How can the White Sox possibly lose money?

[caulfield12]

I found this at wsi (cws05champs gets the credit)

 

 

Assuming the Sox play 32 WGN games as they did in the regular season last year, 18 WCIU and 112 CSN games I have estimates the total revenue:

 

32 WGN games (@ ~$350K): $11,200,000

18 WCIU games (@$200K): $ 3,600,000

112 CSN games (@ $450K): $50,400,000

----------------

$64,800,000

 

Sox Average ticket price was $38.65 and average attendance was 27,091 giving you and estimated: $1,047,067 per game or $84,812,435 for the 81 games at home.

 

That's a total of $149, 612,435 revenue just from TV and attendance. This does not include concessions, parking, merchandise, advertising, spring training revenue and revenue form their Silver Chalice digital media firm among other things.

 

And of course it does not take into account expenses such as their lease, operating costs for the stadium and staff etc. But you could confidently say they bring in well over $200M in revenue.

 

 

 

You can also add in $14.3 million per team for national broadcast rights, shared equally (7 year agreement pays $3 billion, or $429 million per season and will at least double if not triple when it's renegotiated after the 2012 season).

 

So you have $64.8 million from local/regional and $14.3 million from national rights (ESPN/TBS/TNT), so that's $79.1 million alone.

 

The average ticket price this year is $40.67. (http://sports.espn.go.com/chicago/mlb/news/story?id=6281410)

 

Right now average season attendance is at 22,180. Even in any WORST case scenario (let's say we continue to average only 22,000 for the remainder of the season), the White Sox will STILL generate at least $72.5 million from ticket sales alone.

 

So right there, you're talking $72.5 million + $79.1-89 million=$151.6-161 million. If we average the 27,000 of 2010, it's $89 million from ticket sales alone.

For concessions/parking/merchandising or souvenirs, I'll throw out 3 numbers and try to come up with some type of average.

 

The cost to take a family of four to a Cubs game, using the Fan Cost Index formula, is $305.60, and the White Sox is $258.68, the third- and fourth-highest totals in baseball.

 

Let's say the average family of four goes to a game (father/mother/2 kids)....that's an average of $65 per person entering the stadium, essentially $25 X 4=$100 over the average ticket price of $40.67.

 

So let's say 40% of the attendance at Sox games is families, 20% are the type who may or may not pay for parking/buy food before the game or bring it in, don't buy souvenirs, maybe they buy 1-2 beers, etc. (we'll put them at $10) and the other 50% spend let's say, $17.50 on average above their ticket prices....

 

 

40%=$25/person above ticket prices

20%=$10/person

40%=$17.5/person

 

That's another $35-40 million booked in revenue (based on 2010 attendance).

 

So you're looking at somewhere between $185-195 milllion for total revenues.

 

Minus $129 million payroll, of course you've also got insurance (for example, Peavy's contract), running the minor league system, draft/scouting, front office/admin, security for games, the stadium lease (pretty negligible), etc.

 

Then there's $68 million/20 years for US Cellular naming rights, or $3.4 million per season (about one stupid Manny Ramirez contract).

 

That doesn't even take into account a litany of corporate sponsorships, promotional events and tie-ins, stadium signage/billboards, executive suite rentals, etc.

 

As cws05champs guessed, the overall revenues have to be in the $200-220 million + range.

 

Are the White Sox capable of spending $70-80 million in other areas??? How? We certainly know it's on not the draft or are Dominican and Venezuelan operations, since they and Jerry Krause seemingly haven't produced any results yet. Ozzie and KW don't make THAT much. Although Ozzie would like to, I'm sure. He keeps reminding us that he has a new house to pay for and his twitter feed to maintain.

 

http://www.forbes.com/lists/2011/33/baseba...Sox_334758.html

Forbes has us at $26-28 million for EBITDA and overall revenue of $210 million.

Edited May 14, 2011 by caulfield12

[Marty34]

Exactly. More than likely, the Sox aren't going to lose money this year. Moreover they made a ton of money last year according to Forbes, so they can afford a down year if they have one.

 

What I find fascinating is this notion that the Sox have to draw 2.5M to break even. Chairman Reinsdorf never gives out that type of stuff. It's largely reporters speculation. Reporters, who have the same access to Forbes as we do, and who can see Forbes estimates, believe the Sox need to draw $2.5M just to break even. They have to do their jobs a lot better.

