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show me the moneyThe annual – and oft-debated – Business of Baseball rankings are out, thanks to Forbes, which annually does its best to determine not only the value of, but the revenue and income of, each MLB franchise. How it does this without actual access to the individual teams’ books (as private entities), remains a laudable mystery.

According to Forbes, the Chicago Cubs are the fourth most valuable franchise in baseball at $1 billion in value, behind only the Yankees ($2.3 billion), Dodgers ($1.615 billion), and Red Sox ($1.312 billion). These are dramatic shifts upwards from last year, which was to be expected after the Dodgers were sold for north of $2 billion, and the industry was flooded with valuable TV dollars.

Of more interest to you, perhaps, is Forbes’ estimate that the Cubs took in $274 million in revenue in 2012, which earned them $32.1 million in income – the highest figure in baseball. What remains unclear is what the Cubs do with this “income.” According to team Chairman and Owner Tom Ricketts, every dollar that comes in the door goes back into the organization. The Cubs have invested in non-player expenses for the last couple of years (software, facilities, etc.), so it’s possible that the “income” ends up being used there somehow … but wouldn’t those simply be expenses? Then again, how does Forbes know exactly how much the Cubs are spending on, for example, proprietary software acquisitions? I’d think the Cubs wouldn’t want to share that information.

The other obvious ending point for “income,” if it’s being put “back into the organization,” would be using the income to pay down the Ricketts Family’s debt, which they took on to purchase the team. But Forbes indicates that the Cubs have a 58% debt/value ratio, which, at $1 billion in value, yields $580 million in debt. After the 2010 season, according to Forbes, the Cubs had … $580 million in debt.

It’s entirely possible that the Ricketts Family has paid down none of the debt in two years, but it feels a bit surprising. It also raises questions about the $30ish million in “income” that the Cubs have been purportedly netting the last couple of years. Where exactly is that money going if every dollar that comes in the door is staying in the organization? Rainy day fund? The front office has mentioned money potentially being rolled over from year to year as needed, so that’s a possibility. But $60 million over the last two years is a pretty healthy rollover.

Here’s where I get called a homer, but I tend to believe that Tom Ricketts isn’t flat-out lying about how organizational dollars are used. And, if I believe that, I have to regard the Forbes figures suspiciously.

That said, I’m sure Forbes has solid sources on their information, and I’d love to be able to reconcile the large amount of “income” the Cubs receive with the fact that the debt remains the same, and all revenue is supposed to be going back into the organization. I’m no finance guy, so maybe there’s some obvious answer I’m missing. You know, besides simply saying Forbes’ estimates are way off, which is entirely possible, too.

  • Andrew

    maybe the income is being invested to be cashed in for another season so they can keep a higher payroll when they do compete or so they can be ready to pay for the renovation more easily when that is possible

    • http://www.bleachernation.com Brett

      Yeah, thanks, I meant to include the rainy day option, too. I just don’t think Forbes’ numbers are right, frankly.

      • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

        And I think you are being a homer about it.

        • http://www.bleachernation.com Brett

          I know you do.

          You’re just being a … whatever the opposite of homer is.

          • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

            Objective, handsome realist

            • http://www.bleachernation.com Brett

              How could anyone not like you?

              • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                The guy who says the emperor has no clothes is not always the most popular guy in the room, nor the happiest. It’s a burden I bear with dignity.

                • Patrick W.

                  Nobody can use the word “absurd” so much and still claim dignity. :)

          • Andrew

            roadie?

            • TWC

              heh

  • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

    The Cubs are paying “less than three percent” interest on the debt, so if they are paying interest-only it would just be about $25m a year (math?).

    • http://www.bleachernation.com Brett

      Where did you hear that the debt was less than 3%? I know rates were great back then, but for $580 million worth of debt? If that’s their rate, I hope they never pay it down.

      • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)
        • http://www.bleachernation.com Brett

          Holy crap. I can’t believe I didn’t know this, and it really, really changes the way I think about the debt. Thank you for pointing that out.

          Now I’m certain that the Ricketts aren’t using Cubs revenue to pay down debt (and they absolutely shouldn’t be) … but it does reinforce the broader question: is there “missing” money?

          • Rebuilding

            Curious as to why you come to that conclusion based on his article, Brett. If Ricketts considers debt as part of “baseball operations” why would it matter whether it is owed directly to the bank or to the Ricketts (as a pass through to their bank)?

            • http://www.bleachernation.com Brett

              Because, at less than 3%, the Ricketts would be fools to pay down the debt in any appreciable amount. Forbes’ numbers suggest they’re paying interest only at this point, and they’d be smart to do that as long as the loan permits.

              • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                It’s definitely the smart play when owning a sports team.

                The value of the team will likely far outpace the debt.

          • pete

            I am still trying to get my head around the interest rate. As I calculate it, less than 3% of $580 mill comes to between $16.5-17.5 mill per year. Kind of following up, what is the effect on revenues for every 100,000 increment increase/decrease in attendance? I think you have stated that before Brett but I cannot find it.

            • http://www.bleachernation.com Brett

              I’d have to dig on that one. I know I’ve discussed it, but the post that it was in is not immediately coming to mind. I’m not sure I even remember which year that was …

  • Rebuilding

    Ok, I’ll get in before Kyle. This is why a team like the Cubs should NEVER be in full rebuilding mode. The resources are just too great. While I want a great farm you can do both simultaneously. The Cubs $103 million payroll is flat out embarrassing when you consider:

    White Sox – $117 million
    Cincinnati – $107 million
    St. Louis – $115 million
    Washington -$113 million

    I know all of the Ricketts/Theo fanboys are going to come out of the woodwork to tell us how this all makes sense, but the fact of the matter is that they have slashed payroll, evidently used the money to pay down debt and signed 1 #3 starter in 2 years of free agency. Billionaires don’t get there by being dumb – the hiring of Theo was brilliant because it has given ownership a comete free pass on the numbers above. Again, you could have re-signed Ramirez and gone all-out on Cespedes and Darvish and cost yourself ZERO draft picks except for the comp pick for Ramirez. The smokescreen these guys are putting up is amazing and really makes me respect Ricketts as a businessman.

    *Cue Ricketts/Theo fanboys

    • http://www.bleachernation.com Brett

      “evidently used the money to pay down debt”

      Setting aside the rest of your comment, which I actually think is all fair discussion (even if I disagree), the Forbes numbers indicate that the Ricketts are *not* paying down the debt.

      • Rebuilding

        Forbes would have no idea about the debt. The other numbers can be reasonably estimated. So unless the Dominican facility went 500 percent over budget, the scouting staff are all millionaires and they are operating super computer level proprietary software that money is paying off debt. Where else would it be going? I guess you weren’t convinced by earlier discussions, but I don’t think it could be more clear that Ricketts considers the debt part of “baseball operations”. I think that will be answered affirmatively in the next few years.

        What else don’t you agree with? Do you really think that the Reds should be running a higher payroll than the Cubs? The White Sox two years in a row? Inexcusable when there have been major future pieces available Darvish (26) Cespedes (27) for nothing but money. Why did LA get Puig – they simply weren’t going to be outbid. We have been outbid by the A’s and the Rangers – should never happen.

        • http://www.bleachernation.com Brett

          “Forbes would have no idea about the debt. The other numbers can be reasonably estimated.”

          So it’s more reasonable that Forbes is able to estimate the Cubs’ expenses – much of which are very, very secretive – than it is for Forbes to be able to estimate the loan on the Cubs?

          • Rebuilding

            How are the expenses that secretive. They hired a bunch of new staff, built a Dominican facility, bought some software and other miscellany. I bet the group on this board could estimate those reasonably well, within a few million. There is no way Forbes would know if the Cubs have made a principal payment unless they have a mole deep in the bank willing to be fired immediately for no reason. They know what the original debt was and they keep plugging in that number because they have no idea

            • Hee Seop Chode

              I’ve seen the credit memo. There are a lot of banks holding pieces of the debt – that’s how large debt issuances are done.

              • Rebuilding

                Yes, I handle syndicated transactions for a living. So you are saying this is a bullet maturity? If you e seen the credit memo it should say. Otherwise there is an amortization schedule and the debt is being paid down over the maturity length.

                • Hee Seop Chode

                  I can only speak to the memo (one bank’s interest) I saw, which has an amortization schedule. It was for a 30MM piece.

                  • Hookers or Cake

                    i love internets

          • Die hard

            If the Forbes article is even close to being right then Ricketts should fire his CPA who is obviously not doing his job of cooking the books

    • JulioZuleta

      I won’t respond to everything, but I will say that you can’t use the White Sox figure as a comp because Reinsdorf has said for years that the White Sox operate at a loss and he uses Bulls income to subsidize Sox payroll. I completely understand your argument, and respect it, I just disagree with it. The willy-nilly spending is what killed us in years past. Nowadays, a bad FA signing or two will cost you $40 M a year…for 6 or 7 years. Can’t just go out and be irresponsible because you have the money.

