Baseball Books: The Major League's Financial Secrets


There's an old adage that warns, "where there's smoke, there's fire," which is a clever way of saying that if something looks amiss, it probably is. Well, there was a lot of smoke on September 27, 2005, when CNN reported that Major League Baseball was passing up a chance to take MLB.com, its profitable online service, public. (For more, check out A History Of Baseball Economics.)

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According to CNN, Major League Baseball turned down "billions of dollars" from the potential IPO because "owners didn't want to open their books and receive the big payday ahead of upcoming labor talks." Of course, given that many baseball team owners, especially those in the smaller markets, seem to be perpetually crying foul over finances, this seemed like an odd display of reticence.

Now we know why.

On August 23, Deadspin.com posted the financial records of several teams, including many "troubled" clubs like the Pittsburgh Pirates. What those records revealed helped explain why Major League Baseball nixed that IPO several years earlier.

Below is a look at some of baseball's biggest-winning losers.

Pittsburgh Pirates
The Pirates haven't won the World Series since 1979. Pittsburgh, led by Willie Stargell, Dave Parker and scholarly-looking relief pitcher Kent Tekulve, cruised past Cincinnati in the National League Championship Series before outlasting the Baltimore Orioles in the World Series.

That year of glory, however, has been followed by nearly three decades of sorry, as the Pirates have won just three division titles (1990-92), while posting 23 losing seasons since then. In fact, Pittsburgh is currently on track to finish last in the NL Central for the fourth consecutive year. Yet, the Pirates moved into a new ballpark in 2001 - the 11th team to do so since 1998 - and, according to the New York Times, raked in $29.4 million from 2007 to 2008.

That amounts to about $218,000 a victory if you're keeping score at home.

Florida Marlins
Here's an amazing bit of trivia: Name the only Major League team to have captured the World Series twice, despite having never won a division title? If you guessed the Florida Marlins, give yourself a gold star. Although Pittsburgh fans might beg to differ, Florida is arguably the greatest minor league MLB team in history - a club that develops superstars and then sends them packing when, according to club officials, they can no longer afford to pay them. (Find out who else is benefiting in pro sports; read Who's Cashing In On Pro Sports Revenue?)

Clearly, the Marlins have trouble luring fans - even in their last championship year (2003) attendance was just 1,303,215 (15th of 16 NL teams) - but that hasn't stopped the team from making money. The Times reports that Florida "received nearly $92 million in revenue sharing in 2008 and 2009, the years detailed in the statements posted on Deadspin.com, while producing net income of $33 million in those years."

Seattle Mariners
Seattle finished last in its division in four of the five years prior to 2009, but that didn't stop the team from accruing profits of $13.3 million in 2007 and 2008. In fact, Seattle would have made even more money if not for a steep increase (95.2%) in revenue sharing expenses in '08 compared to '07 that resulted in a $4.5 million loss that year.

On the plus side, Forbes.com reported that the Mariners are currently worth $439 million, up more than 300% since Nintendo acquired the club in 1992.

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Tampa Bay Rays
Without revenue sharing, Tampa Bay would surely be hurting. Thanks to a $74 million influx of cash courtesy of Major League Baseball in 2007-2008, however, the Rays are doing just fine. Financial records obtained by Deadspin show that the team earned approximately $15 million in 2007-8. Imagine where the Rays would be without revenue sharing. This from arguably the best young team in baseball.

The Bottom Line
What makes these income numbers so fascinating is that they fly in the face of what Major League Baseball has been claiming for so long. In fact, in December of 2001, MLB Commissioner Bud Selig told Congress that only nine teams had posted an operating profit the previous season and he railed against Forbes' annual list summarizing each team's financial health.

"There is no way. Those numbers are fiction, they are pure fiction," Selig told the AP in a story published by the Columbia Journalism Review. "It's so disappointingly wrong, and they knew it. I think it's a very sad day for journalism in America when somebody knowingly writes something that is not only not true but has been told it is not true."

Indeed Mr. Selig, indeed.

Find out what happened in financial news this week with Water Cooler Finance: The New iPod And The Roller Coaster Market.




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