First Pitch: Why Can’t the Pirates Have a Free Spending Billionaire Owner?

I woke up this morning to a discussion on Twitter about a hypothetical billionaire owner who could buy the Pirates, invest his life savings into building a winner, all while ignoring the financial losses year after year. The conversation stemmed from last night’s article in the Trib about how Bob Nutting is “too rational”. The article, written by Jeff Oliver, interviewed a former minority owner of the Pirates, Jay Lustig, who talked about some of the financial details with the Pirates. A few of the highlights:

**Lustig noted that Nutting was allocating the money properly, and running the business rationally, but mentioned that baseball is an irrational business.

**Lustig approached Nutting about selling to a multi-billionaire who was willing to come in and spend more money to see if the Pirates could win. Nutting refused, and that’s ultimately why Lustig sold his shares.

**He also noted that any profits were put back in the team.

The topic of adding a billionaire owner who will come in and spend the Pirates to victory is brought up far too often. It’s brought up so often that it makes this hypothetical owner seem all too common. In reality, that type of owner is more of a fantasy. There are several valid reasons why this owner doesn’t exist.

Using Your Resources

I’m not a millionaire or a billionaire. There is a Holliday Inn Express right around the corner from my apartment complex. So we’ll say that qualifies me to speak on the subject of how millionaires and billionaires act. That’s how it works, right? Or do I have to actually stay at the hotel, rather than walking in the lobby one morning, acting like I’m staying there, and grabbing one of their cinnamon rolls? Not that this has happened or anything (yet).

So I’m not speaking from experience here, but I’m pretty sure that millionaires and billionaires don’t become rich by going into their investments planning to lose money year after year. That doesn’t seem like the recipe for success. Granted, investments in sports teams is different than other forms of investments. The big payout with a sports team comes when you eventually sell.

Take the Pirates, for example. When the team was bought by Kevin McClatchy in 1997, the purchase price was $90 M. Right now the current estimates have the Pirates valued at close to $480 M. Keep in mind that Bob Nutting, who owns 80% of the team according to the article in the Trib, didn’t buy the team for $90 M. He’s been buying shares of the team over the last 10 years, and has probably spent more than $90 M to get to where he is. That said, he definitely hasn’t spent $480 M, so we can assume if he sold today, he’d make a pretty nice profit, and more than anything he’d get on a yearly basis.

The general argument you see here is that MLB owners get their payout in the long run, so they don’t have to worry about making money year after year. That’s true, but it doesn’t mean they should be losing money each year. It seems that there’s only two options. You’re either making money, or you’re losing money. There is a third option, and that’s aiming to break even. That’s what most teams aim to do. They’re not looking to profit each year, but they’re also not planning on taking losses. The focus is spending their resources. It’s what any business would do. The key difference is that if you’re a publicly traded company, your goal is showing a profit each year. You don’t have to worry about showing a yearly profit in sports ownership.

That doesn’t mean you can constantly take on debt. If you’re losing money each year, that money has to come from somewhere. Either you’re using credit that is available to the team, or you’re investing your own personal money (more on this later). The more you do this, the more you chip away at your profits when you sell. The Pirates have gone up in value about $390 M from 1997 to today. Baseball has seen a big financial boom in this period, so I wouldn’t say that it’s common for teams to increase in value at this rate in the future. But if an owner bought the team at $90 M in 1997 and sold at $480 M today, they’d basically be making $25 M a year over that 16 year period. But if they’re taking big losses each year to try and win, that profit gets chipped away to nothing. Sure, the value of the franchise might increase if they do win, but winning isn’t guaranteed and the alternative is losing money and ending up in a bad financial situation — much like the Pirates were in about ten years ago when Nutting started buying the team.

You might say “Yeah, but what if they only spent a few million each year, thus leaving a long-term profit?” Let’s be honest here. We’re not talking about a hypothetical billionaire owner just so we can see the team add an extra bench player and a reliever for a few million more. The dream is someone coming in to spend $30 M or more to take the Pirates from one of the lowest spenders to closer to the middle of the pack in the league. To do that, you’re going to have to spend more than the Pirates make, you’re going to have to take big yearly losses, and you’ll lose your long-term profits a year at a time. As for that owner…

Bill Gates Will Give You $5,000 If You “Like” This Photo

You’ve probably seen the photos on Facebook involving Bill Gates sharing his wealth. In the photo he’s holding a sign saying he’ll give everyone $5,000. All you have to do is click “like” and share the photo, and you’ll get a piece of that sweet, sweet action. But any reasonable person knows that Bill Gates isn’t really giving away his wealth based on a Facebook status, just like Justin Bieber won’t stop making music if you like his photo one million times. And both of those things are disappointing.