      • CubFan Paul

        No one is asking Ricketts/Theo&Co to spend irresponsibly on free agency just cause the money is there…

        I hate that argument Julio.

        • JulioZuleta

          So you would prefer they beat the contracts given to Bourn, Swisher, Pujols, Fielder and Greinke? I would argue that all 5 of those contracts were over-pays to older players and only made sense for fringe-competitive teams. Keep in mind, adding just one or 2 of them would still not make this team a WS contender. The money will be spent when it makes sense to. For now, they are choosing to do things like pay a 20 year old prospect $30 million, extend guys like Castro, and negotiate an extention with Samrdzija and probably Garza (at least talks for sure).

          • Rebuilding

            Not what I said – everyone always ducks Cespedes, Darvish and Ramirez. Those guys provided 13+ WAR last year at our 3 biggest gaping holes. we were outspent by the A’s, Rangers and the Brewers.There are two wildcards now and the playoffs are a complete crapshoot. Meanwhile the value of the franchise is exploding and we are or are close to being the most profitable team in baseball. I’ll ask again – what if Soler, Baez and/or Almora flame out? When will everyone on this board be ok getting more than Edwin Jackson or flip able pieces? 2018?

            • DocShock

              Two points in regard to Cespedes and Darvish. First with Darvish it was a blind bid to win negotiating rights. The Cubs bid what they thought would win the rights how were they to know the Rangers would bid more? Plus there has not been a ton of good history of Asian pitchers coming over and doing great. Let’s see how he does not that teams have had a year to scout him. As for Cespedes how many teams thought he was going to play like he did last year? He was a surprise, even the A’s were happily surprised at what he gave them. Let’s also see what he does this year now that teams have had a year to scout him. If they both bomb what will you say then?
              I understand the desire to have good players but looking back on one good year and immediately saying the FO blew these acquisitions is a rush to judgement in my opinion. How many players have had a great year their first year and then fizzled out? Now before you call me a FO apologist know that I like some of the moves they have made and have disliked others they have made. I feel that overall we are moving in the right direction and are in better shape for long-term success than we have been for a long time. That does not mean that I wish some things had been done differently, but I am willing to give the benefit of the doubt to the Cubs right now. If we don’t progress in the next couple of years then I will be glad to say that we need a different course.

              • Chris

                I have to agree with DocShock here. Cespedes and Darvish were exceptions to the rule. The Cubs were in it to the end on both and didn’t come out the winners. It’s unfortunate, but I don’t come away from those scenarios thinking they were less than aggressive in their pursuit of either player. As for Ramirez, sure they could have used his performance. But sometimes you have to let players move on if things are not working out. Even he was recently quoted saying something to the effect of, “Since they were rebuilding, it made sense not to sign me long term.” I don’t believe that anyone on this website is advocating the Cubs should continually spend less money in the marketplace. But I have every expectation that when the right players and timing align, the Cubs will increate their budget significantly. Further, the money saved over the last couple of years should be brough out of savings and reapplied to the ML team. I don’t consider myself a FO apologist. I thoroughly believe in the approach they’ve taken to restock the minor league team. I like the approach they’ve taken on beefing up the staff for better talent evaluation. But I also like the rationale behind signing Jackson to help fill out the rotation a bit more, understanding there won’t be 4-5 starting pitchers available in any given F/A market. A methodical approach seems to be the right way to go. Other than showing who’s spending more, simply comparing teams payrolls in a given season doesn’t tell the entire story. Each of those teams have contracts they wish they didn’t have. The Cubs are working to eliminate some of that, while acquiring talent to build around. In most cases, the examples given of teams spending more reflect that those teams are at their ceiling for salary expense, while the Cubs are currently at their floor. Now if the trend continued on 5-6 years, maybe there would be a valid complaint to be had. But this number will start to creep up next season, and when it makes better sense to spend more it could significantly increase. We’ve all been waiting for the championship. If I die tomorrow without seeing one, I’ll be pissed. But I feel good about seeing an actual plan rather than seeing them spend just for the sake of spending. Too often there was no plan.

                • Chase S.

                  Also, if I’m not mistaken, I don’t believe Ramirez wanted to resign with the Cubs anyway.

                  • Rebuilding

                    As Chris quoted Ramirez saying “They were rebuilding so it didn’t make sense to resign me”. Sounds more like he didn’t see himself as part of a competitive team so might as well play your last few trying to win. I’m pretty sure 4/50 instead of 3/39 would have changed his mind.

                • Edwin

                  Good point. I think the concern is that if you wait too long to decide “when the right time/players are available” that you risk missing out on opportuniteis, and perpetually landing in the “we’ll wait until next offseason to start spending” situation, or that when the team finally does have a young core that they want to spend around there aren’t any options on the open market. Signing a player like BJ Upton might not make a huge marginal difference this year, but he helps bring the team closer to that “right time to spend” level 1-2 seasons from now. Plus he would act as insurance in case one of Soler, Almora, or both don’t pan out.

                  Signing a top FA now can help put the team in a better position to contend sooner than waiting.

                  • Rebuilding

                    ^^ Well put

                  • DocShock

                    Yes but you must have players othe teams want to trade for, without giving up your current core MLB, otherwise your just moving laterally. And the player has to want to go to a specific team and accept a contract there. In a perfect world every great player would want to play for Cubs but that is not real world.

                    • DocShock

                      *should be you’re not your!

          • CubFan Paul

            “So you would prefer they beat the contracts given to Bourn, Swisher, Pujols, Fielder and Greinke”

            This is the ‘Hansman’ argument. I hate it too. There are other ways/lesser players available that could of been had to keep the 2012 & 2013 teams competitive. I’ve never pounded the table for theo&Co to come in and win a world series within two years. Parallel fronts

            • JulioZuleta

              Lesser players like David DeJesus, Baker, Feldman, Hairston, Fujikawa? Where exactly is your middle ground?

              • CubFan Paul

                “Competitive” is the word i use that people always overlook. A seventy something win team on paper to start the season is not “competitive”

                • JulioZuleta

                  I know…I asked you what free agent over the last 2 years would have made them competitive?

                  • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                    Let’s flip this tired ploy around.

                    I demand that you show how many games the Cubs would have won with every possible combination of free agents, in order to show that it wouldn’t have been enough for the playoffs.

                    • JulioZuleta

                      It’s not a tired ploy. Im asking who the players are that were available, between the caliber of the Greinke-Pujols-Fielder-Swisher-Bourn mold and the DeJesus-Baker-Feldman-Fujikama mold? You can’t make statements that “Oh, I wasn’t necessarily talking about the top tier guys,” but then not be able to support that with some sort of feasible, middle ground. Who would you have wanted?

                    • JulioZuleta

                      I’m tired of your tired ploy of getting backed into a corner only to “flip” the question to the other side. I’m not the one who suggested the Cubs should have spent on FA’s…I just asked who you suggest that’s been available the last 2 offseasons.

                      There gets to a point where you need to back up your conclusory statements with some substance.

                    • MichiganGoat

                      agreed Julio agreed

                    • MichiganGoat

                      Kyle quick question… If you know it all why can’t you answer this question. Play GM tell us who the Cubs should have signed while building the farm system so that you parallel front plan would look successful. I’m really not trying to be combative here, I just like to see a model of your plan.

                    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                      Because I’ve answered the question literally dozens of times at this point.

                  • MichiganGoat

                    Paul this is not a direct question for you but I like where this conversation is going, SO….

                    That an answer I’d like to hear, if we remove the super contracts that I think most people agree would not have been a wise decision (Fielder, Pujols, Grenkie) and as for Darvish that was a blind bid vs. a negotiation with a player or agent. As for Cespedes it was the 4 year contract that won the A’s his services. So I’m guessing the following players are the FA that some people wish the Cubs signed: Hamilton, Wilson, Bourn. If there are others someone please chime in but I don’t see how those players give us anything but a near .500 team (and that’s if everything goes right).

                    What i find amusing is how many people lament over the Soriano contract yet wish the Cubs would sign more FA… idk something about cake and having comes to mind – cue DarthHater meme ;)

                    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                      Wilson was dead-set on going to LA, I won’t ping them for that.

                      The Soriano contract wasn’t ideal, but it wasn’t nearly as bad as people think.

                    • hansman1982

                      When you do these things, you also have to account for Ramirez’s desire to remain in Chicago. Without him, 3B, CF, C all remained black holes (CF and C (the magnitude) came out of nowhere).

                    • CubFan Paul

                      A run down on “other ways/lesser players available”, as i put it is exhaustive because its been two offseasons.

                      Theo&Co are signing guys off the scrap heap because they want to pick in the top 10 in 2012, 2013, 2014 and maybe 2015 also. That’s the Plan.

