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Thread: Management Talks $, 11 M Profit over 2

      
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    Default Management Talks $, 11 M Profit over 2

    Pirates made less than $11 million past two years
    Part 1: Management divulgues a profit level well below most estimates, insists it can show that all of it went back into baseball, not to owners
    Sunday, December 06, 2009
    By Dejan Kovacevic, Pittsburgh Post-Gazette
    Gene J. Puskar/Associated Press
    Pirates president Frank Coonelly.

    INDIANAPOLIS -- The Pirates have made less than $11 million in profit over the past two years, and all of that was channeled back into baseball, team president Frank Coonelly told the Post-Gazette.

    Coonelly, eager to dispel mounting charges that the franchise puts big profits above winning, broke from the team's long-standing policy of not discussing finances to disclose in a series of interviews last week that the Pirates put all their profit in that span toward $11 million in baseball-related capital investments and, even then, needed to incur additional debt to cover the rest of the amount.
    The Post-Gazette's two-part series on the Pirates' finances

    Monday: The team discloses that is has made less than $11 million over the past two years, and that all of the profit has gone into baseball-related capital investments.

    Tuesday: Where, exactly, did that profit go? And what of next year, when payroll could drop even further?
    Catch more on the Pirates at the PG's PBC Blog.

    Those capital investments included a $5.4 million baseball academy in the Dominican Republic, $2 million toward the renovation of the Pirate City complex in Bradenton, Fla., and the recent purchase of a new Class A affiliate to play in Bradenton.

    "The Pirates utilize every dollar we receive in our effort to build a winning club," Coonelly said.

    All that information, Coonelly added, has been documented, audited and, as per standard procedure, can be seen by their professional peers.

    Although the Pirates are a private company and have no obligation to divulge finances publicly, they are required to share their books with Major League Baseball, all 29 other teams and the players' union. That means that all figures Coonelly shared with the Post-Gazette can be cross-checked by any of those entities, including the more specific figures that led to them.

    An annual profit of $5.5 million, which is how the team's past two years would average at their highest, would be considered marginal in professional sports. And it would be well below the most prominent published estimates, made each year by Forbes magazine, which many sports executives say has no access to any franchise's books: Forbes showed the Pirates making a $17.6 million profit in 2007, $15.9 million in 2008.

    Coonelly described the Pirates' formula for calculating their profit, a common one in business, this way:

    The first figure is operating income, which is simply money in vs. money out. He would not divulge that figure for either year but characterized the 2009 figure as "significantly" lower than $14 million.

    Next, any cash paid on debt is subtracted. In the Pirates' case, the cash paid on debt -- roughly $6.5 million each of the past two years -- has covered nothing more than interest charges on debt of a little more than $100 million, Coonelly said. The Pirates have made no payments on the debt's principle the past two years and, in fact, the debt has increased slightly because of those capital investments.

    The team elected to fund the capital investments through profits for two reasons, Coonelly said: One, there was not enough money in standard baseball operations. Two, they could extend those investments over long periods for tax purposes.

    Also visible in the team's books, Coonelly said, is that no ownership dividends have been paid the past two years, and no money divested to outside ventures.

    Bob Nutting, the Pirates' controlling owner since January 2007, confirmed that. He also praised Coonelly and general manager Neal Huntington, the men he hired later that year, for their work since then.

    "I have put the plan in place, hired the right people and will continue to provide the necessary resources to see that plan through," Nutting said yesterday. "We've been been extremely effective over the past two years in carrying out our plan as we put ourselves in position to compete for the playoffs on a consistent basis."

    The Pirates declined to break down specific profit figures for each of the past two years, other than to acknowledge a profit was made each year.

    "While the Pirates turned a profit in 2009, all of the free cash generated by our operations was reinvested in the club," Coonelly said.
    Charges multiply

    Baseball's Winter Meetings begin today at the Indiana Convention Center with the Pirates the recent focus of national discussion in the sport, largely because of publicly stated views on their finances.

    In mid-November, Scott Boras, the sport's dominant agent, told the Boston Globe that some teams are receiving $80 million-$90 million from MLB's various national contracts and revenue-sharing pool before any local revenues are counted, including ticket sales. Boras also charged teams with using the revenue-sharing money for paying down debt, which is not allowed.

    "If I'm a fan, I really have to question it and look at the history of my franchise and the others and evaluate what commitment each franchise is making," Boras said.

    Boras did not mention the Pirates, but they clearly were among those implicated: Their major league payroll for the 40-man roster in 2009 was $49 million, third-lowest in baseball, they have acknowledged making a profit each of the past six years, and they are among MLB's top revenue-sharing recipients.

    When ESPN challenged Boras on his figures of $80 million-$90 million, he cited an August article in the New York Daily News. That article, citing unnamed sources, described the Pirates as receiving $75 million in national monies.

