Revenue/Payroll Reinvestment is the Thing to Watch
When asked about the size of the Twins’ payroll, Terry Ryan and Bill Smith have always said that it’s simply a function of revenue — that the team will always spend right around 52% of revenue on the major league payroll. It’s a good excuse for keeping the payroll low; “we don’t have enough money” is something that seems to resonate with both fans and sportswriters.
But is it true? Khoi Vinh, a Yankees fan, did some research on this very topic in the interest of defending the Yankees* against those who would say they only won the World Series because they have the most money.
* Personally, I don’t think that’s necessary at all. And doesn’t the fact that this is what everyone’s talking about kind of tarnish their championship celebration? I’m sure the media and the Yankees themselves would have found some other way to tarnish it, but still. Let’s all get over the fact that they have the most money. We knew it before they won another World Series, and we know it’s going to continue. It’s just reality, folks.
What he came up with was a table comparing 2008 revenue to 2009 payroll, and compared them to get an “investment rate” in the team’s payroll. The Yankees’ investment rate was 4th, at 54%. The Tigers led the league with a 62% investment rate.* And the Twins? Well, the Twins were in the bottom third of the league, with a paltry 41% investment rate.
Given the numbers Vinh cites, the Twins should have had an $82M payroll in 2009 rather than $65M, based solely on their revenue and their claimed level of reinvestment in the team.
* Does anyone else think the Tigers are setting themselves up for some financial trouble in the near future? I mean, they’re in Detroit. How is their revenue not going to continue to drop? I’m guessing all those big long-term contracts are causing some ulcers in the front office right now.
It’s worth noting, of course, that the Twins’ 2008 revenues were the 4th lowest in the league, ahead of only the Marlins, Pirates, and Royals. So while it’s certainly easy to accuse them of not spending a large enough percentage of their payroll, they’re not exactly wrong that they simply lack the funds of other franchises.
The revenues probably went up in 2009, as they sold out an inordinately high number of games, took down the curtain to open up several thousand extra seats and sold those out, and played an extra home game with the curtain down. Additionally, revenue will certainly increase with the new stadium, as people rush to see the place, and season ticket sales climb, and (perhaps most importantly) the Twins actually get a reasonable share of the revenue from the Dome.
(I’ve written before about the Twins’ deal with the Metrodome. Basically, it’s the only stadium deal in professional sports that is not set up for the team to continually siphon off extra money from the municipality, instead allowing the local government to siphon money from the team. Minneapolis and Minnesota have received over $100M of free money from the Twins since the Dome was built. In all other stadium situations, that flow of money is reversed. I’m guessing that Target Field will be more common, so in addition to generating more revenue overall, a larger percentage of that money will find its way to the Twins.)
They could probably also use a more lucrative cable deal, which is increasingly one of the things that sets apart the large-revenue teams.
But the thing to watch, as the Twins move into Target Field next year, is not only the revenue increases, but also the level of investment in the team — if the percentage remains as low as it currently is, the increased revenues from the new stadium will simply go as profits, and will not help the team’s competitiveness as much as they should.
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Jim Pohlad seems like he is willing to spend more money than his father was. I think it will be difficult for us outsiders to every accurately project how much money the Twins make in order to calculate the re-investment rate. There are just too many sources of revenue, both obvious (ticket sales) and not obvious (if I had an example it wouldn’t be not abvious, would it? but something like ad sales for TV and Radio can get a little more murky than ticket price times # of tickets sold). Hopefully the twins get the right players without locking up too much money. I think whats more important for a team like the Yankees than being able to “buy” the best players is their ability to absorb bad contracts. The Twins don’t have that ability.
I don’t know how Vinh compiled his revenue data, but if you trust him, the Twins brought in $158M in revenue in 2008. Not only do I not know how/where he got the data, I don’t know what it includes — is it just ticket sales? Does it include TV/radio deals? What about luxury tax revenues? If it does include luxury tax revenues for teams like the Twins, is the luxury tax removed from the revenue numbers of the Yankees? Etc.
But it doesn’t seem all that likely to me that he’s drastically overestimating the Twins’ revenue. If anything, he’s underestimating it … meanwhile, the payroll numbers are adequate. So if he is underestimating the Twins’ revenues, then the Twins are spending an even smaller percentage of revenue on the team than expected.
I’m sure its close enough. I’m hoping revenues go up enough where we won’t really have to increase our re-investment rate that much. Lets assume that revenue increases to meet up with St. Louis. That is reasonable. They re-invested at 40% and had a playoff team. I don’t think its really necessary for us to jack up our spending to upwards of 50%. We need to be spending smarter, not bigger.
That is not to say the Twins aren’t spending smart now, but to take this new cash flow and just hand tons of it over to guys like Cabrera,and Pavano or similar players would be stupid.
True, but I think the low-40’s is way too low. We can easily afford to be spending $75M-80M right now, before we even see any new revenue from the new stadium. I think right around 50% reinvestment is the sweet spot.
Also, we need to be spending money wisely regardless of the size of the revenue or the percentage of reinvestment. We absolutely should not offer Cabrera any money … but checking out the bidding war on Beltre and Figgins is within our monetary range and we should absolutely do it.
I do not want to hear from Bill Smith that he looked into Beltre and Figgins, decided they were too expensive for the size of our payroll, and then read about them signing like a 4/$40M deal or something. If we can get either one of them at 4/$40M, we need to jump on it. (Something like 5/$60M might be just out of our range for them. And this is why I don’t like to try to project what a free agent will go for. I have no idea which is more likely.)
And infield of Beltre/Figgins, Hardy, Morneau and Punto is much better than an infield of Tolbert, Cabrera, Punto, and Cuddyer. How did we make the playoffs with that infield? Oh thats right, Joe Mauer.
Exactly. And with the Beltre/Figgins, Hardy, Punto, Morneau infield, we should have a pretty damn solid team. The only weak spots in the lineup would be Punto and Delmon Young (who really needs to turn the corner). It’s a team that should be the favorite in the AL Central. (Though of course it won’t, because of the built in anti-Twins factors in everyone’s projection systems. We’ll be projected to fight for 3rd place, as always.)
What really helps us, I think, is that the White Sox picked up Rios and Peavy and thus can’t afford to go after Figgins.
I’ve always liked Figgins. Would you bat him second behind Span? Hypothetically of course.
Absolutely I would.
Span Figgins Mauer Morneau Cuddyer Kubel Hardy Young Punto
Not a bad lineup. A big fear is that we get Beltre and Gardy puts him lower in the lineup — sliding Punto into the 2-hole rather than sliding Mauer up.
Span Punto Mauer Morneau Cuddyer Kubel Beltre Hardy Young
is Gardy’s most likely lineup … but is clearly a gross misuse of talent.
Despite having the same players, that first lineup is significantly better than the second one. That is why lineup construction is so important. And why its so frustrating that Gardy is bad at it.
Yeah, I disagree with the stathead notion that lineup construction is meaningless. If you do it totally wrong, you’re basically crippling your offense.
But imagine we do make a move to improve 3B … and either Young turns the corner or Punto has one of his good years. (It is a walk year for Punto, which means a good season is more likely. All his good years are walk years.)
If we get a good year from either of them … it barely matters what the lineup looks like. As long as the following two things aren’t both true:
[...] thirdbase market consists basically of Chone Figgins and Adrian Beltre. Both will probably be very expensive, with Beltre probably getting more [...]