The reality is that Bill Gates isn’t going to just give you his fortune. If you’ve followed what he’s doing now, he’s more about giving his wealth to philanthropy. The definition of philanthropy isn’t “give everyone $5,000 so they can buy a new big screen TV and a bunch of other cool stuff with their bonus money”. If you think Bill Gates is actually going to give you his money, you’re dreaming. And if you think Justin Bieber will stop making music that you hear every time you turn on the radio, you’re also dreaming. Sadly.

The billionaire owner who comes in and spends his own personal wealth to try and get a sports team to win is the same dream as Bill Gates giving money away on Facebook. It involves someone with a ridiculous amount of money giving that money away for the sole reason that they have plenty, and can afford to lose huge chunks of cash without going broke. And who benefits? You do. The whole purpose behind the billionaire owner isn’t personal wealth or achievement. The people who benefit are the fans. The billionaire owner is just spending his wealth to give the fans a winner.

So let’s recap. A guy with a huge bank account is willing to come in and spend his own personal wealth for the benefit of a large group of complete strangers. Where have I heard that before? Oh yeah, Bill Gates giving money away on Facebook.

Mark Cuban Isn’t That Guy

Normally when you talk about this fictional billionaire owner who will come in and spend whatever it takes to win, you don’t have a name. It’s usually just “there’s probably a rich guy out there who is 80 years old with no family and close to his death bed who is willing to donate his personal wealth to see the Pirates win”. That kind of sounds like the Nigerian Prince e-mail scam, but what do I know?

In Pittsburgh, there’s actually a name and a face for this fictional billionaire owner: Mark Cuban. It’s a simple solution. Sell to Mark Cuban. He will come in and make the Pirates one of the top spenders in the league because he has a ton of money, and would only care about winning. The problem is that Cuban wouldn’t do this. He’d operate within the team’s resources, just like any other owner. How do I know this? Cuban said it himself in his personal blog a few years ago. The link is here, and some quotes below.

My plans were to spend to win, not to spend for spending’s sake.  IMHO, the money I could save being in the 2nd tier of payroll could be invested in scouting and development.

In particular, a lot of the “intelligence” that I would be a big time spender seemed to come out of Chicago.

More important to me was the cash flow.  If the economy had a significant impact on future revenues, it would also impact how much I could invest in players.  The absolute last position i wanted to be in was paying so much for the team, that if  revenues fell off, I couldnt [SIC] play to win.

If you read through the whole post, you’ll see that Cuban says he doesn’t have to out-spend the Yankees and Red Sox. In this case he was talking about the Cubs, and said he only has to compete with the teams in the NL Central. It also becomes apparent that Cuban isn’t a guy who just throws away money. He spends a few paragraphs talking about margin calls, the credit market at the time, the value of cash, and so on. That doesn’t sound like a guy who will spend with no regard for profits. It sounds more like what I described earlier: a billionaire who got to where he is by making smart business decisions, and who will probably continue to operate that way.

Cuban also notes that he was a big spender in his early days with Dallas. According to HoopsHype, the Mavericks have the 13th biggest payroll in the NBA this year, and the difference between them and the top team is about $31 M. The NBA has a soft salary cap, meaning teams can go over the cap, but have to pay a luxury tax if they go over a certain threshold. Last season the Mavericks were one of six teams in the league to pay a luxury tax, so they do spend more than most teams. Of course, the NBA isn’t exactly a balanced league, so some teams can easily spend more than others. The point is that Cuban could be the top spender in the league, and the amount is the same amount we’re talking about him spending for the Pirates each year. But looking at the quotes above, Cuban isn’t a guy who is just going to throw money at the problem. He said he wouldn’t plan to spend just to spend. It sounds like he would be focused on smart spending, which doesn’t always mean increasing payroll. And that brings me to the next point.

What Does Money Buy?

The misconception about spending is that it buys success. Money doesn’t buy success in baseball. Money buys forgiveness. This year the Pirates are spending about $8 M of their own money on A.J. Burnett. If Burnett goes down for the year in his next start, the Pirates are stuck with their own internal options. They can’t afford to go out and add another high-priced arm. Meanwhile the Yankees lose Alex Rodriguez for half a season, and the answer is signing Kevin Youkilis for $12 M. That’s what money buys. Sure, it allows you to keep your own free agents, and maybe add a few high-priced guys. But the key benefit is that if you have a player go down, or if a free agent doesn’t live up to expectations, you can eat that cost and replace the player with a new player.

