New York Yankees 2012-2013 Offseason Outlook

[grizy]

I think lots of people miss this point.

No doubt they are making money. But the return is not as good as people think when you consider it's a billion franchise.

Yes.

In addition, I think people underestimate the financial resources of other teams.

The Nationals owner for instance just wants to get a WS ring before he dies.

He's signing the checks like George Steinbrenner and making smart decisions like Billy Beane.

[spikeowenfan]

Starting from 2014, it's 50% luxury tax rate for repeat offender. If they keep it under $189M just for one year, the luxury tax rate for 2015 will be 17.5%.

It's a one time opportunity for the Yankees to maximize their spending capability in the future.

The opportunity is there every few years. Seeing how committed the team is to getting it in 2014, I think it might just be a long-term adjustment.

[kan_t]

The opportunity is there every few years. Seeing how committed the team is to getting it in 2014, I think it might just be a long-term adjustment.

No it's not. They don't have a chance to get back to 22.5% luxury tax rate (first offender) under old CBA.

[spikeowenfan]

I'm not following you. The new CBA resets the luxury tax percentage every time a team stays under it for a whole season. After 4 consecutive seasons it gets maxed out at 50%. There's nothing special about 2014 other than it's the first year. Unless I'm missing something, the team will always have this option.

[kan_t]

I'm not following you. The new CBA resets the luxury tax percentage every time a team stays under it for a whole season. After 4 consecutive seasons it gets maxed out at 50%. There's nothing special about 2014 other than it's the first year. Unless I'm missing something, the team will always have this option.

It runs to 2016 only. They don't have any chance to pay 50% luxury tax rate if they get it under the thresholds in 2014.

[spikeowenfan]

Yankees just aren't as flush as some people think it is.

Forbes estimates Yankees made 10m in 2011 (80m if you include its 34% or so of the ~220m operating income of YES).

With estimated net worth of 1.85 billion, that's 0.5% return on equity, very low by any standard. Even if you include the Yankees' share of YES' operating income, the RoE still only goes up to 4.3%. By the standards of high variance business like professional sports, that's very unhealthy.

For comparison, the ROE of S&P 500 has averaged around 14% since 1970, between roughtly 10 to 18%.

Do you have a link for this? I found this Forbes list of baseball team finances: http://www.forbes.com/lists/2011/33/...es_334613.html

It's really interesting looking at all this stuff. The Yankees, according to that piece, are doing much better than all the other teams. The franchise is also appreciating by about 100 million every year for the past decade.

[spikeowenfan]

It runs to 2016 only.

ah so I was missing something.

2 opposite actions, but the 189 push and the Soriano signing feel like purely business decisions instead of baseball moves. It's understandable, but still disappointing.

[grizy]

Do you have a link for this? I found this Forbes list of baseball team finances: http://www.forbes.com/lists/2011/33/...es_334613.html

It's really interesting looking at all this stuff. The Yankees, according to that piece, are doing much better than all the other teams. The franchise is also appreciating by about 100 million every year for the past decade.

My numbers are pulled from that forbes article you linked and the updated version:

http://www.forbes.com/teams/new-york-yankees/

Notice according to the Forbes page, the Yankees actually has a negative net operating income (-100m) for the past 10 years. Even with the income from concessions and their share of YES and you still only have a marginally profitable business.

The ROE is basically awful. The picture is much better in terms of profit/revenue (including concessions and their share of YES) but 15~25% profit margin for a team that has made the playoffs for all but 1 of the past 10 years is not that impressive. I am also being extremely generous not taking taxes off the YES portion of operating income (because I don't know the rate, but I am sure it's not zero.)

[dabomb2045]

They are spending money. $189M is more than enough money to put a quality team on the field. Be thankful there is no salary cap like the NFL has at $120M. Or $58M in the NBA. When the NHL used to play hockey,the cap was $64.3M in 11-12. It increased to $70.2M based on 57% of $3.3B.

It is...but until certain contracts are off the books, we have almost no way of getting better AND cutting payroll at the same time.

[kan_t]

It is...but until certain contracts are off the books, we have almost no way of getting better AND cutting payroll at the same time.

Prospect development.

[ElDandy]

It is...but until certain contracts are off the books, we have almost no way of getting better AND cutting payroll at the same time.

Stop gaps are always available to hold over until your prospects come through. It's a risky concept of course but that's how most teams have been getting by; developing their guys and making smart signings.