    Boras declined to be interviewed for this article.

    Next, John Henry, owner of the high-spending Boston Red Sox and former owner of the low-spending Florida Marlins, told the Globe, without singling out any team, "Change is needed, and that is reflected by the fact that over a billion dollars have been paid to seven chronically uncompetitive teams, five of whom had baseball's highest operating profits. Who, except these teams, can think this is a good idea?"

    And those two hardly have been alone, as local newspapers, talk shows and Internet forums have made the Pirates' finances maybe the top topic regarding the team.

    MLB's national monies are distributed annually in two forms:

    One is the Central Fund, a collection of all national television, radio, Internet and merchandise properties. That check, for each of the 30 teams, was $40 million this year, but each team had to pay $10 million in national pension and operations fees out of that.

    Thus, the Pirates' Central Fund check was $30 million.

    The other is revenue-sharing: MLB collects 34 percent of local revenues from all 30 teams -- a $416 million total this year -- and distributes that to its lowest-revenue franchises through a check, with a stipulation that it must be spent on making the team "competitive." Teams must write a letter each winter detailing how the money was spent, and MLB, the other teams and the players' union receive a copy.

    The Pirates' revenue-sharing check was $36 million.

    The two checks together totaled $66 million, which is 12 percent below the $75 million stated in the Daily News report and about 30 percent below Boras' range.

    "The union takes seriously its role of reviewing how clubs spend their revenue-sharing dollars in an effort to improve on-field performance," Coonelly said. "The Pirates take this requirement just as seriously."

    The Pirates have what is considered a good local broadcasting contract for Pittsburgh's size, at roughly $15 million, so they have $71 million before any tickets, sponsorships or other PNC Park revenues are counted. But all MLB teams also have expenses above major league payroll, generally in the range of $50 million-$60 million, including for the draft, international signings, administration, managers and coaches at all levels, scouts, equipment, travel and stadium maintenance.

    The latter figure usually is the largest, and the Pirates' cost at PNC Park -- believed to be in the range of $12 million-$15 million -- is no exception.

    The Daily News also reported that the Pirates would make a $14 million profit in 2009, a figure that Coonelly called "significantly higher than even our operating income before interest is paid and far, far higher than our income after interest."

    Coonelly took umbrage with the comments made by Boras, a longtime nemesis dating back to Coonelly's decade working at MLB headquarters as a labor counsel, and Henry of the Red Sox, for whom he professes a deep respect.

    "What I really care about is not what some agent believes and, quite frankly, what some owner says after he used to advocate quite eloquently in favor of revenue sharing when he owned a team in Miami," Coonelly said. "What I care about is what our fans think about what we're doing here in Pittsburgh."

    In Henry's interview with the Globe, he called for eliminating the revenue-sharing system when baseball's labor agreement expires in 2011 and replacing it with a stringent luxury-tax system that would require all teams to have a minimum payroll, or salary floor.

    "Even though Mr. Henry apparently believes there's too much revenue sharing -- the revenue sharing that has allowed baseball to continue in great baseball cities like Pittsburgh, Kansas City, Cincinnati and others, including Miami -- to get to baseball's average payroll, you have to be spending $103 million on the 40-man roster," Coonelly said. "So, even that system that at least one owner is preparing to scrap isn't nearly sufficient. As a result, we have to build our team much differently than the Red Sox, who can afford a $140 million payroll."

    Nutting declined to respond to Henry's remarks.

    "I have a great deal of respect for Mr. Henry and all of my fellow owners," Nutting said.

    In September, the Post-Gazette asked Bud Selig, baseball's commissioner, if the Pirates were making profits similar to those estimated by Forbes.

    "Absolutely not. Unequivocally not," Selig replied with a raised voice. "I'm telling you, they're not pocketing it. I mean, it's just an economic myth."

    Selig added that neither the union nor any team has approached him formally about the revenue-sharing spending of any team, though he and others have acknowledged informal talks between the commissioner and union on such topics.

    "I've never had a complaint," Selig said.

    Selig and the owners offered to install a salary floor during 2006 labor talks, but the union balked on the principle that, if it accepted a floor, it must also accept a cap. Baseball is the only one of the four major professional sports that does not cap team payrolls. The World Series champion New York Yankees just spent $215 million on payroll, with Florida coming up last at $37 million.

    Mike Weiner, the union's newly named executive director, said on a conference call Wednesday that the union's stance on the floor has not changed and that it prefers to handle issues of low-spending teams "through other means."

    "We've had discussions with the commissioner's office on various clubs for many years under the revenue-sharing plan," Weiner said. "I would imagine that again will be an issue in 2011."

