Are the Red Sox being cheap? in SoxProspects Discussion Forum

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Are the Red Sox being cheap?

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SoDDaveB	Are the Red Sox being cheap?		Lead	[-]
Rookie Posts: 44 12/16/09 1:29 PM	Tags : None 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 spending. This may be completely off-base and slightly convoluted but the overriding put is this, why are we (as fans) spending more money and not seeing a better product? Even with these new signings the Red Sox will still only have a budget around $130M. Either they are saving the money and we should see the rewards for being patient or they have spent it on themselves. Sox on Deck
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Steve Dillard		#1	[url]	[-]
Veteran Member Posts: 1204 12/16/09 1:32 PM	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. Last Edited By: chavopepe2 12/16/09 1:34 PM. Edited 2 times.
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chavopepe2		#2	[url]	[-]
Posts: 1221 12/16/09 1:33 PM Senior Forum Moderator	The payroll this season will likely be between $160 and $170 million. If the hypothetical scenario that you laid out is true (they can support a $140 million payroll) then they are likely using all of the money they saved the last two years this coming season. I don't, however, think your hypothetical is true.
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albertpujolsin2012		#3	[url]	[-]
Rookie Posts: 63 12/16/09 1:35 PM	The Red Sox base their payroll on the 40-man roster. The 2010 luxury tax threshold is $170,000,000 and is based on their 40-man roster. Next year, the Sox have $65,050,000 coming off of the books from the following players (Ortiz, Lowell @ $12 million, Beckett, VMart, Varitek, Gonzalez, Lugo, and Billy Wagner) which brings them to $78,310,000 under the luxury tax threshold. Following the 2011 season, the Sox have $14 million (Drew), an estimated $8-10 million (Papelbon), $4 million net from Scutaro, $3 million from Hermida, $1.5 million (Wakefield), and $100,000 (Atchison) coming off the books totaling $31,600,000 coming off of the books if Papelbon is not targeted.
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JimRiceRocks		#4	[url]	[-]
Veteran Member Posts: 1231 12/16/09 1:49 PM Veteran Member	Just because $140million can be supported, doesn't mean it's wise to use it all every year. I mean if I go to TJ Max and get a great deal on something I don't need, but does fit within my budget, that may prevent me from gettinng the real shiny new toy that just became available. Or should I buy some other expensive gadget for myself even though I've completed my Christmas shopping well under budget. "You can never have too much bitching" - left coast bosox fan "No wonder a lot of opponent's announcers have bullpenis envy - left coast bosox fan
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ancientsoxfogey		#5	[url]	[-]
Veteran Member Posts: 4436 12/16/09 2:11 PM Veteran Member	When a team spends upwards of $140 million per on payroll, if they spend a little less one year, that isn't being cheap, it's being frugal. It's like your rich uncle -- he isn't crazy, he's eccentric.
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costpet		#6	[url]	[-]
Veteran Member Posts: 94 12/16/09 4:47 PM	Not counting the raise in ticket prices this year.
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SoxSail		#7	[url]	[-]
Veteran Member Posts: 441 12/16/09 9:18 PM	albertpujolsin2012 wrote: Next year, the Sox have $65,050,000 coming off of the books from the following players (Ortiz, Lowell @ $12 million, Beckett, VMart, Varitek, Gonzalez, Lugo, and Billy Wagner) which brings them to $78,310,000 under the luxury tax threshold. If Speier's article (linked above) is right -- and it's probably low considering it lumps M. Wagner, Brown, Atchison, Castro, Hulett, Manual, Richardson, Bates, Bowden and R.A. Ramirez into a single 1.5 mil grouping -- the Sox are just about at the threshold for the Lux Tax for 2010. He also doesn't include Wagner's or Gonzalez' buyouts, but I have a feeling that those don't count. Either way, if they count, and then come off, we're going to get the same result. At the end of the year, we have several salaries coming off of the Lux Tax calculation: Ortiz: 13 mil AAV Lowell: 9mil (traded so not AAV) Lugo: 9mil (traded so not AAV) Beckett:10.1 mil AAV V-Mart: 7.68 mil AAV Varitek: 3 mil (option, so not AAV) Bonser: .65 mil AAV This totals only 51.78 million coming off of our cap number which currently sits about 167.42. That would leave us at 115.64 mil for next year, only about 55 to 60 million under next year's cap (assuming it's between 170 and 180 million.) After you give raises to Paps, Ells, R. Ramirez, Okajima, Kotchman and Hermida, you're probably going to have only 40-50 million clear of the cap, again, partly depending on where the line is set, and how much Paps, Ells and hopefully Hermida get. Extending Beckett or VMart could eat up a good chunk of this, and if done this year, would put us over the threshold. The same is true for signing Beltre or even N. Johnson.