[SatchelPaigeYankee]

Stop gaps are always available to hold over until your prospects come through. It's a risky concept of course but that's how most teams have been getting by; developing their guys and making smart signings.

it's funny because it's true, and yet remains inconceivable to us as yankee fans

[ywchang]

I'm not following you. The new CBA resets the luxury tax percentage every time a team stays under it for a whole season. After 4 consecutive seasons it gets maxed out at 50%. There's nothing special about 2014 other than it's the first year. Unless I'm missing something, the team will always have this option.

How likely is it for the Yankees to get under 189m for 2013?

[kidofkevinmaas]

If getting under 189 million is primarily a fiscal decision, doesn't it seem a bit short-sighted? Without making some really creative trades and hitting the jackpot with affordable free-agent signings, the product on the field doesn't appear to have much chance of getting appreciably better over the next two seasons. And if the product on the field declines at all - a significant possibility due to the age of the roster - I can foresee a situation where the Yankees don't make the playoffs two years in a row, attendance numbers decline two years in a row, and the value of the franchise is hurt. Wouldn't that end up costing the Yankees more money in the long-run than ignoring the 189 budget in the short-term?

[grizy]

They just don't have that kind of leeway.

Yankees, by financial standards are a barely profitable company. Like many have said, even just one or two bad years can hurt attendance. With the margins the Yankees are running, that's enough to push them into the red.

The Steinbrenners really aren't rich enough to take the kind of risk Lerner takes with the Nationals (Werth).

[awy]

hmm, the valuation of the team keeps going up though. there are legit buffer worries especially with the tight credit market, though i believe they are still doing pretty well revenue wise in the new stadium vs old.

the event of a bad year financially is tied to a bad year on the field though. that does suggest that they don't want to have severe rebuilding years. the brittleness of the current roster is worrisome in that light.

[grizy]

The new stadium is generating about 80 million more than the old one per year.

According to Forbes, in 2011, Yankees Stadium paid about 64 million in debt service payments, most of it to service the 1.2 billion PILOT bonds and other financing associated with the new stadium.

[awy]

i think YES also charges less than equivalent regional sports networks?

but yea the debt servicing is pretty big especially with this climate

[grizy]

There is probably some money to be extracted from YES but 90M a year is already pretty damn generous and it's basically impossible for the other owners of YES to agree to just letting 75m (~34% of 220m) go to the Yankees. So there really isn't that much water in that well either.

Quite honestly I think YES can generate a lot more money. Going forward we're going to see super-regional (or whatever they gonna call it) programming from Fox/NBC as they ramp up to compete with ESPN. There is way too much air time totally wasted on YES now.

Fox isn't paying the Dodgers 150m and Rangers 80m just for RSN rights. They are building a national sports network. YES/Yankees will need a national partner if they want to capitalize on the TV rights. I am 100% sure someone is already talking about it.

[awy]

yea news corp wants to buy a stake in the network. they'll probably incorporate it into their content

[Zimmers' Helmet]

Prospect development.

Agreed, and I actually look forward to it. The word "rebuild" is rarely used when talking about the Yankees, but I wouldn't be surprised if that's part of the strategy for 2014.

Let's not fool each other here - this is an aging roster which by 2014 will feature a 40 year old Derek Jeter, a 39 year old A-Rod while CC and Tex will be 34.

Cashman always talks about the legacy he wants to leave behind - I strongly believe 2014 will make or break him once and for all.

[sweet_lou_14]

yea news corp wants to buy a stake in the network. they'll probably incorporate it into their content

We already get Fox Business News "updates" during Yankee games. If it gets any worse -- if I'm forced to endure Fox propaganda every time I want to watch baseball -- there's going to be a problem.

[grizy]

I watch Fox Business News and Fox News muted. Eye candy galore.

Megan Kelly makes me smile.

[awy]

murdoch knows what sells

[Yankees1962]

Agreed, and I actually look forward to it. The word "rebuild" is rarely used when talking about the Yankees, but I wouldn't be surprised if that's part of the strategy for 2014.

Let's not fool each other here - this is an aging roster which by 2014 will feature a 40 year old Derek Jeter, a 39 year old A-Rod while CC and Tex will be 34.

Cashman always talks about the legacy he wants to leave behind - I strongly believe 2014 will make or break him once and for all.

I don't because I think he has the full confidence of Hal. When the Yankees are ready to spend again, Cashman will be there to do so.