Payroll Projection Discussions

In recent weeks many bloggers and fans commenting on blogs as well as media pundits have complained about the $100 million payroll limit mentioned by Terry Ryan when he was introduced as the new GM. One of the most interesting and persuasive articles on this topic appeared yesterday on 1500ESPN.com written by Phil Mackey. I highly recommend it.

Anyone who follows Mackey on Twitter (@PMac21) knows he is one of the more articulate Twins columnists. Because he is a credentialed member of the Twin Cities sports media, he presumably has access to sources inside the organization as well as in major league baseball that most bloggers do not have. That gives him a perspective that most of us can only wish for.

After the Terry Ryan promotion and through the latter part of the fall, for several reasons I was more or less convinced that the $100 million figure was not firm. It seemed to me that it was much more likely that the Twins would end up spending somewhere between $105 and $110 million. Even as late as last week, I still held to that view expecting that Ryan would make a couple of moves in the next few weeks to at least improve the bullpen.

Mackey has persuaded me that the limit is probably accurate, at least as the Twins begin the season. In previous posts I’ve discussed the importance and likelihood of recovery of Mauer, Morneau and Span. It makes a great deal of sense to take a wait and see approach to the 2012 season. How they perform will determine just how much of a rebuilding job Ryan has in the next couple of years. Holding back on payroll might be wise as it would allow for mid-season acquisitions if all goes well.

Many fans are not business owners and most likely many are also not in management which makes it difficult to understand the perspective of such positions. Every year, we the fans want to win now. Prudent management requires a longer term view and sometimes that means assessing and even rebuilding knowing that winning even a division title is less likely in one of those years.

As Mackey pointed out in his column, as a private company the Twins do not disclose their total revenue. Because that is the case, we do not have a good sense of all that must be considered. Also lost in most fans’ perspective are the other income and expenditures related to a full major league franchise. Operations of the minor league affiliates, the costs of signing draftees, expenses of the whole scouting apparatus, and front office expenses are all part of the cost of doing business.

On the flip side, not only ticket sales produce revenue. All concessions and merchandise sales as well as TV revenue are significant components on the income side. In the Twins’ case, TV revenue will increase in 2012, as Mackey reports, via a new TV deal with Fox Sports North, but it will not be anywhere close to the TV revenue of the major media markets. As a result the Twins, who have a reported $29 million annual income from TV for 2012, will find it difficult to compete in payroll with the LA Angels, for example, as they have just signed $150 million TV deal. This goes a long way in understanding how the Angels can bring in Pujols for the money he commanded and the Twins are looking a lower tier free agents to fill holes.

In addition, there are other complications for all baseball clubs. For example, the MLB revenue sharing is now flipped for the Twins. It used to be as a small market team the Twins received millions of dollars each year from the league courtesy of the high revenue clubs. In 2011, that changed and the Twins now are paying out. If one considers the radical shift from receiving millions to giving millions, one can see the one-year swing is tough to manage.

Overall when it comes to payroll, I am not one who believes it is the deciding factor in winning and losing. In the long run consistently high payroll certainly helps to remain competitive every year as the Yankees and Red Sox have proven, but small market and smaller payroll teams win as well. It is more important how the money is spent than the total amount available.

After seeing what other teams were willing to pay Cuddyer and Kubel, I think it was wise to not overpay and re-sign them. Their level of production can be found with less money spent. I like the signings so far to fill their shoes.

What I think is still needed are some significant upgrades in the pitching. If there is any wiggle room as Ryan continues to say there is, it is pitching that will be signed before spring training.

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