                      Theo&Co building a competitive team (80ish wins on paper to start the year) goes against the Plan (Draft Bennies).

                    • hansman1982

                      “The Soriano contract wasn’t ideal, but it wasn’t nearly as bad as people think.”

                      Last year at this time, it was looking like it was pretty bad with 3 more years of crap to go.

                    • DarthHater

                      Sorry, I’m asleep at the switch today:

                      [img]http://4.bp.blogspot.com/-ZMJ5X7J-Sv4/T6GQ9rcwC4I/AAAAAAAAA8c/uc3EHIf9u8c/s320/my+cake+meme.jpg[/img]

                    • MichiganGoat

                      That’s better Darth

                  • Rebuilding

                    Ramirez, Cespedes, Darvish, Aaron Hill, Jeremy Affeldt, Melky Cabrera, Shaun Marcum, Adam LaRoche (if u kept Cashner), Kyle Lohse, Jeff Keppinger, Brandon McCarthy, Anibal Sanchez, Jokim Soria, BJ Upton, Noriachi Aoki, Wei Yen Chen, Ryan Doumit, Jason Kubel, Ryan Ludwick, Josh Willingham are a few guys that could help this team

                    • Rebuilding

                      All of these guys on “reasonable” contracts

                    • MichiganGoat

                      I guess but we are already signing people in this level, what we aren’t doing is over paying anyone is this category of FA, plus we wen’t really hard on the best name on there, Sanchez, but he instead was determined to go back to Detroit. But the rest of them are in the David DeJesus quality of FA. And I’m not sure how much better our team would be with any of those players.

                    • MichiganGoat

                      “All of these guys on “reasonable” contracts”

                      That’s the rub a reasonable contract for most of those players is like 5-6M a year and to push it beyond that isn’t a sound decision.

                      Plus the best value we can get out of players from list (minus a few) is to flip them like we did last year. I guess I’m not seeing you you can be upset with the FO when these are the types of players they are already signing and flipping if they perform.

                    • Rebuilding

                      Doing nothing but not getting outbid by the A’s and not giving out a longer than 3 year contract you could have:

                      C Doumit
                      1b Rizzo or LaRoche
                      2b A Hill
                      3b A Ramirez
                      SS Castro
                      Util – Keppinger
                      LF – Soriano
                      CF Cespedes
                      RF Reddick/Ludwick
                      OF1 DeJesus

                      If you have that lineup maybe you go get Grienke or outbid Det for Sanchez

                    • JulioZuleta

                      Stellar list. I wouldn’t consider all of those reasonable, I wouldn’t say all of them would even start on this team, I wouldn’t say any combination of 3 of those guys makes this a playoff team, and I wouldn’t say that the Cubs weren’t involved in the negotiations on those guys,

                    • MichiganGoat

                      That is really fantasy baseball lineup and just isn’t realistic that a team can sign that many FA in two years. And again I don’t think that really gives us more of a team than we had last year before the sell-off, you’ve got a meager offense there with no pitching.

                    • Rebuilding

                      Uhhhh…what? By WAR that is the best lineup in the National League…by far

                    • Rebuilding

                      Really? We have signed that many guys off the scrap heap the last 2 years. Actually more since Ramirez was a Cub

                    • JulioZuleta

                      I posted my comment before I saw your lineup. Now that I see it, what was I thinking? Look how easy it is to sign 8 FA’s? You forget, the Cubs were rumored to have signed Sancez, were in on Cespedes…there are a lot of problems with that list. (Besides the fact that the payroll would be pretty huge, higher than it’s ever been before).

                    • MichiganGoat

                      Seriously you don’t see how you are playing fantasy baseball with that lineup and then you throw out WAR as you supporting detail. While ignoring the logistics of signing that many FA in two off-seasons and reality that it would ever happen. But yeah like WAR man WAR what is is good for… absolutely everything I guess

                    • CubFan Paul

                      Cespedes’ agent was only interested in a 4year deal (age 30) or 10 year deal (age 36).

                      The Cubs came in with a no-win bid at 6 years for some reason..

                    • Rebuilding

                      Resigning Ramirez and signing 3 bats over 2 years? You could take out the RF and put DeJesus there and it’s still a Top 3 lineup. We signed more #5 starting pitchers this year

                    • Rebuilding

                      I love the “build a fantasy lineup” straw man. What do you think Epstein and Hoyer are trying to do – get the most WAR or wins or whatever the hell old timers call things that win ball games. It’s an unreasonable 2 offseasons to re-sign your 3b, replace Barney, figure out what Cespedes agent wants and sign Aaron Hill who was due for a bounce back? You guys have really low expectations

                    • http://www.bleachernation.com Brett

                      It’s very important, in this conversation, to make sure that you ignore:

                      (1) Any years beyond 2013. Only 2013 matters.

                      (2) Free agents are real people who won’t just sign anywhere for any amount you estimate based on how much they signed with another team for.

                      If you ignore those two things – which you have successfully done – it’s quite easy to explain how the Cubs could have been vastly better in 2013. You are quite right about that.

                    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                      Who wants 2013 when you can have vague promises of a better, undetermined future?

                    • http://www.bleachernation.com Brett

                      Who wants a long-term plan when you can have expensive back-to-back first round playoff sweeps and then years of shit?

                    • DocPeterWimsey

                      What team came close to signing a fraction of these guys?

                      This is the problem with the “Team X could have fixed all of its problems with Free Agents” argument: it requires that one team beat out all other teams for each player. That isn’t going to happen: sometimes players will be eager to go to a different location (e.g., Sanchez), and sometimes one team will completely trump all of the other teams by huge margins (e.g., Cespedes and Darvish).

                      Now, could the Cubs have filled all of their holes with FAs in 2011/12? Sure. Would the other 29 teams have stood by idly and let them? No.

                    • Rebuilding

                      I did list about 20 guys who would make this year’s team better (and last years) in response to a direct question. I purposefully left out anyone with longer than a 3 year contract (except for Sanchez because evidently we wanted him). None of these guys makes over $13mil a year (except for Sanchez).

                      Ok, I’ll ask you guys – if 2 of the 3 of Soler, Baez and Almora don’t make it, which probability says will happen, what year would you be ok with getting more than Edwin Jackson, Scott Baker, Scott Feldman and Carlos Villanueva? 2016, 2017? How long would you stick with Valburna at 3rd before signing an actual major leaguer? And please don’t say Amaya, Candelario, etc… Those guys are at least 2016 if at all. Is everyone prepared to wait that long if Soler and Baez don’t blow up? We have wasted 2 offseasons of not signing quality major leaguers while slashing payroll to wait on the farm. What if the farm fizzles? What’s Plan B?

                    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                      The post-2011 Cubs had significant money coming off the books and tons of payroll room (had they not lowered payroll).

                      The other 29 teams may not have stood by and let it happen, but there were few of them who could have done much about it.

                    • Sahadev Sharma

                      Also very important to ignore the fact that Rebuilding has the benefit of hindsight. Duh, it was obvious Aaron Hill was due for a bounce back year, since we already saw it happen.

                      What I’d rather see you do, Rebuilding, is tell us who the Cubs should have signed this past offseason and then in six months we’ll revisit your list and see how it looks. You’re not only asking them to spend more on free agents, you’re asking them to nail every one of their moves. That’s completely unreasonable.

                      You readily admit that Almora, Soler and Baez could all bust out, but you want Theo and company to be perfect when they spend on free agents, big or small. It’s illogical.

                      As far as Cespedes and Darvish, I’d have liked them to go harder on Darvish, I’m fine with what happened with Cespedes. But again, you’re completely ignoring what the Cubs scouts actually thought about these players. Did they actually see such a large investment in either player as wise? We can’t just disregard whether they perceive a move as a wise investment or not because it’s not our money and we don’t care how much is spent.

                      I do agree that payroll should be among the higher ones in pretty regularly. I think they’ll be spending big very soon, so I’m not gonna complain about a couple lower years. But I also think cherry picking who they should have spent on in the past is unfair.

                      You’re also assuming that none of these players in the minor league system will be used as trade bait to get established major league stars. Acquiring a guy in his late-20s like Max Scherzer or David Price via trade is a much smarter route than banking on a early 30’s free agent to not break down on you.

                    • DocPeterWimsey

                      “but there were few of them who could have done much about it.”

                      It only takes a few. The Rangers were willing to bid over twice as much as anybody else for Darvish’s services. And why not? Although they might not have had the Cubs resources, they also had fewer needs: and thus could allocate more for any one of them. (Obviously, the Rangers now regret having over-spent by so much, but the Rangers really wanted that extra pitcher to put them over the top.)

                      The A’s were willing to spend half again as much as anybody else on Cespedes. The A’s certainly do not have deep pockets: but they went pretty much all-in on him as one of their two pickups of any magnitude.