[caulfield12]

Exactly. More than likely, the Sox aren't going to lose money this year. Moreover they made a ton of money last year according to Forbes, so they can afford a down year if they have one.

 

What I find fascinating is this notion that the Sox have to draw 2.5M to break even. Chairman Reinsdorf never gives out that type of stuff. It's largely reporters speculation. Reporters, who have the same access to Forbes as we do, and who can see Forbes estimates, believe the Sox need to draw $2.5M just to break even. They have to do their jobs a lot better.

 

 

If we drew 2,700,000 fans, we'd book $110 million in ticket revenues.

 

That would put our net revenue in the $225-235 million range, or a full $100 million over our player payroll.

 

Which doesn't even take into consideration profits of roughly $50 million over the last two years. They can intimate it's all being rolled back into team, but how is that possible??? Where?

 

 

Edited May 14, 2011 by caulfield12

[Soxbadger]

Youre probably overestimating revenue and underestimating costs.

 

The White Sox have employees and staff 365 days a year. The Sox have a spring training facility that costs money. We just have no idea how much it costs for things like transportation, travel and other operating costs.

[caulfield12]

Youre probably overestimating revenue and underestimating costs.

 

The White Sox have employees and staff 365 days a year. The Sox have a spring training facility that costs money. We just have no idea how much it costs for things like transportation, travel and other operating costs.

 

 

Where am I overestimating revenue?

 

Forbes, sportsmarketingreport, Fan Cost index numbers, there's not really any debate about them.

 

I might also be underestimating parking/souvenirs/concessions spending. I came up with pretty a conservative estimate.

 

 

They have spring training costs, but they also derive spring training revenues. I'm pretty sure they have sweetheart deals with the airlines (when/if they ever fly commercial, such as Southwest) in return for advertising. There has to be a lot of trades engineered by the marketing/promotions department, where they're not booking revenue directly but the expenditures are dramatically lowered. Same thing with hotels for road trips.

 

Last year, we were under the assumption (or the year before) they took losses because of the spring training complex construction and the Viciedo contract. I wonder if those two were figured into the Forbes calculations or not.

 

And the majority of the secondary staff/support doesn't work 365 days per year, they're only working 81 home dates at the stadium.

Edited May 14, 2011 by caulfield12

[Marty34]

Youre probably overestimating revenue and underestimating costs.

 

The White Sox have employees and staff 365 days a year. The Sox have a spring training facility that costs money. We just have no idea how much it costs for things like transportation, travel and other operating costs.

 

There's no way for us to know for sure of course, but I'd bet a publication with the reputation of Forbes is pretty darn accurate in its reporting of team finances. The Sox are in good shape financially. That doesn't mean they made wise decisions on how to spend that money.

Edited May 14, 2011 by Marty34

[caulfield12]

And they're sharing/splitting a lot of the costs of the Glendale ST site with the Dodgers.

 

I'm sure they still net LOSE money on spring training, but perhaps not as much as one might think.

[SkokieSox]

Where am I overestimating revenue?

 

Forbes, sportsmarketingreport, Fan Cost index numbers, there's not really any debate about them.

 

I might also be underestimating parking/souvenirs/concessions spending. I came up with pretty a conservative estimate.

 

 

They have spring training costs, but they also derive spring training revenues. I'm pretty sure they have sweetheart deals with the airlines (when/if they ever fly commercial, such as Southwest) in return for advertising. There has to be a lot of trades engineered by the marketing/promotions department, where they're not booking revenue directly but the expenditures are dramatically lowered. Same thing with hotels for road trips.

 

Last year, we were under the assumption (or the year before) they took losses because of the spring training complex construction and the Viciedo contract. I wonder if those two were figured into the Forbes calculations or not.

 

And the majority of the secondary staff/support doesn't work 365 days per year, they're only working 81 home dates at the stadium.

 

I seriously doubt they make money from ST, especially with a newly built stadium. Either way though, you've labeled high level fixed costs... If we had eyes on their entire budget sheet, I'm sure there are many overlooked items. And there's plenty of variable costs that change year to year. Costs continue to go up, especially in this poor economy, where vendors are trying offset their own losses or lost growth. Sure, deals are worked out, but they're certainly not getting anything for free, or even as good as a deal as you may think. You start factoring taxes, revenue sharing, insurance, advertising, stockholders... I'm not saying they don't make money, but you can't determine they are full of s*** with a paragraph of high level accounting.

 

[caulfield12]

Of course, for every line item, we can go back and forth.