If you look around baseball, you’ll see big spenders who lose and small spenders who win. Money isn’t the most important thing to winning. Making smart decisions is the most important thing. You probably wouldn’t have to follow me for years to know that the Rays are my model franchise. They don’t spend a ton on an average annual basis. For all the talk about the Pirates having a low TV deal, the Rays have a lower deal. They don’t get much attendance. Yet they make smart decisions, probably to the point where they’re the smartest team in the league.

Then there’s the Yankees. They’re not a team that spends wisely. They just spend freely. They have little regard for prospects, and really, why should they? Baseball is set up so that big market teams build through free agency and established players, while small market teams have to build through prospects who aren’t guaranteed. If you give them both the same amount of money, I guarantee the Rays are going to beat the Yankees every season because they’re a much smarter organization. But you give the Yankees the advantage of money, and the playing field shifts. The Yankees can add Kevin Youkilis to replace their third baseman for half a season. The Rays lose Evan Longoria for half a season in 2012 and they have to rely on Jeff Keppinger and Sean Rodriguez. The end result is that the Rays are a much better run organization, but the Yankees are a better bet to make the playoffs each year.

Now that’s the Rays. They’re, in my opinion, the smartest team in the game. So what happens when you have a small market team that is making poor decisions, or even a team that is good, but not great? If a team isn’t winning because of poor decisions, then giving them extra money isn’t going to help. I’m not saying the Pirates only make poor decisions. There have been some poor investments, but there have also been some good investments. What I’m saying is that the most important thing isn’t money, but how an organization is run. If you think the Pirates have no shot at $68 M, then they’re not going to have a shot at $98 M. If you think they’re making more good decisions than bad decisions, and could benefit from extra money, then they might have a shot with some extra payroll. It’s all about the decisions and how the team is run, not about how much the team is spending. It’s possible for a team to win at the payroll level the Pirates are currently at. It’s a lot harder for the Pirates than it is for bigger spenders, but it’s possible. So the idea that money is all it takes it too simplistic. First, you need to make sure the organization is spending that money wisely.

Why Can’t Nutting Spend More?

Let’s say you would find an owner who would be willing to take a personal loss to see his team win. Why couldn’t that be Bob Nutting? What if Nutting wasn’t so “rational”, as Lustig put it?

That’s a common question that gets thrown around: why doesn’t Nutting spend more? The simple answer is that he can’t.

Nutting owns 80% of the team, which means the minority owners own 20%. Yeah, that’s basic subtraction. Be impressed. Nutting can’t just put his own cash into the team. If he does that, he increases his ownership of the Pirates. Let me break it down.

Say you and I own a company that we bought for $100,000, and I own 80%. To keep it simple, let’s say the company is still worth $100,000. I mean, times are still a little tough. The economy is turning around. The S&P 500 and the Dow have both touched record levels recently. Plus we both believed in this investment when I made it up a few sentences ago, and it would only make sense to stick with it. The only thing is, I now want to invest $80,000 of my own money in the company. If I do that, then I go from owning 80% of the company to owning 89% of the company. The only way you maintain your 20% is if you invest $20,000 to keep pace with my investment.

It’s the same way with Nutting. If he invested his own money into the team, he’d be increasing his ownership. The only way around this is if every other owner matched the investment based on their ownership percentage. So if Nutting invests $16 M, the other owners need to come up with $4 M.

The Pirates actually had this situation a few years ago. Nutting loaned the team money, and wanted to turn that money into equity. In doing so, he would have increased his ownership of the team. The partners ended up voting that down, with Nutting abstaining from the vote due to a conflict of interest.

So it’s not like Nutting can just spend his own money. The only way that could happen is if he owned 100% of the company, and it seems like that’s his goal based on the article in the Trib.

The Reality For Pirates Fans

Let’s be realistic. The Pirates are a low revenue team in a league of haves and have-nots. That billionaire owner who is going to come in and spend his life’s savings to build a winner? He doesn’t exist. The current owner? By all indications it doesn’t look like he intends to sell. That doesn’t mean the Pirates will never win.

Small market teams can win. They just need to be smart, and be a bit lucky to avoid injuries and down years from their top guys. The Pirates can win as a small market team. In doing so, they can increase their revenue and payroll organically. Win and more people buy tickets. More people buy tickets and you have more to spend. Spend that money wisely and you’ll win more. And the cycle continues. That’s the cycle that every successful small market team has followed. That’s also the only option for the Pirates.

