Tuesday, August 24, 2010
Associated Press
PITTSBURGH
Don’t feel too sorry for the cellar-dwelling Pittsburgh Pirates. Losing has been profitable.
The Pirates made nearly $29.4 million in 2007 and 2008, according to team financial documents, years that were part of a streak of futility that has now reached 18 straight losing seasons. The team’s ownership also paid its partners $20.4 million in 2008.
The documents offer a rare peek inside a team that made money by getting slightly less than half its income (about $70 million) from MLB sources — including revenue sharing, network TV, major league merchandise sales and MLB’s website. The team also held down costs, keeping player salaries near the bottom of the National League, shedding pricier talent and hoping that untested prospects would blossom.
The club’s earnings were included in nearly 40 pages of statements that the Pirates submitted to Major League Baseball and were recently obtained by The Associated Press.
“The numbers indicate why people are suspecting they’re taking money from baseball and keeping it — they don’t spend it on the players,” said David Berri, president of the North American Association of Sports Economists and the author of two books detailing the relationship between finances and winning. “Teams have a choice. They can seek to maximize winning, what the Yankees do, or you can be the Pirates and make as much money as you can in your market. The Pirates aren’t trying to win.”
Club executives vehemently disagreed with that assessment. Yet the numbers show Pittsburgh hasn’t spent as much as its opponents — and hasn’t won.
By 2010, the Pirates had baseball’s lowest opening-day payroll — $34.9 million or just $2 million more than in 1992, the club’s last winning season.
Pirates officials say they are trying to field a competitive team, and there is nothing nefarious in the team’s financial dealings. MLB backs them up, saying Pittsburgh has complied with the rules for revenue sharing, which are supposed to help less well off clubs compete with likes of the Yankees and the Boston Red Sox.
Still, Pittsburgh fans have long complained that the club’s various owners have been more interested in profits than performance, and top sports economists who reviewed highlights of the team’s statements wondered if it now makes more money losing than it could by winning.
“If they won and were forced to increase their payroll from $34 million to $75 million or $80 million ... how profitable would they be?” Berri said. “There’s a ceiling in terms of gate revenues.”
Economist Roger Noll, a Stanford University economist, said: “Probably the Pirates would be less profitable if they tried to improve the team substantially.”
Pirates president Frank Coonelly said the team spends its revenue-sharing money in several ways designed to create a winner: scouting; amateur draft choices; a new Dominican Republic academy that cost more than $5 million; player development; and, a new computer system used in player evaluation.
According to the documents, the Pirates spent $23.2 million in 2008 and $21.2 million in 2007 for player development, in line with other clubs.
The Pirates’ strategy of building with prospects rather than with proven players was illustrated this month when they paid nearly $12 million for amateur draft picks, putting them at or near the top of baseball, and raising their draft expenditures to $31 million for the past three years.
They also spent another $2.6 million for 16-year-old Mexican pitching prospect Luis Heredia, the highest price they’ve paid for an international prospect. General manager Neal Huntington, who was hired three years ago, said the team has a plan for the future and is in the middle of executing it.
“Even when we’re winning, we will be a revenue-sharing recipient ... and in much better position to generate revenue and, depending on how we control other expenses, to generate additional income,” Coonelly said. “But you can win without an $80 million payroll. We’re seeing it this year.”
San Diego had the second-lowest opening day payroll and the Padres are leading the NL West. Tampa Bay went to the World Series in 2008 with a relatively low budget.