Owners' Chicken Little Talk - only in SD

Owners' Chicken Little Talk - only in SD

Post by Scot Goul » Thu, 02 Sep 1999 04:00:00


Information from the press release addresses some of your points.

Quote:


> > For your discussion, mainly because I want some ammunition when my Chicken
> > Little friend approaches me with this story later today, as he most
> > certainly will.

> The books were audited, but that only says that the numbers balance; it
> doesn't say anything about which revenues and expenses were charged
> where.  I don't know what related-party transaction they have available.

Agreed. The claim is that the Padres used the simplest system possible
(see paragraphs below.)

Quote:
> One paragraph in the article suggests that an important source of
> reveneu may be hidden:

> The team said its financial statements, audited by
> PriceWaterhouseCoopers, showed revenue increased from $59 million to $79
> million, thanks to record-setting attendance of 2.56 million.

> How about revenue from the playoffs themselves?  The team that loses the
> World Series gets a large share of the playoff revenue.

The press release says the increase is due to BOTH the attendance and
the revenue from the playoffs.

Quote:
> The operating losses do not include the direct expenses for promoting
> the new stadium, but the Padres' World Series appearance was also a
> contributing factor.  That is, the Padres had an incentive to take a
> loss in 1998 in order to produce future gains.

Such "below the line" expenses were identified as expenses beyond the
$6.9 million operating loss.

Quote:
> However, the Padres didn't include the tax benefits owners of a team
> get. After buying a team, owners can write off many of the acquisition
> costs over a five-year span.

> That is, if the *team* loses $10M but the *owners* pay $!0M less in
> taxes, the team claims a loss but the owners lose nothing.

Agreed. This is Moores 5th year as owner.

I have have no doubt that the Padres lost money year (and continue to as
advertising at the Q go to the Chargers, parking goes to the city and
little of the concessions go to the Padres), however I do think they
could be wiser about the players they sign. Moores realizes that money
does not buy wins, but he still thinks that the lack of money means
losses. Hopefully the success of other teams such as the Reds and
Athletics will convince him that smart teams (and lucky teams) win.

------- From the PR statement.
"There are several established methods to calculate and describe
financial
results," said Tom Insley, Managing Partner of PriceWaterhouseCoopers,
whose
firm has audited the Padres' financial records since 1990.  "The Padres
used
what is undeniably the simplest, clearest method, cash in and cash out,
to
calculate these results.  

"There is no 'Hollywood Accounting' involved in these cash losses," said
Insley.
 "They do not reflect depreciation or other 'paper losses.'  These are
real cash
payments that the Moores family and Larry Lucchino have had to cover to
keep the
team afloat."

The club opened its audited financial statements for 1995 and 1996 to
the
Mayor's Citizens Task Force, which has studied the club's finances since
1996.
The task force concluded, based on the '95 and '96 results, that the
club cannot
break even at Qualcomm Stadium, and a new baseball-oriented ballpark is
essential for the club to generate sufficient revenues to survive in San
Diego.

 
 
 

Owners' Chicken Little Talk - only in SD

Post by james withr » Fri, 03 Sep 1999 04:00:00

I was thinking about Michael Jones's way of calculating a teams' fan
bases one day and came up with the idea of assigning congressional
districts to teams as a way to quickly figure population.  I think the
congressional districts do a better job than SMSAs for the TV markets
because they count rural and small town residents.

Anyway, the point is that California has more than its share of teams,
population-wise.  Using the populations of the US and Canada and
dividing by 30 teams, you get about 15 congressional districts as an
equal distribution.  California has 52 CDs and 5 teams.  Three or four
teams would be about right for the population.  I feel this sheds some
light on why California has two financially weak teams-- San Diego and
Oakland.

BTW, the underrepresented areas of the US would be the NYC-New
Jersey-Eastern Pennsylvania area, North Carolina-***ia and
Memphis-New Orleans.  

                         Withrow

 
 
 

Owners' Chicken Little Talk - only in SD

Post by David Grabine » Fri, 03 Sep 1999 04:00:00

Quote:

> Information from the press release addresses some of your points.

Thanks.

Quote:
> > The operating losses do not include the direct expenses for promoting
> > the new stadium, but the Padres' World Series appearance was also a
> > contributing factor.  That is, the Padres had an incentive to take a
> > loss in 1998 in order to produce future gains.
> Such "below the line" expenses were identified as expenses beyond the
> $6.9 million operating loss.

My point here is that improving the team is an "above the line"
expense.  It had the side effect of improving support for the new
stadium, which will lead to large profits in the future.

I recognize that expenses directly related to the new stadium are "below
the the line".

Quote:
> ------- From the PR statement.
> "There is no 'Hollywood Accounting' involved in these cash losses,"
> said Insley.  "They do not reflect depreciation or other 'paper
> losses.'  These are real cash payments that the Moores family and
> Larry Lucchino have had to cover to keep the team afloat."

