How much money do the Royals have? A lot.

by James Quinn on Dec 2, 2007 8:34 PM EST Comment 13 comments

The KC Star ran an interesting story today regarding the new willingness of Glass to spend money on the Royals' roster. The article speculates Glass will raise the roster budget to $75-80M this season if deals can be closed. If this is true than it represents a good half step by Glass in the direction of becoming a responsible owner.

"The way we're operating is no different from the way we did things in Atlanta," said Moore, who spent 12 years in the Braves' front office before taking control of the Royals in June 2006."

Why the change? Well, according to this oddly mysterious source:

""He's fought a lot of battles over the years to do what he thought was best for baseball," a close friend said. "He still feels the same way, but he's tired of losing. He wants to win."

I wish Dutton had done a better job on this article.

Dutton presents Glass as an owner willing to spend a lot of money to field a winner. The situation could better be described as Glass finally being willing to spend enough on the team that he will only earn a modest profit rather than huge profit. Glass is finally willing to earn less profit in order to stop being laughed at and known as the worst owner in baseball. There is no reason to conclude Glass was pushed in this direction because his burning desire to win. For years Glass as been the shining example of the greedy baseball owner. Glass was called out by George Steinbrenner last year for just pocketing revenue sharing money sent to him by the Yankees rather than reinvesting it back on the field.

Some figures provided by Dutton today paint the picture better than he is willing to openly state.

The Royals will get about $25M from revenue sharing this off-season.

The Royals will get about $20M from MLB common pool revenue sources. As far as I know the main source of this revenue is MLB.com Advanced Media subscriptions.

Plus, the Royals signed a new ten year deal with Fox Sports Midwest to broadcast Royal's games. I do not know how much extra money this will be but I think the deal is probably for around $15-20M a year. Does anyone know the actual terms?

Plus the Royals will be receiving what amounts to a $225M subsidy from tax payers to pay for renovations on Kauffman stadium. The Royals are chipping in $31M themselves. Undoubtedly these renovations are designed to increase long term team revenues to ensure the team does not relocate. You of course remember that Glass and Seleg both strongly indicated that if the voters didn't cough up the subsidy that the Royals would start looking for a new host city.

So, not even bringing in ticket sales and the huge radio network, the Royals have a lot more money to spend now than they did just a few years ago. The Royals will receive about $60M just from revenue sharing, MLBAM, and FSMidwest this year. That is more than last year's entire roster budget. Throw in ticket sales, radio, concessions and tax breaks and it looks to me like the Royals are probably bringing in well above $80M in revenue per year.

Bottom line, there is no reason Glass cannot afford that $75-80M roster budget. The Royals are making him a ridiculously wealthy man. He bought the team for $96M in 2000. Forbes estimated its value at $282M last April. During Glass' reign he has just been throwing profit on top of his mountain of money every year. If the Royals show up with an opening day payroll of less than $75M it is not a factor of KC being a small-market franchise, it is a factor of the Royals being owned by a man driven more by greed than desire to win.

I hope we all keep this in mind during the hot stove months. The Royals might spend a lot of money on some less than perfect players, but as long as those players help the team it will be a good thing. When the Royals are faced with the prospect of paying more than they want for a player or doing nothing, push for the risky contract. Bottom line, I would rather see the Royals spend $45M on Kuroda or $12M on Riske than to see it thrown on the big pile already sitting in Glass' bank account.

0 recs | Comment 13 comments

Story-email Email Printer Print

Comments

The Royals and Glass can afford a lot

The Royals are bringing in a lot of revenue from a lot of sources, as mentioned above. Of course, they have many expenses as well, including increased expenses that came after Moore took over (including but not limited to more scouts, an additional minor league team, and increased development efforts in Latin America). But I am confident that there is a tidy profit being made and that profit is increasing every year.

