Are the Red Sox being cheap?

Re: Are the Red Sox being cheap?

feeds@kickapps.com (FenwayTheHardWay) — Mon, 21 Dec 2009 14:43:01 PST

Pantera wrote:
For instance, a team may maximize its profits by winning 85 times a year and never making the World Series. Yet an owner might be perfectly rational in trading less profit for ten more wins and a world series championship because s/he derives personal utility out of wininng a World Series.

I really doubt the Red Sox would be as profitable in the long term at 85 wins a year as are now at 95. Teams that do better financially by not competing are usually only accomplishing that by gaming the system somehow (eg, the Marlins).

Re: Are the Red Sox being cheap?

feeds@kickapps.com (bighead) — Mon, 21 Dec 2009 11:19:32 PST

Pantera wrote:

For instance, a team may maximize its profits by winning 85 times a year and never making the World Series.

This was the Boston Bruins business plan for years (still might be, I lost interest in the NHL due to over expansion), build a team just good enough to sell playoff tickets for the 1st round but never spend enough to go for the cup.

Anyway, the Sox charge a lot of money but that is the price you are going to have to pay to watch a championship caliber team play and continue to play at Fenway Park. I have a hard time calling them cheap when I see them putting a lot of money into providing a better product. Between the mass improvements made to Fenway and liberal spending on the IFA market and the total signing bonuses paid out to draft picks and whatever is costs to scout and develop these kids I think they are putting a lot back into the team. All...

Re: Are the Red Sox being cheap?

feeds@kickapps.com (Pantera) — Sun, 20 Dec 2009 21:29:54 PST

FenwayTheHardWay wrote:

Pantera wrote:
It maybe rational for the owners of the Red Sox to not maximize their profits.

Why?

Because a person who owns a baseball team can derive utility out of that asset in other ways than making a profit.

For instance, a team may maximize its profits by winning 85 times a year and never making the World Series. Yet an owner might be perfectly rational in trading less profit for ten more wins and a world series championship because s/he derives personal utility out of wininng a World Series.

Besides, most people who invest in sports teams don't do so because its the highest return option for their money given the amount of risk they are willing to take. You don't get to yell at the refs and get courtside seats if you invest in tech startup.

Re: Are the Red Sox being cheap?

feeds@kickapps.com (FenwayTheHardWay) — Sun, 20 Dec 2009 21:13:51 PST

Pantera wrote:
It maybe rational for the owners of the Red Sox to not maximize their profits.

Why?

Re: Are the Red Sox being cheap?

feeds@kickapps.com (Pantera) — Sun, 20 Dec 2009 20:34:43 PST

This is just silly talk. The Red Sox are a for-profit business.

The Red Sox are a little different than most for profit businesses. It maybe rational for the owners of the Red Sox to not maximize their profits whereas it is irrational for the owner of most any other busienss to make a decision that would not maximize their profits.

Re: Are the Red Sox being cheap?

feeds@kickapps.com (JimRiceRocks) — Sun, 20 Dec 2009 13:07:44 PST

This is just silly talk. The Red Sox are a for-profit business. They can adjust their margins any way they see fit. It's the marketplace that will determine whether they made wise decisions.

You also can't predict your payroll very well in most years. Different FA's come on the market which you may or may not need or like and even if you bid for them, their cost may go way up or may lose out. That has a big effect on your payroll year to year. If you plan on adding $22mill per year for Tex and then lose out - you may not be able to sign players that you need worth $22million without just stupidly blowing money (at least that year and maybe for another year or two). You don't want them doing that, do you? So, it's going to be a fluctuating number.

Re: Are the Red Sox being cheap?

feeds@kickapps.com (nateg26) — Sun, 20 Dec 2009 04:04:08 PST

Yet a major league team payroll doesn't explain winning percentage perfectly never mind the quality of the overall product. Studies have shown that AT BEST the variance in payroll explains only 30% of the variance in winning percentage. The Red Sox could raise their payroll tommorow by trading Jacoby Ellsbury for Juan Pierre but they would also likely decrease their winning percentage next year as well.

A rational firm can only add value by investing its dollars in projects where the returns are greater than its cost of capital. If no such projects exist, than the firm should not spend the money. The same is true with a major league team. It makes no sense to add payroll unless the increase in wins justifies the cost.

Finally as another poster mentioned, its rational for the Red Sox to spend their overall budget in a way that will maximize future profits. Spending on stadium improvements, draft picks, or international signings could very well be a higher...