This still doesn't exclude related party transactions, but I don't know
whether the Padres have the opportunity for such transactions (as the
Braves do, for example).

Given often factors such as the team's poor stadium deal and the effect
of the 1998 team on 1999 attendance, I wouldn't be surprised to see a
loss.  This isn't the same trickery that the Marlins used.

--

http://www-math.bgsu.edu/~grabine
Shop at the Mobius Strip Mall: Always on the same side of the street!
Klein Glassworks, Torus Coffee and Donuts, Projective Airlines, etc.

 
 
 

Owners' Chicken Little Talk - only in SD

Post by Michael David Jon » Fri, 03 Sep 1999 04:00:00

Quote:

>I was thinking about Michael Jones's way of calculating a teams' fan
>bases one day and came up with the idea of assigning congressional
>districts to teams as a way to quickly figure population.  I think the
>congressional districts do a better job than SMSAs for the TV markets
>because they count rural and small town residents.

I didn't use SMSA's, though. I used Nielsen's TV markets. The info is
on their web page.

Quote:
>Anyway, the point is that California has more than its share of teams,
>population-wise.  Using the populations of the US and Canada and
>dividing by 30 teams, you get about 15 congressional districts as an
>equal distribution.  California has 52 CDs and 5 teams.  Three or four
>teams would be about right for the population.  I feel this sheds some
>light on why California has two financially weak teams-- San Diego and
>Oakland.
>BTW, the underrepresented areas of the US would be the NYC-New
>Jersey-Eastern Pennsylvania area, North Carolina-***ia and
>Memphis-New Orleans.  

My gut feel is that your conclusions are correct. SD is one of the 3
bottom markets in my study.


That's the main problen, is that many parents today don't bother to
take the time to talk with their kids, to instill values in them. They
figure its easier to just complain and have the government pass laws.
Then they don't have to bother communicating with their kids.
        - Paul Silver

 
 
 

Owners' Chicken Little Talk - only in SD

Post by David Marc Niepore » Sat, 04 Sep 1999 04:00:00



Quote:

>> "There is no 'Hollywood Accounting' involved in these cash losses,"
>> said Insley.  "They do not reflect depreciation or other 'paper
>> losses.'  These are real cash payments that the Moores family and
>> Larry Lucchino have had to cover to keep the team afloat."
>This still doesn't exclude related party transactions, but I don't know
>whether the Padres have the opportunity for such transactions (as the
>Braves do, for example).

Well, at a minimum, they have the opportunity to pay themselves big
salaries or "management fees" or whatever they feel like calling them.

And how many relatives does Moores put on the payroll?

There are just so many ways to turn profit into loss that vague statements
and press releases don't mean anything.
--
David M. Nieporent                    "Mr. Simpson, don't you worry.  I

3L - St. John's School of Law          The sound wasn't on, but I think I
Roberto Petagine Appreciation Society  got the gist of it."  -- L. Hutz

 
 
 

Owners' Chicken Little Talk - only in SD

Post by james withr » Sat, 04 Sep 1999 04:00:00


Quote:

>>I was thinking about Michael Jones's way of
>>calculating a teams' fan bases one day and
>>came up with the idea of assigning
>>congressional districts to teams as a way to
>>quickly figure population. I think the
>>congressional districts do a better job than
>>SMSAs for the TV markets because they count
>>rural and small town residents.
>I didn't use SMSA's, though. I used Nielsen's
>TV markets. The info is on their web page.

I stand corrected.  However, didn't your method somehow leave some TV
markets out?  I'm thinking that you used only the hundred largest or
something.  Using CDs would include all TV watchers while limiting your
calculations to about 500 districts.  I remember thinking that the
Midwest and South seemed underrepresented in your numbers.  

Just a thought.

                              Withrow

 
 
 

Owners' Chicken Little Talk - only in SD

Post by Michael David Jon » Sat, 04 Sep 1999 04:00:00

Quote:



>>>I was thinking about Michael Jones's way of
>>>calculating a teams' fan bases one day and
>>>came up with the idea of assigning
>>>congressional districts to teams as a way to
>>>quickly figure population. I think the
>>>congressional districts do a better job than
>>>SMSAs for the TV markets because they count
>>>rural and small town residents.
>>I didn't use SMSA's, though. I used Nielsen's
>>TV markets. The info is on their web page.
>I stand corrected.  However, didn't your method somehow leave some TV
>markets out?  I'm thinking that you used only the hundred largest or
>something.  Using CDs would include all TV watchers while limiting your
>calculations to about 500 districts.  I remember thinking that the
>Midwest and South seemed underrepresented in your numbers.  

Yes, I only used the top 100. My thinking was that that would cover
all major population areas, and that omitting the smaller ones would
introduce some fuzz into the results but that that would be acceptable
as long as no one tried to interpret them down to 4 significant digits.

