Raw Story: Covid19 Destruction of the Minor Leagues.

[Can_of_corn]

3 minutes ago, DrungoHazewood said:

Like I said, my assumptions aren't your assumptions neither of which may not be the ground truth.  Salaries are paid by MLB, unless you're an indy league team like the Blue Crabs I was talking about.

It is interesting in the link Rick provided that even the AAA teams that draw almost 10k a game and have higher ticket prices only have operating profits of a few $million a year.  Most indy league teams have to be operating on a shoestring.

I think various taxes, rent and insurance eats up a lot of capital.

[atomic]

4 minutes ago, DrungoHazewood said:

Like I said, my assumptions aren't your assumptions neither of which may not be the ground truth.  Salaries are paid by MLB, unless you're an indy league team like the Blue Crabs I was talking about.

It is interesting in the link Rick provided that even the AAA teams that draw almost 10k a game and have higher ticket prices only have operating profits of a few $million a year.  Most indy league teams have to be operating on a shoestring.

Oh indie league teams might go under.  But affiliated teams will survive in one form or another. I wouldn't mind owning a business that makes a few million a year in profit.  That would make you quite rich. 

[Frobby]

2 hours ago, DrungoHazewood said:

I'd like to know.  Some back-of-the-napkin guesses:

- The Blue Crabs drew 200k fans last year.  If they got $15 in revenues per head, that's $3M in revenues.  
- If they have 20 employees that average $30k each that's $600k
- 25 players times six months times $1500 = $225k in player salaries
- 60 hotel days times $125 a room times 12 rooms (everyone doubles up) = $90k
- If the bus is rented at $5000 per trip, 20 road trips = $100k
- Stadium rent?  Facility maintenance?  Player equipment?
- Fees to the league for umps, league salaries?
- Costs for promotions?
- Revenues from stadium advertising?
- Costs for insurance?
- I'll assume most minor league teams have near zero media revenues.

I'm sure some of that is off and I've missed some things.

So I guess it's plausible that they make a decent profit of several hundred grand a year.  But the margins can't be big.  And certainly this year the revenues are near zero, while at least some of the expenses continue.

 

1 hour ago, Redskins Rick said:

 

Granted from 2016, but I think it shows a big comparison between the haves and some of the have nots.

I have no clue if these figures are correct, but just for discussion sake.

Some teams have no problem making money in MLB.

https://www.thesportsadvisorygroup.com/resource-library/business-of-sports/minor-league-baseballs-valuable-teams/

Very useful article, thanks.   Shows 20 teams with $10-20 mm in revenue, and the next 10 in the $8.5 - $10 mm range.   Of course, those are the 30 most valuable teams, per Forbes.   Hard to say what the others earn.    I’ll guess though that Drungo was a little low.   

No Orioles affiliates in the top 30, but I see our former affiliate in Rochester is in there.   
 

[DrungoHazewood]

25 minutes ago, atomic said:

MLB has incentive to have minor league teams survive.  What is minimum number of levels teams need? Could they survive with 3 levels. Even if MLB kicked a million a year to help the teams it wouldn’t amount to much for them. I don’t see the survival as a problem. Look at Oriole attendance figures in the early 70s. Those years were abysmal and they survived. Just pay MLB players less money.  It’s not like star players will stop playing if they get 12 million a year instead of 30.  Baseball and minor leagues will survive. 

MLB has some incentive for the minors to survive, but they also are probably thinking that they have a backup plan: they could just have some kind of extended spring training with intersquad games, scrimmages and tailored workouts.  There is some benefit to having real games, both to players and baseball fans.  But you can guarantee that if the bean counters decide that having only a couple levels of affiliated minors saves each MLB team $10M they'll move that direction.

On your point about reduced revenues and salaries... it would be a very painful transition.  Sure, baseball would still exist if MLB had five or three or one $billion in revenues instead of $10B.  But the contracts, the media, the advertising... everything is set up on a $10B budget.  It would be like someone making $150k a year suddenly making $60k.  They won't starve, they'll do fine.  They'll sell their house and their cars, downsize, forget about vacations, eat out once a month instead of every other day.  For at least a few years it'll be pretty crappy.  But they'll live.  Baseball would be similar.  It would survive, but there would be big, uncomfortable change.

[DrungoHazewood]

17 minutes ago, Can_of_corn said:

I think various taxes, rent and insurance eats up a lot of capital.