It all starts with smart decisions. Is the current management group the right group for those decisions? Personally I think we’re going to find out one way or another this year. I don’t see this group surviving another losing season, but I also don’t think a losing season is inevitable. There are questionable things about this group. They add players who they seemingly have no interest in playing. They make day-to-day roster decisions while ignoring a long history of stats that suggest those are the wrong moves to make. On the other side, they’ve done some things right. All the talk about how they can’t develop talent ignores guys like Starling Marte, Kyle McPherson, Phil Irwin, Gregory Polanco, Alen Hanson, and so on. These guys didn’t go from low bonus players or mid-round draft picks to legit prospects by themselves. They’ve also made some shrewd moves compared to the current markets. In a time when Kevin Correia is getting $5 M per year on the open market, and good starters are getting ridiculous contracts, the Pirates are paying $8 M each to A.J. Burnett and Wandy Rodriguez.

As we’ve seen with the Rays, even the smartest small market team is at a disadvantage. The Pirates don’t need money to win, but they also can’t afford to make mistakes — even small ones like wasting $2.75 M on John McDonald and Brandon Inge. If this group is the group that will lead the Pirates to becoming a winner, then the extra money will help, but it won’t be necessary. If this group isn’t the group that will lead to winning, then giving them more to spend isn’t going to help anything.

In short: we should spend less time pining for a fictional billionaire owner who is willing to lose all of his money making the Pirates a winner, and instead we should focus more on whether the Pirates are making the decisions necessary to win at their current payroll level.

Links and Notes

**The 2013 Prospect Guide and the 2013 Annual are both available on the products page of the site. If you order them together, you’ll save $5. Get them both to use throughout the 2013 season.

**2013 Bradenton Marauders Season Preview.

**2013 West Virginia Power Season Preview.

**Pirates Pregame: Update on Injured Pitchers.

**Rodriguez, Bullpen lead Pirates past Cubs.

**Minor League Schedule: 4/4/13.

Tim Williams

Author: Tim Williams

Tim is the owner and editor in chief of Pirates Prospects. He started the site in January 2009, and turned it into his full time job during the 2011 season. Prior to starting Pirates Prospects, Tim worked with AccuScore.com, providing MLB, NHL, and NFL coverage to various national media outlets, including ESPN Insider, USA Today, Yahoo Sports, and the Wall Street Journal. He also writes the annual Prospect Guide, which is sold through the site. Tim lives in Bradenton, where he provides live coverage all year of Spring Training, mini camp, instructs, the Bradenton Marauders, and the GCL Pirates.

Share This Post On
  • http://twitter.com/Spazaru Spazaru

    Great article! I also think the Rays are the model organization and wish the Pirates could find their secret. I think fans of teams like the Bucs shouldn’t expect to win. I hate to say that but with baseball’s ridiculous finance system, it’s a fools errand to think they’ll be successful. They might finish over .500 one year, but to expect consistency is unrealistic. I’ve learned to take pleasure in the draft and player development and watching guys go from rookie ball to the majors. The World Series doesn’t even enter my mind and sadly, that doesn’t even bother me anymore. I would love to see the Bucs win again, but I can still enjoy the team if they don’t. Watching guys like Cole, Taillon, McCutchen, Marte, etc is still more fun to me than if I was a Yankees or Dodgers fan and my team just went out and bought anyone they wanted. That’s a really boring concept in my opinion, so I’m actually glad their isn’t a billionaire looking to piss his money away. That wouldn’t be any fun at all to follow. I live in southern California and these Dodgers fans don’t believe me, but I don’t envy them. Rooting for the Dodgers would be like rooting for getting excited about a merger on Wall Street. No soul involved at all.

  • kevin21

    Agree, Great Article. It seems like for a small market team, there is more volatility in the sense that more ‘pieces’ have to line up in order to succeed. Ie. Player’s A-D have to peak at the right time and if player C goes down the small market teams do not have the depth of Major League Talent ready and able, where as others can sign/trade for key pieces. (like mentioned in article)
    I do want to bring up possible separating the front office from holding people accountable. Player Snyder is on Hurdle. Also, players need to start producing; and if they don’t it’s on them. Ie. Sanchez needs to start producing. Was it a stretch to draft him in the First Round. Yes, but that was the stagey his save money for prep arms later in draft. But there should be a point where you start wanting more out of the players rather than just pointing the buck at the front office.