    Weiner added that the union is open to short-term exceptions for teams building around young, low-cost players, so long as the team eventually spends more.
    More questions in 2010?

    The Pirates, 62-99 in 2009, have had 17 consecutive losing seasons. And they will fall into that young, low-cost category next summer, with precious little experience, some promising talent such as outfielders Andrew McCutchen and Garrett Jones, and a payroll currently projected to fall to $34 million. The latter might end up the lowest in baseball.

    Although this divulging of financial figures was a first under this ownership group -- Nutting took control in early 2007 -- many in the team's increasingly disillusioned fan base surely will want more.

    Nutting was asked: Why not simply open the books to the public?

    "Like every other public company, our books are not open to the public," Nutting replied. "However, they are open to the commissioner, as well as the players' union. I am confident that they fully understand we have appropriately invested in all levels of our baseball operations budget."

    Coonelly made clear throughout his interviews that he wished public attention would turn away from the Pirates' finances.

    "I think it receives far more attention than it deserves, quite frankly," he said. "What should be the focus is: Are we making good, sound baseball decisions? You cannot simply look at the money spent on major league payroll and reach conclusions as to whether this organization is making sound baseball decisions."

    He reiterated his long-held view that previous, if previous management had shifted money from major league payroll to scouting and development as his group has, the team would be in a far better baseball position today.

    "For far too long, the Pittsburgh Pirates, much like the media, were solely concerned with what major league payroll looked like. In doing so, they neglected to make the long-term investments critical to a team in a market like ours. Investments weren't made throughout the organization or the draft or the international markets like the Dominican. That's what we need to compete with the big boys."

    Read more: http://www.post-gazette.com/pg/09340...#ixzz0YyX4kANI

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    Default Re: Management Talks $, 11 M Profit over 2

    Man.... that is a really really good article. Maybe one of the best I've read in a good long time.

    I give Frank some kudos. You know that he wants to lay it all out there but isn't allowed but this is perhaps the first time we've really seem some numbers out there and other things explained such as debt and stuff like that.

    I also loved how blunt Frank was in his comments. You could almost hear him swearing reading his words... like...

    "What I really care about is not what some agent believes and, quite frankly, what some owner says after he used to advocate quite eloquently in favor of revenue sharing when he owned a team in Miami," Coonelly said. "What I care about is what our fans think about what we're doing here in Pittsburgh."

    In Henry's interview with the Globe, he called for eliminating the revenue-sharing system when baseball's labor agreement expires in 2011 and replacing it with a stringent luxury-tax system that would require all teams to have a minimum payroll, or salary floor.

    "Even though Mr. Henry apparently believes there's too much revenue sharing -- the revenue sharing that has allowed baseball to continue in great baseball cities like Pittsburgh, Kansas City, Cincinnati and others, including Miami -- to get to baseball's average payroll, you have to be spending $103 million on the 40-man roster," Coonelly said. "So, even that system that at least one owner is preparing to scrap isn't nearly sufficient. As a result, we have to build our team much differently than the Red Sox, who can afford a $140 million payroll."
    That's an attack if I ever read one. He threw Henry straight under the bus, most likely wanted to say "**** you Boras" and then slammed Henry and the Redsox and all of the larger owners under the bus with his comment of how the Pirates have to do things differently etc...

    Just awesome


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    Default Re: Management Talks $, 11 M Profit over 2

    Dejan had been pretty vocal in the "where is the money going?" camp since he took over the beat. This is an article that he's been hoping to write forever, and there will be a part 2 out tomorrow. I'm expecting to see some reactions around the web tomorrow. Should be interesting.

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    Default Re: Management Talks $, 11 M Profit over 2

    I have asked this before...

    Even if the profits were $15m as one report said, and all that money was put into the payroll of the ML team... where does that put us. Maybe $65m?

    So, as the arguments go about "why isn't he putting all the money back into the team", even if he put every penny into payroll... he still can't really compete with the other clubs.

    And, contrary to what a lot of people think... I doubt there are too many owners who like taking their own money to field a team. Except maybe the Snyder type owners

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    Default Re: Management Talks $, 11 M Profit over 2

    Quote Originally Posted by moneytalks View Post
    This quote is hidden because you are ignoring this member. Show Quote
    I have asked this before...

    Even if the profits were $15m as one report said, and all that money was put into the payroll of the ML team... where does that put us. Maybe $65m?

    So, as the arguments go about "why isn't he putting all the money back into the team", even if he put every penny into payroll... he still can't really compete with the other clubs.
    And, contrary to what a lot of people think... I doubt there are too many owners who like taking their own money to field a team. Except maybe the Snyder type owners

    If all is true then, the fact is your right, the current ownership cannot complete with any other club. The Pirates then should be the leader for a salary cap to help level the playing field. Otherwise the most we can hope for is a payroll of maybe 4 million increase, which buys mostly a backup. This also means they won't be able to keep players like Cutch past arbitration years, perhaps that is why we see Duke and Maholm involved in trade discussions. This is really worse news than they actually are making a lot of money.