 

For example, merchandise/souvenir sales from all over the world. I live in Korea and 50% of the hats I see here are some variation of the White Sox hat, all licensed through MLB Properties, New Era, etc. It's also not taking into consideration monies from MLB Extra Inning packages, MLB.TV. MLB Gameday Audio, MLB International/World Baseball Classic, etc.

 

Spring training costs can also be written off against taxes, for example.

 

If the majority of "small market" teams have been very profitable (think of teams like the Royals or Pirates) by keeping artifically low payrolls and simply taking in the revenue sharing from the larger market clubs, there's still no way any of those teams are spending anything close to $50 million per year on all these other costs we're talking about, or they wouldn't be booking any profits.

 

Very, very conservatively, there's at least a $70 million-80 million spread between revenues and player payroll. There's no way anyone can convince me they're coming close to spending that.

Edited May 14, 2011 by caulfield12

[Balta1701]

Of course, for every line item, we can go back and forth.

 

For example, merchandise/souvenir sales from all over the world. I live in Korea and 50% of the hats I see here are some variation of the White Sox hat, all licensed through MLB properties, New Era, etc.

 

Spring training costs can also be written off against taxes, for example.

 

If the majority of "small market" teams have been very profitable (think of teams like the Royals or Pirates) by keeping artifically low payrolls and simply taking in the revenue sharing from the larger market clubs, there's still no way any of those teams are spending anything close to $50 million per year on all these other costs we're talking about, or they wouldn't be booking any profits.

 

Very, very conservatively, there's at least a $70 million-80 million spread between revenues and player payroll. There's no way anyone can convince me they're coming close to spending that.

Hat and apparel sales don't go to the team, I believe they go to revenue sharing dollars.

[sin city sox fan]

Don't forget that the White Sox also have to pay taxes....just like any other business.

[caulfield12]

Don't forget that the White Sox also have to pay taxes....just like any other business.

 

You mean like Exxon, G.E. and Bank of America?

 

With creative accounting and offshore accounts, a lot of Fortune 500 companies don't pay any taxes these days.

 

 

I'm sure the IRS makes sure the players do, but the teams themselves? I'd like to see the tax returns for the White Sox since Reinsdorf took over.

Edited May 14, 2011 by caulfield12

[Balta1701]

You mean like Exxon, G.E. and Bank of America?

 

With creative accounting and offshore accounts, a lot of Fortune 500 companies don't pay any taxes these days.

 

 

I'm sure the IRS makes sure the players do, but the teams themselves? I'd like to see the tax returns for the White Sox since Reinsdorf took over.

A baseball team can't exactly hide assets overseas as easily as Microsoft can. Almost all of its revenue is domestic.

 

That said, there's probably a hundred ways to move money around to save on taxes, especially if there is debt that is being paid off.

[caulfield12]

Just a few days ago, everybody's favorite agent threw baseball's pooh-bahs into a serious froth. All it took was Boras telling the Boston Globe's Nick Cafardo that some teams are collecting $80 million to $90 million from Major League Baseball just in revenue sharing and central-fund welfare -- and essentially stuffing much of it in their mattresses. Well, not quite.

 

Not that there weren't some shreds of truth in there someplace. But we've run those figures past all sorts of people who ought to know. None of them thinks that particular number adds up. However …

 

Boras would have been a lot closer to the actual facts if he'd just included teams' local TV and radio payouts, which are heftier than you might think. So we did that. And that led us to …

 

Our second conclusion: If you add in that local TV-radio money -- and if you add only that money -- you'd be astounded by how many clubs seem to be running up higher revenues than payrolls before they print a ticket. We've added up all the revenue streams. And here's what we found:

 

If we just use the raw numbers, it appears that at least 10 teams collected $90 million-plus this year before they opened their ticket windows, let one car into their parking lots or sold one slice of pizza.

 

That number, once again, was $90 million-plus. By at least 10 teams.

 

But not everyone in baseball thinks that's a valid figure. Some argue that $10 million of that $90 million-plus shouldn't count -- because each team is required to pay $5 million into a pension fund and another $5 million into an MLB operations fund.

 

OK, so fine. Make it $80 million-plus.

 

Whichever it is, we're convinced our estimate is on target. Do the math yourself.

 

• Central fund (includes national TV, radio, Internet, licensing, merchandising, marketing, MLB International money): Each team, from the Marlins to the Yankees, gets the same central-fund payout. And that check comes to slightly over $30 million per team if you deduct the $10 million in pension and operations fees, or just over $40 million if you don't.