  • bqjd

    They had a billionaire who wanted to buy the team, Ron Burkle. While I don’t believe he intended to loose millions of dollars a year, he was smart enough to realize that he could package the pens and the bucs together and create a regional sports network. That sports network, likely, would have allowed Mr. Burkle the chance to both make a profit and put more money into baseball operations. That sports network would have definitely made more money than what the inept FC got from Root.

    While I believe that FC should have been fired for numerous reasons, the terrible contract he signed with root sports is at the top of the list, and I’m still astounded that a bottom line guy like Nutting did not fire him for it. It has set both profits, and the pirates’ chances of winning, back decades.

    Lastly, a half of a life ago, I caddied for a Jay Lustig. He was an ass. He liked to hood all of his clubs to make it seem like he could hit the ball really far. He may have hit the ball far, but he sucked and other members of the club would laugh at him for it. He also treated workers like shit.

    • http://www.piratesprospects.com Tim Williams

      Two notes on the ROOT contract:

      1. That was around when the Burkle rumors came around. So it would be hard for him to make that regional sports network when ROOT had the rights.

      2. The ROOT deal came before all of the recent big TV deals. It’s hard to say whether that’s just bad luck due to timing, or if it’s a mistake the Pirates made. No one was complaining at the time the deal was announced. We’re only now talking about it because a lot of huge deals have been reached in the last year or two.

      • bqjd

        FC made the extension with Root with a few years left on the contract. While a regional sports network may not have been immediately created, I am sure that was the idea behind the offer.

        It was FC’s job to know the market. It appears that Burkle and Co. knew the market and wanted the bucs for the television rights.

        And I don’t understand the timing implication. No where does it say that the Pirates could not have been the first to cash in big with a TV rights deal. If the Pirates are going to win, they need to be proactive on all fronts, not reactive.

        Lastly, it cannot be argued that the poor TV deal put the bucs even more behind the eight ball.

        • http://www.piratesprospects.com Tim Williams

          I guess that would be the mistake — making a deal when you didn’t have to make one.

          As for the big TV deals, most of the groundbreaking ones came in big markets. A team like the Pirates needs a team like the Rangers to break ground. Then they can point to those deals when negotiating.

          It’s kind of like free agency. The mid-tier free agents let the top guys set the market. Then the mid-tier guys use those prices to find their relative worth.

          • bqjd

            Even assuming that you are correct, that the large market teams help determine the market for smaller market teams, FC should have known to wait, that the Dodgers and the Rangers were going to get huge deals that would increase the Pirates bargaining power. I don’t recall the timing of everything, but Frank McCourt knew the TV deal was going to be huge, Magic & Co. knew the same and Nolan Ryan & Co knew the same. FC just flat out missed it.

            And I realize that it is not as black and white as I make it out to be, but the deal that was signed put the bucs in an even more difficult position moving forward. I could easily see the John McDonalds of the world costing $5 million a year, and obviously the Pirates never being able to venture into the free agent market

      • https://profiles.google.com/109574077056716189484 Joel Davis

        You didn’t really address the Burkle issue though. The answer to the question of your post “Why can’t the Pirates have a free spending billionaire owner?” is they could have, Burkle, but Nutting refused to sell. Which obviously Nutting owns the team, that’s up to him. But the idea that this is some fantasy that is made up by under-informed fans is false, because it existed. Most likely Lustig is referencing Burkle in the article.

        Also, the idea that because “we” weren’t complaining at the time of a trade or a tv contract signing that then it isn’t FO fault is a fallacy. It’s there JOB. If a contractor makes a mistake on my kitchen and I don’t notice it until later, it’s still his fault. That might not be the best example, but I think you get my point…

        • http://www.piratesprospects.com Tim Williams

          Burkle isn’t a free spending billionaire. I talked about that when those rumors came out: http://www.piratesprospects.com/tag/ron-burkle

          He operates in a league with revenue sharing and a salary cap/floor. Before the NHL had that, the Penguins operated the same way the Pirates currently operate.

          As for your example, I get what you’re saying, but I don’t think you get what I’m saying. What I’m saying is that there’s a reason no one was complaining at the time. It wasn’t an issue. This isn’t a situation where there was a mistake and it just took a few years to notice. It’s a situation where the market changed after a deal was struck. People are only complaining now because of the deals that were made after the Pirates made their deal.

          • https://profiles.google.com/109574077056716189484 Joel Davis

            He may not be “free-spending”, but he would give us more flexibility to sign Pedro or Cole down the line, where with Nutting they will almost certainly need to be traded to replenish. I understand he won’t be signing Greinke. That’s fine. That’s smart actually.

