Orioles Had -$2.1 Million Operating Loss Last Season

[spiritof66]

23 minutes ago, weams said:

You do not have to wonder. It was obviously the intended outcome that was promised to the buyers of the franchise from the MLB. 

It's an interesting question, one I have spent some time puzzling over. Was there a premeditated plan by MLB to screw the Orioles out of much of the benefit they were promised when the MASN agreement was entered into, or did things just fall out that way? My best guess is that there was a little of each. 

Here's what I am convinced of:

1. The Orioles screwed themselves by agreeing to have future rights fees (a) defined in a way that doesn't really make sense, and (b) determined in an arbitration, with very limited rights to judicial review, by unknown persons of unknown competence who could be expected  to do what MLB management told them to do. This was the result of either very bad lawyering, terrible decision-making by the Orioles , or a combination of the two. 

I have hinted at some of this in past posts. I'll spell it out more fully at some point.

2. The only reason that the Orioles are not stuck with (at least not yet) the rights fees set in the arbitration is the gross incompetence and arrogance with which MLB conducted the arbitration. That's one reason why I question whether MLB planned this out in advance. If that were the case, it seems to me, Manfred (who was in charge of this thing) would have been more careful in the way he staged the arbitration.

[OsFanSinceThe80s]

1 hour ago, Redskins Rick said:

Paper loss for the tax man?

Exactly, show me the statement of cash flows and MASN revenue for the whole picture.  

[Redskins Rick]

Just now, OsFanSinceThe80s said:

Exactly, show me the statement of cash flows and MASN revenue for the whole picture.  

Isnt some of MASN revenue posted in escow awaiting final outcome of the arbitrators, or am I behind times?

[Frobby]

59 minutes ago, wildcard said:

I don't agree with Frobby.   164m is the opening day 2017 payroll as reported by Cots Contracts and I agree with that number.  It does not include deferrals. Here s the link.

http://legacy.baseballprospectus.com/compensation/cots/al-east/baltimore-orioles/

The 2016 opening day payroll was 147m before deferrals.  The ending 2016 payroll was 152m before deferrals and 139m after deferrals.

I follow this very closely during the season and I will be glad to post both 2016 and 2017 payrolls if anyone wants to see them.

 

OK, I've gone back to look at the Forbes article, and we are talking apples and oranges.   The article gives both the 2017 opening day payroll ($164.3 mm) and the 2016 opening day payroll ($147.9 mm) on the first page of the article.    The operating income is found on a different page, and is for 2016.   https://www.forbes.com/teams/baltimore-orioles/  No mention is made there of what payroll number was used.    Obviously, opening day payroll is not final payroll and I draw no inference at all about what payroll figure they used to determine operating profit for 2016.   Instead, they use a number for "player expenses" which they say (in a footnote) "includes benefits and bonuses."

[bobmc]

8 minutes ago, Frobby said:

OK, I've gone back to look at the Forbes article, and we are talking apples and oranges.   The article gives both the 2017 opening day payroll ($164.3 mm) and the 2016 opening day payroll ($147.9 mm) on the first page of the article.    The operating income is found on a different page, and is for 2016.   https://www.forbes.com/teams/baltimore-orioles/  No mention is made there of what payroll number was used.    Obviously, opening day payroll is not final payroll and I draw no inference at all about what figure they used to determine operating profit for 2016.   Instead, they use a number for "player expenses" which they say (in a footnote) "ncludes benefits and bonuses."

Loving all of the legal "chit chat"!  As weams says, "It makes good convo" or some such HHS.  But wondering about Can's posit yesterday, "What has PAA done for the legal team lately?"  I guess this battle is what he has been doing.  That and scrutinizing medical records of potential TOR candidates....  I kid because i love!  (Thank you John Lennon!)

[Going Underground]

26 minutes ago, spiritof66 said:

It's an interesting question, one I have spent some time puzzling over. Was there a premeditated plan by MLB to screw the Orioles out of much of the benefit they were promised when the MASN agreement was entered into, or did things just fall out that way? My best guess is that there was a little of each. 

Here's what I am convinced of:

1. The Orioles screwed themselves by agreeing to have future rights fees (a) defined in a way that doesn't really make sense, and (b) determined in an arbitration, with very limited rights to judicial review, by unknown persons of unknown competence who could be expected  to do what MLB management told them to do. This was the result of either very bad lawyering, terrible decision-making by the Orioles , or a combination of the two. 

I have hinted at some of this in past posts. I'll spell it out more fully at some point.