                      And that’s why the other teams could do something about it: the final pieces of the puzzle are worth more to you (and easier to just go hog-wild on) than is one of many pieces that you need.

                    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                      The hindsight argument is completely unfair. For one, many of us were here arguing against this plan at the time it was happening.

                      For another, we could do a “no-hindsight” version, but we’d have to assume things like Marlon Byrd and Geovany Soto being useful, or Kerry Wood being a decent set-up man.

                      You can’t ask “did they perceive it as a wise investment” when the very issue being debated is their wisdom in this regard. That’s begging the question.

                    • Rebuilding

                      I made a long list to show what was available over 2 years. Of course we wouldn’t have signed all of these guys. Jeez, I didn’t know I had to make that caveat. Signing 4 guys to relatively short term contracts over 2 years now blows your minds? I’m continually amazed that that people like Kyle and me are treated like crackpots when this team lost 101 games last year, slashed payroll and added 1 decent free agent. You are all sitting around crossing our fingers that 3-5 guys who have never played above A ball turn into superstars, but you are the rational ones.

                    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                      The “you needed many pieces” argument ignores that the Cubs left a lot of money on the table. They could have afforded to outbid for Darvish or Cespedes or both or any of the other several pieces that would have fit those needs.

                    • hansman1982

                      “The other 29 teams may not have stood by and let it happen, but there were few of them who could have done much about it.”

                      Then you start getting into the territory of grossly overspending to contend.

                      To get Ramirez it would have been 4/$50, Sanchez 6/$85-90.

                      There’s $30M a year right there.

                    • DocPeterWimsey

                      The point is getting them all, but getting as many as needed. What team has filled as many holes as the 2011 Cubs had in one off-season? The Dodgers insane spree over the last 12 months has not filled as many holes as the Cubs had. (It’s not filled all of the Dodgers’ holes, and they were a better team after 2011 than were the Cubs.)

                      It’s really very simple competition theory: if two competitors both need X pieces, and A has X-1 whereas B has X-10, then that last piece is actually worth more to A than it is to B. And that is why the other 29 Teams would not and will not stand by idly while one rich desperate team buys up players: they are worried solely about what *they* want, and if they are in a position where they think that they need only one or two pieces, then they can concentrate their resources on the appropriate players.

                      (In a sense, this is akin to r vs K selection in simple ecological models: but with the difference being that the Cubs needed K-level effort on r-level progeny.)

                    • Rebuilding

                      And I’ll ask again. If the farm system fizzles what’s plan B? When would you guys start picking up useful major leaguers? 2015, 2016? I’ve laid out a pretty detailed explanation of things, so what’s the other side? I’m curious to find out how long people are willing to wait on a major league average 3b?

                    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                      I think Doc is severely overestimating how many holes we had.

                      1b, 3b, and 2 SP was what we needed to fill going into that offseason.

                    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                      That’d be $30m well spent.

                      This exact team with Ramirez and Sanchez added is a serious WC contender.

                    • Rebuilding

                      @Hansman – I would take those 2 contracts right now, no questions asked. Ramirez earns that money in 2 years. The Cubs have deep enough pockets to carry his dead weight the last 2 if he breaks down. That’s what being a big market team allows you to do. I think Sanchez at that price is a bargain. As was suggested before I’ll start keeping a tally to see how I do and Hans can tell me how much over what these guys actually signed for we would have had to pay. Lets see how I do

                    • DocPeterWimsey

                      The “Team X still had money left on the table” argument ignores the fact that many Teams A, B, C, etc. had fewer holes to fill than did the Cubs and thus more money per hole than did the Cubs, as well as a greater sense of urgency about filling those holes. (The Rangers with Darvish obviously are the extreme example, as they probably bid $25M more for negotiating rights than they needed to do: but, by golly, they got those rights!)

                    • Sahadev Sharma

                      How is the hindsight argument unfair? That’s exactly how the front office has to operate. You can’t criticize them for not getting specific free agents when you have the benefit of hindsight. Criticizing them for not spending is perfectly allowable. I may disagree, but I won’t rip you for it. My hindsight comment was strictly in regards to Rebuilding’s list of players that they could/should have signed. It was a big list of guys who surpassed their value. How do we know one/some of Feldman, Villanueva, Schierholtz, Hairston, etc. won’t be on that same list come next year?

                      And I wasn’t begging the question (when the hell did the phrase suddenly get popular? Keith Law is using it all the time. Was there a push back against the dopes who don’t know how to use that phrase correctly or something that I missed?). I was under the impression that the discussion was them merely not spending money.

      • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

        Every owner in all of sports, ever, has claimed to be losing money.

        • CubFan Paul

          Especially NBA owners…that was the owner’s argument/defense during the last CBA negotiations a couple years ago.

        • JulioZuleta

          Well….the Cubs, having much lower payroll and a far greater revenue stream, profited only $32 million. The Sox payroll was $14 mil higher and their attendance was about a million less…not to mention all of the other reasons the Sox make less payroll. I think Reinsdorf is telling the truth.

          Also, that kind of contradicts itself “Every owner in all of sports, ever has claimed to be losing money.” If you read carefully, Reinsdorf says that he MAKES so much money on the Bulls, that he is able to subsidize the Sox.

          • CubFan Paul

            I’ll believe Reinsdorf crying Poor Sox when he shows his books.

            • JulioZuleta

              Look at the numbers posted by Forbes…The Cubs made only $32 M with a MUCH lower payroll and greater revenue…Obviously he’s not poor, but he’s not making much, if any,off the Sox.

              • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                Operating income is not profit.

                • hansman1982

                  It’s close-ish.

                  To get to net profit you’d also have to remove taxes and interest expenses.

                  Interest from the $580M would be around $16M, that leaves $16M taxable.

                  $8M to the DR plus a portion of the $15M they are paying for the Arizona facility.

                  At the end of the day, we are talking about (again, assuming Forbes numbers are correct) $5-7M unaccounted for.

                  • hansman1982

                    $5-7M “unaccounted for” being the max, if we are to use the Forbes numbers as gospel.

                  • Edwin

                    Also depreciation and Ammortization expense.

                    • hansman1982

                      That is taken out before Operating Income.

                      Gross – Operating Expenses – Depreciation – Amortization

                    • Edwin

                      Hans,

                      According to Forbes, the income number they show is EBITDA.

                    • hansman1982

                      Well then (maybe I should have checked their footnotes).

                      That would reduce the amount left over some more, probably not a whole lot as they may still be accounting for expenditures from (potentially) before the sale.

        • David

          What good does it do Reinsdorf to lie about losing money on the White Sox when he is, simultaneously, admitting to using his hugely profitable basketball team to make up for it?

          • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

            Is MLB pushing for revenue sharing harder than the NBA is?

            • JulioZuleta

              That argument implies that MLB is not able to determine the White Sox financials…but you think Forbes can?

              • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                It implies that PR matters.

                • JulioZuleta

                  It also implies that the Sox can hide their financials from the MLB, but not Forbes. You evade the obvious problems with your statements and shift the focus to something else.

                  • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                    It implies no such thing.

    • gocatsgo2003

      And a team should be measured by payroll because… ??

      They’re actively working to get the $102MM down and in fact are currently only on the hook for $55MM in 2014 and $24MM in 2015. The allocation of spending is (rightfully) shifting toward improving facilities and other infrastructure before beefing up the MLB payroll.

      • Rebuilding

        Why? Is HoHoKam so bad it was turning away free agents? The A’s are playing there next year. I realize the Dominican situation changed, but I would much rather have put that money towards lining these kids “handlers” pockets and putting more boots on the ground.

        • Patrick W

          The As are not playing there next year. Next year they are doing a complete remodel and the As are coming in 2015. It’s a year round facility that is needed and a new complex was the Cubs preference. The As won’t move in until HoHoKam is upgraded to a better facility

          • Patrick W.

            where the hell are my apostrophes?

          • Diesel

            The remodel is coming in the form of removing seats since the A’s will not draw fans to HoHoKam the same way the Cubs did. They don’t want to see a bunch of empty seats so they are going to remove them so it looks just as full.

    • TWC

      I would agree that the Cubs payroll is absurdly low for a team in their position, but your insistence upon referring to people who may disagree with your position (for whatever reason) as “Ricketts/Theo fanboys” is stupid and juvenile. Crap like that just totally undercuts what may indeed be a legitimate point.

      • Rebuilding

        Not sure what else to call people who reflexively think everything they are doing is the right move. Not including you in that group, but there are many. I think several of the things they have done are laudable, but I’m sure Kyle and I have been called worse. You make a fair point and I’ll stick to the facts

      • MichiganGoat

        That’s it TWC turn over you Fanboy Membership Card, jean jacket, and lock of Theo’s hair. You do not deserve them anymore.

