Milwaukee Brewers Blog - Between the Green Pillars : payroll

Is A Firesale Possible?

Ryan Topp — Sun, 05 Apr 2009 20:10:42 GMT

It's impossible to escape references to the financial crisis that seems to be readying itself to swallow the whole world at the right moment. I was reminded of it reading a review of one of my favorite band's comeback shows, for crying out loud. Baseball writers have tried to read the tea leaves all winter and predict what may be in store for all of us. One of the latest gloomy warnings of possible impending doom comes from ESPN.com's Buster Olney (sorry, but it's another insider article). Here is the key part:

...The Tigers' season-ticket sales have dropped from 27,000 to 15,000, as Shawn Windsor and Jon Paul Morosi report.

So now we have a clearer understanding of the context in which the Tigers are making their final roster choices. Their ticket sales are awful, making it even more important that Detroit starts its season strongly. If the Tigers get off to a terrible start, as they did last season, fan interest in the team -- already impacted by the economy -- will take a body blow. (Privately, executives with other clubs say the same thing could be said for about 15 to 20 other teams in the big leagues.)

What does this have to do with the Brewers? Aren't their ticket sales record setting-ly strong? Sure, but they still have a long ways to go, as Don Walker points out in the JS:

But neither the team nor Attanasio is feeling complacent, especially as other clubs are feeling the pinch of an economy that has Commissioner Bud Selig fretting. If the Brewers aren't in the playoff hunt late in the summer, they know that fans might keep their money in their wallets.

And financially, their margin of error is thin. The Brewers drew just over 3 million fans last season, a franchise record, and a source knowledgeable about their finances says they'll have to attract somewhere between 2.8 million and 2.9 million this year just to break even.

So yeah, the Brewers have already sold 1.75 million tickets and that is well above their historical bests. However, not only do they have a long way to go to reach 2.8 million in tickets sold, but they also need to be reasonably competitive to ensure that all those people who have purchased tickets so far show up and pay for parking, beer and food to cover their investment.

Now, it's entirely possible that the Brewers will pull this off. A good start in the first few months of the season would go a long way towards ensuring that they'll be competitive through the summer and get the tickets sales up close to that number. If they make the playoffs, obviously they'll be just fine. If, however, they get off to a slow start and go into the summer looking up at .500 by a good margin, it may be to late to hit the break even mark regardless of how well they play toward the end of the summer. In that case, the team would probably be best off, from a fiscal standpoint, to dump payroll and try to get ready for another run in 2010.

The problem with selling off payroll mid-year, if it should come to that, is that they'll have to find a buyer with the ability to take on that salary. That brings us back to Olney's point that there are lots of teams on shaky ground financially and that many may not be able to take on payroll even if they are in contention and in a position to make a playoff push. With the amount they already have committed to payroll, the Brewers probably are in that group.

Surely there will be some teams in a position to take on salary when the time comes at mid-season, and obviously there are plenty of teams that would like to shed payroll right now, let alone in a few months when they're out of contention. There are also teams that would like to pick up talent to make a run mid-season that won't be able to take on salary to do so. Perhaps we could see an NBA-type situation where teams try to match-up contracts and then use prospects (in the place of draft picks in the NBA) to match value in trades. If the Brewers are in position to make a trade for talent mid-season, perhaps they could shed some payroll in a trade while giving up prospects to facilitate a deal. If a team really does have talent they want to move and cannot find someone willing to take on that payroll themselves, they may have to be willing to match-up salary to get the young talent they want.

As the new season draws near, there is a lot of uncertainty surrounding not just the ability of teams to compete, but their ability to stay financially afloat. The winter's free agent market showed that most teams have had to adjust to a new fiscal reality, so there weren't a lot of new bad commitments made this last offseason. There are, however, a lot of bad commitments on the books limiting possibilites, and how teams manage those negative assets is going to be a big story in baseball in 2009.

Sale of Cubs Has Implications for the Brewers

Ryan Topp — Sun, 22 Mar 2009 20:40:00 GMT

ESPN.com Hall of Fame writer Peter Gammons recently blogged about the impending sale of the Chicago Cubs to Tom Ricketts. The relevant portion for Brewer faithful:

Meanwhile, Cubs CEO Crane Kenney pushes ahead to try to bring the team into the 21st century. The Cubs have taken control of the rooftop viewers. They are opening their first restaurant, with plans for a hotel and other businesses in the Wrigley neighborhood. Their regional sports network soon will be up and running. The Cubs have been a $200 million business that should be closer to $300 million, especially considering the fact that they, the Yankees and the Red Sox are the sport's three national franchises; the eight largest crowds in the Cactus League this spring have been with the Cubs playing.

