Are the Phillies Really Cheap?

i cant remember who said this recently, whether it was a player, bill simmons or someone else (i think it was something related to the sonics situation). but, if you cant afford to pay salaries for players, sell the team. owning a sports team should not be a business or an investment. an owner should have one goal: win a championship. an owner should be able to withstand losses. just look at bon jovi’s approach to the soul. if only could withstand just losses at a higher level and own a real professional sports team. these owners are billionaires through and through and over spending, at least for a year or two, should be possible to bring home the one thing all fans desire: a championship.

Pete,

regardless of who made the comment, my point still stands. people who buy sports teams should do so with one intention and that is winning. if you want to make money, continue doing whatever it is that got you in a position to be able to afford a sports team in the first place (unless you inherited your money of course).

the way sports has taken over our country and they way they affect our everyday lives (and emotions) means that fans do not deserve owners who don’t care about winning. if the phillies owners have to lose many millions over the next few years to put the phillies in the best chance of winning a championship, they must do it. as has been said on this blog before, our window is not very large. we may never have players like rollins, utley, howard, lidge and hamels all in their prime at the same time. the owners must do everything they can to get this team to win now. just being above average is not good enough.

since i have no problem with following the marlins model, the owners can just stop spending money after the championship and make the lost money back from revenue sharing.

but because the phillies owners will not do whatever it takes to win now, i find the phillies have always been cheap and still are cheap.

Bill Simmons on Suns owner Robert Sarver:

“I can’t imagine why someone would want to own an NBA team if he cared more about breaking even than winning a championship.”

http://sports.espn.go.com/espn/page2/story?page=simmons/080501

@ sonido

the only time i have ever heard of the phillies being involved in a latin or japanese player was with alfonso soriano. the phils were actually one of five teams or so who made a run at him when he came over from japan (i guess he fits both parts of this equation). of course, the phils were outbid by the yankees. who knows if they really even tried. but hey, there name was included.

PETE: You have defended the Phillies, with regard to their spending and what they have available for payroll, a couple times now. I understand that each team’s inancial situation is different. Each team brings in different amounts of revenue and has their own budgetary constraints, limiting what they can spend on payroll. I just don’t believe the Phillies(or many other teams for that matter) are at their limit.

I believe that I have mentioned Andrew Zimbalist here before. He is a professor of economics at Smith College and has written several books about baseball economics. I am going to make a few counter points to your counter points using Zimbalist’s book, “May The Best Team Win”.

Payrolls don’t win championships, scouting does:
This is the “It’s not the money, it’s the management” argument. Scouting certainly does matter, but if it matters so much, why don’t the Yankees move heaven and earth to get Billy Beane? Then they can cut their payroll in half (which would still be more than the Phillies’ payroll). That’s good baseball and good business, right? I’m sure the Steinbrenners would love to keep another $100 million in their pockets. According to Zimbalist, Beane wanted to sign Ben Sheets, but he didn’t have the money, so he chose Barry Zito instead. Zito certainly worked out for the A’s, but he wasn’t their first choice. If Beane had the money, he would have spent it. Scouting is only half the story. The only way moneyball truly works is when you add the money and the scouting together. Bill James is in Boston AND they are spending money. That’s why they are successful. Zimbalist goes on to say that, since the mid-1990s, the relationship between payroll size and the likelihood of on-field success is direct, dramatic, and undeniable. It’s not that a low payroll team can never succeed or that a high payroll team can never fail. What he says is that the opportunities for success are very significantly diminished by a smaller payroll, especially over the long term. Now, I’m not saying that we are a low payroll team, but you’ve got to admit that for a big market team(which we are) with a new stadium, we act like we’re on a small market budget. I would say we are on the fence. We spend enough to be good, but not enough to be great. If I were a cynic, I would say that this suits the owners just fine. As long as we stay competitive, attendance stays up, merchandise sells, and business is good. They are selling us hope. It’s like the law of diminishing returns. You know, where you can get a B by studying for 1 hour, but you need to study for 6 hours to get an A. It’s not worth all that extra effort, so you put in 1 hour and take the B. I see ownership as being happy with a B.