Re: Are the Red Sox being cheap?

feeds@kickapps.com (Pantera) — Sat, 19 Dec 2009 19:33:21 PST

nateg26 wrote:
Would you extend that logic to any business?

After all, the fixed costs of any company are paid for by those who create the revenues of that company regardless of who signs the checks.

The situation is definitely more unique than in any other business, but if you are to compare the two, then yes, if the product or service being provided by a business takes a hit in quality because the business is not willing to invest it's planned budget in ensuring so, then the product should become less expensive and often time does.

Re: Are the Red Sox being cheap?

feeds@kickapps.com (nateg26) — Sat, 19 Dec 2009 18:51:20 PST

"Would you extend that logic to any business?"

After all, the fixed costs of any company are paid for by those who create the revenues of that company regardless of who signs the checks.

The situation is definitely more unique than in any other business, but if you are to compare the two, then yes, if the product or service being provided by a business takes a hit in quality because the business is not willing to invest it's planned budget in ensuring so, then the product should become less expensive and often time does. Also, my statement wasn't so much that I want the Sox to spend more money so much as that, if the ownership is allotting a certain budget for the front office to spend on player payroll, lets use it either to make the team better, or reinvest it into the team. If the FO doesn't use it all to improve the player personnel, then put it back into the team and drop ticket prices. Obviously the ownership likes making...

Re: Are the Red Sox being cheap?

feeds@kickapps.com (bighead) — Sat, 19 Dec 2009 15:39:36 PST

nateg26 wrote:
If the Sox do NOT meet the $140 mark then ticket prices should drop the following season. Clearly that is not their standpoint, but I'm just saying. We pay the player's salaries, regardless of who's name is on the players' checks.

Any consideration given to the fact that the Sox are doling out a lot of signing bonuses in the draft and the International Free Agent market? I believe that they were one of the top if not the top in spending on the draft in the last 3-4 years. No links or figures to back that up. I also don't want to root for a team that has a front office that feels it needs to spend money for the sake of reaching the "$140 threshold". If there are acquisitions that make sense then make them, if there aren't spend on amateur talent. I don't think the Sox are short changing their fans one bit. I'm not trying to call anybody out...

Re: Are the Red Sox being cheap?

feeds@kickapps.com (SoxSail) — Sat, 19 Dec 2009 15:36:03 PST

Pantera wrote:

Steve Dillard wrote:
Because their payroll isn't $140. When you count all the bad money wasted by Theo, you have the highest non-NYY payroll ever.
http://www.weei.com/sports/boston/baseball/red-sox/alex-speier/2009/12/15/breaking-bank-look-red-sox-payroll-2010

I kind of doubt that their payroll is at an exact fixed amount. I'm sure that when the Red Sox add an additional dollar of payroll they consider how much that dollar will contribute to winning and to increased profits.

Can we clear up a couple of terms here? I think that Pantera is talking about Budget (prolly a typo on his part)....

Re: Are the Red Sox being cheap?

feeds@kickapps.com (Pantera) — Sat, 19 Dec 2009 12:49:49 PST

Steve Dillard wrote:
Because their payroll isn't $140. When you count all the bad money wasted by Theo, you have the highest non-NYY payroll ever.
http://www.weei.com/sports/boston/baseball/red-sox/alex-speier/2009/12/15/breaking-bank-look-red-sox-payroll-2010

EDIT: Please make links work.

I kind of doubt that their payroll is at an exact fixed amount. I'm sure that when the Red Sox add an additional dollar of payroll they consider how much that dollar will contribute to winning and to increased profits.

Re: Are the Red Sox being cheap?

feeds@kickapps.com (Pantera) — Sat, 19 Dec 2009 12:41:41 PST

nateg26 wrote:
If the Sox do NOT meet the $140 mark then ticket prices should drop the following season. Clearly that is not their standpoint, but I'm just saying. We pay the player's salaries, regardless of who's name is on the players' checks.

Would you extend that logic to any business?

After all, the fixed costs of any company are paid for by those who create the revenues of that company regardless of who signs the checks.

Re: Are the Red Sox being cheap?

feeds@kickapps.com (ancientsoxfogey) — Sat, 19 Dec 2009 07:16:38 PST

Hmm ...... extending that argument, the prices of souvenirs and food at the stadium should drop, the cost of the cable rights to broadcast the games should drop, the cost of the programs and media guides should drop, ....... What a concept!!

