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Things That Go Boom!

I'm not afraid to admit that I like Scott Boras, at times he's a bit obnoxious, and I don't believe for a minute that he buys half the product he sells, but if I were a ballplayer I'd certainly want Boras as my representative. As a fan I want Boras to be after all 25 players on my roster since he usually has his mind on his money and his money on his mind and when he's interested in a player he must see dollar signs, usually signifying the player is due for a pay raise.

Mainstream media has given agents like Boras unprecedented coverage due in part to his outspoken nature and outrageous quotes. When Boras says something, he usually delivers, remember when Alex Rodriguez signed that unprecedented deal? Boras was speaking that figure since before the All-Star game that year, eerily similar to the current A-Rod situation. Perhaps he plays a magical flute that lures general managers and owners into saying things like "I'll do whatever it takes to get him," that phrase was uttered by a member of the Detroit Tigers' ownership concerning Ivan Rodriguez, giving Boras a blank check to simply fiddle with. He cashed it, like he does every other check, and moved on to the next general manger willing to pay his demands, and there is always someone willing to pay his demands.

As a writer I find it perfectly acceptable that fans, owners, and of course players hate Boras, and as a Rays fan it's almost a given. Remember this is the same man who announced that Mark Teixeria wouldn't sign with the Rays if drafted, thanks for Dewon Brazelton Scott! I doubt he's a fan of Moneyball, not that he doesn't have a computer with manually entered statistics from decades of seasons, but the last thing on his mind would be a team trying to conserve on budget, something that with Boras representing Carlos Pena and talking to, perhaps wooing, Carl Crawford and Scott Kazmir could get tricky pretty fast for the Rays.

Perhaps the Boras line that most caught my attention was in regards to Pena, but more so about the Rays:

"And I'm sure their fans are waiting to see that, too, knowing also that Tampa Bay is one of the most successful economic franchises in the sense that their payroll is so low (about $25-million) and they're generating probably $140-million worth of gross revenues. When you count revenue sharing, the national TV package and licensing you're almost talking about $80-million before they even sell a ticket."

I'm hardly an economics expert, but as you may have guessed by now sports economics are a large part of my posting repertoire, however it took this quote a few weeks to catch on. Consider that stuff such as air conditioning at the Trop, maintenance fees, and the television deal with ION Network are all implied, or otherwise implicit costs, at the end of the day they aren't considered when talking about an economic profit, so perhaps the statement caught me on an odd day and finally sank in, but here we go...

The Rays are bringing in approximately 80 million dollars from revenue sharing, television broadcasting, advertisers, licensing, and other league specific items alone, not to mention the 11 year 650 million dollar deal that XM and the MLB signed a few years ago. That's an 80 million dollar economic profit that they have little to no involvement in. In J.C. Bradbury's The Baseball Economist he theorized that a team gains $3.88 per every person in the city, the Tampa Bay area is home to around two million folk, roughly 8.44 million is gained solely from that figure, and that's not even including ticket, vending, and other team specific costs.

Let's assume Boras' 140 dollar figure is correct, he has nothing to gain from fabricating the numbers one way or the other since in the end Pena is under team control for the next two seasons no matter what he says, how much of that money is going back into the team? Nyyfan made a comment when the quote was posted, and mentioned that stadium improvements are pre-budgeted and for the large part are implicit costs, the only items that are variables would be labor costs (every player, coach, employee, ect.) and non-conventional items like the foreign camps (Nyyfan posted the Venezuelan figure of 14 million.)

Flights, meals, hotel rooms, even equipment all of that is written off when it comes to economic profit. I've done a lot of payroll figures in the past, so they came in handy when figuring these numbers up:

MLB payroll = 45 players 28 million
Minor league payroll (note: other than specific salaries I simply used this scale:

"First contract season: $850/month maximum. After that, open to negotiation

Alien Salary Rates: Different for aliens on visas--mandated by INS (Immigration).