So, if the 2008 payroll were to equal the 2007 payroll, the Royals have about $27M to spend on FA's. If the payroll went up to $75-80M, then they would have $34-39M to spend. So, the Royals can likely afford to pick up Guillen or Jones as well as Kuroda or Silva. And that wouldn't even spend up to the top of the budget. And with even more revenues rolling in over the next fiscal year, there would almost certainly be significant money to throw at FA's next year.

So, if we sign two of Guillen/Jones/Fukudome/Kuroda/Silva, no one should complain that this means we won't be able to spend money on FA's next year. There's a lot of money to go around.

I probably disagree with you.

by NYRoyal on Dec 2, 2007 3:07 PM EST reply actions 0 recs

That was cool

Applauds Applauds Applauds

Play MLB Managers Survivor at Royals Nation! http://royalsnation.proboards62.com/

by Royals Nation on Dec 2, 2007 4:07 PM EST reply actions 0 recs

A friend of mine had a good point.

He said that the owners should have a minimum payroll they have to meet. If the owners had to pay at least hmm say $75 mil a year it would keep teams like the Marlins honest. After all, they are supposed to be competing, not just profiteering. And it would keep my boy Howie in the American League.

Yoda

by Yoda on Dec 2, 2007 5:21 PM EST reply actions 0 recs

everyone in baseball is making money...

the only difference is no one really knows the details regarding the owners, whereas the player salaries are basically psuedo-public

we need to start holding glass accountable

the line about how he fought for what he thought was right was just hilariously absurd

Hillman, you're on notice.

by FireBell on Dec 2, 2007 6:05 PM EST reply actions 0 recs

How much to MLB owners profit

I would be very interested to know this also.

The Royals recently released a press statement that they earned about a $1M profit last year. What thinking person believes this nonsense?

If that were true, than the Royals earned less than one percent profit last year. In other words, they lost about 2-3% if inflation is taken into account. If this were true than owning a baseball team would be one of the worst investments in the world, worse than just putting the money in a saving account and drawing interest.

Yet, somehow, somehow the Royals team value more than tripled in less than 8 years from 96 to 282 million dollars. And MLB revenues more than tripled during the same time period.

I wish Dutton and other reporters were actually acting like we expect journalists to act. When he hears nonsense like this, he should call Glass on it. Instead he basically acts a press release system for the stream of BS.

This matter becomes much more newsworthy when we remember that KC tax payers are now sending $225M to the Royals to help Glass make more money. There sure are a lot of other needs in the KC area that could use that money. The minimum that should be demanded of someone like Glass who is taking hundreds of millions of dollars of corporate welfare should be more honesty and openness.

When you think about it, it does get you mad. KC really has been beyond patent with Glass.

Rock Chalk Talk for pretty good KU College Baseball Coverage

by James Quinn on Dec 2, 2007 6:34 PM EST up reply actions 0 recs

Dutton should ask:

"Does the $1M 'operating profit' include revenue sharing and luxury tax payments from MLB?" Corporate -- and especially profressional sports -- bookkeeping is an art in creative flexibility. One can count various credits and debits in a variety of ways. I think it is likely that the reported "operating profit" included all organizaton expenses and "regular revenues" for the fiscal year. I think those revenues include the standard sources such as gate, TV, radio, stadium advertising, etc. But I doubt they counted in the "operating profit" all of the money that came directly from MLB. It is an exercise in technical bookkeeping and semantics designed to make it look like the organization is just barely breaking even, so the ownership is "doing everything they can" to build a winner.

However, I don't think that the organization is just rolling in profits. The Royals have a great many expenses over and above the MLB players payroll. And the Royals revenues (even including that which comes from MLB) are much, much less than the vast majority of major league teams. So I think there are profits there, and Glass can afford to increase payroll by 10-15% and still make a tidy profit, but I don't think the Royals are a huge profit source.