Also, IMO the big benefit of using the TV markets is that they are
designed to capture communities of common interest; the Chicago market
(for example) will include everywhere that gets most Chicago media,
which is *exactly* what you want to look at for market size since so
much of the difference in revenue base is from (a) gate attendance and
(b) local media revenues. Media revenues are based pretty directly on
how many viewers/listeners can be drawn from the (Nielsen) market
since those are the numbers typically used to set advertising rates,
and the people reached by those media outlets are the ones being
attracted to come out to the park. I've been thinking of redoing the
survey using all markets, possibly for publication next spring, but
don't have time at the moment.


The greatest of faults, I should say, is to be conscious of none.
        - Thomas Carlyle

 
 
 

Owners' Chicken Little Talk - only in SD

Post by Scot Goul » Sat, 04 Sep 1999 04:00:00

Quote:

> Well, at a minimum, they have the opportunity to pay themselves big
> salaries or "management fees" or whatever they feel like calling them.

I don't know how much of a salary Moores pays himself. I doubt he pays
anything to himself. Lucchino is a different matter.

Quote:
> And how many relatives does Moores put on the payroll?

Just a couple. I am told he has a niece who works in the customer
service dept., however his daughter is a partial owner and his
son-in-law works under Towers.

Moores is probably right in what he sees - a huge disparity between what
SD can bring to a team and what NY can. Basically, the Padres draw only
from a local region. There isn't much to the east (desert), none to the
west (ocean), little from the south (Mexico) and two other teams to the
north (Dodgers/Angels). However, he really shouldn't fret - the team has
done spectacularly well in the few years of his ownership. (2 divisions,
one NL championship in 5 years). Also John (and his family) don't
exactly "need" the Padres. <g>

Moores is generally a "good" guy who appears to be a bit stubborn. What
he thinks might happen to the Padres, does not translate to other teams.
It appears Moores does not see this.

 
 
 

Owners' Chicken Little Talk - only in SD

Post by Scot Goul » Sat, 04 Sep 1999 04:00:00

Quote:

> > Such "below the line" expenses were identified as expenses beyond the
> > $6.9 million operating loss.

> My point here is that improving the team is an "above the line"
> expense.  It had the side effect of improving support for the new
> stadium, which will lead to large profits in the future.

> I recognize that expenses directly related to the new stadium are "below
> the the line".

I agree. It appears they simply chose to list such development as a
separate entity.

Quote:
> > "There is no 'Hollywood Accounting' involved in these cash losses,"
> > said Insley.  "They do not reflect depreciation or other 'paper
> > losses.'  These are real cash payments that the Moores family and
> > Larry Lucchino have had to cover to keep the team afloat."

> This still doesn't exclude related party transactions, but I don't know
> whether the Padres have the opportunity for such transactions (as the
> Braves do, for example).

I'm sorry, but you lost me. To what "related" party transactions are you
referring?

Quote:
> Given often factors such as the team's poor stadium deal and the effect
> of the 1998 team on 1999 attendance, I wouldn't be surprised to see a
> loss.  This isn't the same trickery that the Marlins used.

Moores is probably a honest guy, however he appears to think what is
true about the Padres must be true about other teams. A little education
about the state of the Indians and the Braves 10-15 years ago might
enlighten him. <g>
 
 
 

Owners' Chicken Little Talk - only in SD

Post by james withr » Sun, 05 Sep 1999 04:00:00


Quote:
>Also, IMO the big benefit of using the TV
>markets is that they are designed to capture
>communities of common interest; the Chicago
>market (for example) will include everywhere
>that gets most Chicago media, which is
>*exactly* what you want to look at for market
>size since so much of the difference in revenue
>base is from (a) gate attendance and
>(b) local media revenues. Media revenues are
>based pretty directly on how many
>viewers/listeners can be drawn from the
>(Nielsen) market since those are the numbers
>typically used to set advertising rates, and the
>people reached by those media outlets are the
>ones being attracted to come out to the park.
>I've been thinking of redoing the survey using
>all markets, possibly for publication next spring,
>but don't have time at the moment.

Your preliminary tally was pretty interesting.  I'd say the most
surprising thing to me was the size of the Seattle market.  The M's
actually have a nice little territory now.

It's your study and I don't want to be too intrusive about it, but you
might consider separating the media and attendance revenue streams if
you can decide on some fraction to give each.  I say that because the
two draw from different geographical groups.

The attendance population is largely drawn from the SMSA, I'd guess.
THe media market for a team can be much different, though.  I grew up in
the Midwest and I know there are many fans in less urban areas who watch
plenty of baseball on TV, but might see one game a year in person.  It
might make sense to use SMSAs for attendance and TV markets for media
revenue.  

Still though, I think congressional districts might actually be closer
to the mark than TV markets even if you used every single TV market.  I
say this because there are more and more rural residents every year who
use satellite dishes.  Teams' TV revenues look they'll be more
influenced in the future by regional networks like Fox Southwest than by
revenue from either cable giants like TBS or WGN or local TV stations.

                          WIthrow