        • DarthHater

          [img]http://cbsboston.files.wordpress.com/2012/06/theo-epstein.jpg?w=300[/img]

          • DarthHater

            Isn’t he just . . . dreamy? :-P

    • hansman1982

      Starting a new reply thread:

      “I think Doc is severely overestimating how many holes we had.

      1b, 3b, and 2 SP was what we needed to fill going into that offseason.”

      The FO did a good job filling 3 out of 4 (Damn good filling the 1B hole). They did make a hole in the BP by trading Marshall.

      2012 contention went out the window once Byrd, Soto and Soriano (just for 45 days) decided they weren’t going to hit. Losing 1/3 of your offense (especially when they all were considered capable of providing above positionally average offense) is a huge blow, especially when you don’t have any Votto-esque superstars on the roster.

      • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

        They did more than just trade Marshall. They also traded Cashner and took Samardzija out.

        When you gut a pen like that and make no replacements, it’s no surprise that the 2012 Cubs had the worst pen in baseball. -8.5 wins compared to a league-average pen in net WPA. I don’t think people understand how much a league-average bullpen and 3b would have improved the Cubs last year.

        It’s true that contention would have been pretty hard with what happened to Soto, Byrd, Jackson, Wood and Garza. But we didn’t know that at the time.

        • http://www.bleachernation.com Brett

          But, now that it’s happened, wouldn’t you prefer that the Cubs finished 2012 2nd to worst in baseball rather than, say, 11th worst?

          • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

            Depends on what players we added to get there. If some of them are around at key positions for 2013, I’ll still take it.

        • hansman1982

          One more good pen arm would have been nice. Not make or break, especially when you factor the additional wins obtained by Samardjiza in the rotation.

          It’d be nice to see the pre and post deadline bullpen stats.

          This also calls into question the desire to trade Garza before last season.

      • hansman1982

        “@Hansman – I would take those 2 contracts right now, no questions asked. Ramirez earns that money in 2 years. The Cubs have deep enough pockets to carry his dead weight the last 2 if he breaks down. That’s what being a big market team allows you to do. I think Sanchez at that price is a bargain. As was suggested before I’ll start keeping a tally to see how I do and Hans can tell me how much over what these guys actually signed for we would have had to pay. Lets see how I do”

        I’ve said before, I’d take Ramirez at that contract. Sanchez at 6/85-90 – ehhh…

        “That’d be $30m well spent.

        This exact team with Ramirez and Sanchez added is a serious WC contender.”

        And you would have the 2010 Cubs.

        • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

          The 2010 Cubs except better and with a better organization running the farm system.

          • hansman1982

            Looking at it positionally, the only places better would have been 2B, SS. These would be offset by LF and 3B being marginally worse (due to aging).

            SP would be highly similar, Bullpen and Bench would have been similar.

      • hansman1982

        To Sahadev:

        “How do we know one/some of Feldman, Villanueva, Schierholtz, Hairston, etc. won’t be on that same list come next year?”

        Heck, you could put Maholm, DeJesus, LaHair, Marmol, Camp (I wish we would have just let him walk) on that list from last year.

  • JulioZuleta

    With all of the random expenses (software, dominican facilities, Spring traing stuff, international signings, development expenses for the renovations, paying salaries of departed players (Zambrano), an army of scouts, crazy city amusement taxes, debt repayment…, as well things like possibly sweetening the deal so Demp would waive his no trade) it’s hard to imagine that Forbes can confidently say they made $32.1 m last year. How could they possibly know all that stuff?

    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

      Software is cheap (on the scale we are talking about)
      The Dominican facilities were balanced out by money we saved on the CBA amateur restrictions
      Zambrano’s salary was included in the MLB payroll
      Scouts are dirt-cheap
      The Cubs don’t pay the tax directly
      The Cubs didn’t make a payment to Ryan Dempster to get him to approve a trade

      • http://www.bleachernation.com Brett

        “The Dominican facilities were balanced out by money we saved on the CBA amateur restrictions”

        I’m going to give you a chance to do a do-over on that one.

        • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

          And I’m going to pass on that do-over.

          The Cubs spent roughly $20 million in 2011 on amateur signings (draft and IFA).

          On 2012, the Cubs were restricted by the CBA from spending more than about, what, $13 million or so?

          The Dominican Facility cost $8m.

          (Soler and Concepcion both got MLB contracts and are counted under MLB payroll)

          • http://www.bleachernation.com Brett

            “(Soler and Concepcion both got MLB contracts and are counted under MLB payroll)”

            Don’t try to bury that in a parenthetical. That’s the entire point – to say that the Cubs “saved” money on amateur spending in 2012 because of the CBA is, like, literally the opposite of true. The CBA artificially drove UP the prices on Soler and Concepcion. If you want to make this point in 2013, I could potentially see it. But not in 2012.

            (I suppose I see what you’re saying on them being in Forbes’ payroll figure; but I’m saying we don’t know how those contracts are calculated for the Cubs’ spending purposes. It could easily be that, internally, they “paid” for Soler and Concepcion entirely in 2012, since there was “extra” money to spend. This kind of exposes the problem with us only getting very limited numbers – estimates, at that – from Forbes, with no breakdowns whatsoever. It could be very misleading. Or it could not. We don’t know.)

            • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

              It doesn’t matter where you want to account for them.

              The Cubs combined amateur+mlb spending went down a ton in 2012. If you want to count it all as MLB spending or whatever, it ends up in the same place.

              • hansman1982

                Did you read the Forbes article? The graph they have says player expenditure increased from 2011 to 2012. They do project it to go down this year.

                • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                  That’s not what the graph says.

                  Look at it again. 2012 is the far left-hand bar, and it is lower than the one immediately to its right, 2011.

                  • hansman1982

                    Then why does the “hover bubble” say 2013?

                    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                      Because they paid some intern in college credits to label the graph.

            • hansman1982

              If you look at the article, they have a graph indicating player expenses. Last year player expenses were $162M, this was an increase over 2011. The last time this amount decreased was from 2006-2007.

              • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                Are you looking at an article for the wrong year or team? Because it clearly says the Cubs’ 2012 player expenses were $137m.

                • hansman1982

                  If you look at their 2011 article:

                  http://www.forbes.com/lists/2011/33/baseball-valuations-11_Chicago-Cubs_335092.html

                  It has 2011 player expenses at $157M with no data for 2012.

                  Their 2012 article lists the same expenses in 2011, but then has 2012 listed at $162M.

                  • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                    You are going to have to post a screenshot or something

                    of where you are getting $162m from.

                    I’m looking at the article right now, and it very clearly says $137m for player expenses:

                    Year Purchased: 2009
                    Revenue2 : $274 M
                    Operating Income3 : $32.1 M
                    Debt/Value4 : 58%
                    Player Expenses5 : $137 M
                    Gate Receipts6 : $132 M
                    Wins-to-player cost ratio7 : 59
                    Revenue per Fan8 : $54
                    Metro Area Population: 9.5 M

                    • Cubbie Blues

                      If you scroll down and look at the graph. Hover your mouse over the far left bar. It says 2013.

                    • http://www.bleachernation.com Brett

                      It’s the graph.

                      But a head’s up to Hans: the years they’re showing are the year of the Biz of Baseball, which is a year later than the year they’re talking about, for whatever that’s worth. The 2013 $137M figure is for the 2012 season. That $162M figure is for the 2011 season, and includes all player expenses.

                    • hansman1982

                      Then, according to their graphs, the entire world, except for them, missed out on a year of baseball.

                    • hansman1982

                      Look at this page:

                      http://www.forbes.com/lists/2011/33/baseball-valuations-11_Chicago-Cubs_335092.html

                      Then look at this page:

                      http://www.forbes.com/teams/chicago-cubs/

                      Either I am WAAAAY off in how I am looking at this, or Forbes snuck an extra year of data in this year.

                    • http://www.bleachernation.com Brett

                      Forbes’ 2012 Business of Baseball page for the Cubs – which is data from the 2011 season – is offline (or I can’t find it). The 2011 Business of Baseball is for the 2010 season.

                      See the footnote in that 2011 Biz post: “Revenue and operating income are for 2010 season and net of revenue sharing and stadium debt service.”

                    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                      We both know the Cubs didn’t spend $162m on players in 2012.

                      Or at least, I really hope you know that. You seem like you’ve been paying attention.

                    • http://www.bleachernation.com Brett

                      The $162M is for the 2011 season.

                    • hansman1982

                      “We both know the Cubs didn’t spend $162m on players in 2012.

                      Or at least, I really hope you know that. You seem like you’ve been paying attention.”

                      That number includes bonuses and the like.

                      However, the broader point being, either this is the only number that could possibly be inaccurate in the entire Forbes article or you have to call into question all of their numbers.

                    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                      We know how much the bonuses were, too.

                      It all adds up.

                    • hansman1982

                      It is entirely possible that I was directed to an old article.

