The Payroll Defense
by Michael Riehn
Whiteyball Staff
In a recent article by Joe Strauss, he broke down the Cardinals decrease in payroll for 2009. It’s definitely fair game to be critical of the Cardinals and how they spend their money, but I think sometimes writers sensationalize a bit to extend their point. Let’s take a look at one of the comment threads in particular:
Including major-league payroll, the Cardinals’ baseball operations incurred more than $150 million in expenses last season against overall revenue exceeding $200 million.
The club realized an operating profit of $23 million-$25 million,
according to sources, before spending more than $17 million to service debt on Busch Stadium.
Bill DeWitt
I didn’t embelish the quote with extra spacing. This was how the article was presented. How much money did the Cardinals profit? The first statement makes it look like 50 million, the second, 23-25 million, but if you pay close attention to the last statement, we are now down to 6-8 million.
That’s still a lot of money, but of that 6-8 million, this probably doesn’t include “non-baseball” operation cost increases (If you are in business, you know how much insurance increases each year) or ownership profit. Also, DeWitt defended that statement (buried in the bottom of the article):
“And to the extent we’ve had excess money the past few years, we’ve re-invested it in the operation.”
Say DeWitt decided to keep the 6-8 million dollars in his pocket (remember, he’s not the only owner, so this would technically be spread out). Would you be terribly upset by this? If so, why? The average fortune 500 CEO makes 12.8 million dollars a year. What is DeWitt worth? Has he proven that he knows what he’s doing with the keys to our club?
As an owner of a baseball team should he be required to put all profit into payroll? Don’t get me wrong, I’d love if he would do this… but I doubt if many people wouldn’t want their cut if they were in his same shoes. Many owners have been extremely greedy with their profit margins (see the Florida Marlins and Kansas City Royals for just 2 examples). We’ve got it good folks.
Also remember, that this was last year’s revenue. Different economic times mean less income to pay expenses. It’s an unfortunate reality that nearly all businesses are cutting costs and paying closer attention to the bottom line. This isn’t monopoly money, and while the Cardinals project their income, they don’t really know until the end of the year what they will receive to pay expenses. I’m glad that they are fiscally responsible, and they can’t spend extra money that they may not be able to afford.
Cardinals 2009
DeWitt and company have to balance winning with what is reasonable in a small market business environment, and feel comfortable with what they are shelling out of their pockets. Remember, just because you spend the money, doesn’t mean you are going to win any more games. You have to be smart about what you spend, which is why the minor league development is necessary, and the gains exciting.
The ownership has shown that they are willing to make investments in the team, but they will not spend wildly to do it. I like this approach. The “low hanging fruit” comment has gotten a bad rap in my opinion. If we can get players for less, why should we pay extra?
If the Cardinals would have spent a ton of money on free agents last year, we would have been in an entirely different place when the bottom dropped out of the market. We would be mad right now because they would be forced to hold a firesale for many of their good players? No owner should be expected to LOSE money, or work for free (you may not like him, but DeWitt DOES work).
How much do you value DeWitt as an owner? If he were in the open market, would you give him $10,000.00 a year to run the team? What about $100,000.00? That sounds like a lot of money, but remember that EVERY PLAYER on the payroll WOULD BE MAKING over 3 times MORE than him. Even at 12.8 million, he’d be making less than 2 of his players (Deservedly so, but you get the point).
The Cardinals club has been criticized for their lack of spending. We aren’t New York, Boston or even Chicago and can’t throw money at mistakes. In this economic time, you need to be smart and utilize resources wisely. Remember that there is a certain number 5 who is due for a big payday soon, and we don’t want to tie ourselves up in dead contracts so that we can’t afford him. If Pujols hits the open market, Boston and New York will break the bank to woo him for their team.
A shortstop with a lot of potential and 2 left handers were signed this off-season as proof that improvements were made. They seem to have covered their needs, and I haven’t seen a glaring hole on the club in spring training. The team’s minor league talent seems to be taking care of many of the issues that weren’t addressed via free agency, and La Russa is using his creativity for the rest. I still contend that we need one more starting pitcher for depth, but that can be acquired in trade if needed.
