Whenever Major League Baseball and the players square off in labor battles, the owners attempt to claim that owning a baseball team is not a lucrative endeavor. They cry poor and claim that they’re losing money and argue that if the players do not make financial concessions that baseball simply cannot continue.
It’s generally baloney.
As we’ve argued so many times over the years, baseball finances are notoriously opaque and ownership claims that they are losing money are rarely if ever documented. What we do know, however, is that baseball revenue has gone up dramatically, year over year, for around 20 straight years, and franchise values are skyrocketing, with every team being worth at least a billion dollars. Meanwhile, over the past couple of years, overall baseball payroll has gone down.
If you have dramatically increasing revenue, dramatically increasing team value, and slightly decreasing player costs — and if, each time a team goes up for sale, billionaire investors fight for the chance to join the ownership club — it sort of strains credulity that the one unknown in all of this — team profits — is negative for major league baseball owners. Yet that’s what the owners typically claim.
The latest owner to claim it is Cardinals owner Bill DeWitt Jr., who appeared on St. Louis’ 590 The Fan with Frank Cusumano today. He claimed that baseball is a bad business to be in financially:
“The industry isn’t very profitable to be quite honest, and I think they understand that. But they think, you know, the owners are hiding profits, and you know there’s been a little bit of a distrust there.”
Maybe that distrust comes from some of the owners’ other implausible claims. Like the one DeWitt made just moments before when he argued that increased revenue and decreased player salaries are all being eaten up by other costs.
“Don’t think for a minute that the reduced payroll added money in the pockets of the owners, because it didn’t,” DeWitt argued. He says non-player personnel growth has eaten up a big chunk of that revenue growth, noting that the Cardinals have gone from 240 to 400 non-player employees. He says that after “training, conditioning, promotional work, front office, analytics, it’s a bit of a zero sum game.”
That’s fairly rich when one realizes just how much revenue has gone up. Specifics are hard to come by, but it’s generally thought that average team revenue has increased around $15 million each year over the past several years. And that’s before you add one-time gigantic payments like the several billion baseball owners realized from the sale of BAMTech to Disney, when each owner got around $50 million over and above annualized increases. Even if the Cardinals added 150 trainers and analytics employees EACH YEAR and even if each of those new employees were making hundreds of thousands of dollars a piece — which they are certainly not — there’d be far more left over for profit, which the clubs are most certainly seeing.
DeWitt isn’t just claiming that his baseball team isn’t profitable. He’s also claiming that his team’s real estate investments aren’t either.
Referring to Ballpark Village — the Cardinals real estate development around Busch Stadium — he claimed that “we don’t view [Ballpark Village] as a profit opportunity. We think it’s great long term for the franchise and downtown St. Louis and what’s good for St. Louis is good for the Cardinals.” I wonder if his fellow investors realized that they were investing in a philanthropic act of public works? I wonder if they thought they were doing so to make some money? I bet they thought they were making money. And I bet they are.
Finally, DeWitt claimed that new stadiums are, for all practical purposes, non-profit too:
“There’s been talk by one of the angels that teams build new stadiums so that they can generate more revenue which will help them when they sell the team. The fact is, it generates more revenue and the more revenue the more money the players get too.”
Which directly contradicts what he said above in response to the idea of player salary going down while revenues go up, but we’ll let that one go. For now I’m just wondering why anyone would every want to own a major league team given how, according to DeWitt, there’s no money in it at all.
I’ll let all of this go after two more little notes.
The first one: never trust a baseball owner when they talk about profitability. If you doubt this, just remember what Blue Jays executive Paul Beeston once famously said: “I can turn a $4 million profit into a $2 million loss and get every national accounting firm to agree with me.” If you think that’s not still happening, I have a Ballpark Village to sell you.
The second: given that DeWitt himself just purchased an $8.5 million villa in the Hollywood Hills that will, almost certainly, be his second or third home (he lives in Cincinnati and likely has a residence in St. Louis), how much bigger a joint could he have bought if the Cardinals weren’t such a money loser?