2. The only reason that the Orioles are not stuck with (at least not yet) the rights fees set in the arbitration is the gross incompetence and arrogance with which MLB conducted the arbitration. That's one reason why I question whether MLB planned this out in advance. If that were the case, it seems to me, Manfred (who was in charge of this thing) would have been more careful in the way he staged the arbitration.

The whole thing is a weird setup. The less Angelos pays in broadcast fees to the teams,he then keeps more money with MASN. Not sure how much this has changed over the years..

Many feel that the Orioles are shorted by MASN ownership (which also happens to be Orioles ownership) in being paid just $31M annually in broadcast rights fees. The Nationals have the same complaint, including from their ownership, and honestly, they probably have a bigger complaint: Washington, DC is a 5.5-million-person metropolitan area compared to Baltimore’s 2.75 million residents, plus whatever shared broadcast area there is to give the unaffiliated in North Carolina the opportunity to watch the Nationals. It only makes sense that a bigger metropolitan area would bring in more advertising revenue and therefore worth more in broadcast rights fees.

It’s worth noting here that the ownership shares of MASN do in fact favor the Orioles. That does not, however, affect the marginal revenue product of the players. The Orioles owners actually suffered a decline in the value of their asset in being forced to share their market with the Nationals, and the deal Peter Angelos and company agreed to was intended to offset that loss. Again, and most importantly, Orioles revenue generated by the Nationals is not influenced by the wins that the Baltimore team earns.

The problem with Angelos okaying more money being provided to the Orioles in broadcast rights fees is in his agreement with Major League Baseball. For every additional dollar he agrees to give the Orioles in broadcast rights fees, he must match it exactly for the Nationals (or, in this scenario, the other way around). A $1M increase in the rights fees paid to Baltimore really costs him $2M (assume that this is $1M from Angelos’ pocket and not $1M total; since he holds an 87% ownership stake in MASN, this equates to a $1.149M increase in rights fees paid to each team for an additional $2.298M in total outlay).

However, profit from MASN that isn’t paid to the team in broadcast fees is not subject to revenue sharing. This provision that benefits the small handful of teams that get their own RSN and provides clear incentive for the Orioles and for Peter Angelos: keep broadcast fees as low as possible. Where the Astros and Dodgers pay far more in this pocket of revenue sharing because their broadcast rights fees are higher, those teams wouldn’t have any money if it weren’t for broadcast fees. The Orioles, on the other hand, can take just a few dollars in broadcast dollars and keep the rest for themselves.

For that additional $2M outlay to make any sense in a vacuum, he has to get a 100% return on the broadcast rights fee paid to the Orioles – a highly unlikely proposition in the first place. But that decision doesn’t take place in a vacuum.

 

http://baltimoresportsandlife.com/ownership-economics/

 

[spiritof66]

23 minutes ago, Going Underground said:

Orioles are not a public company so this is all guesswork and estimates. You can show a loss one quarter and accrue something into another quarter or even into another year. You can deprecate property in all different manners. Public companies use loopholes in the tax laws on their financial statement. A  private company without seeing their books is a guess at best.

You're right that there's no way to confirm the accuracy of the Forbes numbers, but I believe they are much more than guesswork.

Other than the timing of when revenues and expenses are recorded, the factors you mention should not affect the Forbes numbers. Forbes tries to figure out the total revenues each team has in a season and what  current expenses are  incurred in that season, and then subtracts the second from the first. That's the operating profit or loss for the season. Depreciation and amortization of assets don't figure into any of that. Nor does the team's use of tax deductions/exclusions/loopholes. Those things come into play when the teams prepare their financial statements for investors or lenders and their tax returns. 

You're right that teams can do some things to alter the timing of revenues or expenses. It's possible that those things could affect the numbers in the Forbes report. But the effect almost certainly would be minor, and could be eliminated by looking at a few years' numbers, something I've done on occasion to see whether something peculiar (other than big changes in player payroll) shows up in a particular year.

And you're right that these are estimates. It would be stupid to say, for example, that the Mariners' revenues in 2016 couldn't be more than $300 million because Forbes said they were $289 million. But these are estimates that, I believe after looking at them and working with them over the past few years, paint a pretty fair picture of teams' relative relative annual performance.

Forbes has been doing this for 20 years.  It tries very hard, and I have to believe it succeeds by now, in treating each team's numbers -- player payrolls, for example --- in the same way, so that they are apples-to-apples or very nearly so.  Forbes has access to some non-public sources of information, and I've seen or heard people say that  over two decades Forbes has developed sources of access to lots of that information. Having looked at and worked with Forbes' numbers, I think they're pretty good. I am sure they're the best numbers we have. 

[Frobby]

5 minutes ago, spiritof66 said:

You're right that there's no way to confirm the accuracy of the Forbes numbers, but I believe they are much more than guesswork.

