Braves CEO: There’s No More Money

Context is Important

Everything requires context if it is to be understood. In an interview with the AJC last Wednesday, Braves CEO Terry McGuirk provided much needed context to the present and future payroll situation.  In doing so he confirmed what I wrote the day before; the Braves have no money to spare –  there is no payroll flexibility. While this was the most revealing interview we’ve had from the Braves front office it still requires some use of my diplomatic translator to clear away the fog of diplomat speak.

Mr. McGuirk began by defending the current payroll, saying the Braves have “a little over $90 million right now” committed to it right now. That wasn’t a huge secret. I wrote that I calculated the Braves had already committed between $93-94 million this year. After looking at my estimates for pay increases to a few higher performing, not yet arbitration eligible players in light of his interview, I’ve lowered that to $91.65 million. (Details of my details are further down the post.) He went on to say the maximum available money this year for payroll is $94M. That is new, details please.

Translator on

McGuirk: The Braves  will have “no profitability, no free cash flow.” 

Translation: We’re not broke but dang close to it. We can pay the bills and eat but there will be no luxuries – anything that requires an increase in payroll – in this year’s budget

The Braves are effectively a nonprofit organization without the tax advantages This year’s projected income and expenses add up to zero and Liberty Media will not help.

McGuirk: The $94M “will look more like $84 million in actual players on the ground”

Translation: We’re still paying for that awful Lowe contract and the ill-informed trade for McLouth so while spending $94M we have an effective payroll of $82.5M. I rounded up to 84, that’s allowed isn’t it?

Time for that payroll spreadsheet. . .

Notes:

• Salary estimates from Baseball Prospectus -COTS and various posts on www.MLBTraderumors.com
• Assumes Peter Moylan will be added to the 25 man roster.
  
• Assumes minimum wage players will get the minimum wage –$480K – and no morre. This includes Freeman and Kimbrel.
• Assumes Hanson, Medlen and Venters will get raises that maintains  the existing differential between their salary and the major league minimum last year.

Drew Sutton’s contract is reported to be $500,000. Adding him in place of Hicks – I expect that to happen – would obviously raise this estimate by $20,000.

McGuirk: “I think this team is on a glide path where it has the ability with all our youth to be good for a long period of time, continue to raise enthusiasm in Atlanta and drive revenue and allow us to spend more on the team.”

Translation: An aircraft gets on its glide path just before landing; the Braves are coming back to earth due to lack of fuel (money) for the engine (everyday player roster.)  Whether this is a touch and go landing or a layover depends on future revenue. Right now it looks like a layover. If the fans don’t come out and support the team in bigger numbers it will get worse. Non-payroll expenses go up annually. If income doesn’t increase at least that much expenses (payroll) must go down or the Braves lose money. Oh and Liberty Media? They won’t help.

His point is easy to understand when you look at the numbers. There’s about $28.1M coming off the books in 2012.

• The Braves need to extend or replace Ross, Diaz, Hinske, Wilson, Moylan and Bourn as well as find someone to fill Chipper’s roster spot IF he retires.

• Based on this year’s arbitration numbers it could take as much as $14.2 million more to pay Jurrjens, Hanson, O’Flaherty, Beachy, Prado and Heyward in 2013.
• Bourn will get $8-10M/year as a free agent so extending him will cost that and is probably a fantasy

• If Chipper doesn’t retire his option starts at $7M and grows to  $9M if he plays 123 games this year. It goes up $1M @ 128,133,138, 140.

Bill James projects Chipper to play 110 games. But if Chipper has the year the Braves need him to have in order to contend,  he will reach at least the $9M level. If he then decides to play in 2013 it leaves around $5M to replace the departing players.

So when Mr. McGuirk says, “I think that is part of what the quiet this winter reflects — a real confidence in our minor-league system. I wouldn’t trade our young people for any team’s youth corps. I think the state of the franchise is extremely positive.”

It translates to: It isn’t going to get better soon folks. Remember the 2005 Baby Braves? They did very well and we have some good young players now that we hope will do well too.  That’s what we’ll have to do for a while, it’s all we can afford.

The Braves have to hope their minor league system begins developing every day players the way it’s produced pitchers in the past.  Looking back it is obvious they knew this and may have already (I hope) implemented the needed changes. It was a long drought from the arrival of McCann and Jeff Francoeur to the Heyward and Freeman era.

Liberty Media

The interview was quite specific that Liberty Media have no plans to sell the team today. Unlike an individual owner who takes a personal interest in the team and wants more than anything else to win, Liberty doesn’t care if we win as along the value of the team rises. With the current spend what you earn edict in place the Braves cost them nothing to run while their value continues to rise relative to the original investment.

Unlike a company making widgets that requires investment to retain value, Liberty Media don’t have to invest money to increase the value of the Braves franchise.  They just watched a depleted Houston Astro team sold for $600million.  The lesson? No matter how bad a team plays the owners make money when the franchise is sold. My personal view is that they see this as a bad time to sell the franchise because the economy has yet to rebound and that one of four things will eventually generate a corporate decision to sell.

• They need an infusion of capital to invest in their core business and a buyer for the Braves exists with that much money available.
• The team starts to operate at a loss – probably because they aren’t competitive – and they sell to cut their losses.
• Internal politics will cause the shareholders to force a sale either directly or indirectly.
• Bud Selig will put pressure on them to sell to suit his own agenda
• I will hit the Powerball and form a group that convinces Liberty Media to sell us the team. (don’t hold your breath, I’ve never won anything.)

The Future

The limitation on money spent each year means the immediate future will look like the recent past. We have some bright lights in the farm system but many bright lights dim quickly when they arrive at The Show.  To win a division title and progress in the post season everything has to go perfectly – on the field and heath wise – because we have no margin for error.

The Braves must draft  more effectively, develop more everyday players quickly and waste picks less often.  Transactions must be smarter. Money and talent wasted on deals like those involving Kenshin Kawakami, Nate McLouth, or Mark Teixeira must be a thing of the past, there is no safety net – no owner with pockets full of extra money – to pick up the slack like Mike Ilitch just did in Detroit.

One last thing. The Braves front office must continue to be more open and less obtuse with the fans. The Terry McGuirk interview – as painful as it was – is the best, most open explanation fans have had about what’s driving player decisions. Understanding why won’t make us – well me anyway – passively accept what I consider bad decisions. But at least we’ll have some context for those decisions.

What do you think? Can the Braves maintain a competitive roster – by competitive I mean  capable of winning a post season series every year – or will we start to see a slide back to the bad old days?  Comment below and let me know.

You may follow me on  Twitter @fredeowens or email braveslegend@fireweb.com