As far as revenues, Zimbalist has this to say: “The owners of baseball teams do not treat their teams as stand-alone profit centers; rather, each team is a cog in the larger corporate machine or investment portfolio, used to maximize the long-term profits of the larger entity.” The players produce profits for the owners both on and off the ball field. A specific example for us is that the Phillies are part owners of Comcast Sportsnet. The Phillies can overpay Comcast to broadcast the games. This increases expenses on the baseball side, which eats into the baseball revenue. Teams either own or are part owners in all kinds of related companies(like concessions, for example), which they use to drain funds away from the baseball operation. They can then show a loss on the baseball side, but in reality they are just taking money out of one pocket and putting it in another. You see underreporting revenue is advantageous in baseball because of revenue sharing. Less revenue means less sharing. No revenue means no sharing. It’s not that teams are losing money, it’s that they are REPORTING that they are losing money. It’s all paper tricks and accounting sleight of hand.

As far as the owners, here’s my take. All of these individuals have been very successful in businesses outside of baseball. Am I supposed to believe that they have lost every shred of business acumen the minute they became the owner of a baseball team? We know beyond all doubt that businesses(especially major corporations) employ accountants whose sole job is to find ways to hide money, under report revenue, over report expenses, decrease the tax burden, etc… Am I supposed to believe baseball is any different? Also, when is the last time you saw a baseball team sell for less than the previous owners paid for it? How about for the same amount? No, franchise prices continue to skyrocket. Why is that? If all these teams over spend on payroll and continually lose money, why would any shrewd businessman buy in? You know why. Because the money is there, it’s just hidden from us.

I’m not trying to go all Oliver Stone here, but come on. It’s kind of like when you buy a new car and the salesman tells you what a great deal you just got because they only made $100 on the sale. Do you believe that? Baseball is the same way. The money is there. I’m not saying that the Phillies can go out and spend $200 million on payroll.(Although we will never know because I’m sure the accounting is very well done and kept out of sight.) What I am saying is that I’m sure that there is more money there than what they are spending.

Pete, you’re right in that the owners of these teams are all billionaires. What makes the Phillies ownership different is the fact that they initially purchased this team for $30 million dollars in the early ’80s!

The three main owners, Claire Betts, The Buck Brothers (or Tri-play Associates), and John Middleton are worth billions. Betts got her husbands cash and share when he was killed. If I remember correctly, she has the second largest piece of the ownership. The Buck Brothers started one of the first venture capital firms in the Philadelphia and tri-state area. They were able to capitalize on using federal money mixed with their money on investments. Their net worth is very well hidden, and you’ll never seen them on a “Richest” list, but it is HUGE. Middleton is worth close to 2.5 billion dollars. Giles and Montey hold tiny slivers and shouldn’t even be counted as owners.

What are the Phillies worth right now? Between 500 – 600 million? The point is that the majority owners have not only made their money back, but posted an incredible ROI. Even if they were to go in the red for the next 5 years, the damage done to that ROI would be minimal.

The Florida Marlins model (which someone already mentioned), from a business perspective makes a huge amount of sense. It shows Wayne Huizenga’s desire to win championships combined with his business sense.

I think the Phillies are still trying to overcome the label of being cheap from the 90’s. I don’t know what the numbers are but it seemed like they were cheaper then and have raised payroll the last few years.

Agreed that in 2007 they were normal.

As a fan NOT a businessman I want to see them bump up their payroll in the years that they think they have a legit chance at winning in the playoffs like this year and the next couple years. If their payroll would have been $100 mil for the next 10 years I would hope that they could increase payroll by 20 mil for the next 5 years and decrease it to 80 mil the following 5 years. Without checking numbers, the Braves seemed to do this as they cut their payroll a few years back letting Glavine Maddux and others go but then take on Texeria last year.

If wouldn’t be upset if the phils went for it all the next few years and then cut back by letting ryan howard leave when he hits free agency.

Pete, I actually think a lot of people thought “Yeah! But we sucked in most of the 90s!” It took a long wait to make the playoffs, years where the team was mediocre because they didn’t want to spend cash. They made the playoffs last year and were 1 and out. Now the goal should be the NLCS and the World Series. With the core of this team in their prime, they should be willing to up the payroll to 120 or 130 million dollars for the next couple of years to push this team over the top. But with that being said, the ownership group just wants to be successful financially and if the can win a World Series at the same time, well, that’s extra gravy.

Pete, awesome research. Bski, excellent assessment of the business side of baseball.

There’s nothing I can really add to this discussion (you guys and several others have pretty much said it all) other than we might be playing with semantics.