So when Ricketts takes over -- likely before Memorial Day -- it will be interesting to see whether the Cubs can take on a couple of contracts from one of the teams expected to be affected by the recession. There still seems to be a feeling they will be able to take on Jake Peavy's $63 million obligation if they can satisfy Padres GM Kevin Towers with a gaggle of prospects.

Bud Selig has often made sure that sales of teams are not approved coming into an off-season because he is worried about "new owner syndrome" where they feel the need to dump a bunch of cash to prove something to the fans. As Gammons mentions, though, there are likely to be teams looking to shed payroll this year and Ricketts may very well allow Hendry to go nuts and take on payroll. The short term implications for this season are fairly obvious. The Brewers are still probably going to have to be very budget conscious while making moves at the deadline, but the Cubs almost certainly will not and that probably gives them a leg up in the race before the season even starts.

Long term, this could be, in many ways, a "game changer" in the NL central if the Cubs do in fact start producing revenue at this level. The Cubs are a team on the old side of the age curve. Their best players, with the notable exceptions of Carlos Marmol and Geovany Soto, are all in or past their primes right now. Derek Lee, Aramis Ramirez and Alfonso Soriano have all probably had their best years already and Carlos Zambrano, Ryan Dempster and Ted Lilly also aren't getting any younger. Those players all have sizable contracts that carry them through and past their respective primes. The team will then have to decide what they want to do with the players as those contracts expire. Will they take the Yankees big budget approach and resign most of them knowing that they won't be able to fully live up to the money or will they be more cautious, Red Sox style and allow many to walk while only retaining a few key players?

Either way, the key is still going to be how the Cubs do developing players on their own heading forward. Currently, their farm system is not very highly rated. They are thin on top flight positional talent behind 3B Josh Vitters, and their pitching is young and interesting but lacking any advanced star potential. They would be well served to take a good chunk of money this summer (and the next few years) and plow it into the draft and the international market in the hope that they will have a new wave of prospects ready around the time that they have to decide on keeping the older players or letting them go. If they do commit themselves to becoming a "player development machine" using the same strategies that Boston and, to a lesser extent the Yankees, have used, they can probably become the kind of team that makes the buy-in for competing in the division they are in 90 wins.

If the Cubs do become an NL central version of the Yanks/Sox, the Brewers' task will become a more difficult one. Sneaking into the playoffs with 86 wins is probably off the table as a possibility, and there will be years where 92 or 93 wins won't be enough to snag the division or the wild card. If this does happen, Milwaukee management will probably want to refocus their overall strategy to put a bit more emphasis on the "big year" and accept more down "rebuilding" years as the price of doing business in a tougher division. This all hinges on the Cubs ability to parlay increased resources into a more productive farm system and a more stable major league future.

Walking A Fine Line

Ryan Topp — Thu, 19 Feb 2009 05:23:57 GMT

The Dow Jones is down over 1200 points since the close of 2008. Unemployment is up almost three percent since the start of 2008. Every talking head on the TV machine tells us that it's only going to get worse before it gets better and that at best we can hope to avoid a "lost decade" like Japan suffered in the 1990's. So is it any surprise that Mark Attanasio, the principal owner the Milwaukee Brewers, is uneasy over spending big bucks to field a baseball team in the current economy?

"We feel a little more comfortable with [the pitching]. I think when we saw everybody at the fan event [in Milwaukee last month], we were still at a bit of a discomfort point.

"Now, I'm at a little bit of a discomfort point on the payroll."

That line drew a laugh, but at the same time it's serious business. If Gagne makes the team and he and other players reach what Attanasio called reachable incentives, Milwaukee's payroll would push past $90 million, a tough number to support in one of baseball's smallest markets.

If you believe the reports that came from Miller Park last year, the Brewers stood to lose money on the year if they failed to make the playoffs carrying a 90 million dollar payroll. Making the playoffs is a huge windfall for any franchise, and hosting two games put the team well into the black, but they had to get there to make that money. Early ticket sales for 2009 have been strong (over 1 million sold, according to the article), but if the team falls out of contention in the summer, it will be next to impossible to equal last year's three million fan mark as no-shows become a big issue with a disappointing team, especially in a bad economy.

Making matters worse....

He (Attanasio) expects the Brewers' share of Major League Baseball revenue sharing to be lower in 2009, and he's trying to preserve a manageable budget so the Brewers can afford the rising salaries of their young stars. Prince Fielder's pay, for example, jumped from $670,000 in 2008 to $6.5 million this season and will go to $11.5 million in 2010 as part of his two-year contract extension. Corey Hart just signed a $3.25 million, one-year contract on Tuesday after earning $444,000 last year.