 

• Revenue sharing: Only income-challenged teams get a revenue-sharing check. But you should never forget that those checks are a lot larger than your average rebate check from Target. This sport shared $400 million in revenue this year -- more than the gross national product of Western Samoa. Now every club's payout is different. But the five neediest teams -- which we believe to be the Marlins, Pirates, Rays, Blue Jays and Royals -- averaged somewhere in the vicinity of $35 million in revenue-sharing handouts per team. And that still left over $200 million -- more than $20 million a club -- for the rest of the "payees" to divvy up.

 

• Local TV/radio/cable: Good luck getting these exact figures. But we know that 29 of the 30 teams make at least $15 million a year in local broadcast money, and no team rakes in under $12 million. Obviously, some clubs collect much, much more than that. Or own their networks. Or both.

 

Add $30 million, plus $35 million, plus $15 million, and what do you get? That would be $80 million. At least. Before these teams spin their turnstiles once.[/i]

http://sports.espn.go.com/mlb/columns/stor...rumblings091119

 

 

 

So we can be pretty accurate with some of our numbers.

 

White Sox at close to $80 million just for broadcasting rights.

 

Central Fund=$30-40 million, depending on how you look at it (net is $30 million)

 

Ticket Sales=$70-110 million (anywhere from 2 million - 2.7 million)

 

Parking/Food/Concessions=$35-45 million

 

Once again, taking the MOST conservative numbers, $235-245 million for revenues.

Edited May 14, 2011 by caulfield12

[maggsmaggs]

Youre probably overestimating revenue and underestimating costs.

 

The White Sox have employees and staff 365 days a year. The Sox have a spring training facility that costs money. We just have no idea how much it costs for things like transportation, travel and other operating costs.

That stuff adds up very quick. Maintaining a professional baseball stadium is extremely expensive alone.

[Balta1701]

Conveniently, your basic math doesn't strongly disagree with the Forbes numbers by that much. Almost all of the high-revenue teams show revenue in the $200-$250 million range, except for the Yankees who are above $400 million. The White Sox's revenue last year was estimated by Forbes to be just under $200 million.

 

FWIW, in the NFL, they're arguing about having player salaries bye 50-60% of total revenue right now, so if total team revenue was $200 million, a $120 million salary is 60%.

 

And of course, it's worth remembering that operating expenses in MLB are much higher than the NFL since you are operating a facility 81+ times a season rather than 8.

[Soxbadger]

Those are your conservative numbers based on speculation and using averages.

 

And even if we use $250 as revenue, you have $120 mil of just salary expenses at the major league level.

 

That leaves $130 mil to run the entire business, and Im not sure youve convinced anyone about the operating expenses.

[maggsmaggs]

 

http://harvardsportsanalysis.files.wordpre...ckers-costs.jpg

 

This was the Packers' expenses from 2009, approximately $230 million. I would venture to say a baseball team costs a lot more money to run, so you can see how much expenses are even if you are bringing in a lot of revenue.

Edited May 14, 2011 by maggsmaggs

[Soxbadger]

Once again stats ruin a thread!

[bmags]

plus i bet our marketing costs are pretty high.

[LittleHurt05]

plus i bet our marketing costs are pretty high.

 

ALL IN!!!!

[Marty34]

plus i bet our marketing costs are pretty high.

 

Everything accounted for Forbes estimated the Sox made 27.6M last year. Fifth best in MLB.

[Soxbadger]

And the Sox increased payroll this year...

 

Running a business isnt about hoping for best case scenarios every year, if they want to be successful over long periods of time they will need to make profit some years.

 

Do you want them to run negative?

[caulfield12]

 

http://harvardsportsanalysis.files.wordpre...ckers-costs.jpg

 

This was the Packers' expenses from 2009, approximately $230 million. I would venture to say a baseball team costs a lot more money to run, so you can see how much expenses are even if you are bringing in a lot of revenue.

 

 

So because the Green Bay Packers spent $23+ million in marketing two years ago, in a completely different sport, you're assuming the White Sox are spending the same amount?

 

What?

 

The NFL broadcasting rights deal alone is currently at $20 BILLION. The current MLB deal is $3 billion for 7 years. You can't compare NFL teams and MLB teams.

Edited May 14, 2011 by caulfield12

[Leonard Zelig]

It would seem the Packers could save a nice chunk of that marketing expense since the wait for season tickets is about 40 years.