I probably disagree with you.

by NYRoyal on Dec 2, 2007 6:54 PM EST up reply actions 0 recs

all good points

by royalsreview on Dec 2, 2007 8:10 PM EST up reply actions 0 recs

Agreed

Do any of us really know 1) how much money the Royals have to spend or 2) how much money it actually takes to run an entire organization? No, we don't. The only numbers we know are some of the player payroll numbers. But how much money goes into scouting, office staff, other overhead costs (such as electricity. cleaning the stadium, travel..etc..)? Is that $10 M? $20 M? $5 M?

I have a hard time hating on Glass without more than the very limited numbers we get. I do wish that as part of the stadium renovation bill, they would have worked in a provision that the Royals and Chiefs would have to make their audited financials public. Oh well.

by Stook on Dec 3, 2007 1:04 AM EST up reply actions 0 recs

I seem to recall

Baseball Prospectus estimating that the average team spends about $30-40 million on non-player salary expenses. This includes scouting, management salaries, stadium expenses, etc.

Relive Royals History at royalsretro.blogspot.com

by RoyalsRetro on Dec 3, 2007 10:51 AM EST up reply actions 0 recs

Well,

I guess if the average team spends $30-40M, I guess that means the Glass Royals spent about three or four dollars.

Joke of course.

Obviously I don't have full numbers to work with, but here are some more rough estimates.

Royals gate. 81 games, 17,000 per game, $15 average ticket = ~$20M.

Luxury Boxes = who knows? Maybe $5M?

Trademark merchandise = who knows? Every good person in the world owns at least a few Royals shirts and caps.

Radio broadcast rights = Who knows? I'll guess around $5M for the full network plus XM.

Concessions at Kaufmann = Who knows? I know the Royals get a cut.

Most minor league teams now make a profit. In the past parent clubs might have had to subsidize the low level teams but today all they have to do is pay the salary of about 2/3rds of the players. That comes to at most $6-7M even with signing bonuses. The only other expenses for the Royals are staff, coaches and rent.

If we add these to the $60M already coming from cable, revenue sharing and common pool we come up with a number around $100. So, even if the Royals paid $20M operating the team (which I don't in any way believe is true) then they still have $80M for the roster.

Glass did say he took $20M profit in 2005. Actually Glass did not say this, it was supplied by other baseball owners who were mad about revenue sharing. And the 2006 roster was just as cheap as the 2005 version. Even the 2007 roster was only a bit higher. Stands to reason that Glass has been pocketing between $10-20M each of the last three years. I would not be one bit surprised to learn that Glass' personal profit from the Royals has already broken $100M since he was nice enough to help out the little folks in KC and buy the team.

Rock Chalk Talk for pretty good KU College Baseball Coverage

by James Quinn on Dec 3, 2007 11:53 AM EST up reply actions 0 recs

+1

Wonderful post.

Relive Royals History at royalsretro.blogspot.com

by RoyalsRetro on Dec 2, 2007 11:24 PM EST up reply actions 0 recs

I'll estimate the concessions

This is one area that the club has "fixed" costs - the concession is operated by Centerplate, and the agreement calls for the Royals to take approx 45% of the gross sales off the top, while Centerplate is responsible for all operating costs. (This is pretty standard industry practice).

Here is a guesstimate:

Take the Royals attendance of, say, 1.7 million, times an estimate of $5-10 per person per game for concessions, times 45%, and you get an estimate of between 3.8m and 7.6m

Note: I have no idea what the avg expenditure per attendee is, but $5 - $10 each seems a reasonable guess. If your guess is something else, than simply plug that figure in...

by loyal2s dad on Dec 3, 2007 1:37 PM EST reply actions 0 recs

Sounds about right to me

Some people, like me spend $0 in concessions (I hate spending 2-3 times more than usual for something like Bud Light or a mediocre hot dog), while others always buy something and more than a few people get multiple beers, nachos, hot dogs and more. So around $5M to the Royals for concessions sounds pretty close to accurate.

I probably disagree with you.

by NYRoyal on Dec 3, 2007 2:11 PM EST up reply actions 0 recs