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    Default Re: Management Talks $, 11 M Profit over 2

    This part is was very very good as well...

    "For far too long, the Pittsburgh Pirates, much like the media, were solely concerned with what major league payroll looked like. In doing so, they neglected to make the long-term investments critical to a team in a market like ours. Investments weren't made throughout the organization or the draft or the international markets like the Dominican. That's what we need to compete with the big boys."
    Honestly, this quote really says it all. Coonelly addresses this statement more as a means of saying what the previous ownership and management did wrong and mentioned the media. He could also throw in the fanbase as well, because it's the fan base perhaps more than the media that has only cared about $$$$$ and in doing so had and still do completely ignore all of the awful decisions that had been made which is the main reason the Pirates have continually stunk. - Bad Decisions.

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    Default Re: Management Talks $, 11 M Profit over 2

    Quote Originally Posted by rbilak View Post
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    If all is true then, the fact is your right, the current ownership cannot complete with any other club. The Pirates then should be the leader for a salary cap to help level the playing field. Otherwise the most we can hope for is a payroll of maybe 4 million increase, which buys mostly a backup. This also means they won't be able to keep players like Cutch past arbitration years, perhaps that is why we see Duke and Maholm involved in trade discussions. This is really worse news than they actually are making a lot of money.
    The hope though is that increased revenues will occur by a team improving on the field. A better team on the field = increased ticket sales and gate revenue, increased concession sales and revenue, increased merchandise and advertising revenue. Those extra funds are way a team like Milwaukee can have that much more of a payroll than us. They far exceed us in attendence which also gives them increased concession moneys and they also make a good bundle on parking rights which we get nothing from, a better team = better and more merchandise sales and more advertising money...

    So... right now, the Pirates dont really have a lot of wiggle room in regards to payroll which is why they are going with the rebuilding, youth movement, trying to build up that way and perhaps a good team in the near future increases other revenue streams to allow them to up payroll and keep guys like Cutch.

    Problem with a Salary Cap is that it will have to wait until the 2012 season with the CBA expiring after the 2011, so no changes are going to be made until then and for a Salary Cap to happen you're likely looking at a strike of some magnitude and length. I doubt baseball wants to go through that so they'll probably patch on a new bandaid for the 5 years after instead of attacking and fixing the issues

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    Default Re: Management Talks $, 11 M Profit over 2

    Quote Originally Posted by Kipper View Post
    This quote is hidden because you are ignoring this member. Show Quote
    The hope though is that increased revenues will occur by a team improving on the field. A better team on the field = increased ticket sales and gate revenue, increased concession sales and revenue, increased merchandise and advertising revenue. Those extra funds are way a team like Milwaukee can have that much more of a payroll than us. They far exceed us in attendence which also gives them increased concession moneys and they also make a good bundle on parking rights which we get nothing from, a better team = better and more merchandise sales and more advertising money...

    So... right now, the Pirates dont really have a lot of wiggle room in regards to payroll which is why they are going with the rebuilding, youth movement, trying to build up that way and perhaps a good team in the near future increases other revenue streams to allow them to up payroll and keep guys like Cutch.

    Problem with a Salary Cap is that it will have to wait until the 2012 season with the CBA expiring after the 2011, so no changes are going to be made until then and for a Salary Cap to happen you're likely looking at a strike of some magnitude and length. I doubt baseball wants to go through that so they'll probably patch on a new bandaid for the 5 years after instead of attacking and fixing the issues


    Kip,

    I can only speak for myself on this, I am so glad the NHL lost a year to get it done. I for one haven't watched an inning of playoff baseball in a decade. This is from a fan who didn't misa a tv game for 30 years. I only root for the Yankees to lose. If a strike took 5 years I wouldn't care. I loved the Pirates for over 40 years, I fear I will never see a winning team again in my lifetime, let alone a playoff team without drastic actions. The gap between the big market and small market continue to grow, I would say it has doubled in the last five years, so the Pirates, even with a good team will find it hard to even keep up. Thank god Geno and Sid wear Black and Gold and not Ranger Blue. If it were baseball, they would be Yankees.

