January 26, 2012 at 11:02 am by Franklin Rabon under Atlanta Braves
Surprisingly frank. That was my first thought when reading today’s interview by Tim Tucker of Braves “Franchise Control Person” Terry McGuirk. I never expected that we’d ever get a firm, confirmed number on the Braves payroll unless it was unearthed in some leaked Liberty internal memo or tax filing. While it was surprising to hear that the Braves payroll is officially $94 Million, the actual number was completely unsurprising.
McGuirk also confirmed that Liberty is not looking to sell now that they are able to do so under the agreement they made with MLB (such an agreement likely wouldn’t have been enforceable anyway had Liberty really wanted to sell). Whether this is true or not is hard to say. First of all, if they were looking to sell, there’s no reason they’d need to tell Terry McGuirk that. You make money in MLB not by making money, but by raising team value, and that’s been what the team has been trying to do all along anyway. So whether or not Liberty would be selling would have little to no effect on the way the day to day operations were run. Second of all, even if McGuirk knew they were trying to sell, he’d have no interest in divulging that information.
McGuirk also commented that the mode of operations going forward is through player development and the farm system, saying effectively that free agency should only provide minor enhancements and that the core of your team should be built through prospects and the occasional trade. McGuirk, correctly, views free agents as overvalued compared to the value received from prospects.
However, the most surprising aspect of the interview was McGuirk’s admitting just how hamstrung the Braves are by their current television and radio deals. McGuirk divulged that during the waning years or the Ted Turner/Time Warner era the team signed, at the time, near 30 year deals for all TV and Radio (currently about 25 years remaining). At the time, McGuirk said, those deals were at the going rates. However, in the intervening years the market price of television and radio deals has exploded. When Tucker pushed McGuirk on whether or not this would be a disadvantage, McGuirk simply stated “let’s just say it won’t be an advantage.” Perhaps worse, McGuirk revealed that the contracts do not provide for opt out or renegotiation clauses, meaning that the Braves really are more or less stuck with their deals for the next 25 years unless both sides decide they want to part ways (not likely an option, since Fox Sports South and Sports South, being the biggest players, would have no incentive to do so).
First, you have to really question the outgoing management for these deals and wonder if the Turner/Time Warner people saw the writing on the walls and just didn’t care what these deals would look like 25 years down the road. While we don’t know the actual numbers, we do know that recent television deals for MLB, the NFL and NCAA Football have taken staggering leaps forward. Regardless of the dollar amount, signing a deal for 30 years without opt out or renegotiation clauses just seems irresponsible. While the businessmen at AOL Timewarner might not have been the world’s greatest, even they had to have known that this deal would likely end up looking awful in 30 years and were just taking a hit on the backend (which they knew they wouldn’t be around for) for a bump on the front end.
One area where I think McGuirk may have let slip even more than he meant to was when admitting that the contract does allow for cost of living increases. While this comment isn’t in and of itself remarkable, it is remarkable in what it probably doesn’t mean. It probably means that the Braves’ deals don’t contain clauses for increases in value based on incoming revenues. For instance, it would have been possible to structure the deal such that it was tied to viewership numbers, ad revenue generated during the games, etc, but this apparently is not the case, since when clauses such as those are added in, cost of living increases generally aren’t. This means that the amount the Braves are getting for their broadcasting deals are likely set, except for relatively minor (usually 2-3% maximum) increases based on inflation.
So, putting the blame game aside, which is pointless by now, what does this mean for the Braves? Not great things. While it doesn’t necessarily mean that the Braves will be confined to Pirates-like mediocrity, it does mean that they will have to work increasingly hard to remain competitive. It will likely also mean that the Braves are going to be stuck with Turner Field for a long time. I don’t forsee the state of Georgia financing a stadium any time soon (the Braves got lucky with the olympics allowing for a retrofit, netting them Turner Field, or we may well still be playing at Atlanta Fulton County Stadium). Not that Turner Field is terrible at this point, by any means, but 25 years from now? And while it is incredibly difficult to predict exactly what the market will be for TV contracts 25 years from now, it’s possible that towards the last 15 years the Braves could very well be today’s equivalent of the Oakland A’s. Worse still, they couldn’t even do anything about it, as even if more people tuned in and came to the games, the flat rate TV contract would still severely inhibit payroll.
Right now, things aren’t necessarily bad. A lot of teams are currently locked into broadcast deals they signed four or more years ago, before the current boom. The problem lies in the fact that a few aren’t, and each year more teams will shed those contracts and negotiate (or renegotiate) lucrative TV deals that will push the Braves payroll further and further towards the bottom. You also have the teams that own their own broadcast deals, which have made a fortune for the most part (it’s no coincidence that the Yankees and Red Sox both own YES and NESN, respectively).
This also would put a damper on any new, individual, owner coming in as a white knight to save the team, as many Braves fans want, because the locked in TV deal likely means that a new owner wouldn’t simply be able to spend on the team and significantly raise revenues. As now that TV deals are the primary revenue drivers in MLB, there isn’t a whole lot that can be done. Any new owner would likely have to plan on holding the team for close to 25 years before they would adequately be able to profit from the expiration of the current TV deal, either through selling the team or directly reaping the actual revenues.
This may actually mean that the current ownership structure, where Liberty Media really doesn’t care that much about how much the Braves are making, could actually be a best case scenario for the team. An owner or ownership group that had a substantial portion of their assets tied up in the Braves may well be forced to slash payroll even more in the coming years, while Liberty will likely just let them continuously break even, until they believe that the coming expiration of the TV deal will let them sell the Braves at an enormous profit. Because if the Braves brand can be maintained over that time period, towards the end, the value of the franchise will see an enormous jump, when they could negotiate a new deal. Liberty may well even run the Braves at a small loss for a while under such a scenario, where an individual owner might not be able to.
However, this can, in no way, be spun as a positive for the Braves. Not only will it likely keep them out of the big ticket free agent market in future years, it will also likely mean that they will only be able to retain a very few of their prime developed prospects much past their arbitration years. This will put an enormous burden on the farm system to churn out top prospects every 5 years at nearly every position. While the Braves do have a good record in terms of getting value out of their farm system, that’s a lot to ask of any system.
The final question I’ll pose is why did Terry McGuirk divulge this information? Was it to get in front of an emerging public relations fiasco, as more and more Braves fans clamor for payroll increases? Effectively (and perhaps justifiably) blaming it on “the old guy”? That’s the most reasonable answer I can think of, especially for an organization that has been so guarded with information of that sort. But it’s still curious.
edit: To explain a little bit more why this is such a raw deal, I’ll lift something I said in the comments, for those who don’t wade through comment sections:
When striking up long term, fixed term, deals, you look at where the risk is going if the deal turns out bad. The Braves took almost 100% of that risk, with no way to mitigate it, for a really, really long time. Then, on top of that, the market for sports shifted away from gate revenues to TV revenues, and that shift doesn’t look like its going to reverse any time soon. Especially not in an area where the fan base is so spread out geographically and transportation costs (ie gas) continue to rise.
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