When the Dolan family was finally heard from following the trades of Cliff Lee and Victor Martinez, the stock line to fans was that they were going to lose $16 million this year due to a 500k differential in fans coming through the turnstiles. At the time, I was just happy to finally hear from the owners of the Indians that their fire sale was about money. I get the arguments about needing to make good value of good players in years when the wins just aren’t coming. I understand that turning one guy on an uncompetitive team into four or five guys who might be able to contribute in the future is a reasonable strategy sometimes. But ultimately, the big excuse that had any teeth at all was the $16 million. I wondered exactly what that number was at the time, but still it seemed satisfactory to just finally hear someone admit that the moves were about money.
Yesterday Bill Madden of the New York Daily News added some eye-opening facts to the situation. First of all, as we all know MLB distributes profits from some of the richer teams to some of the poorer teams. For this season some $400 million was distrubuted. According to Madden, a little more than 25% of that figure was provided by the Yankees alone. Anyway, apparently the Indians received just north of $20 million from the revenue sharing fund. In addition to that, the Indians received a $35 million stipend from the MLB central fund that distrubutes profits from baseball’s larger TV deals, merchandise and satellite radio, etc.
If Bill Madden’s figures are correct, then the Indians started the season with $55 million in the bank even before one of the gates at Regressive Field had opened to the public. The Indians also started the year with a payroll in the neighborhood of $81 million. That means that the Indians needed to make up $26 million to cover their payroll. But this is when things get dodgy. When the Dolans were talking about their $16 million shortfall were they just talking about baseball operations? When they were quoting numbers from their projected income statement, did that statement include the revenues from local TV and radio? Does it include the sponsorships and advertising in the stadium? How about the money from the concessions? My point is that what we don’t know is whether we can believe that $16 million number at all due to the complex nature of baseball revenues.
When we are talking about revenue sharing I know it doesn’t include a lot of things. Teams like the Yankees pay out the most money, but they also do wonders to hide revenues into “non-baseball related” buckets so they don’t have to pay revenue sharing on it. The question is whether the Dolans are just talking about losing $16 million in baseball revenue? Does that mean they aren’t losing any money at all when you look at the entire Cleveland Indians financial picture? Then again, maybe I don’t want the answers to all these questions. If Larry Dolan starts talking to us about how high his mortgage payment is on the $323 million he paid to the Jacobs family for the team my eyes might glaze over.
Just for fun, let’s pretend that the Cleveland Indians are a home that Larry Dolan bought with a standard 30 year mortgage. So, Dolan has to come up with 20% to put down. That is $64,600,000. That down payment in and of itself represents an 85% premium over the $35 million Jacobs paid for the team in 1986. So, anyway, that means Dolan has financed $258,400,000. Let’s pretend he got a good 6% interest rate and he plans on paying it back over 30 years. If all these facts were true then his monthly payment on this loan would be $1,549,238.56. Multiply that by 12 to see what it costs per year and the number is $18,590,862.68. So, if my completely made up scenario and numbers are true, then the Dolan shortfall of $16 million can almost exactly be tied to the fact that he overpaid for the team after bidding against himself!
If Dolan wants to reduce those payments, maybe he ought to call Dan Gilbert who can surely help him refi.