Number Crunching: Leaked MLB Financials Show Pirates Really Are Flat Broke

Posted by Jonathan in INTERNET on 08-31-10    No Comments


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I guess this is what happens when I try to talk  sports: I love the games, and sometimes I run out and make all sorts of nutty assumptions based on little or no practical knowledge.

Hence, it is with some newly found humbleness that I am taking a look at the financial statements for the Pittsburgh Pirates. These documents, along with data from  MLB’s Tampa Bay Rays, Florida Marlins, Los Angeles Angels, Seattle Mariners and Texas Rangers, were leaked leaked to sports blog Deadspin earlier in August.

Deadspin’s general thesis is summed up in this quote from their post:

  • “If there is a thread running through all of these financial statements, it is the incredible ability of baseball teams — whether they’re winners or losers, big market or small, “rich” or “poor” — to make their owners a fat pile of money.”

Now, we all love Deadspin. It is a leader in a new generation of sports coverage. But the fact is, far from the image of a small-market cash cow, these documents paint a clear picture of a struggling operation trying to function in a highly illogical, disorganized market with a nagging problem of rising costs.

To get a sense of the disconnect here, download the financial statements for the Pittsburgh Baseball Partnership, from this link.  Start right on page 1, on the first line of the Balance Sheet. See “cash and cash equivalents.” From Oct. 31 in 2007 to the same date in 2008 the supposed “fat pile of money” the Pirates were hording fell by almost 62 percent! I kid you not, cash on hand dropped from $1,667,311 to $608,180 for the period. That’s about $265,000 a quarter, or almost $90,000 a week!

During that same period, total current liabilities went up by a pretty miserable 3.8 percent. And total partners capital — that is, what the folks who invested their money in this operation have left — fell by a General Motors-like 8.7 percent.

Yikes!

The only thing that rises here are total assets, but that comes mostly from  an increase in the value of the property lease on PNC Park, the Pirates’ gem of a stadium, and the money they are making from dealing away their pricey players — look for “players contracts, net.”

The Income Statement on page 2, is equally grim. Home game receipts fell by about 5 percent. Broadcasting revenues  were off a tenth of a percent. Yes, signage, concession and other revenues were up slightly. But the only real growth was in revenue sharing, which increased by about 30 percent, based mostly on TV revenue from MLB.

Now, is there data that indicates the partnership is making some money? Absolutely. Start on page 4 and look for the line that shows cash flow from operations. Here the operation shows a whopping gain of 400 percent in operating cash flow, year over year. But there are a lot of one-time items on this disclosure: the sale of the Nationals, the changes in the Major League Central Fund and other bits of accounting foolishness that can inflate the cash flow picture.

Regardless, the narrative is clear: This is a decidedly feeble operation that struggles to sell tickets, control its costs and work with its partners. What I think it really shows is that baseball remains what it always has been: a tough business played by tough guys for bragging rights, not for money.

Nothing — not technology, nor the desire of a popular blog to run salacious content — can change that.

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