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What would be the worst-case scenario under new ownership?

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What if John Sherman actually makes things worse?

Cleveland Indians v Kansas City Royals Photo by Reed Hoffmann/Getty Images

Last time, I wrote a best-case scenario under new ownership that would have the Royals looking to contend next year. That was absolutely pie-in-the-sky, wishful thinking. It was a lot of fun to research and write.

Now it is time to look at the worst-case scenario under potential new ownership.

Worst Case

First of all, I think we can all agree that the absolute worst-case scenario is the Royals leaving for another city. I don’t believe this will happen. Sherman is known to be a Royals fan, being a season ticket holder at one point (possibly still). I also do not believe that Glass would sell the team to a person who would move.

A worst case scenario where the team stays would involve ownership cutting back on investments in player personnel. In 2017, the Royals officials went on record saying they break even at 2 million in attendance and $115 million in payroll. In 2018, 1.66 million fans attended Royals games, and this season they are on pace to draw about 10% below that, around 1.5 million. I won’t even begin to guess at what percentage attendance impacts their bottom line, but given that 2020 does not look to be much more promising than 2019 in terms of competitiveness, it’s difficult to imagine they have a significant uptick in attendance, barring drastic changes to the team.

The Royals reportedly are nearing a new TV deal where they expect to make an additional $20-$30 million per season, which could help their financial situation. I will speculate (with no insider information at all) that the timing of the sale and the TV deal may not be coincidental.

If we take the current break-even point, and tack on an extra $25 million, we’ll arrive at a break even point of $140 million again assuming 2 million in attendance. Without knowing how much the attendance factors into this, we can only say that it will actually be lower than that with current levels of attendance. Still, even if it’s only $130 million, that’s a reasonable payroll to operate from, even if you take a few percentage points from profit.

Even with new local TV money, however, ownership could cut back on costs. There are a few reasons this could happen, not the least of which would be taking on debt for the purchase.

The Marlins ownership group reportedly took on $400 million in debt when they purchased the team for $1.2 billion. Again, stipulating that I have zero insider information, it it possible to think new ownership could go into debt to purchase the team. Any debt taken on will have to be repaid, and those payments would cut into the payroll the team was able to float.

Another factor to consider is the fact that baseball is a business. There’s no reason to think the new ownership group would not want to make money, too. How much would they want to take? Again, we can only guess, it could be small amounts (relative to team revenue) or it could be higher amounts.

Separately, team debt and ownership profits probably don’t severely limit the teams ability to operate a competitive roster. Combined however, we could see something like the Marlins have gone through in the past few seasons. They have operated with a payroll of $98 million in 2018, and around $70 million this season. The Royals opening day payroll this year was around $96 million, and (again, worst case scenario) this could be a new norm.

Goodbye free agent acquisitions. Goodbye extensions for young players (Mondesi, Keller, etc). Goodbye players once they hit their second or third year of arbitration. The team would likely only be willing to go over this if there was a very high chance of making the post season, meaning they would need to wait for the farm system to develop a large portion of their roster.

We would likely see prospects being moved very slowly through the minors, even if they deserve promotions. Why promote just one or two when they can wait for several to be ready to come up and possibly contend? Whit? He’s gone before Spring Training, probably packaged with Kennedy to dump that salary. Duffy? Also gone. Salvy? Probably here through the trade deadline to rebuild his value, but then gone. International spending? Probably decreased as well.

The Good News

The good news is that at this point I have been unable to find any reports that the ownership group is taking on debt. It’s unknown how much of the Indians John Sherman owns, but he will undoubtedly have a good amount of cash to use for the purchase after selling his stake.

Unless the ownership group goes into significant debt, I don’t believe the payroll constraints will be lowered so significantly. I’ll go over what I believe the most likely scenario is in another post.

What do you think the worst case scenario is for the new ownership team? A downtown stadium (something I didn’t touch on here)? Esky being hired as hitting coach? GMDM given a lifetime contract?