Bill Shea over at Crain’s Detroit Business published an excellent article Sunday night explaining how the Detroit Tigers can cover the Prince Fielder contract. Rather than just link it on Twitter (which I still did, and you should click the link and read the full piece) I felt like pulling a few of the excerpts would be more impactful, and simpler, in order to make my point.
The question of whether or not it could be one of the worst contracts in the history of the game is a moot point here. It probably will be, in terms of WAR to Dollar value at the end of the deal, since Fielder will most assuredly be one of the highest paid players in the game and the reality of age, injury, and the fact that he will most likely be a full time DH over the second half of the contract, makes it hard to justify.
But my chief concern, and the concern most Tigers fans I’ve spoken with at length have, is, can the Ilitch group afford this and still remain competitive for years to come? Can they resign Cabrera? Verlander?
Below I’ve bulleted the most important financial information included in Shea’s article:
- 2012 Payroll will come between $110 and $120 million.
- $63MM alone will be committed to Prince Fielder, Miguel Cabrera, and Justin Verlander.
- Mike and Marian Ilitch personally are worth an estimated $2 billion, No. 212 on Forbes‘ 400.
- The Ilitch-owned companies generate more than $4 billion in annual revenue.
- Roughly $2 billion of that comes from the pizza business.
- The Tigers will receive nearly $90MM this season from shared revenues.
- · The Tigers get about $40 million annually from baseball’s Central Fund of shared revenue.
- The Tigers would receive an estimated $45 million from its 10-yr deal with FSD to air games.
- The Tigers had $192 million in revenue for the 2010 season.
- Forbes estimates that the Tigers are worth $385 million and have $215 million in debt.
- Ilitch bought the team in August 1992 for $85 million from Tom Monaghan
- He has spent more than $1.1 billion on play salaries since then
Also from the article that is just as important:
The team is saving money in 2012 by not re-signing aging outfielder Magglio Ordonez, who was paid $10 million last season but who also has broken his ankle the past two seasons. Also off the payroll is second baseman Carlos Guillen, who got $13 million in 2011. Together, their contracts have the same value as Fielder’s pay this season. He also gets $23 million in 2013 before the team elevated it to $24 million annually over the final seven seasons. There also are several million dollars in potential bonuses in the deal. Martinez’s $13 million salary this season is expected to be covered at least in part by the team’s insurance policy.
The Ilitches have owned the Detroit Red Wings since 1982 — only an $8 million investment — and have a $58 million payroll this season. They benefit from the NHL having a salary cap, a cost control absent in baseball. The team, which has won four Stanley Cups under the Ilitches, regularly fills Joe Louis Arena and its suites and collects revenue from the Fox Sports Detroit cable deal to offset costs.
“Given his wealth and his wife’s wealth and their myriad business interests, it’s quite plausible what he’s doing with the Tigers is maximizing his wealth portfolio,” Andrew Zimbalist (professor of Economics at Smith College) said. “If the Tigers are successful on the field, if he’s got superstars playing for him, he thinks people will be more likely to gamble, to eat pizza.”
If Fielder is the final ingredient the team needs to win a World Series, the team can expect a revenue bounce from a boost in season-ticket sales, suite sales, new corporate sponsorships, merchandise, etc. Teams typically raise ticket prices after winning the Fall Classic, as well, and see increased income for several years.
That’s how Fielder and the other top-dollar contracts will be paid for: “It’s going to come from an increase in ticket sales and sponsorships. That’s where the money is going to come from,” Michael Rapkoch, president Addison, Texas-based Sports Value Consulting LLC. said.
The comparison that I’ve seen most people bring up when talking about how the Ilitch’s can afford the contract is that of Alex Rodriguez’s first $252MM, 10 year deal with Texas. Four straight years of finishing in last place lead Tom Hick’s to trade him to NY to offset the cost of the deal. In 2010 Hick’s filed for Chapter 11 bankruptcy in order to sell the team to the current Texas ownership.
Obviously there is much more involved in the failure of the Rodriguez deal and the subsequent sale of the team, but at first glance many people see a team invest more money than they could actually afford in one player and it was nearly a decade before they actually became competitive.
The point simply is this: The Ilitch Ownership is much more financially secure than people realize. The Tigers aren’t going to be constrained financially and I doubt the failure to re-sign either Cabrera or Verlander (or any other Free Agents) would be because they couldn’t afford it.