            As for the contract, I think it lacks any foresight to not notice TV was becoming king. The YES network has been around for awhile and has been making a lot of money. If nothing else, he could of made the contract shorter. I’m talking out my ass obviously because I don’t know the ins and out of how these things work. But again, that’s my point.

            • http://www.piratesprospects.com Tim Williams

              I don’t think any owner is going to keep a Scott Boras client in Pittsburgh. If Milwaukee can’t keep a guy like CC Sabathia from going to the Yankees, even when offering $200 M, then the Pirates wouldn’t have a chance no matter who owns the team.

              Also, as I said, when the NHL was set up without a cap and revenue sharing, the Penguins were operated just like the Pirates are now. Low payrolls, trading veterans for prospects, trying to build from within.

          • bqjd

            My last post on the topic.

            No one complained about at the time because we had no idea that the market was going to blow up. We did not know because it was not our job to know.

            It was FC’s job to know and he failed. Others, like Ron Burkle appeared to know that the boom was coming and wanted in. That is one of the reasons he is so successful.

            One more example. You invest a bunch of money with a money manager. A few years back he talks you into investing into mortgage backed securities. Obviously, in short order your investment is worth pennies on the dollar. You go to find out what happened and he says that the market changed. Is that a good enough answer?

            Thanks for the banter. I need to get some work done but I enjoyed the exchange and will have to post some more in the future.

            • http://www.piratesprospects.com Tim Williams

              I appreciate the discussion as well.

              I don’t really like the “it’s not our job to know” line. Yes, analyzing the market is the job of Coonelly, but predicting something like this shouldn’t be expected.

              You bring up the financial comparisons. I’d say this is something like when the markets tanked back around 2006. I don’t think anyone really saw that coming. Maybe people thought things could go bad, but if your investment manager didn’t pull all of your stocks out of the market before it tanked, I don’t think that would have been on him.

              That’s how I see this situation with the Pirates. It’s a total surprise market swing.

              But as we’ve talked about, if they don’t sign early, then the market explodes and they can use that for their next deal. So the big question would be, why the need for an early deal?

        • bqjd

          I think a good example is the guy who buys gas for an airline. Say he buys his company’s gas futures at $4 per gallon. And six months later gas is at $1 per gallon. He just cost his company a lot of money.

          He cannot simply say he did not know or it was bad timing. He can’t say that because it was his job to know.

          Just like it was FC’s job to know that TV contracts were going to explode. He failed at his job and so far it does not appear that he has suffered any consequences.

          PS I know the prices of my gas situation are outrageous. However, they needed to be to make my point

          • http://www.piratesprospects.com Tim Williams

            I don’t know if gas futures can be compared to TV deals. Something like gas futures can be volatile, while TV deals relatively stay the same. Like I said in the previous comment, it was a huge surprise when the Rangers signed their deal.

            I also wonder how many other teams signed deals before the Rangers agreed to their deal?

  • leadoff

    What kind of contract did the Penguins sign with the Root Sports?
    Many of the posts I am reading are posts by misinformed people that do not have all the facts. Before you get someone fired get your facts and get them straight.
    The reason the Pirates don’t have a bigger TV contract and they won’t get a much larger contract “EVER” is because they don’t have the viewership, winning won’t get them the viewership I am talking about. Amount of people in the area is what I am talking about.
    One of the reasons Oakland is having such a hard time building a stadium in San Hose is because the San Francisco Giants have San Hose as one of their territories and they don’t want to give that up.
    Nutting was open to a deal with the Penguins about a sports network. The Pens asked him over to talk about a deal, when he came, they only wanted to talk about buying the Pirates. I would have told them to go fly a kite if I were Nutting and it would appear that he left that meeting with his team and no discussion of a sports network.

    • bqjd

      i was not going to post again, but you personally attacked me calling me misinformed. That is far from the truth. I’m willing to bet I am more informed than 99% of the fandom. I follow everything, a lot.

      I would agree that the number of viewers greatly affects the the size of the television deal. I also a agree that the buccos will never get a TV contract as big as the Rangers, Dodgers, Angels, etc.

      However to suggest that could not do better is ludicrous.

      Cleveland similar size to Pittsburgh $40 million per year for 10 years.

      http://hardballtalk.nbcsports.com/2013/01/02/indians-new-local-television-deal-with-fox-worth-400-million-for-10-seasons/

      The Reds, one of the smallest TV markets in MLB $30 million a year

      http://www.bizjournals.com/cincinnati/blog/2013/04/reds-30m-tv-deal-ranks-higher-than.html

      that article notes that “experts say they could get a bump to as high as $75 million when they renegotiate the current contract, which is due to expire in 2016.”