                    • http://www.bleachernation.com Brett

                      Can you guys not see my comments?

                      The “2012” $162 million figure is for the 2011 season, when it is entirely possible that the Cubs spent $162 million on total player costs.

                    • hansman1982

                      “We know how much the bonuses were, too.

                      It all adds up.”

                      Ya, I agree, player expenditures makes sense now (the $160M seemed out there).

          • JulioZuleta

            Hiring Bloomberg to personally create an entirely new analytical software system and agree to only sell it to you is cheap? I’m asuming you have some sort of basis for that statement.

            Also, my point was that in an organization of this size, there are so many moving parts that having an outside company that presumably hasn’t audited you put a precise number on your income seems like a stretch.

            • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

              Because it doesn’t cost tens of millions of dollars to commission that sort of software.

              You’re just trying to throw dirt on the numbers. Sure, we can’t know them down to the dollar without seeing the books. But sports teams operate very publicly, and we can make very reasonable guesses.

              • JulioZuleta

                Reasonable is pretty ambiguous.

                Also, consider expenses like paying $23 million for the McDonald’s accross the street. They made a huge number of unusual, non-payroll expenses over the last few years that will help the team down the road.

                • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                  The Cubs aren’t responsible for every land purchase the Ricketts make.

                • Cubbie Blues

                  Actually, the Cubs did not purchase the McDonald’s. Ricketts did. That would make it two totally separate books.

              • D.G.Lang

                I have been working with main frame computers since 1967. I have held the titles of Systems Specialist (higher than a senior Systems Analyst) and Systems Engineeramong others and I own my own consulting company. I mention this only so you can better judge my level of experience and knowledge.

                Back in the late 80’s and early 90’s I worked for a telephone company in Chicago which no longer exists. They invested several million in a new telephone billing system. During the development phase they had from what I’ve heard over 400 consultants coding the new system. I know of one of those people who was making well over $125.00 per hour and there were several other independent consultants who were also charging over $100.00 per hour. I personally worked on that system for a little over 5 years.

                It took over 4 years to finish coding and testing the new system. The company had purchased a smaller billing system and then modified it to complete the new system.

                Most people have no idea of how expensive it is to develop new systems and how much effort is required to test the system to ensure every part is running correctly.

                An entirely new system with very few previously existing components is even more expensive to create from scratch. I don’t think that there many systems like the Cubs new system existing anywhere.

                Boston did and propably still has a system in place but I don’t think it is anywhere near as comprehensive as the new Cubs system will be when it is completed. We should remember that Theo was a major force in developing Boston’s system and he most likely would know where it falls short of being able to handle everything that he wants for the Cubs.

                As time passes and one develops experience in a system, they acquire new ideas of how to expand that system to derive even more value from it. I am sure that Theo has several new ideas for the new Cubs system and new ideas are especially hard to create systems and programs for.

            • CubFan Paul

              “having an outside company that presumably hasn’t audited you put a precise number on your income seems like a stretch.”

              Forbes obviously has MLB “sources”

              • JulioZuleta

                Presumably, the Cubs accountant? What other MLB source couput a number on that?

                • hansman1982

                  Team accountants would be getting fired (and probably sued) left and right if they were Forbes’ sources.

                  They are using estimates (which are probably in the ballpark for most teams) to gauge every teams value, income, etc…

                  These numbers should be taken with as much confidence as someone trying to predict a SC outcome based on the oral arguments.

                • CubFan Paul

                  The MLB Front Office, i’m guessing…

                  • JulioZuleta

                    Ok, I’m much more confident in the numbers now that you “guess” the source is an MLB front office person. What is that guess based on?

                    • CubFan Paul

                      It’s based on Forbes being a reputable finance publication/company.

                • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                  Sports figures operate in very public spheres.

                  While they may not publish their books, they do let the information leak out in drips and drabs. Nothing that was in the report was out of line with all the information we’ve gotten before.

                  • JulioZuleta

                    Mr. Know It All (Kyle)
                    March 27, 2013 at 1:35 pm | Permalink | Reply
                    Every owner in all of sports, ever, has claimed to be losing money.

                    I wonder why they would do that. If a bunch of internet commenters can speak so clearly on team’s finances, since, after all “Sports figures operate in very public spheres. While they may not publish their books, they do let the information leak out in drips and drabs.”

                    If it’s so easy for US to determine team’s books, why was it such a HUGE deal that NFL owners don’t show their books during CBA negotiations? Why also, were reports of the Carolina Panthers revenue off by a couple of hundred million or so? Because IT’S NOT THAT CUT AND DRY.

                    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                      They claim it because it is in their best interest to claim it.

                      Doesn’t mean that people who are paying attention can’t see through it. Just that we are not the majority.

                    • hansman1982

                      Wow, I just realized, we had this same conversation last year when it was released.

            • When the Music’s Over

              Having managed an IT department’s spend (from the Finance side) of an 800 person IT consulting firm for a number of years, I can say with 100% confidence that proprietary IT software at this scale, while expensive when looked at in a vacuum, simply isn’t that expensive overall. Maybe, just maybe it cost $5M upfront, and I’m being super generous. You could also possibly tack on another few hundred thousands tops for year to year licensing, maintenance, etc, but that’s about it.

              • JulioZuleta

                I’m genuinely asking this question: it would only cost the Cubs a “few hundred thousand a year” to keep Bloomberg from selling it to other teams. Right now, the Cubs have the only access to it. It seems peculiar that the Cubs would pay $5M, but only a few hundred thousand a year to keep it from other teams. Clearly, Bloomberg would make TONS more by selling to all 30 franchises.

                • When the Music’s Over

                  Who’s to say Bloomberg can’t create similar proprietary products for other teams? Cubs have one version completely tailor made for their team, using specific variables, etc. Another team could have a different version completely tailor made for another team, using different specific variables, etc.

                  Backbone of the programming is likely similar enough that the baseline coding is similar enough to leverage from one team’s model to the next, therefore, development costs to Bloomberg are kept in check.

                  I could be completely wrong, but I doubt the Cubs made Bloomberg sign some non-compete agreement with 29 other MLB franchises. You know what, now that I think about it, during the presentation Bloomberg ran at Hub 51 last year, I’m almost positive they said they were working a lot of different MLB teams.

                • Pat

                  It isn’t Bloomberg’s software to sell to the other teams. The Cubs essentially sub contracted Bloomberg’s employees to create the code, which the Cubs hold the rights to.

    • hansman1982

      Brett:

      “The “2012″ $162 million figure is for the 2011 season, when it is entirely possible that the Cubs spent $162 million on total player costs.”

      We can see them, just choosing not to.

      I somehow landed on the report they sent out in 2011 believing it to be last years report. When I saw the extra year gap, I was anticipating they were estimating for the 2013 season, already.

  • CubFan Paul

    Like I said Hans, at least $270M a year…

    • hansman1982

      Well, according to Forbes, the 2012 revenue was $256. The $274 is the 2013 revenue (obviously projected).

      • CubFan Paul

        I should of been saying ‘an average’ of $270M a year. I apologize. But, no way is it $30-$40M lower than that

        After the Renovation is complete, the Cubs are expected to top/reach $360-$400M a year easy.

  • fromthemitten

    wouldn’t this money be going to renovations?

  • fromthemitten

    Aren’t they saving this money for what will be very costly renovations?

  • fromthemitten

    What about renovations?

    • fromthemitten

      ack sorry about the triple post. they weren’t showing up because my IP was flagged

  • Chad

    I haven’t read through all of the comments, so maybe this has been touched on.

    $32m income does not equal cash in less cash out. The Rickets could pay down all the debt they wanted to, and that would not effect net income one bit. There are a lot of factors to consider when talking about net income. If the books show 32M in net income, that doesn’t mean there is 32M in $$$s to re-invest, spend, etc.

    • Edwin

      The $32M is also not Net Income, it’s EBITDA. Or Operating Income.

      • Chad

        I’m not sure if the 32m is Net or Operating income, Brett’s article doesn’t say one way or the other. Either way……it doesn’t equal available cash.

        • http://www.bleachernation.com Brett

          It’s EBITDA. They call it operating income.

          • Edwin

            Hansman is right, technically EBITDA and Operating Income are different. Operating Income = EBIT.

            • http://www.bleachernation.com Brett

              I edited my comment (I have that privilege) – I’m not touching the finance stuff, because it isn’t my field. I’m just saying what Forbes’ report says. They call the income “operating income,” and then define it as EBITDA.

              • Edwin

                It’s ok, I’ll just go edit Wikipedia, and then we can call be right.

            • When the Music’s Over

              The definition of Operating Income can vary quite a bit from firm-to-firm, and from year-to-year or even quarter-to-quarter depending on how they want to spin things.

      • Edwin

        My bad, it’s not Operating Income.