The Brewers are in a very dangerous position here. If they don't make the playoffs this year, they're almost certainly going to lose money in 2009. In that event, it will be up to management if they want to risk another year where they lose money, and they very well might decide to start trimming payroll back to compensate for past losses. Should it come to that, the team will almost certainly have to decide if it's time to scrap the current core group of players and embark upon a rebuilding project a year or two early simply for fiscal reasons. Given the limited number of opportunities that any given team has in a success cycle, being forced to make a decision like that undercuts the whole mission of doing whatever it takes to win a World Series.

Beyond that, there are other potential hazards to running a big league payroll up close to your operating budget. Some of the best money that teams spend in any given year is the money they commit to signing bonuses of drafted and signed amateurs. If you are able to develop a star player, as the Brewers have recently done so often, you end up saving millions on payroll due to the cheap control years that those players are obligated to play out before cashing in. At times in the past, teams have cut back their budget for signing amateurs significantly to squeeze out a million or two for a mediocre veteran or two. It's key that the Brewers do not do this, as they'll have a few extra picks this year that they need to take advantage of. Furthermore, there is talk that the economy will likely cause a downturn on bonuses in general, leaving the door open for a big time opportunity for those with some money to spend.

Last year, the Milwaukee Brewers made a few bets at the all-star break to give the franchise a shot at making the postseason and they ended up paying off in the end. It would appear that they are doing the same thing this year, despite a rapidly deteriorating economy and without the benefit of having half the season under their belt while sitting right in contention. It's always hard to be able to separate fact from fiction when it comes to a sports teams finances, but it does seem safe to say that the Brewers are once again sticking their neck out for a shot at winning.

They just better hope that it doesn't get lopped off.

Now or Later?

Ryan Topp — Fri, 23 Jan 2009 02:49:11 GMT

Brewers Principal Owner Mark Attanasio and General Manager Doug Melvin chatted it up on MLB.com earlier tonight and a few little nuggets of info popped out, this being the most interesting to me....

jaybrew82: I've been somewhat keeping tab of the team's payroll and I see it currently at about $75M. Thank you Mark for raising the payroll! But, my question is... last year we were in the mid $80's. Couldn't we offer Sheets a 1-yr deal in the $8 mill range?

Mark: We are currently between $80 and $85 million. Doug is assessing our options and deciding between signing a starter now or preserving flexibility to pursue roster additions during the season. By the way, it is our understanding at this time, that Ben is pursuing a multiyear deal.

We already sort of knew most of that. The speculations on where the payroll stood have been out there on various interweb sites for a while, and most have conceded that after the Brewers signed Hoffman the team was close to where they opened the 2008 season. Considering the declining economy and the loss of big draw CC Sabathia, that seems like a reasonable place for 2009, at least to start. Which brings us to the issue raised in the rest of the response, which is should the team spend on a starter now or should they wait and see what becomes available in midseason?

On the side of spending on a starter now:

As it currently stands, the Brewers will be sending out two young pitchers who will likely be on at least somewhat limited pitch and inning counts (Yo Gallardo and Manny Parra), two pitchers who have recently topped out around 200 innings, but have slipped below that count often (Dave Bush and Jeff Suppan) and one guy who has no track record eating innings (Seth McClung). This is after losing two guys who routinely went into the late innings last summer (Ben Sheets and CC Sabathia), taking pressure off the bullpen. So what where are the innings going to come from if it's not from another starter? What about an injury that occurs early on, before (and if) Capuano is ready or teams start dealing?
The market for players is as good as it has been in years. Unless they were lucky enough to be coveted by the Evil Empire, pretty much no free agent who has signed has gotten close to their original asking price this offseason. That would lead one to believe that there are opportunities for bargains out there, if a team is willing to spend.
If the team does make a move for a starter (or any other player) during next season, they will have to give up talent to land them.

On the side of waiting:

The rotation, as it stands, might be able to get the job done. Gallardo could emerge as a legitmate ace, Parra and Bush might fall in place as solid complimentary peices while McClung and Suppan eat up innings at the back end effectively. Or, if one of them isn't able to get the job done, Chris Capuano could come back and be an effective starter at some point.
Piggy-backing off the above point, it may be that another need emerges mid-season, due to injury or ineffectiveness, and the money being spent on the starter prohibits the Brewers from addressing a more pressing need, even though there are solutions to be had on the market.
There is a good possibility that any mid year deal could take the form of a "salary dump" where the primary return for the team giving up the talent is taking money off the books, and very little is given up in the way of prospects. In the past, that sort of "dump" has been the province (mostly) of teams like the Yankees and Cubs who have giant budgets, but if the Brewers have space to spend and a team is desperate, it could happen here too.