Are the Phillies cheap? No.

Are the Phillies CONSERVATIVE? Hell, yes.

It would be nice to have ownership with a lets-do-whatever-it-takes-to-win-a-championship mentality. Even if they followed the Wayne Huizenga win-it-all-then-blow-it-all-up methodology.

Can you believe the Florida Marlins have twice as many championships as the Phillies? I need a drink.

@ dan-

you nailed it brother! i think pete may actually be david montgomery….or some be in how on their payroll. This argument has to whether or not the Phillies are CHEAP needs to be in the context of the last 20 dismal years…not just 2007’s payroll.

DROLZ: Thanks. I think you got it right. The Phillies are more on the conservative side than on the cheap side. They see the money they are making for the amount they are spending now and are happy with it. Most likely they are figuring they would need to spend a good deal more to win a championship and they wouldn’t get enough profit back to justify the extra expenditure.

PAT: You hit on something I have said many times here. The Phillies have taken step one by retaining their core, but that has only gotten us so far. They are at the point where they need to take the second step, which is spending to add to the core. This is where our frustration comes in, because we know they are close. It certainly seems that money is the only impediment to us adding what we need to get us there. Since ownership will not agree to spend the money, we see them as cheap.

For my part, I don’t want to continually suffer by feeling ownership is conservative or cheap or whatever. I would prefer ownership to look at the situation honestly. If they know they are at their payroll limit and they cannot play the free agent game with the big boys, then they need to take a different approach to building a winner. They need to spend the money they do have more wisely. Maybe our current payroll spending would be sufficient to make the moneyball approach work. Instead of spending tons of money on free agents, they can pour that money into drafting and developing young players. They can upgrade their minor league instructors. They can pay above slot to get the top notch draft picks. They can spend more money in Latin America to gain access to their top prospects. By doing this, they should be able to generate a steady stream of players to contribute at the big league level. Also, I would hope we would have enough extra prospects to use in trades to fill holes, which would be less expensive than the free agent route. With what we spend, we should be able to get a few free agents, like we do now, and also keep more of our own players than Oakland does. We are already pretty certain that we will not be able to keep Howard and we could possibly lose Hamels as well. This also plays into the Oakland strategy of either trading them for handfuls of prospects or getting compensatory draft picks if they walk. Either way, we keep the cycle going.

I realize that now is not the ideal time to switch our approach to building a winner because we would just be pissing away any shot we’ve got with Howard-Utley-Rollins. I’m just saying that if ownership knows they don’t have enough money to play the free agent game, then it is incumbent on them to find another, more efficient way to maximize what they do spend in order to build a championship caliber club.

why does everybody just LOVE to complain; hey they may not be the red sox or yankees but they do spend money. sure they could spend more but remember this is a business; EVERYBODY’S CHEAP! we’ll see just how cheap they are when hamels and howard come up for contracts. i personally dont think its that bad. now the Eagles?…..dont get me started.

It doesn’t even matter if the Phillies are cheap, they’re not doing badly at all this year and the past two years they’ve had the NL MVP

EVERYBODY: Rich Hoffman’s article in today’s Daily News ties into our discussion here. He says the Phillies are 13th in revenues and 13th in payroll, so they are not cheap. They do what pretty much everyone else does. The focus of the article is about the Mets’ new ballpark and how much more revenue it will generate. The extra revenue will give them even more money to spend on players, widening the gap between them and us, making it that much more difficult to compete with them. If the Phils are truly at their upper limit in terms of payroll, maybe they should start thinking about acting like a low payroll team and find an alternate, more efficient way to build a winner. It may be their only shot.

Here’s the link for the article

sonido – I actually think my dislike of the Phils provides a degree of objectivity. Being inundated with news about the team and all that, I think the offseason after basically a humiliation at the hands of the Rockies was going to be a crossroads type of situation for the team. Moves could have been made to acquire big name, big talent players to put around Utley, Hamels, and Howard. Lidge was a major question mark that thus far has totally panned out. Feliz and standing pat behind the plate and with the back end of the rotation were questionable moves that don’t seem to have. As I said previously, I actually feel some degree of empathy for the fans, because they are super passionate and knowledgeable for the most part, and the ownership leaves them hanging out to dry more often then not. To me, good enough is not not good enough – it has to be about getting the ring. Especially in this market.