Other than the timing of when revenues and expenses are recorded, the factors you mention should not affect the Forbes numbers. Forbes tries to figure out the total revenues each team has in a season and what  current expenses are  incurred in that season, and then subtracts the second from the first. That's the operating profit or loss for the season. Depreciation and amortization of assets don't figure into any of that. Nor does the team's use of tax deductions/exclusions/loopholes. Those things come into play when the teams prepare their financial statements for investors or lenders and their tax returns. 

You're right that teams can do some things to alter the timing of revenues or expenses. It's possible that those things could affect the numbers in the Forbes report. But the effect almost certainly would be minor, and could be eliminated by looking at a few years' numbers, something I've done on occasion to see whether something peculiar (other than big changes in player payroll) shows up in a particular year.

And you're right that these are estimates. It would be stupid to say, for example, that the Mariners' revenues in 2016 couldn't be more than $300 million because Forbes said they were $289 million. But these are estimates that, I believe after looking at them and working with them over the past few years, paint a pretty fair picture of teams' relative relative annual performance.

Forbes has been doing this for 20 years.  It tries very hard, and I have to believe it succeeds by now, in treating each team's numbers -- player payrolls, for example --- in the same way, so that they are apples-to-apples or very nearly so.  Forbes has access to some non-public sources of information, and I've seen or heard people say that  over two decades Forbes has developed sources of access to lots of that information. Having looked at and worked with Forbes' numbers, I think they're pretty good. I am sure they're the best numbers we have. 

I also think they are pretty good.   A couple of years ago, Deadspin got hold of 2-3 teams' internal financial statements, and they matched up with Forbes pretty well.

[spiritof66]

6 minutes ago, Frobby said:

I also think they are pretty good.   A couple of years ago, Deadspin got hold of 2-3 teams' internal financial statements, and they matched up with Forbes pretty well.

I think there were leaks of the Pirates' and Rockies' financials. Not sure if that's part of or in addition to what Deadspin got.

I forgot to mention that in 2013 Bloomberg (the financial news organization, not the billionaire ex-mayor) did a valuation of each team that was more detailed than Forbes, with some user-friendly features, and, IIRC, in some ways confusing. https://www.bloomberg.com/graphics/infographics/mlb-team-values.html  But I believe the numbers were similar. Bloomberg had not published MLB numbers since then.

[Going Underground]

13 minutes ago, spiritof66 said:

I think there were leaks of the Pirates' and Rockies' financials. Not sure if that's part of or in addition to what Deadspin got.

I forgot to mention that in 2013 Bloomberg (the financial news organization, not the billionaire ex-mayor) did a valuation of each team that was more detailed than Forbes, with some user-friendly features, and, IIRC, in some ways confusing. https://www.bloomberg.com/graphics/infographics/mlb-team-values.html  But I believe the numbers were similar. Bloomberg had not published MLB numbers since then.

I agree they get it close but a 2.1 million operating loss could be wrong. I know this local guy did an analysis a few years back so most of the numbers could be gotten. The only team we have some confidence in that has pretty good numbers is the Packers. Publicly traded. Celtics used to be but were taken private.

http://baltimoresportsandlife.com/ownership-economics/

 

[atomic]

1 hour ago, Going Underground said:

 

Many feel that the Orioles are shorted by MASN ownership (which also happens to be Orioles ownership) in being paid just $31M annually in broadcast rights fees. The Nationals have the same complaint, including from their ownership, and honestly, they probably have a bigger complaint: Washington, DC is a 5.5-million-person metropolitan area compared to Baltimore’s 2.75 million residents, plus whatever shared broadcast area there is to give the unaffiliated in North Carolina the opportunity to watch the Nationals. It only makes sense that a bigger metropolitan area would bring in more advertising revenue and therefore worth more in broadcast rights fees.

 

 

Your logic is severely flawed. The are was entirely the Orioles market.  The Orioles agreed to let the Nationals into the Orioles market for the benefit of getting a regional sports network with two MLB teams on it that guaranteed them a certain amount of profit.  

So the way that cable deals with local sports networks are negotiated is that the sports networks make the cable companies charge everyone a fee whether they watch the local sports network or want to have the sports network.  So some single mom in Virginia has to pay MASN say 4 dollars a month just because she wants to watch the Food Channel and the HGTV.   5 years ago both teams probably had 25k people watching each game.  So out of 8 million people very few of them actually cared about whether they had MASN.

I bet 10 years from now no one will be arguing about MASN profits as they will probably be so small that the Nationals will be just glad someone is carrying their games.  As more people cord cut or cable goes a la carte profits are going to go way down.  Fox just unloaded their local sports channels to Disney.   Disney probably is going to try to bundle all their products up for one fee.  IF that works maybe baseball teams will continue to see big TV revenue if it doesn't there will be no profits to divide up. 

