2K21 - Houston Astros

[Don Quixote]

This could be comparing apples and oranges. Perhaps part of that profit could be due to possibly having fewer hangers-on, fewer relatives of friends and front office people, fewer useless mouths on the payroll. Some of the more profitable teams use what would otherwise be (taxable) profit to enrich themselves, their family, etc. Maybe Crane's not doing that.

[Judge Jude]

in the interest of fairness and without any conclusion as to the contents, here is the Astros response

http://houston.astros.mlb.com/news/article.jsp?ymd=20130826&content_id=58517146&vkey=pr_hou&c_id=hou

"We are very disappointed that, earlier today, Forbes released an article that includes significant inaccuracies relating to the Astros' finances. The Astros do not disclose financial information. However, as MLB will confirm, the information reported in the Forbes article relating to the Astros' revenues, the Astros media rights fee from CSN Houston, and CSN Houston's per subscriber rate are all significantly inaccurate. As a result, the conclusion about the Astros operational profit is significantly inaccurate."

see link for more

[Kevin Seitzer]

The Forbes article is a poorly-researched, sensationalist raft of crap that they should be embarrassed to have run.

Simply assuming that the RSN is bringing in $80 million is the biggest error, as a bit of cursory research beyond a Google search would have informed them it is nowhere near that. It goes on from there in the same vein.

As a baseball outsider, I thought the Forbes estimates were probably generally correct, and that MLB was just whining about them for PR purposes. Now that I'm on the inside, I wonder if Forbes just makes shit up.

[Moonlight J]

Forbes makes it up because baseball won't open the books to prove otherwise. Seems like a game of chicken

[RSF]

They are taking the best guess available and what they publish is reasonably consistent with what has come out during trials and other more sophisiticated economic assessments that occur for a variety of reasons.

Forbes is nowhere near perfect, but let's keep in mind that there's a ton of opaqueness to this process, both externally and internally. Teams also have a whole collection of revenue streams that go in different pockets (RSN, stadium, concessions contract, co-marketing agreements, etc) and almost no one has enough visibility into the full picture to really have a clear understanding of what is going on in each of them.

I have no idea whether Forbes is, on net, right or way off on this one---but I'm pretty positive that others do not either.

[Controller Jacobs]

I'd like to see the Astros get back into the $75M+ payroll range, but there's no point in them doing it on contracts they don't want.

Remember when Pittsburgh traded Rajai Davis for Matt Morris and his bad contract? Morris had been meh to terrible for years. The only rationale anyone could come up with was the Pirates wanted to boost their payroll to shut people up.

Arguably a minimum payroll should be instituted. But it should include minor league system investment and allow deferment for larger future payrolls.

[dslaw]

I think Seitzer should verify the report as true and then ask for a raise.

[Moonlight J]

Jim Crane responds in kind

http://blog.chron.com/ultimateastros/2013/08/26/full-transcript-of-jim-cranes-rebuttal-to-the-forbes-claims/

[Don Quixote]

I think Seitzer should verify the report as true and then ask for a raise.

Are you going to pay his salary after he becomes unemployed?

[TranaGreg]

Are you going to pay his salary after he becomes unemployed?

c'mon, it's Houston, he's probably making minimum wage ...

[Don Quixote]

c'mon, it's Houston, he's probably making minimum wage ...

That doesn't answer my question.

[Controller Jacobs]

Just read that the Astros' payroll is $13 million. Is that even true? If so, once again, holy cow!!!

That probably doesn't include the $5M to Wandy Rodriguez (traded last year) or the $2.9M for Carlos Pena (released).

Opening day was $26.1M, and they've traded Bud Norris and Jose Veras, and released Carlos Pena.

[Kevin Seitzer]

Just read that the Astros' payroll is $13 million. Is that even true? If so, once again, holy cow!!!

Depends on what you mean by payroll. According to the typical definition, yes, we are currently paying 23 of the 25 players on our active roster within several thousand dollars of the minimum salary. Erik Bedard and Phil Humber are the two players making more than that. That adds up to about $14 million.

But as Scott points out, we are also paying other players not on the roster, such as Carlos Pena, Rick Ankiel, Ronny Cedeno, and the Pirates for Wandy Rodriguez, as well as other players on the 40-man roster but not on the active 25 (e.g., Alex White, Carlos Corporan, etc.). As far as a club is concerned, the active 25-man payroll isn't a number that matters, for what that's worth.

[Kevin Seitzer]

They are taking the best guess available and what they publish is reasonably consistent with what has come out during trials and other more sophisiticated economic assessments that occur for a variety of reasons.

Forbes is nowhere near perfect, but let's keep in mind that there's a ton of opaqueness to this process, both externally and internally. Teams also have a whole collection of revenue streams that go in different pockets (RSN, stadium, concessions contract, co-marketing agreements, etc) and almost no one has enough visibility into the full picture to really have a clear understanding of what is going on in each of them.

I have no idea whether Forbes is, on net, right or way off on this one---but I'm pretty positive that others do not either.

Forbes is not trying to do the best job they can given the information available to them. I guess that's what bugs me about them. Not that they can't arrive at the perfect answer, but that they purposefully ignore public information available to them as well as basic common sense about how companies operate that should be available to any student with a college-level education in corporate finance. They are trying to sensationalize, not educate.

In general, they purposefully choose to handle money flows from RSNs in ways that are just stupid. Beyond that, they often ignore expenses for which it wouldn't be that hard to make a reasonable estimate, instead estimating that the expense must be zero because the club has not released the number. In the Astros' case, both of the errors have huge impact and should be obvious to someone seriously trying to arrive at a correct answer. Does it matter if the best public evidence that you can find in an hour's research seems to show that the Astros are making $36 million from the RSN, but Forbes decides to claim $80 million because that's the lazy answer they can find in Google? Does it matter if the Astros are paying interest on a $275 million debt but Forbes decides to report EBITDA and act as if that is a meaningful number in the way they are talking about it?

The only reason others don't know whether Forbes is mostly right is because no one else is trying to do the research. It's not necessarily anyone's job to do that, but if someone wants to beat the pants off of Forbes and has some basic education in corporate finance, it wouldn't be very hard.

Furthermore, the idea that a heavily indebted team could simply shed all its payroll and become the most profitable club in major league history doesn't square with common sense. It's true that our financial situation is a lot better now than it was when Jim Crane first took over ownership from Drayton McLane, but if it were that easy to print loads of money, a lot more owners would be doing that. It doesn't work that way. You cannot conjure huge profits out of thin air. I think in some ways that myth plays to the fears of baseball fans, which is why Forbes can make up a story like this and get so much play with it.

[Kevin Seitzer]

Forbes makes it up because baseball won't open the books to prove otherwise. Seems like a game of chicken

I think this is true, that Forbes makes up sensationalist numbers to poke MLB with a stick in an ongoing feud. I guess I used to think that Forbes was an impartial outsider trying to tell the truth, and I've been disappointed to find out instead that they, too, are running an agenda, facts be damned. I knew MLB was running an agenda already; I'm not trying to portray them as a group of 30 lily-white, social do-gooders who don't have a care in the world for profits.