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    Default Re: Management Talks $, 11 M Profit over 2

    Quote Originally Posted by rbilak View Post
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    Kip,

    I can only speak for myself on this, I am so glad the NHL lost a year to get it done. I for one haven't watched an inning of playoff baseball in a decade. This is from a fan who didn't misa a tv game for 30 years. I only root for the Yankees to lose. If a strike took 5 years I wouldn't care. I loved the Pirates for over 40 years, I fear I will never see a winning team again in my lifetime, let alone a playoff team without drastic actions. The gap between the big market and small market continue to grow, I would say it has doubled in the last five years, so the Pirates, even with a good team will find it hard to even keep up. Thank god Geno and Sid wear Black and Gold and not Ranger Blue. If it were baseball, they would be Yankees.
    I am right with you. I would easily take a strike, wipe out an entire season... just fix the problems with the league and provide a fair and balanced league for every team, not a league that leans so heavily towards the large market teams.

    What needs to happen are a band of small market CEO's and owners like Anastacio from Milwaukee whose already spoken out about the disparity and wanting a cap, guys from Oakland, Minnesota, Florida, Washington, TORONTO (not a huge market but that's a team that will continue to always be just a 3rd place team in a division with the Sox and Yankees), Arizona, San Fran, Colorado, Baltimore, Cleveland, Cincinnati etc... I mean to be honest, there are far mroe smaller market teams, add in the middle market teams as well... the goal should be to erase the advantages that larger cities like New York, Boston, Chicago and Los Angeles's teams enjoy because of their market size/revenue advantages.

    The NHL's model like you said IMO is the best league model amongst the 4 major league sports. Better than the NFL and NBA. They were the last to do it all and fixed the mistakes that the NFL and NBA have. MLB needs this but they will have to endure a strike and would need a great number of small and mid market owners to rally for it

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    Default Re: Management Talks $, 11 M Profit over 2

    Quote Originally Posted by rbilak View Post
    This quote is hidden because you are ignoring this member. Show Quote
    Kip,

    I can only speak for myself on this, I am so glad the NHL lost a year to get it done. I for one haven't watched an inning of playoff baseball in a decade. This is from a fan who didn't misa a tv game for 30 years. [HIGH-LIGHT]I only root for the Yankees to lose.[/HIGH-LIGHT] If a strike took 5 years I wouldn't care. I loved the Pirates for over 40 years, I fear I will never see a winning team again in my lifetime, let alone a playoff team without drastic actions. The gap between the big market and small market continue to grow, I would say it has doubled in the last five years, so the Pirates, even with a good team will find it hard to even keep up. Thank god Geno and Sid wear Black and Gold and not Ranger Blue. If it were baseball, they would be Yankees.
    I used to - but, now I want them to win EVERY FREAKING YEAR

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    Default Re: Management Talks $, 11 M Profit over 2

    Part 2:

    INDIANAPOLIS - So, where is the Pirates' profit going?

    A good place to start might be where they are adamant it is not going: in the owners' pockets or in any of controlling owner Bob Nutting's other business ventures.

    "What is critical for the Pirates' fans to know," team president Frank Coonelly said, "is that we are investing all available resources from our operations, whether local or national, back into the club in our effort to return a winning baseball team to the city of Pittsburgh."

    The Pirates maintain that neither Mr. Nutting, who is believed to have a controlling interest approaching three-quarters, nor anyone in the ownership group has been paid dividends related to the past two years. Neither has Mr. Nutting drawn any salary.

    Not all of the minority owners are pleased, apparently: One minority owner, who declined to be identified, described a meeting several months ago in which the minority owners were denied distributions to cover taxes they owed on the team. Some owners promptly left the room.

    Mr. Nutting and others in management stressed that, despite this incident, there is no disharmony in the ownership group.

    Mr. Nutting also said that none of the Pirates' money has ever been diverted to his or his family's other prominent local holdings, including the Seven Springs Resort and the Ogden Newspapers chain founded by his father, Ogden Nutting.

    "No, each operates as an independent organization," Bob Nutting said. "We continue to operate efficiently and effectively at both Seven Springs and Ogden Newspapers, and both are performing very well."

    The Pittsburgh Post-Gazette reported yesterday that the Pirates made less than $11 million in profit the past two years. The team made $11 million in baseball-related capital investments in that span, Mr. Coonelly said last week, and used its profit plus a "modest" amount of incurred debt to cover that.

    Mr. Coonelly, who has refused to give the Post-Gazette profit figures, clarified yesterday that the team also made, out of its operating income, "significant" capital investments in PNC Park and other payments related to taxes and interest in that span.

    In the past two years, since Mr. Nutting hired Mr. Coonelly and general manager Neal Huntington, the amount spent on payroll for the 40-player roster - by far, the largest and most visible expense because individual players' salaries are made public - dipped from $51.4 million in 2007 to $50.7 million in 2008 to $49 million this year. The 2009 dip was due mostly to the midseason trades of their three most expensive players: Jack Wilson, Freddy Sanchez and Adam LaRoche.