      The Padres $50 million per year for 20 years

      http://www.cbssports.com/mlb/blog/eye-on-baseball/18355869/reports-padres-new-tv-deal-could-be-worth-more-than-1-billion

      Rockies are getting $20 million per year, but there deal expires after next year. I think its safe to assume that they will do better.

      http://www.sltrib.com/sltrib/sports/54034430-77/rockies-television-deal-billion.html.csp

      FC failed in getting a good deal for the Pirates. All of these teams are in a similar size markets and have done remarkably better.

      As far as the meeting between the Pens and Bucs, I don’t know what went down and neither do you. All you know is that the Pens made an offer to buy the Pirates.

      16 months after that meeting, the Pens signed an extension with Root for a 20 year agreement. I could not find financial terms. Not that I need to defend the Penguins, but it was suggested in my research that the cost of starting a regional sports network would be about $300 million and obviously, 80+ Penguin games would not be enough to fill all of the needed programming. I can only assume that the cost and the lack of programming were prohibitive in creating a network.

      And yes FC should be fired. If you lost your company millions of dollars, what would happen to you. That is on top of everything else.

      So leadoff, in the words of Donald Trump, “You’re fired”.

      • LWD

        You are talking about TV markets but missing area on influence. Cincy draws from Columbus, Louisville, Lexington and Indy. Cleveland has Buffalo and Erie and splits Youngstown. SD has most of S. Cal outside of LA County plus prices/costs are inflated because everything. Pirates are sort of stuck in a lousy area. To the North and Northwest they are battling with the Indians for fans/viewers. To the East once you get past Somerset or Breezewood you are dealing with Baltimore and Philly. There’s really no population and the rest of the area is WV – Charleston, Morgantown and Wheeling. Really not comparable to Indy, Columbus and Louisville.

      • leadoff

        I did not personally attack you, but you can take it any way you want to.
        You have facts, just not the right ones, you need to get more facts before you fire anyone.
        You don’t know what was available to FC when he made the deal, you don’t know what the deal is with the Penguins. You don’t know what Root sports is prepared to pay the Pirates and the Penguins in the future, you have not said where the TV money that FC can’t get will come from if someone else takes over the presidency of the Pirates.
        The difference in Leadoff and you is that you are not Fired, keep writing, just get more facts before you start firing someone.

  • jg941

    Great job, Tim!

    Two things – there’s other differences btw millionaires and billionaires. Even though I think the crazy billionaire thing is a pipe-dream, there is that reality that people for whom money is no object tend to but lots of toys/things that decrease in value all the time (or certainly don’t increase in value/make them a profit (Bugattis, yachts, etc.). IOW, they’re SO rich, they don’t need this 100th thing in their portfolio to throw off profits – a loss-leader if you will.

    Some baseball-crazy gazillionaire with big ego might just love to have a pet team and a world series trophy, who knows.

    But, back in the real world, there are certain scenarios that say the Bucs could possibly add $30 million/year to “win” and still stay above water, but a bunch of things have go into that equation.

    First and foremost, the actual owner WILL have to make less money to buy up a winner. However, there is one area where the Pirates are in exponentially better shape than the Rays….the fan base, IMO. The Rays – who I agree are clearly the smartest organization in baseball – are stuck in this stunningly bad fan hell. They have averaged 92 wins/yr for the last 5 years, playoffs 3 times, WS once…..and nobody gives a crap, nobody goes to the games….unbelievable.

    Conversely, when the Bucs merely start to peek above .500, folks come out of the freakin’ woodwork, so I think there’s a financail model you could run in Pittsburgh with some assumptions that might say, for instance: if I could actually field a 85-90 win team that was a playoff contender each year, how much would my fan-only revenue go up? In this town, honestly, I think attendance could increase by as much as 5,000 per game for a team constantly in the hunt, if not start to approach regular (or many, many) sellouts. Feel free to weigh in on that, but we all saw what happened the last two years when they merely started to look not-awful for a change.

    I could conservatively say that adds $25/person/game for each of those 5,000 new tix – that’s a little over $10 million in new profits/year. but I’d also run an even more aggressive model that showed assumptions for merchandise, possibility of increasing tix prices, etc., and maybe I’m even low on what a typical fan spends at the Park each game.