  • JulioZuleta

    I find it funny that whenever the Cubs say something, or anyone says something positive about the team, Paul and Kyle tear it apart like conspiracy theorists. Now, when these numbers come out, you blindly accept them and say “SEEEEE guys, we were soo right”

    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

      I’ve said no such thing.

      However, I have said that these numbers line up with my own research on the subject, while I find the case against them (some combination of “Ricketts promised he wouldn’t do that” and “nuh-uh!) to be rather lacking.

    • CubFan Paul

      i’ve also said no such thing.

      and on this post it’s Brett with the conspiracy theory:

      “What remains unclear is what the Cubs do with this “income.”…I’m no finance guy, so maybe there’s some obvious answer I’m missing. You know, besides simply saying Forbes’ estimates are way off, which is entirely possible, too.”

      • http://www.bleachernation.com Brett

        That’s a conspiracy theory?

        • CubFan Paul

          by conspiracy theory i mean: It looks like you were poking holes in the “back into the organization” statement. I wasn’t. I gave that up after Theo’s first offseason/Ricketts lowered the payroll again..

          • hansman1982

            Based on the Forbes calculations, we are talking about $5M a year in “missing” money.

  • 1060Ivy

    It all comes down to do you believe Ricketts statement that ‘every dollar that comes in the door goes back into the organization’.

    I believe that the statement is truthful but I also believe that he includes the Ricketts’ family is part of that organization so decreasing payroll while increasing his and his family’s compensation would keep every dollar in the organization.

    it’s no big deal but can be a seriously misleading statement.

    • When the Music’s Over

      Totally agree with you that it all comes down to what you believe.

      Just like politicians, I personally think savvy/smart management of any firm can spin comments however they like, always leaving themselves an out if/when the truth is exposed. I saw this firsthand working closely with an Investor Relations department/CFO/CEO for years. The shit they’d spin to the street to keep investor confidence (and therefore the stock price) high during quarterly earnings calls was fantastic, and at times border line complete bullshit. Careful wording was always king.

      This sentiment is nothing against those that choose to be more optimistic. It’s just a simple disagreement in belief.

  • MichiganGoat

    Can you believe it, we are having good discussion and debates without talking about the Wrigley renovation. Ah baseball season is almost here.

  • Kevin

    Some people have heartburn if the Cubs are paying down their debt because they feel any debt reduction is not in line with keeping all monies inside the Cubs organization. I believe any regular scheduled payments is just smart business. What happens if things don’t work out to stay at Wrigley? Wouldn’t you want them to be in a position to choose plan B if they don’t get they want from Tunney and the RT owners? Additionally, a couple years ago the Chicago Cubs were on a list of ball clubs carrying too much debt.

    http://m.espn.go.com/mlb/story?storyId=6621842&src=desktop

  • TSB

    Contrary to the concept of some of the brain-trusters here, the Ricketts’ peeps are under no obligation, moral, legal, or whatever to sink money back into the Cubs. It’s their money, and their business to sink or swim. I own stock in a small savings and loan; I do not send them back my dividend check to renovate or build a new headquarters building, nor to offer more pay for employees.

    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

      You are responsible for doing what you say you will do, which in Ricketts case is not taking any profit and turning it back into the team.

  • OCCubFan

    Just in case none of the 179 previous comments on this article mentioned it, fwiw in connection wit stadium renovation vs. moving, the Forbes article lists Wrigley Field’s value as 222M.

    Also, take a look at the wins-to-player-costs ratio. It’s been a decade since it was as high as 100 (i.e., average). There’s the real problem.

    • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

      That’s what happens when you haven’t had a first-round draft pick hit since Starlin Castro.

      • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

        And by Starlin Castro, I mean Mark Prior. I should eat something…

        • OCCubFan

          Your confusion is understandable. After all, Castro and Prior have similar names, play the same position, and look alike.

  • DaveY

    OK, I have to add my two cents here about all the talk of software. First, baseball statistical analysis, no matter how detailed or complicated, is childs play for todays computers. An xbox or playstation has more than enough processing power. No super computer is needed. Any laptop or desktop computer is enough.

    Second, if Bloomberg is billing the Cubs for services and software, and that can be expensive, for baseball purposes, it’s really not that complicated. The Cubs would be better off hiring a good stat guy and maybe a database architect. The key is finding the right stat guy.

    What would cost more is data collection. To really get good data you would need someone either at the game or viewing video to collect stats that is more detailed than your standard box score. Info such as the exact speed, location, and break of every pitch and where and how it was hit, if hit at all. Stuff like that can be tedious but isn’t exactly unskilled labor so you have to pay for someone to do it or…. if you have software that can analyze video to do it… now that is expensive software, though still pocket change for the Cubs, definitely under a million per year.

  • Jono

    Most boring comment section ever

  • Rebuilding

    I obviously have too much time on my hands so here goes. In a looking forward exercise I would have done the following. I’m assuming the Cubs when competitive would carry $130mil payroll (8% more than the Cards and White Sox) and assumed it is $103mil now. I also left the bullpen alone. Also, no signing “flippable assets”.

    (1) Don’t sign/re-sign: Feldman $6mil, Baker $5mil, Stewart $2mil, Shierholtz $2.25mil, Villanueva $5mil, Edwin Jackson $13mil or Random Cuban Guy (pretty sure that was $3ml) = $39.7mil – that we are paying that much for these guys is shocking in itself

    (2) Do sign/re-sign: Ramirez 4/50, Bourn 4/45, A. Sanchez 5/90, S. Marcum 1/5, B McCarthy 2/17 (I gave all of these guys bumps to actual)

    SP – Smardj, Sanchez, Marcum, McCarthy, Wood with Garza pushing Wood to BP when he comes back

    Lineup – CF Bourn, RF DeJesus, SS – Castro, 3b Ramirez, 1b Rizzo, LF – Soriano, C Castillo, 2b Barney

    No way those signings are unreasonable. Signed fewer players than we did this offseason. No one is blocked. We lose our 2nd round pick this year. This is an 86-88 win team on paper with upside from Castro and Rizzo and possible downside from pitcher/Ramirez health. I’ll be happy to look back at the end of the season and see how we did.

    * Caveat – I realize that this payroll is higher than the actual Cubs payroll, but that’s kind of the whole point. If the Cubs were trying to contend this year I would fully expect them to have a $125-$135 mil payroll given what other teams in the division have

    • Rebuilding

      Whoops, my math was off. That’s only a $110 million payroll

    • Edwin

      Sure. By my count (quickly/lazily looking at numbers on Fangraph’s position projections), I’d say it improves the Cubs by about 7 WAR, which probably pushes them into the 82-86 win level.

      The downside is that the top three contracts (Ramirez, Bourn, Sanchez at $12.5, $11.25, and $18 M/year) are all in the decline phase, or just about to decline, and you’ve signed them all for 4-5 years. Since all three will be declining, to improve the team into the 90 win level, you’d need to sign more FA for 2014, 2015, 2016, and 2017. So to really see the consequences of your moves, you’d need to show how much money will come off the books in 2014, and what FA you will sign to improve the team.

      This isn’t to say signing some of those guys wouldn’t have been a good move, but people do have a point when they are cautious about the long term effects of signing FA’s. In your situation you’ve improved the Cubs considerably in the short term, but going forward it’s going to be tough to improve the team while combatting the natural aging decline of the FA’s you signed. You’d either need to ratchet up spending even more (resulting in similar problems), or you’d really put pressure on your farm system to produce.

      Putting together a winning team isn’t just about looking at 1 year, it’s about thinking long term and figuring out the best way to leverage your financial resources into Wins.

      • Edwin

        On the flip side, you could do this formula the other way, and show the danger of Not signing any FA. Since there’s a limit to how much wins are available in FA each offseason, it means there’s only so much you can add. If the farm system stalls, you’re left with plenty of payroll flexability, but nobody to spend it on. If the Cubs can sign a player right now that can help them for the next 3-4 years and not hurt their financial flexability going forward, they should sign that player. It’s why I like signing Edwin Jackson or Sanchez, but not signing both Edwin Jackson and Sanchez.

      • Rebuilding

        Hmmm. Ramirez alone will prob outperform Valbuena by 5 wins and Bourn by 3 over DeJesus based on just defense alone. I also think Sanchez/Marcum/McCarthy is a definite upgrade on Jackson/Feldman/Wood. Ramirez would only have 3 years left, agreed Bourn is a risk and would have tried harder to get Cespedes last year but needed to fill that void and Sanchez just turned 29 and by all accounts the light bulb turned on with all of his talent (not to mention I believe the Cubs were actually willing to give him 5 years). You could literally say the same about any contract given to a 30+ year old. But at 3 and 4 years they aren’t Soriano like.

        Sorry, I’ll take 83-86 wins and try to grab a wildcard. Then anything can happen. Cards won the World Series after winning 83 games just two years ago.