[wildcard]

47 minutes ago, Frobby said:

OK, I've gone back to look at the Forbes article, and we are talking apples and oranges.   The article gives both the 2017 opening day payroll ($164.3 mm) and the 2016 opening day payroll ($147.9 mm) on the first page of the article.    The operating income is found on a different page, and is for 2016.   https://www.forbes.com/teams/baltimore-orioles/  No mention is made there of what payroll number was used.    Obviously, opening day payroll is not final payroll and I draw no inference at all about what payroll figure they used to determine operating profit for 2016.   Instead, they use a number for "player expenses" which they say (in a footnote) "includes benefits and bonuses."

Its interesting.   I also find it interesting that when Dan talks his refersfkds;fkas;dfkak to payroll is after deferrals.  He appears to get a budget and it does only increases what he has be pay out that year.  So deferrals are important to him.   Almost no service  track deferrals.

[Frobby]

6 minutes ago, cimota said:

 

So the way that cable deals with local sports networks are negotiated is that the sports networks make the cable companies charge everyone a fee whether they watch the local sports network or want to have the sports network.  So some single mom in Virginia has to pay MASN say 4 dollars a month just because she wants to watch the Food Channel and the HGTV.   5 years ago both teams probably had 25k people watching each game.  So out of 8 million people very few of them actually cared about whether they had MASN.

I bet 10 years from now no one will be arguing about MASN profits as they will probably be so small that the Nationals will be just glad someone is carrying their games.  As more people cord cut or cable goes a la carte profits are going to go way down.  Fox just unloaded their local sports channels to Disney.   Disney probably is going to try to bundle all their products up for one fee.  IF that works maybe baseball teams will continue to see big TV revenue if it doesn't there will be no profits to divide up. 

I am sure there are many households that would not pay $4 per month for MASN.    There are also households that would pay a lot more for it than that, like mine.   The Nats averaged 77,000 households per night and the O's averaged 66,000, in their local markets.  https://www.forbes.com/sites/maurybrown/2017/08/24/local-prime-time-numbers-for-each-of-the-29-u-s-teams-shows-mlb-rules-summer-tv/#124b9b5c204d   Each is the top-rated show in the market when games are played.  That doesn't include the people in the DC market or the rest of the non-Baltimore MASN territory who watch Oriole games, or the people in the Baltimore market or the rest of the non-DC MASN territory who watch Nats games.

If people could de-bundle their cable and pay only for those channels they wanted, the rates for those channels would go up considerably, and peoples' overall cable bills would probably decline.   Whether MASN would lose revenue is difficult to say.

[Frobby]

13 minutes ago, wildcard said:

Its interesting.   I also find it interesting that when Dan talks his refersfkds;fkas;dfkak to payroll is after deferrals.  He appears to get a budget and it does only increases what he has be pay out that year.  So deferrals are important to him.   Almost no service  track deferrals.

And, to remind you, the teams do have to put the deferrals into an escrow account at a discounted rate 18 months after they are earned.   In 2018, we will be putting aside deferred comp for Chris Davis and others even though it won't be payable to them until later.  That's money that can't be spent on other things.

[atomic]

1 hour ago, Frobby said:

I am sure there are many households that would not pay $4 per month for MASN.    There are also households that would pay a lot more for it than that, like mine.   The Nats averaged 77,000 households per night and the O's averaged 66,000, in their local markets.  https://www.forbes.com/sites/maurybrown/2017/08/24/local-prime-time-numbers-for-each-of-the-29-u-s-teams-shows-mlb-rules-summer-tv/#124b9b5c204d   Each is the top-rated show in the market when games are played.  That doesn't include the people in the DC market or the rest of the non-Baltimore MASN territory who watch Oriole games, or the people in the Baltimore market or the rest of the non-DC MASN territory who watch Nats games.

If people could de-bundle their cable and pay only for those channels they wanted, the rates for those channels would go up considerably, and peoples' overall cable bills would probably decline.   Whether MASN would lose revenue is difficult to say.

You are mentioning now.  In 2011 years ago the average viewers was I think 26k and 24k respectively.  With the teams improving the viewers have gone up.  If the teams start being losers again the viewership will drop. 

 There is a reason sports networks fight to have their shows bundled part of a package. If it were more profitable to have them as a stand-alone premium channel then they would have them be stand alone channels like HBO is.The cable companies would much prefer that. Sports networks like ESPN and the Local Sports Networks are the highest costing channels for the cable companies.