pirates, who have recorded 18 consecutive losing seasons, earned a $29.4M profit in '07 and '08 due in part to $69.3M in revenue sharing. The Marlins received nearly $92M in revenue sharing in '08 and '09 and produced a net income of $33M in those years. Similarly, the Rays received $74M in revenue sharing in '07 and '08 and "total net income in those years of a little more" than $15M. Author Vince Gennaro, a consultant to several MLB teams, said, "If I were Major League Baseball, I’d be much more concerned if the Yankees’ numbers were released. It would present a dramatic disparity and you’d begin to wonder how you can retain an economic structure that allows teams to earn such disparate amounts of money" (N.Y. TIMES, 8/24). A baseball player agent said, "This is precisely the type of financial documents that MLB has been trying to keep secret for years" (SPORTINGNEWS.com, 8/24).

TRUE HOLLYWOOD STORY: Angels officials yesterday "confirmed the authenticity of the 16 pages pertaining to their organization" that appeared on Deadspin. The documents "cover a range of financial figures including net income, revenue-sharing payments and postseason revenue" from '08 and '09. Angels VP/Communications Tim Mead: "It's a breach of confidential information. We're going to let it run its course and the appropriate people are looking into it." The documents revealed that the Angels "generated a net income" of $10.7M last year and $7.08M in '08. The Angels also paid $16.4M in '09 as part of MLB's revenue-sharing program, and $14.7M the previous season. The documents also identified a "third minority owner" of the franchise as the Pope family, which "purchased a limited partnership interest of 2%" for $3.45M in '06 (L.A. TIMES, 8/24).

RAY OF LIGHT: In St. Petersburg, Stephen Nohlgren notes while the Rays' financial documents end in '08 and thus "don't reveal how much the Rays made or lost last year or this year," they may "lend some support to owner Stuart Sternberg's contention that he is now losing money." 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 is "how much cash they have at the end of the year." The team's net income in '08 either was $4M or $218,509, "depending on which line on the financial statement you use." Also of note, revenue in '08 reached $161M, up 20% from $134M in '07, while expenses were $147M, up 31% from $112M the year before. The Rays also earned $63M in '08 from revenue sharing, "national TV and merchandising" from MLB, and Nohlgren notes that is "why small-market teams can make money by keeping salaries low" (ST. PETERSBURG TIMES, 8/24).

Samson Says Cost-Cutting Measures
Were Needed To Keep Marlins Alive

WELCOME TO MIAMI: In Miami, Adam Beasley notes Samson yesterday on a conference call argued that the 42-page document "vindicated the club's cost-cutting actions over the past five years -- even though the data showed the team turned an operating profit of roughly $49 million over the two seasons in question." The Marlins prior to the '08 season "dealt popular -- but expensive -- stars Miguel Cabrera and Dontrelle Willis to the Tigers for prospects to slash payroll." Samson yesterday said that the trade was "among many moves designed to ensure the survival of the ballclub." He added, "We could have had Cabrera and no ballpark. We always made our decisions on the long-term viability of the ballclub" (MIAMI HERALD, 8/24). In Ft. Lauderdale, Sarah Talalay notes Samson yesterday "changed his long-held contention the team wasn't making a profit and instead said the documents prove the team has been saving its dollars to pay for its new baseball-only ballpark under construction in Little Havana." He said, "It basically confirms everything we have said over the years of how we've operated the team. It's about making sure baseball would be secure in South Florida" (South Florida SUN-SENTINEL, 8/24).

SOUNDS FISHY: In Miami, Greg Cote writes under the header, "Now We Have Proof Florida Marlins' Frugality Was A Poor Excuse." Marlins fans now "know why the club fought so hard to keep its finances a secret even as the city and county wanted full disclosure during negotiations" for its new ballpark. Cote: "It's because what you see when the curtain is thrown open and the light pours in is an owner who could have spent much more on players and still made money. What you see is a ball club that was crying poverty with pockets full" (MIAMI HERALD, 8/24). In Ft. Lauderdale, Dave Hyde wrote, "I have no problem with companies making money. That's the point of being in business. But when you trade Cabrera based on lies? When you lose this season because you won't invest a few million into a bullpen? ... When you cry poor to the city in a time of public crisis and get a $600 million stadium? Without showing any financial records?" It is "not surprising," however, and it "reminds you of what's really important to the Marlins" (SUN-SENTINEL.com, 8/23).

TRYING TO MAKE AN EXTRA BUC? Sports business experts contend that the leaked financial documents "are an indictment of Major League Baseball's revenue-sharing system." The records also "appear to show the Pirates are sticking to their grassroots plan to restore the franchise to respectability." Business of Sports Network Founder Maury Brown said, "I've never felt that Bob Nutting is cheap. I felt that what might be happening is that they're cutting margins to allow for profitability in some way, shape or form. But, lately, there's been more spending going on." Forbes National Editor Mike Ozanian: "The Pirates' spending is in line with other teams, as far as the development of players. But they spent a lot less than other teams for their major league payroll. It's a great illustration of why the revenue sharing system doesn't work" (Pittsburgh TRIBUNE-REVIEW, 8/24). A Pittsburgh TRIBUNE-REVIEW editorial states the Pirates' financial statement is "not the prettiest of pictures," but it does "much to address the long-running criticism that the Pirates' ownership group has been taking profits at the expense of fielding a winning team." It appears that there is "not a lot of excess cash to run the kind of development programs and player acquisitions of franchises in the larger market." The editorial states it is "probably remarkable that the Pirates, this season's worst team in Major League Baseball, have the programs and players that they do" (Pittsburgh TRIBUNE-REVIEW, 8/24).

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