        Agreed that maybe Bourn and Ramirez become dead weight in the next 3 years, but that is the advantage of being a big market club. You can carry a few of those in “out years” to try and win now. Plus Soriano’s contract falls off by the time that happens.

        • cubfanincardinalland

          You kind of blow your argument when you say Ramirez is 5 wins better defensively than Valbuena. Do you watch any ball games?

          • MichiganGoat

            Yeah that’s just not going to happen maybe offensively but 5 wins is about the ceiling ARam will give both offensively & defensively combined.

            • Rebuilding

              Stewart/Valbuena gave us 0.4 last year (I won’t even count Vitters at-bats) and Ramirez put up 5.4. Valbuena/Vitters/Stewart/Lake may be potentially negative this year. So 5.4 – 0.4 = 5. What am I missing?

              • King Jeff

                “based on just defense alone.”
                This part of your first statement. The difference in dWars is minimal if any.

                • Rebuilding

                  I said Bourn = he’s +3.0 dWAR and DeJesus was -0.9 mainly in right field. That’s nearly 4 wins from Bourn just catching flyballs

          • Rebuilding

            Thanks for the ad homin attack.
            Ramirez = 5.4 oWAR and a 0.7 dWAR = 6.1 WAR
            Valbuena = -0.1 oWAR and 0.6 dWAR = 0.5 WAR
            Stewart = -0.3 oWAR and 0.4 dWAR = 0.1 WAR
            Vitters = -1.0 oWAR and -0.3 dWAR = -1.3 WAR

            If anything I was being conservative depending on how much we see Stewart, Vitters and Lake

            • Rebuilding

              Here’s CF:

              Bourn = 3.2 oWAR and 3.0 dWAR = 6.2 WAR
              DeJesus = 1.9 oWAR and -0.9 dWAR (RF) = 1.0 WAR
              Jackson = 0.1 oWAR and 0.1 dWAR = 0.2 WAR

              DeJesus was -0.9 mainly playing right field. He’s going to kill us on defense in center. It’s worth having Jackson up just to catch flyballs. So I think it would be safe to assume that Bourn will outperform or CFs by at least 4 wins in 2013 and that’s being comservative.

              So between 3b and CF I think it’s entirely believable it’s potentially 9 wins difference on a team projected to win 76 games. I’ll do the pitchers if you want.

            • Edwin

              Ramirez is projected(Fangraphs) for between 3-3.6 WAR this year. The Cubs 3B is projected to produce 1.8 WAR. Ramirez is probably a 2 WAR upgrade, at most.

              CF: You’re not replacing Dejesus, I’d assume he would play RF. You’d be replacing Shierholtz and Hairston (2.5 WAR) with Bourn (about 4 WAR). I’d say it’s about a 2 WAR upgrade, and that’s probably peak.

              I’d say your drastically overrating Bourn and Ramirez, at least by looking at Zips and other projection metrics.

              Besides, the point isn’t the lack of improvement. The Cubs would have a good chance to compete for the wildcard. The point is that by signing all of these players, who are all mostly in the decline, you’re making it harder to improve your team going forward. Most players start to decline by about .5 WAR around age 29-30. Obviosuly it isn’t always the same for all players, but on the whole it somewhat averages out. In your scenerio, you’d need to find a net 1.5 WAR gain in 2014 just to make up for the age related decline.

              • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                Projecting 2.5 wins out of Hairston/Schierholtz is extremely optimistic, imo.

                • http://www.bleachernation.com Brett

                  That’s how much fWAR they were worth last year with an appropriate number of plate appearances.

                • Edwin

                  My bad, I looked at the wrong column. 1.7 WAR instead of 2.5.

              • Rebuilding

                Yeah, I take Zips,Steamer, James, etc.. with just a bit more than a grain of salt. All of those projection systems mush everyone into the middle of the bell curve. They have been shown to be wildly wrong over and over. They projected Ramirez for 2.7 WAR last year. The high end and older players are continually underestimated. With that said, just using your aging regression signing 2 guys puts the wins difference at 5-6 games for a projected 76 win team. What if Rizzo or Castro break out? Shark becomes an ace? Marmol is good all year? I think you just have to give yourself a chance to get in the playoffs and see what happens.

                There really isn’t a loss of financial flexibility in the future. With Soriano falling off, new TV money, new revenues (let’s hope) and the farm graduating some guys we will have plenty of money post 2014

                • http://thecubcontrarian.blogspot.com Mr. Know It All (Kyle)

                  I really love how Fangraphs did their position-by-position WAR projection. Very similar to some of the projection talk I’ve had this offseason.

                  http://www.fangraphs.com/blogs/index.php/2013-positional-power-rankings-wrap-up/

                  Their sum projection has us at 78 wins, 6 behind the Diamondbacks and Cardinals for the last Wild Card Spot.

                  It’s maddening how the front office can do enough to get us so close, yet so far away, and still leave resources on the table.

                  • Rebuilding

                    Our production at 3b and CF absolutely kills us

          • Rebuilding

            @CubsfaninCards – The defensive comment was about Bourn who put up a 3 dWAR last year as opposed to DeJesus who may just well be negative this year

        • Edwin

          Where are you getting your projections from? It’s not hard, just show what the players you would have signed are projected to produce versus what they player’s they are producing are expected to produce.

          • Rebuilding

            There’s 3b. With regression from Ramirez and less at bats from Vitters I think it’s fair to say Ramirez will outperform Cubs 3b by 5 wins

          • Edwin

            whoops. should be verus what the player’s they are replacing are expected to produce.

            Also, the above point still stands: You’ve taken a chance at being a wildcard team this season, at the cost of hurting your financial flexability the following seasons. Soriano’s 19 mil comes off, but so does his production. The same risks of there not being a good replacement through FA still exist as well.

            • Rebuilding

              Ummm…my payroll is $110 mil so an expansion to $10 mil over the Cardinals (to $130 mil) who have a $15mil local TV contract compared to our $50mil (a portion of which is about to get renegotiated higher) gives us another $20 mil to spend. So you would have another $40 mil to spend after 2014. Even figuring in extending Smardz extension you prob have $30mil extra to spend after 2014

      • Rebuilding

        Soriano’s 19 mil falls off after 2014. That fills some holes. In reality Ramirez signed for 3 so you could have just really upped the per year. Sanchez is a year younger than Jackson so same risk. Agreed on Bourn, but that’s just a gaping hole that needed to be filled and maybe just maybe you get 3 good years. The chances every team takes

  • Another Idea

    “Here’s where I get called a homer, but I tend to believe that Tom Ricketts isn’t flat-out lying about how organizational dollars are used. And, if I believe that, I have to regard the Forbes figures suspiciously”

    I don’t think your a Home Brett,but I do believe Ricketts is lying..I mean come on Team owners lie all the time…… You are just to close to the cubs to be able to say or see the truth…..

  • Another Idea

    The truth is Ricketts and company could have signed Numerous Big league All Stars Stars and have had the money,but Ricketts wants to spend as little as he can and pocket as much as he can……..The Cubs have a Dream of winning the world series with a Team full of Young Stars that all get paid scraps in MLB values,So Epstien can be the first to prove Money Ball works…But no one has won a series with Money ball yet and no one will.The Players Union is gonna make the owners spend money

  • jim

    Excuses, excuses. Money went to romney campaign ;-) btw, with wood n feldman at 3 n 4 = 100 loses.

  • gutshot5820

    Where is the extra $32 million going? The Ricketts entire family is on the board.. You didn’t think hey were going to pay themselves less than what they are playing their FO employees? Technically, every dollar going in is being spent on the club, since board members are part of the payroll.

  • cubfanincardinalland

    Epstein said a few weeks ago that the payroll where it was the previous years, was “unsustainable”. What gives? Either Forbes or the Cubs math is off then.
    If you are pumping all your money back into an organization, would your profit not be zero?
    And based on these figures, they should make 60 million this season.
    Interesting, the article valued Wrigley at 222 million, and the market at 445 million. I wonder if that is the 9.5 million people greater Chicago market or the Wrigleyville market.

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  • Madprizamwoo

    Facilities and software costs are capitalized on the balance sheet. Only the depreciation will hit the income statement.

    The important statement is the statement of cash flows which we don’t see here. You can make $100 million and still end up decreasing cash year to year by way of significant purchases. So in other words the income statement has very little to do with “is all the money that is being made being put back into the organization.”

    I’m a CPA and worked for a big four firm for 13 years. Also, all 30 MLB teams are audited by one of the big four acctg firms and I can only assume Forbes has sources to get a hold of these financials.

  • Die hard

    I suspect that revenue figure is light by 100 million …. Either deferred or otherwise buried by well paid CPA firm …..the team has too many sources of revenue to be that low

  • Jan Forty-Two

    $30 million income? Some lottery tickets must have been extremely well planted. The FO or their gardeners did a great job.

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