Re: Are the Red Sox being cheap?

feeds@kickapps.com (nateg26) — Sat, 19 Dec 2009 04:12:34 PST

If the Sox do NOT meet the $140 mark then ticket prices should drop the following season. Clearly that is not their standpoint, but I'm just saying. We pay the player's salaries, regardless of who's name is on the players' checks.

Re: Are the Red Sox being cheap?

feeds@kickapps.com (SoxSail) — Thu, 17 Dec 2009 15:34:41 PST

ancientsoxfogey wrote:
Another thing to consider is that the Sox's preoccupation with going over the cap threshhold is totally a matter of principle rather than necessity. They have gone over the cap before (which is why they are now in the 30% tax bracket), and more importantly, at the level we are talking about the luxury tax would be at best a minor nuisance. The Sox wouldn't be taxed 30% on the entire payroll if they go over the limit, they would be taxed 30% of the excess over the cap. So if they went, say, $10 million over the cap, they would have to pay an extra $3 million in tax. The way the Sox throw money around, what's another $3 million?

It doesn't change your point, but again, according to Speier's article, they'd be assessed at a 22.5% rate if they went over this year. It's my understanding that after a year or two of not being over the cap, teams'...

Re: Are the Red Sox being cheap?

feeds@kickapps.com (SoxFanPJ) — Thu, 17 Dec 2009 12:31:39 PST

Are the Sox ownership still carrying debt for the $700M purchase of the team? Are there any construction loans taken out on the multiple renovations they have done on Fenway park and the surrounding area? The improvements they have made to NESN including the cost of moving to High Definition cameras etc.

Over the course of this ownerships tenure and Theo's Front Office Regime, we have seen the Sox be anything but cheap. The only legitimate criticism I think we can make is that Theo and the Front office can be stubborn in how they value players and what they are willing to pay them. They are long term risk adverse, willing to absorb money in the short term but not wanting to tie their hands long term.

This team has been anything but cheap, they simply don't have the resources to out big their chief rival and the appeal of NYC over Boston is going to make it a more appealing destination for certain players and their families. Its not the Sox being...

Re: Are the Red Sox being cheap?

feeds@kickapps.com (ancientsoxfogey) — Thu, 17 Dec 2009 11:17:43 PST

Another thing to consider is that the Sox's preoccupation with going over the cap threshhold is totally a matter of principle rather than necessity. They have gone over the cap before (which is why they are now in the 30% tax bracket), and more importantly, at the level we are talking about the luxury tax would be at best a minor nuisance. The Sox wouldn't be taxed 30% on the entire payroll if they go over the limit, they would be taxed 30% of the excess over the cap. So if they went, say, $10 million over the cap, they would have to pay an extra $3 million in tax. The way the Sox throw money around, what's another $3 million? If there is a real issue here, it's whether the team would want to spend the additional $10 million over the cap -- that's 3.33333333...... times as important financially as the tax.

It's the same principle as is in operation when the exceedingly wealthy hoard money in tax shelters and surreptitious overseas accounts. It...

Re: Are the Red Sox being cheap?

feeds@kickapps.com (Walt in Maryland) — Thu, 17 Dec 2009 11:05:03 PST

What exactly is wrong with the quality of the product the Sox have put on the field?

Re: Are the Red Sox being cheap?

feeds@kickapps.com (BLumbergh) — Wed, 16 Dec 2009 22:27:23 PST

I like that I can post in a "Are the Red Sox being cheap" thread on the same day the Sox held a press conference to announce the signings of John Lackey ($82.5 mill) and Mike Cameron ($15.5 mill) and have an eight figure offer outstanding to Chapman.

Are the Red Sox being cheap?

feeds@kickapps.com (SoDDaveB) — Wed, 16 Dec 2009 14:29:41 PST

There has been a lot of talk lately about the Red Sox budget for players. From my understanding, the Red Sox have said that they can support a payroll of approximately $140M. This seems very reasonable since they have a payroll of $143M in 2007.This leads me to the question of what is done with the money when they are under $140? Companies essentially have 3 options for spending cash; 1) reinvest in the company 2) save the money or 3) give the money to ownership. I believe that they Red Sox are no different.

Over the past 2 season the Red Sox have come in under the $140M level (about 18.2M and 6.7M respectively). Let's assume that the Red Sox put this money in a savings account getting a reasonable .04 interest rate. That would mean today they would have over $26M extra to spend on players. If you continue using the time value of money you'd see that the Red Sox could actually support a payroll of $145M over the next 5 years without increasing their net...