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BLumbergh		#8	[url]	[-]
Veteran Member Posts: 394 12/16/09 9:27 PM Veteran Member	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.
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Walt in Maryland	Are Sox being cheap?	#9	[url]	[-]
Rookie Posts: 11 12/17/09 10:05 AM	What exactly is wrong with the quality of the product the Sox have put on the field?
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ancientsoxfogey		#10	[url]	[-]
Veteran Member Posts: 4440 12/17/09 10:17 AM Veteran Member	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 isn't that they can't pay the taxes. They don't want to, and they feel that they shouldn't have to do so.
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SoxFanPJ		#11	[url]	[-]
Posts: 89 12/17/09 11:31 AM Pete Morrison Wiki Editor SoxProspects.com	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 cheap its just the realities of the situation. Twitter: Pete_Morrison (Pete_Morrison) Star Wars Blog: www.LightsaberRattling.com
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SoxSail		#12	[url]	[-]
Veteran Member Posts: 446 12/17/09 2:34 PM	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' penalty percentage comes back down to the initial threshold. (Am I wrong and it's a three year system?) Also, one counterpoint. Because the cap penalties increase each year, I think it's slightly more of a deterrent than just the one year number. If the Sox can afford it this year, but have hellacious injuries in 2011 and have to take on Salary, they'd rather not be in the position where their entire payroll is taxed for example. Still, your point is valid ASF.
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nateg26		#13	[url]	[-]
Rookie Posts: 17 12/19/09 3:12 AM	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.
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ancientsoxfogey		#14	[url]	[-]
Veteran Member Posts: 4448 12/19/09 6:16 AM Veteran Member	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!!
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Pantera		#15	[url]	[-]
Veteran Member Posts: 365 12/19/09 11:41 AM	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.
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Pantera		#16	[url]	[-]
Veteran Member Posts: 366 12/19/09 11:49 AM	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.
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SoxSail		#17	[url]	[-]
Veteran Member Posts: 453 12/19/09 2:36 PM	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). Payroll is always an exact amount, and no, it's not fixed, it changes when they sign a new player. Payroll (as it refers to the team) is actually they amount they are paying their players in any given year, and it is not set at the outset of the season either, as callups, trades, new signings, etc. can raise or lower this number, and the number could arguably apply to 25-man or 40-man rosters, and in my mind includes all the money still being paid to past players, including buyouts, deferred cash, etc. The CBT Payroll hereafter (CBTP) is the calculation which accounts for the average annual value (AAV) of the contracts of all players on the 40-man roster. It seems like buyouts don't count and trades (which split up the "cap hit" of players between teams) complicate things. The CBTP also includes a 10.5 mil benefit package, and the CBT Threshold changes each year, but is fixed for the season. Dillard's link (above) provides some additional info on this.
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bighead		#18	[url]	[-]
Veteran Member Posts: 90 12/19/09 2:39 PM	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 specifically but I think this notion is a bs talk radio subject used to rile up the masses.
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nateg26		#19	[url]	[-]
Rookie Posts: 18 12/19/09 5:51 PM	"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 extra money and they wouldn't do that, but I'm just saying that it makes sense and the Sox wouldn't be losing out on money - if anything they would ensure an even more loyal fan-base than they already have and make them more money. Last Edited By: nateg26 12/19/09 5:56 PM. Edited 1 time.
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Pantera		#20	[url]	[-]
Veteran Member Posts: 370 12/19/09 6:33 PM	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. 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 retrun option than spending on the major league team.
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