Agreed.  And that's hardest for an outsider to try to put a number on.  

Clearly if those teams in Rick's article have $15-20M in annual revenues, the majors are paying salaries, and they end up with $1-2M in operating profits there are a lot of expenses I didn't account for.

[Can_of_corn]

Just now, DrungoHazewood said:

Agreed.  And that's hardest for an outsider to try to put a number on.  

Clearly if those teams in Rick's article have $15-20M in annual revenues, the majors are paying salaries, and they end up with $1-2M in operating profits there are a lot of expenses I didn't account for.

They could be paying their owners a healthy salary.

[DrungoHazewood]

19 minutes ago, atomic said:

Oh indie league teams might go under.  But affiliated teams will survive in one form or another. I wouldn't mind owning a business that makes a few million a year in profit.  That would make you quite rich. 

If you own it outright, maybe.  I think nearly all people who own majority shares in a minor league team were already quite well off beforehand.

Maybe you could get a Pecos League team relatively cheap, but I have no idea how the lowest levels of indy ball even exist.  You're probably not getting rich owning the Santa Fe Fuego.

[spiritof66]

I think the cancellation of the minor league season will just be a blip in the path the minor leagues are already on. MLB has decided how many MiL affiliates it wants each team to have, and it's going to get there. The cancellation of 2020 MiL seasons might make MLB's task a little easier: if a team that was slated to survive is placed in severe financial stress or bankruptcy, and it has no buyer or investor in a position to put new capital into it, that team's affiliation with MLB could be severed and a team on the hit list would be saved to preserve the 120-team total.

The only thing I can see that might get in MLB's way was, and is, a serious threat of Congress's legislating MLB's antitrust exemption (not really the right term) out of existence. Not gonna happen. 

There is one intriguing possibility I can think of that might grow, indirectly, out of the pandemic. American higher education is in turmoil. One possible result is a change in the traditional college calendar toward year-round classes on a trimester or four-term basis. If colleges are going more or less full-tilt in the late spring and summer, MLB might try to move in the direction of  transforming college baseball in, say, the SEC, ACC, Pac-12 and Big Ten (maybe starting with just the first two) into something more like college basketball or football, with big crowds, TV contracts and substantial revenues for the schools. That would take a substantial investment and time, and it might not work, but the goal for MLB -- having a talent incubator that eventually is funded by someone else, allowing a further reduction of affiliated MiL teams and expenses -- might make it worth trying.

[Redskins Rick]

4 minutes ago, DrungoHazewood said:

Agreed.  And that's hardest for an outsider to try to put a number on.  

Clearly if those teams in Rick's article have $15-20M in annual revenues, the majors are paying salaries, and they end up with $1-2M in operating profits there are a lot of expenses I didn't account for.

that was the cream of the crop, just a handful of the teams. 

From the minor league wiki:

Quote

Today, there are 14 MLB-affiliated minor leagues with a total of 160 revenue-generating teams, located in large, medium, and small cities and suburbs across the United States and Canada, and there are three MLB-affiliated rookie leagues with a total of 80 teams, located in Arizona, Florida, and the Dominican Repub

Thats 240 according to my math. I saw another answer that said there was 261 teams. So the real number is probably along those lines.

Player salaries should be provided by the parent club, and I think I remember some about the parent club providing some expense money to their minor league affiliate to help their expenses.

[DrungoHazewood]

24 minutes ago, Frobby said:

 

Very useful article, thanks.   Shows 20 teams with $10-20 mm in revenue, and the next 10 in the $8.5 - $10 mm range.   Of course, those are the 30 most valuable teams, per Forbes.   Hard to say what the others earn.    I’ll guess though that Drungo was a little low.   

No Orioles affiliates in the top 30, but I see our former affiliate in Rochester is in there.   
 

My take on that, which is just a semi-informed opinion, is that mid-range teams like the BaySox bring in $5M a year.  And don't turn much of a profit.  And the Appy League and similar must be run with budgets like your local antiques and craft store.  When you draw 30k a season your revenues can't be half a million a year.  At that level four or five employees making much over minimum wage starts eating a lot of your margin.

[Redskins Rick]

13 minutes ago, DrungoHazewood said:

My take on that, which is just a semi-informed opinion, is that mid-range teams like the BaySox bring in $5M a year.  And don't turn much of a profit.  And the Appy League and similar must be run with budgets like your local antiques and craft store.  When you draw 30k a season your revenues can't be half a million a year.  At that level four or five employees making much over minimum wage starts eating a lot of your margin.

