First Pitch: The Only Thing About TV Revenue That Matters

The controversy surrounding the Pittsburgh Pirates’ local TV deal is a strange one. The Pirates are considered a small market team, or low revenue if you prefer. Their TV deal has been reported to be one of the lowest in the game, in a time where teams are signing huge TV contracts right and left. The Pirates signed their extension — running through 2020 — just before the TV market exploded. Call it bad timing, bad luck, or maybe go a step further and say that they should have somehow known the way the industry was trending. Either way, the reaction to the small deal has been negative.

Over the weekend, Frank Coonelly said that the deal wasn’t as low as it has been reported. This is something I’ve heard him say in the past, but without hard numbers it’s not something I’d cite as a counter argument. That’s not to say that the numbers reported are to be taken as gospel either, and I’ll get to that in a bit. Coonelly did add that the Pirates’ figure was in the top half of the league. My reaction was similar to the reaction from Bob Smizik and Charlie Wilmoth. I didn’t see the point of arguing that your revenue is actually higher, when people are basically chalking your low payroll up to the fact that the deal is one of the smallest in the league. The two linked articles talk about that. There’s not much I can add to the discussion.

The topic led me to reviewing Wendy Thurm’s analysis of every team’s local TV deals on FanGraphs. One thing I noticed with all of this is that there are many conflicting reports on the revenue of every team. The Reds are reported as having a $30 M revenue, but an update to the article says another source cites it closer to $10 M. The article lists St. Louis at $14 M, although Derrick Goold of the St. Louis Post Dispatch reports that the deal pays $25-28 M (his numbers came out after the FanGraphs article). The Brewers were listed at $12 M, but the figure is expected to be around $30 M by this point.

Overall it’s hard to know exactly what teams are receiving, since there’s so much conflicting information out there. That’s why I wouldn’t take the $18 M as gospel. It could be wrong information like the Cardinals’ figure. It could be out-dated like the Brewers. Or it could just be correct. The thing that is lost here is that none of this really matters, and overlooks the important topic.

Going through the FanGraphs article, I noticed that the middle of the pack was around $30 M. You’d think it would be higher than that, but very few teams are getting $50-60+ M per year. Most teams are reported around $30 M, with a few teams reported around $20 M or less (the Pirates included). The Brewers, Reds, and Cardinals (using the non-FanGraphs numbers) are all around that $30 M figure. So it’s possible that Coonelly could be right, and the increase could put them in that range with so many other teams. It wouldn’t be a massive increase, but it would allow the Pirates to spend what similar markets are spending if all else is equal.

Even if the TV revenue is the same, you can’t compare the Pirates and the Cardinals. The Cardinals have one of the best attendance figures in the league. The Pirates had one of their best years ever in attendance in 2013, getting 2.26 M fans. The Cardinals got 3.37 M fans, which is an average year for them. So in their best year, the Pirates still get one million fewer fans than the Cardinals. That means if you compare the best years for the Pirates with the average years of the Cardinals, the Cardinals would have about $30-35 M extra in ticket revenues, using some back of the napkin math.

The same could be said about the Brewers. They had 2.53 M fans in 2013, which was their lowest since 2006. In previous years they had been in the 2.7-3 M range. That’s not as big of an advantage as St. Louis, but it is an advantage over the Pirates.

The best comparison probably comes with the Reds. Like the Pirates, the Reds play in a small stadium. They had one of their best years in 2013, with 2.49 M fans. That’s a similar range to the Pirates. The Reds wouldn’t be benefitting from additional ticket sales. If the Pirates are making about the same as the Reds when it comes to TV money (assuming the $30 M figure for Cincinnati is the one that is correct), then they should be able to spend as much as the Reds.

Looking at the Reds’ payroll, they have been in the $73-87 M range for most of the last 6-7 years. That jumped to $106 M at the start of the 2013 season, although it doesn’t seem like they will maintain that number. Shin-Soo Choo is now a free agent, and they have been shopping Brandon Phillips and his contract. Cot’s currently has them at $83 M in 2014, and that includes Phillips. Coincidentally, their average payroll has been $83 M from 2008-2013, and the average payroll around the league hasn’t gone up that much in that time.

I’m also not convinced that the new TV revenues will lead to a massive spike in payroll across the board. That’s something that will have to be seen when the Opening Day numbers are released. However, I think that if teams were flush with cash and ready to spend it all on players, we wouldn’t currently see guys like Shin-Soo Choo on the market with very little chatter.

Last year the Pirates ended up spending around $75 M, by my estimates. That was about what the Reds were spending when they first became competitive, and first added all of their big core players. They gradually increased that number to $80 M, then $87 M, then took a huge spike in 2013. Overall, the average is in the $80-85 M range. The new revenues might kick that up higher, but I don’t think the range would go beyond $90-95 M.

Coonelly’s statement doesn’t come with a specific figure, so there is still guesswork involved. However, an educated guess could say that if the deal is higher, it would probably be in the $30 M range with the Reds and a lot of other teams. If that’s the case, then there’s no reason why the Pirates shouldn’t be able to spend what the Reds have been spending. That doesn’t mean the Pirates should have been spending this much all along — the Reds certainly weren’t before they were contenders. What it does mean is that now that the Pirates are contenders, and getting the attendance, and supposedly getting better than reported TV revenue, they should be able to financially compete with a team like the Reds.

It has happened with very little attention, but the Pirates already are getting to the range where they’re competing financially with the Reds. They currently have a projected payroll of $73 M in 2014. That will likely go up when they add a first baseman, and it could go up more if they make any other additions over the off-season. Add in the in-season spending, and it wouldn’t surprise me at all if the Pirates end up with a payroll over $90 M this year. Considering the new revenues, that would be comparable to the $83 M range that the Reds have averaged prior to the revenue increases.

This is a scenario where, even if we hear a number supporting Coonelly’s claim, there is going to be some uncertainty. However, it all boils down to the Pirates’ ability to financially compete with similar teams. That’s the only thing that matters in this entire discussion. If they want to insist that they’re receiving better revenues, then there would be no excuse to keep a lower payroll than those other teams. Based on the early results as contenders, it doesn’t seem like they will be maintaining a lower payroll.

Links and Notes

**The first shipment of the 2014 Prospect Guide has now been printed, and will get to me on Thursday. I probably won’t have everything ready to ship on Thursday, but will definitely have all orders in the mail Friday morning. I’m shipping everything out of Virginia so that it can arrive earlier. In the past when I have shipped books out of Virginia on a Friday, it has arrived on a Monday or Tuesday for most places. I’ll have more updates when I get the shipment. If you’ve ordered, you will get a tracking number sent to you when I print the shipping label. You can still place your orders here to have them shipped out by the end of the week, however there are only about 70 books remaining in the first shipment. I won’t get the next shipment of books until after the new year. I will have an eBook available in the next few days.

**If you missed it, last night I talked about The New Prospect Ranking System in the 2014 Prospect Guide.

**Pirates Had the Strongest 2013 Draft, According to Jim Callis.

**Pirates Interested in Ike Davis and Mitch Moreland.

**Winter Leagues: Sam Kennelly Gains Valuable Experience.

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, 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.

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