    If ownership is making, say, $20-$25 mil/year, then maybe $10-$15 of the $30 mil in salary increase can come from the “success premium” profits, but you’d still have to rely on the owner taking a $15-$20 million haircut, unless you also thought an energized/increased fanbase could allow you to find other revenue streams I’m not thinking of, renegotiate your cable deal, etc.

    In Tampa, with that fan base? No. In this town? Absolutely, the potential is there to get to sell-out mode with a consistent winner.

    Everybody would have to give something, ownership makes less personal profit, fans need to show up and kick in their piece on a regular basis.

    You still may end up with the written-about “Pittsburgh Paradox” that Tampa went thru in 2007 and 2008, where the Rays took their last-place profit of $21 million, threw $20 at new salaries the next year, went to the World Series, and the owner made only $1 million.

    Hard to ask non-crazy billionaires to knowingly lose money like that on a regular basis, but it would be exciting to see the Pirates give it a roll like the ’07 Rays did, to see if it would work.

    But – MORE IMPORTANT THAN ANY OF THAT – I’m also w/Tim right now that more money in the hands of bad decision-makers ain’t the answer.

    Maybe that’s why Nutting won’t cross that line, maybe he doesn’t want to lose any more of his money with the same people making the same kinds of day-to-day decisions, who knows. Obviously, the real attraction of the “new billionaire ownership” dream is that they come in with BOTH more money AND the best-and-brightest (Friedman/Maddon) to make the decisions.

  • bqjd

    you called me misinformed. that is attacking

    You are correct that I do not know all of the details as to how the TV contract came about. FC had a chance to tell us about it at Pirates fest, but declined to do. He only said that it was better than reported.

    By all indications, he got less, in some cases significantly less, than teams in similar markets. All reports have also indicated that there were several years left on the prior contract. Why extend early? Obviously a very good question when the deal he got is subpar.

    You state “you have not said where the TV money that FC can’t get will come from if someone else takes over the presidency of the Pirates.” This is a ridiculous defense. Why would you ever fire anyone then. You can’t change the past. By the same logic Dave Littlefield should not have been fired since the next GM would not have been able to change his poor drafts, trades and other acquisitions.

    You want some more facts as to why FC should be fired. First the terrible TV deal. Second the DUI. Third, the outrageous spat with the bar. Fourth, lying to the media and fans about the Russell/Huntington extensions. Fifth, the terrible teams he has put on the field the last six years. Sixth, hiring a GM who was demoted by his last employer. Seventh, after two consecutive collapsing announcing that thorough review of the franchise would take place but before that review takes place stating the the gm and manager would be back. How can you have an appropriate review, when you eliminate some of the most obvious solutions before you start that review. Also, don’t you have a review regardless of the outcome of the season? Why didn’t a review of the 2011 season aid in avoiding a collapse in 2012? Was there a review after 2011?

    Do you need more facts to fire him?

    If I had more time, I would tell you why Huntington and Hurdle should be fired. Short hand, you oversee two collapses like Hurdle did, you don’t get to keep your job. You are given more money to draft players than any other club in majors and pretty much all you have to show for is picks that any of piratesprospects readers could have made and some low a talent, you don’t get to keep your job.

    • bqjd

      this was supposed to be a response to leadoff

  • leadoff

    As Tim wrote, the Pirates to our knowledge do put their profits back into the system, how much we don’t know. The TV contract is not likely to increase very much, a deal between the Pens and the Pirates seems like it would have been the way to go, but again without any real facts at hand, one can only assume.
    The bottom line is that the Pirates need to fill the seats, on this we agree. To do that they need to build the farm and develop from within, not necessarily to bring players to the Pirates but to have a product that is desired by other teams, good trades are possible if you have something good to trade, that is something the Rays are doing now.
    To my knowledge there are not many owners that are going to spend millions of their own dollars on players that may or may not work out, they use a balance sheet like every other business and if the profit is 10mil they are not going to spend 20 or 30mil of their own money every year to make the fan base happy. If owners do spend their own money on players, I would like to see the evidence of this and I would like to see how many of them actually do spend their own money on players.

    • http://www.piratesprospects.com Tim Williams

      “As Tim wrote, the Pirates to our knowledge do put their profits back into the system, how much we don’t know.”

      That’s what Lustig said. So it’s fact. He also said they put all of the profits back into the system.

      • leadoff

        Thanks for the clarification.
        I find it hard to criticize Pirate management spending as some do because the Pirates don’t open their books for the public, so what they really have and really don’t have is up in the air to me. They can put all their profits back into the system, but if those profits are not very much they are not going to be able to increase their payroll a whole lot, many fans feel their payroll should be much higher than it is.