So before you complain to your neighbor or friend about how “the Cardinals are just lining their pockets and don’t care about winning”, remember that this team is better than it was last year, and they have done more to improve the club than 90% of the other teams out there. Think back to what this ownership has done during their tenure. They deserve the benefit of the doubt.
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Filed Under: Baseball • Uncategorized
About the Author: I am a Cardinal fan, from a small town in Missouri and grew up listening to the Whiteyball teams of the 1980s (but still love the Tony LaRussa version). Currently living outside of St. Louis, I am a partial season ticket holder with a great group of friends.
I hold the position of Director of Sales and Marketing for a hydraulic press manufacturer and serve on a local youth baseball board of directors. Follow me on Twitter at: http://twitter.com/mriehn
Very well said.
Something else that is often overlooked is the amount they are investing in the minor leagues. I have to believe that since returning their focus to developing from within, they have spent more on their farm system than in years past.
Just because the youngsters come up and are cost-controlled for six years, doesn’t mean the team hasn’t already shelled out plenty for them to reach the bigs.
Thanks for the comments. I have heard a lot of negativity towards the Cardinals for their decrease in payroll and wanted to present the other side.
You have a great point with their “non payroll” improvements. I’d add to it by mentioning their hiring of more statistical analysts, increase in scouting the pacific rim and dominican baseball academy.
They are being proactive instead of reactive in trying to find new ways to win.
I’m going to play devils advocate.
Why does anyone care what DeWitt puts into his pocket? I don’t care if the Cardinals make money or not. I want to see a winner. If not making a profit means the team is going to move, then yes, then I’ll care. I know this is a business, and it is there to make money. In there operating expenses, I’d be really surprised if DeWitt did not get a salary that is included in the $150 million in operating expenses. Look at the revenue generated by the organization compared to the revenue generated by companies where CEO’s make millions of dollars. I work for a company that has about $200 million in revenue, and I know for sure that our CEO does not make $1 million. You can’t compare the Cardinals to banking ceo’s and other forbes 500 companies.
Back to my original thought. I want to see the Cardinals win. I don’t care if the club makes $50 million profit, $1 million profit. $.01 profit, or is in the hole. I spend my hard earned money to attend approximately 20 games a year because I love this organization. I don’t stop attending games because I can’t put a full 10% of my income into my savings.
I understand an ownership group wanting to make money, but I want the ownership group to understand my expectation of putting out a competitive team year after year if I’m going to spend my hard earned money, which is more scarce than the owners “hard earned” money. I’m not saying the Cardinals are not putting together a quality team, but if there is a piece that can be added to make this club a post-season club, all avenues need to be explored to get a deal done.
I go outside of my budget and rack up credit card debt each time the Cardinals make the playoffs. I go outside of the revenue my household brings in because I love the Cardinals and I love seeing a winner. Why shouldn’t I expect the organization to do the same?
Nice article, thanks for letting me play devil’s advocate.
They’re saving money so when they travel to play the Cubs they have more money to spend on eating “real” pizza. Pujols gets grumpy without his deep dish.
Wilson,
Thanks for the “devil’s advocate” post. I agree with what you are saying to an extent, but I have two questions:
1. What piece did the Cardinals need to fill “to get them in the playoffs”? It’s hard to quantify isn’t it? There were only a few proven free agents that we know would have pushed them over the edge, and we were not going to outbid New York to get them. Very few teams could.
2. Would you a. have ownership spend money just to get to 100-110 million in payroll or b. would you rather they wait for the best opportunities to spend their money?
Since 1 is hard to quantify, and I would expect the answer to question 2 would be “a”, wouldn’t you say the Cardinals are doing things right and the article from Strauss was a bit sensational?
You have to remember too that last year was a non playoff year. I’m sure they make more money in playoff years, not only on playoff ticket sales but if their competitive all season that also means more people at the park. If they win a World Series they sale all kinds of memorabilia. How many 2006 champions hats do you see walking around town still?
The Cardinals also have the all star game. I think that should be bringing in some extra revenue this year, even with the bad economy.