P1 – Rationale behind the numbers

Hey don’t those highlighted amounts on your Florida Marlins P&L Financial Statement mean you are guessing?

Yes.

But do me a favor, please print it out and follow me here – it won’t hurt.

Each of the amounts highlighted ties into the Forbes Total Revenue amount. So, the guess is about the breakdown of the highlighted amounts only. For example, if one of the estimates were changed to be $3 million higher, another one of the estimates would have to be lowered by $3 million. Within the highlighted amounts, it’s a zero-sum game.

Think of this as a puzzle for which Forbes has already provided every key piece [Gate Receipts, Total Revenues, Total Player Expenses and Operating Income or Loss]. To the extent to which additional information can be uncovered, there is less which has to be approximated to fill in the individual revenue items.

For example, there was a State of Wisconsin Legislative Audit Bureau review report released in 2004 [see page 7 of report], which provided the MLB Central Fund revenues for 1998 through 2003. In addition, Rob Manfred, chief labor executive for MLB, disclosed that the Marlins had received $41 million in Revenue Sharing monies across the two years ending in 2003.

For our purposes, the year 2005 was a very good year. Apparently due to the CBA negotiations ongoing in 2006, MLB Central and Revenue Sharing amounts for 2005 were disclosed in various reports – see list of articles below. So the only guesses involved the Marlins Local Revenues. Using the USA Today 2001 forecasts for each revenue line item, allowed me to approximate the Local Revenues which tied into the Forbes Total Revenue amount. While their attendance has obviously been low, the Marlins have had good ratings for their local broadcasts and likely benefited from an aggressive Fox Sports regional sports network [RSN] efforts to acquire MLB broadcast rights and dissuade teams from setting up their own team-owned RSN.

Note re Revenue Sharing – In the world of MLB finances, Revenue Sharing [based on Local Media revenues] and Luxury [based on payroll] taxes are all part of the revenues which are taken from from certain teams. However, only Revenue Sharing is redistributed to the other [low revenue] MLB teams. Luxury taxes are collected and kept at the MLB Commissioner’s office level.

Those differ from MLB Central revenues [National broadcast & cable contracts, MLB Advanced Media, merchandise, etc] which are derived from external sources and distributed equally among all the teams.

In the case of MLB Central revenues, there is a strong basis to assume that each team’s share has been growing consistently. Revenue Sharing amounts are the revenue item subject to the most fluctuation. Therefore, other than in 2005, I treated it as the last component and plugged the amount needed to match Forbes Total Revenues.

  • MLB Central Fund & Revenue Sharing info – NYT – Murray Chass
  • MLB Central Fund & Revenue Sharing info – WSJ – Stefan Fatsis
  • MLB Central Fund & Revenue Sharing info – NYT – Michael Lewis
  • MLB Yearly Attendance info – ESPN
  • MLB Yearly Major League Player Salaries info – USA Today
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    About Jorge Costales

    - Cuban Exile [veni] - Raised in Miami [vidi] - American Citizen [vici]
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