It should be apparent at this point that this is a tough call for a GM trying to assemble a team on a budget. There is the chance that if the team waits and does nothing that disaster strikes and the team falls out of the race before anything can be done to fix the problem. There is also the chance that if they make a move now, they won't get what they need and instead leave themselves open to other problems they can't fix. This is why general managers get the big bucks, to make the tough decisions and take the heat from fans.

Personally, I would have rather spent the money that went to Trevor Hoffman on a starter in the Randy Wolf or Braden Looper vein and found another option at closer, but that ship has sailed. Whatever Melvin ends up deciding to do here, it's going to be rabbits foot time for Brewer fans heading to opening day 2009, hoping he guessed right.

Talking Payroll Structure Part II or Why Giving CC A Big Contract is Dangerous

Ryan Topp — Tue, 28 Oct 2008 03:06:00 GMT

A while back, I took a rudimentary look at the Brewers payroll structure in terms of the implications of contracts that take up a large percentage of the total payroll. There is recent news that the Brewers may be looking to offer CC Sabathia something in the range of 4 years and 100 million dollars. Given the rising cost of the young hitting core and the few multi-year contracts on the books at the moment, that means that the Brewers would almost certainly be committed to having to support a 90+ million dollar a year payroll in the next 4 years if they plan on competing. They have talent in the minors, but not so much that they could afford to go all Florida Marlins and start dumping most players the minute they hit arbitration and aren't working for slave wages.

The Brewers, as an organization, are particularly tied to their ability to draw people to the park to sustain payroll. Like every other team, the Brewers do get money from MLB from it's overall TV contract, MLB.com and, like all small market teams, they get some revenue sharing. Where they fall very short of many (all, in fact) other teams, is they have the worst TV contract in baseball through 2012. That's right, the worst. Without a big fat cushion of guaranteed TV money to fall back on, the team has to draw fans to the seats to sustain payroll. What's more, the fact that they play in a small market means that even when they are drawing fans, they cannot squeeze as much revenue out of the fans as their competitors. The fact that they had the 21st most expensive ticket prices in 2008 (and 28th most expensive overall park experience) is great news for fans trying to take a family to the park, but limits the amount of money the team can raise.

One thing about attendance is that fans are fickle when it comes to supporting their team. People who are interested enough to be reading this will probably get out to the park much more than most of their neighbors anyway. We all know, however, that when a team is doing well, a lot of people who wouldn't be there otherwise start showing up. Those people go away when the wins start going away.

So what does this mean for the Brewers? In short, it means they would not be able to afford any bad luck what-so-ever without feeling a major budget crunch should they decide to give CC that money. As talked about in part I, signing CC would mean that the Brewers would have a lot less room to do other things. They would have to cut the budget significantly in areas like the bullpen and the bench to make ends meet, which means a lot of "ready or not" guys from the middle levels of the farm system filling in key roles because there wouldn't be money to pay much more than major league minimum. Basically, they would have to get a big number of wins over replacement (different than the traditional "win-loss" record for pitchers) from CC Sabathia because they're going to have a hard time finding money to buy them elsewhere.

If that works out, then the Brewers will almost certainly be a perennial contender in the NL Central for the life of the contract. If, however, Sabathia begins to feel the effects of being pitched very heavily the last two years and having pitched a large number of innings at a tender age overall, then the Brewers will have a very big problem because they will almost certainly have trouble competing.

This brings us back to the consequences of not being able to compete in a given year. If the team is counting on needing to compete to remain financially solvent (as would almost certainly be the case should they take on CC's contract) then they cannot afford to not compete. That means that if a situation calls for taking a step back in say 2011 or 2012 and reloading for 2013 and 2014, they will almost certainly not be able to make that decision and instead probably be forced to do things like trade prospects for marginal players to try to eek out every extra win possible to contend or even just maintain the illusion of "trying to win now." A situation like that would almost certainly not only fail to produce wins in the short term, but also limit the ability to win for several years down the road as a result of giving up prospects out of necessity.

Most Brewer fans rightly seem to realize that giving a contract to Sabathia would represent a big risk. It's important to realize just how large a risk that really is, especially when you consider that the current state of the economy makes any large commitment of money particualrly risky. Of course, it is probably no more than an extreme long shot that CC comes back at anything close to those terms anyway. Still, the organization's willingness to at least consider the possiblity says that they have a good amount of gamble in them. Hopefully they are going into this with their eyes completely open.