    The Pirates' local revenues also have fallen in the past two years. Mr. Coonelly did not characterize the amount. From 2008 to 2009, attendance dropped 1 percent to the smallest average crowd - 19,040 - in PNC Park's history. The team also sold fewer suites and lost at least one major sponsorship.

    Despite that, Mr. Coonelly said, several baseball operations expenses were boosted in the past two years:

    • The Pirates spent $18.7 million on the past two drafts, compared with $10.4 million the previous two years. That two-year total was among the highest in the majors, and it included the signing of Pedro Alvarez, their No. 1 draft choice in 2008, to a franchise-record $6.355 million contract that year.

    • The international amateur budget was increased from $1.13 million in 2007 to $2 million in 2008 and then to $3 million this year. The team also had authorized Latin American scouting director Rene Gayo to offer Miguel Angel Sano into the $3 million range, but Mr. Sano chose the Minnesota Twins at $3.15 million. A Sano signing would have counted above the international budget, Mr. Coonelly said.

    • Overall player acquisition costs in the draft and international signings increased 70 percent since 2007.

    • Player development spending increased 25 percent since 2007. That includes a 9 percent increase last year while the industry as a whole decreased.

    • Spending on scouts increased 20 percent since 2007, including for nine additional full-time North American scouts for the draft, a total of 25, and a near-doubling of the international scouts from 20 to 39. Those scouts now cover 39 countries across six continents.

    All of that, Mr. Coonelly said, is aimed at positioning the Pirates to build from within, where premier talent is cheapest and, because a team controls a player's rights for six years from the time he begins in the major leagues, there is a chance to match talent for talent with the higher-revenue teams that acquire such talent largely through free agency.

    And next year, to be sure, that talent will come mostly cheap: The Pirates' 2010 payroll, even with the recent acquisition of $4.85 million second baseman Akinori Iwamura, currently projects to $34 million. Given that the Florida Marlins had the majors' lowest payroll this year at $37 million, the Pirates might represent the new bottom.

    They also might not - Mr. Coonelly has said Mr. Huntington has ample leeway to add talent this offseason - but the club president said that the team will not force the issue if adding a player does not fit with the current roster.

    But if they do have something in the range of that $34 million payroll? Even if other spending continues to increase, the Pirates probably will project to have a larger profit, and questions will rise anew.

    "I hope that we've been very clear about our long-term vision," Mr. Coonelly said. "Where we'll start the season, in terms of our payroll, is consistent with that vision we've laid out for our fans. While I suspect there will be some grumbling nationally if we don't increase our payroll from what the current roster would earn, the fans in Pittsburgh won't be surprised and, I hope, will support a good, young group of players as they come together."

    One option at some point will be paying down some of the team's $100 million-plus debt, which is largely the result of losses earlier in the decade. Mr. Coonelly said that if the Pirates can begin paying down some of that debt - they instead have added to it slightly each of the past two years through those capital investments - that could help keep some of the team's promising youngsters even into their free-agent years.

    "Paying down debt at some point will make us a stronger organization and allow us to do much more as we go forward," Mr. Coonelly said.

    MLB enforces compliance with a debt-to-equity ratio for all teams.

    Andrew McCutchen, the Pirates' scintillating rookie center fielder last season, likely comes to mind for most when looking well ahead. He is 23 and cannot become a free agent until 2015 but, given the many recent trades of popular players partly because of cost, there surely are those who already can envision Mr. McCutchen in the pinstripes of the New York Yankees.

    Mr. Coonelly encapsulated the model as follows, beginning with the shift of money from major league payroll to development, now virtually complete: Win with the youngsters, draw more fans for more revenues, then spend more to keep some of those players into their veteran years.

    "Because we have taken the painful steps where we can make the long-term investments in our foundation and development system, we now have many good players in the system," Mr. Coonelly said. "Those players now need to come together and play winning Pirates baseball ... ."

    Part of the Pirates' model, as Mr. Coonelly said unapologetically, is staying solvent.

    "We're developing a large, strong core of very good players. We won???t be able to keep every player we develop, but we will work hard to retain as many as possible. How do we retain stars like Andrew? Based on the economics of the game, we need to put together a winning team that can support the salaries of a much larger payroll than we now have. If we do that, Pittsburgh will support a much larger payroll."

    Read more: http://www.post-gazette.com/pg/09342...#ixzz0Z4b6lGD5

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    Default Re: Management Talks $, 11 M Profit over 2

    Quote Originally Posted by moneytalks View Post
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    I used to - but, now I want them to win EVERY FREAKING YEAR
    Just Curious Money, why do you want them to win? Is it to show how unfair the system is? I pray it is not because you became a fan or we will have to preform an exorsism here!