Reading an article many years in the post. It seamed like the Baysox had a shoestring budget, that they stretched by hiring people who wore multiple hats, and they were willing to let interns cut their teeth there for free.

[atomic]

51 minutes ago, Frobby said:

 

Very useful article, thanks.   Shows 20 teams with $10-20 mm in revenue, and the next 10 in the $8.5 - $10 mm range.   Of course, those are the 30 most valuable teams, per Forbes.   Hard to say what the others earn.    I’ll guess though that Drungo was a little low.   

No Orioles affiliates in the top 30, but I see our former affiliate in Rochester is in there.   
 

So I just picked a team at random:  The Birmingham Barons.  Team value $35 million. Operating Income $2.7 million. That would give you a P/E of 12.96.  That beats most anything on Wall Street that doesn't have extensive capital costs (Like airlines and auto manufactures) Which minor league baseball teams would not have.   Seems like decent business to be in if you have one of the good teams. I am sure the less profit you have the cheaper the price.  

 

[DrungoHazewood]

5 minutes ago, atomic said:

So I just picked a team at random:  The Birmingham Barons.  Team value $35 million. Operating Income $2.7 million. That would give you a P/E of 12.96.  That beats most anything on Wall Street that doesn't have extensive capital costs (Like airlines and auto manufactures) Which minor league baseball teams would not have.   Seems like decent business to be in if you have one of the good teams. I am sure the less profit you have the cheaper the price.  

 

You do understand that the Barons were listed as one of the top 20 most valuable teams in minor league baseball, right?  And according to Rick's article they're in the top ten operating income in the minors. So of 160 affiliated teams, 80 complex teams, and maybe another 40-60 indy league teams they're in the top 5%.  You might want to draw another straw to get a more representative sample, before you take some of your pocket change and buy a controlling share of a $35M business.

[atomic]

4 minutes ago, DrungoHazewood said:

You do understand that the Barons were listed as one of the top 20 most valuable teams in minor league baseball, right?  And according to Rick's article they're in the top ten operating income in the minors. So of 160 affiliated teams, 80 complex teams, and maybe another 40-60 indy league teams they're in the top 5%.  You might want to draw another straw to get a more representative sample, before you take some of your pocket change and buy a controlling share of a $35M business.

I don't have $35 million sitting around. I am sure to get a loan on the team I would need more than I have as a down payment.   But like I said the teams with less profit would be much cheaper.  

[DrungoHazewood]

34 minutes ago, spiritof66 said:

There is one intriguing possibility I can think of that might grow, indirectly, out of the pandemic. American higher education is in turmoil. One possible result is a change in the traditional college calendar toward year-round classes on a trimester or four-term basis. If colleges are going more or less full-tilt in the late spring and summer, MLB might try to move in the direction of  transforming college baseball in, say, the SEC, ACC, Pac-12 and Big Ten (maybe starting with just the first two) into something more like college basketball or football, with big crowds, TV contracts and substantial revenues for the schools. That would take a substantial investment and time, and it might not work, but the goal for MLB -- having a talent incubator that eventually is funded by someone else, allowing a further reduction of affiliated MiL teams and expenses -- might make it worth trying.

I think that would be a very unfortunate outcome.  College football and basketball grew organically, when both sports were far less popular.  They were more like intramural games, club teams, that over time evolved into what they are today.  Which is basically professional sports teams.  I'm not sure that if we were starting from scratch that many people would advocate for a large group of taxpayer funded instututions of higher learning to have very large pro sports organizations (with the benefit of being too pure to pay the players) attached.  Especially when the players on these teams often are going to class only in the most minimal sense, and if they have a hint of professional ability they'll drop out the minute they're draft eligible.

Also, not sure how the mechanics would work for very for-profit MLB to push and (presumably) fund non-profit state run universities to turn their non-revenue-generating baseball programs into the equivalent of minor league teams.

Of course MLB would love for the NCAA to function as a free minor league system.  It would take a huge amount of risk and expense and transfer that to the schools.  But who does this benefit besides the MLB owners?  A relatively small handful of players who get a degree who might not otherwise?  But at the cost of further corrupting the already horribly corrupted NCAA.