Wednesday, January 20, 2016

Detroit Tigers spending. Real or BS?

Much has been made in the Detroit area recently regarding how Tiger owner Mike Ilitch has been willing to "open up the vault" to procure talent for his baseball team.

The Tigers' team payroll for the upcoming year will approach a whopping $200 million. Sound like a lot of of money, right? It is and it isn't.

The average John/Jane working stiff find 6, 8, 10, or even $20 million yearly salaries to a player hard to comprehend. Chances are, they can slave away for 30-40 years at their own craft and never make anywhere near what a baseball player earns for one single season. But this is what has happened across the spectrum of professional sports -- mostly due to free agency bidding wars and the obscene TV money rolling in for the rights to broadcast such games.

A "hard" cap is a fixed number and no team is allowed to exceed it. Period. A "soft" cap is also a fixed number, but teams are given loopholes to work around it. This would be the case in the NBA, where clubs can exceed the number to resign their own players.

But Major League Baseball has no cap whatsoever. Instead, at a certain threshold, a "luxury tax" kicks in. Any team exceeding that number has to pay a percentage of their overage to the league as a penalty. Theoretically, this was supposed to keep the ultra-rich large market clubs from scarfing up all the high-priced talent, while the small market teams couldn't afford to pay for a roster of super-studs. In reality, it has served as no deterrent whatsoever.

[Case in point. Since 2003, the NY Yankees have coughed up roughly $280 million in luxury tax fees. But as we know, money doesn't always equate to championships. And didn't the Kansas City Royals -- a "small market" club -- convincingly win the WS last year?]

In 2016, that particular number will be roughly $189 million. For the sake or argument, let's assume Mike Ilitch has decided to spend the full $200 on player payroll for this season. The pundits will tell us the pizza baron is "going for it", or is "all in" when it come to seeking a World Series title -- something the Tigers have been without since 1984.

If that be the case, Ilitch would find himself about $11 million over the luxury tax threshold. Again, a lot of money to pay in penalties, right? Not exactly.

Turns out, the actual luxury "tax" for the 2016 season is about 17%. That equates to under $2 million. The current average Major League player yearly salary is over $4 million. Two million might buy you a back up catcher or the last guy on the bench in the bullpen. Looked at that way, it hardly seems like a pile of money.

And let's get real. Like all other MLB franchises, these days the Tigers are awash in TV money. The exact figures remain "classified", but it's in the hundreds of millions. The TV folks pony up big bucks to broadcast games, which in turn are financed by their advertisers, which in turn again means we have to watch a lot of commercials hawking various products. Any way you slice it or dice it, the eventual cost gets passed on to the consumer, hence also exorbitant ticket prices and paying 10 bucks for fifty cents worth of cheap draft beer/6 bucks for a nasty hot dog you wouldn't feed to your dog at home, etc, etc, etc. All the vendors of such overpriced gut bombs around the stadium have to pay the club to do business as well.

Last year the Tigers got about 2.5 million fans in attendance. Let's conservatively say the average ticket price was $25. That's well over $600 million right there.

Let's not forget about all the "licensing fees". Every store, shop, kiosk, whatever that sells Detroit Tiger paraphernalia has to pay the club a handsome fee for the right to do so. When you consider all the jerseys, caps, jackets, shirts, and countless other items with the Olde English D on them, we're talking about an incredible amount of merchandise being sold. Ilitch benefits from all of it.

Consider the stadium itself. Ilitch cha-chings Comerica Bank every year for the naming rights. Inside, you'll find advertisements EVERYWHERE. All these people have to pony up to Ilitch for their signs to be displayed. How much is that worth?

True, he has some overhead. Ilitch has to pay to keep the lights on for night games and the water bill for flushing the toilets. Plus there's the "ground crew".  Maybe a dozen folks that mow the lawn, bring out/remove the tarp during rainy days, but mostly watch the games. Throw in a few locker attendants to clean up after the athletes make their usual mess. Let's say there's 25 in all making an average salary of 40K. That adds up to a measly $1 million. You can buy a lot of pepperoni for a million bucks, but it's chump change in the world of MLB. Negligible.

But now we find ourselves hearing and reading about what a kind, generous owner Mike Ilitch of the Tigers is. He's willing to go over the luxury tax threshold and take a "major" financial hit in his never-ending quest to give the faithful Tiger fans what they have long deserved. He's "all in" for a shot at a championship.

What a martyr, they say.

What BS, yours truly says.

A $200 player payroll guarantees but one thing. Whether the Tigers finish in last place again like in 2015, or go on to win the World Series, Ilitch is going to be making money hand over mozzarella either way. Such is the financial nature of professional sports ownership these days. Paying a measly couple million in "luxury tax" is laughable. Also, probably tax deductible.

Who's kidding who?

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