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    Default Re: Management Talks $, 11 M Profit over 2

    Quote Originally Posted by rbilak View Post
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    Just Curious Money, why do you want them to win? Is it to show how unfair the system is? I pray it is not because you became a fan or we will have to preform an exorsism here!
    It's to show that the system is unfair. I'm the same way. I HATEEEEEEEEEEEEEEEEEE the Yankees and Red Sox etc... but at this point, if it's not the Pirates in the playoffs... I want every large market team making the playffs and the Yankees to win the World Series just to show the disparity between large market advantages due to money

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    Default Re: Management Talks $, 11 M Profit over 2

    INDIANAPOLIS - So, where is the Pirates' profit going?

    A good place to start might be where they are adamant it is not going: in the owners' pockets or in any of controlling owner Bob Nutting's other business ventures.

    "What is critical for the Pirates' fans to know," team president Frank Coonelly said, "is that we are investing all available resources from our operations, whether local or national, back into the club in our effort to return a winning baseball team to the city of Pittsburgh."

    The Pirates maintain that neither Mr. Nutting, who is believed to have a controlling interest approaching three-quarters, nor anyone in the ownership group has been paid dividends related to the past two years. Neither has Mr. Nutting drawn any salary.

    Not all of the minority owners are pleased, apparently: One minority owner, who declined to be identified, described a meeting several months ago in which the minority owners were denied distributions to cover taxes they owed on the team. Some owners promptly left the room.

    Mr. Nutting and others in management stressed that, despite this incident, there is no disharmony in the ownership group.

    Mr. Nutting also said that none of the Pirates' money has ever been diverted to his or his family's other prominent local holdings, including the Seven Springs Resort and the Ogden Newspapers chain founded by his father, Ogden Nutting.

    "No, each operates as an independent organization," Bob Nutting said. "We continue to operate efficiently and effectively at both Seven Springs and Ogden Newspapers, and both are performing very well."

    The Pittsburgh Post-Gazette reported yesterday that the Pirates made less than $11 million in profit the past two years. The team made $11 million in baseball-related capital investments in that span, Mr. Coonelly said last week, and used its profit plus a "modest" amount of incurred debt to cover that.

    Mr. Coonelly, who has refused to give the Post-Gazette profit figures, clarified yesterday that the team also made, out of its operating income, "significant" capital investments in PNC Park and other payments related to taxes and interest in that span.

    In the past two years, since Mr. Nutting hired Mr. Coonelly and general manager Neal Huntington, the amount spent on payroll for the 40-player roster - by far, the largest and most visible expense because individual players' salaries are made public - dipped from $51.4 million in 2007 to $50.7 million in 2008 to $49 million this year. The 2009 dip was due mostly to the midseason trades of their three most expensive players: Jack Wilson, Freddy Sanchez and Adam LaRoche.

    The Pirates' local revenues also have fallen in the past two years. Mr. Coonelly did not characterize the amount. From 2008 to 2009, attendance dropped 1 percent to the smallest average crowd - 19,040 - in PNC Park's history. The team also sold fewer suites and lost at least one major sponsorship.

    Despite that, Mr. Coonelly said, several baseball operations expenses were boosted in the past two years:

    • The Pirates spent $18.7 million on the past two drafts, compared with $10.4 million the previous two years. That two-year total was among the highest in the majors, and it included the signing of Pedro Alvarez, their No. 1 draft choice in 2008, to a franchise-record $6.355 million contract that year.

    • The international amateur budget was increased from $1.13 million in 2007 to $2 million in 2008 and then to $3 million this year. The team also had authorized Latin American scouting director Rene Gayo to offer Miguel Angel Sano into the $3 million range, but Mr. Sano chose the Minnesota Twins at $3.15 million. A Sano signing would have counted above the international budget, Mr. Coonelly said.

    • Overall player acquisition costs in the draft and international signings increased 70 percent since 2007.

    • Player development spending increased 25 percent since 2007. That includes a 9 percent increase last year while the industry as a whole decreased.

    • Spending on scouts increased 20 percent since 2007, including for nine additional full-time North American scouts for the draft, a total of 25, and a near-doubling of the international scouts from 20 to 39. Those scouts now cover 39 countries across six continents.

    All of that, Mr. Coonelly said, is aimed at positioning the Pirates to build from within, where premier talent is cheapest and, because a team controls a player's rights for six years from the time he begins in the major leagues, there is a chance to match talent for talent with the higher-revenue teams that acquire such talent largely through free agency.

    And next year, to be sure, that talent will come mostly cheap: The Pirates' 2010 payroll, even with the recent acquisition of $4.85 million second baseman Akinori Iwamura, currently projects to $34 million. Given that the Florida Marlins had the majors' lowest payroll this year at $37 million, the Pirates might represent the new bottom.