Triple-A--First year: $2,150/month, after first year no less than $2,150/month

Class AA-First year: $1,500/month, after first year no less than $1,500/month

Class A (full season)--First year: $1,050/month, after first year no
less than $1,050/month

Class A (short-season)--First year: $850/month, after first year no
less than $850/month

Dominican & Venezuelan Summer Leagues--no lower than $300/month

Meal Money: $20 per day at all levels, while on the road"

So figuring 25 players per team = 125 players
D&V = 7,500
A= 21,250
A= 26,250
AA= 37,500
AAA= 53,750

Or a total of: 108,750 thousand dollars add in minor league salary, but let's also remember signing bonuses which equates to a few million (remember the bonuses are stretched over the contract length so we'll set the total at three million) and the team is spending roughly 31,108,750 on players. Adding in all the team employees and coaches you likely won't approach more than 33-34 million at most.

Thus far the team sits at nearly 50 million spent between player salaries and foreign academies, the only areas in which money paid is considered actually spending, if that makes sense. Keep this in mind as we switch topics for a second.

Using the ever so great Tango Tiger and his formulas for wins expected (based on payroll) and his theory that every win adds 2% to total attendance let's see how much the team should win and how much that would add to attendance numbers while keeping in mind that Tiger also theorized that for every 10% added to payroll a team gains a win:

  1. Use the player salaries table in the Lahman database (1992-2005), and figure a team payroll.
  2. Figure an annual average team payroll
  3. Divide 1 by 2, to get a payroll index
  4. Get that team's winning percentage
  5. Get each team's winning record and payroll index in the following year.
  6. Get the deltas of both
  7. Correlate
2006 Rays Payroll = 35 mil
2006 MLB Average Payroll = 82 mil
Payroll Index = 0.42
2006 Rays Winning % = 0.377

2007 Rays Payroll = 28 mil
2007 MLB Average Payroll = 82 mil
Payroll Index = 0.34
2007 Rays Winning % = 0.407

Amazingly a decrease in payroll lead to a higher winning percentage, this is due to obvious reasons (influx of young talent, getting rid of potential overpaid veterans, ect.) but wait there's more:

You can calculate wins paid for as: (P+1)/(P+3)  P = payroll index
0.42+1/0.42+3 = 1.42/3.42 = expected winning percentage of 0.415
0.34+1/0.34+3 = 1.34 / 3.34 = expected winning percentage of 0.401

Unfortunately a correlation between payroll and winning does exist, although as you see cases can swing either way, and in the Rays case of having a load of young and therefore cheap talent it can vary even more.

How are the two points connected? It appears the team collects a 90 million dollar economic profit, 10% increases coordinate to a win, how much would the team have to spend to get to 300% or 30 more wins?

10 more wins - 100% increase - 56 million / +28 million
20 more wins - 200% increase - 74 million / +56 million
30 more wins - 300% increase - 102 million / +74 million

That would potentially raise the team to 76, 86, and 96 wins, very respectable levels, and would also add 2% attendance per win, meaning all of that money spent could potentially be regained through tickets and raising prices along with potential sellouts and more gear sold, of course this would also lower the revenue sharing given to the team, but you have to imagine that would even out with local revenue gained.

I don't support spending just to spend, so please don't interpret this as so, and I don't believe for a second that spending 28 million means a guaranteed 10 extra wins, we dropped seven million and won five more this year so obviously the formula isn't 100% or even close to being completely accurate, it's simply based on past studies.

I'm not advocating overpaying guys to sign here either - although Boras suggested this would be a requirement for his players - but at the end of the day I have to question where the 90 million is going, granted some of it likely does go towards next year's budget, both implicit and explicit but what are the rest of the funds being allocated into?

Boras says A-Rod is worth 500 million in total revenue, how much would his 30 million salary bring in revenue to a team that doesn't all ready have it's own network, sell out, nor have a large fan base? Certainly it's something to chew on, and consider we'd only be spending a third of the profit for one of the best players in the last decade.

I believe Stuart Sternberg and company believe in more than just profits, in my heart I have to believe that while the goal might be making money, it's equal to winning, since winning = more money. Admittedly I don't know if other teams make an economic profit, I'd assume it's the case, although I didn't think the Rays would make that much in pure profit.