    They also might not - Mr. Coonelly has said Mr. Huntington has ample leeway to add talent this offseason - but the club president said that the team will not force the issue if adding a player does not fit with the current roster.

    But if they do have something in the range of that $34 million payroll? Even if other spending continues to increase, the Pirates probably will project to have a larger profit, and questions will rise anew.

    "I hope that we've been very clear about our long-term vision," Mr. Coonelly said. "Where we'll start the season, in terms of our payroll, is consistent with that vision we've laid out for our fans. While I suspect there will be some grumbling nationally if we don't increase our payroll from what the current roster would earn, the fans in Pittsburgh won't be surprised and, I hope, will support a good, young group of players as they come together."

    One option at some point will be paying down some of the team's $100 million-plus debt, which is largely the result of losses earlier in the decade. Mr. Coonelly said that if the Pirates can begin paying down some of that debt - they instead have added to it slightly each of the past two years through those capital investments - that could help keep some of the team's promising youngsters even into their free-agent years.

    "Paying down debt at some point will make us a stronger organization and allow us to do much more as we go forward," Mr. Coonelly said.

    MLB enforces compliance with a debt-to-equity ratio for all teams.

    Andrew McCutchen, the Pirates' scintillating rookie center fielder last season, likely comes to mind for most when looking well ahead. He is 23 and cannot become a free agent until 2015 but, given the many recent trades of popular players partly because of cost, there surely are those who already can envision Mr. McCutchen in the pinstripes of the New York Yankees.

    Mr. Coonelly encapsulated the model as follows, beginning with the shift of money from major league payroll to development, now virtually complete: Win with the youngsters, draw more fans for more revenues, then spend more to keep some of those players into their veteran years.

    "Because we have taken the painful steps where we can make the long-term investments in our foundation and development system, we now have many good players in the system," Mr. Coonelly said. "Those players now need to come together and play winning Pirates baseball ... ."

    Part of the Pirates' model, as Mr. Coonelly said unapologetically, is staying solvent.

    "We're developing a large, strong core of very good players. We won???t be able to keep every player we develop, but we will work hard to retain as many as possible. How do we retain stars like Andrew? Based on the economics of the game, we need to put together a winning team that can support the salaries of a much larger payroll than we now have. If we do that, Pittsburgh will support a much larger payroll."

    Read more: http://www.post-gazette.com/pg/09342...#ixzz0Z4b6lGD5
    That Bob Nutting wouldn't even allow for minority owners to have some profit to pay taxes on the team to me is some good proof that there isn't pocketing of money.

    I don't think it should be much opf a surprise that the Pirates would be using extra profit that they have from for example a lower payroll this season to help pay off debt. I know some about the debt ratio in baseball and that was one of the big problems we faced in 03 when we traded Aram. The Pirates had exceeded that ratio and were forced by MLB to cut costs. I don't think the Pirates want to be forced into that again, I don't think us fans really want to go through that again.

    Frank is pretty much dead on when he said winning baseball will bring them the added revenues needed to jump payroll (and likely not be able to sit back too far on draft costs). I'm going to venture that the Pirates payroll abilities are probably maxed out around $60 million max right now. I just read that ticket prices will remain the same in 2010 for the 8th straight season. Add on top of that, season packages are even dirt cheaper, taking an average cost of a ticket below $5. The Pirates have one of the cheapest tickets in MLB, combined with low attendance, they aren't making much through the gate. Add in that low attendence and lower end concession prices in the league and the Pirates aren't doing great there either compared to other teams.... When you start winning you build demand and when you build demand, your attendence goes up, your concession revenues go up and you can increase ticket prices, concession prices all due to demand and that becomes much added money towards overall revenue. We're talking about a possible jump of $10-20 million.

    So... the bottom line is that THIS plan is THE plan. Start over, build from within, build young and like Frank said in order to compete in this league, having controlled years is really crucial to a team like the Pirates to compete. To do that you have to draft well, develop well and put good money into those areas and hope for the best when it all hits the MLB roster. From there... hope that winning = increased revenue

  15. #15
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    Default Re: Management Talks $, 11 M Profit over 2

    I'm afraid that there is too much of a vested interest among the powers that be to preserve the current mismatch for there ever to be a salary cap. Let's face it, the networks want to always see the Yankees, Red Sox, Chicago and LA teams in the playoffs and WS. Ratings mean $$$ and deep down inside I think MLB itself wants that too. Face it, nobody outside Milwaukee or Dallas wants to see a Brewers/Rangers World Series. The players will never agree to a cap without a prolonged strike. The smaller market teams, although they are a majority, simply don't have enough leverage with the big boys. There will be some tweaking when the current contract expires, but nothing more.
    "Work fast, throw strikes, change speeds"--Ray Miller

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