|Thursday, August 8
Updated: August 9, 11:33 AM ET
Official says only one team will make money in '02
By Darren Rovell
Baseball's updated operating net loss projections for its 30 teams are even more drastic than the $220 million figure estimated to owners at the Jan. 16 owners' meeting.
A baseball executive, with knowledge of the financials, told ESPN.com on Thursday that the new projected operating net losses are more than double the January estimate and that only one MLB team is estimated to produce a net operating profit in 2002 even if there is no work stoppage.
"As of June, given where payrolls ended up and attendance being down more than five percent, net operating losses will be over $450 million," the official said.
The operating loss of Major League Baseball teams in 2001 was $232 million, according to the numbers presented to the House Judiciary Committee in December.
The January projection, made by accountant and MLB consultant Robert Starkey, was revealed in an exhibit as part of the court papers filed Wednesday by Fred Wilpon, who is being sued by his Mets co-owner Nelson Doubleday. Doubleday, who wants to sell his 50 percent share in the team, alleges that Wilpon, as well as commissioner Bud Selig, knew that Starkey was not an impartial appraiser.
Wilpon disputed that assessment Wednesday.
In January, Starkey told the owners that 28 of the 30 teams projected a net operating loss for this year. The MLB official said that one team expected to show a net profit now may post a loss.
Baseball officials, sensitive to the criticism about the truth in their numbers, are considering opening all of the books to a third party to review. The Major League Baseball Players Association has the right to audit the league's numbers, but they are bound under a confidentiality agreement in the Collective Bargaining Agreement not to specifically talk about what they find.
"Our presentation to Congress might have been a summary, but it was more than any other league has ever done," said MLB CEO Bob DuPuy. "We are always reviewing how much we should disclose."
Sal Galatioto, managing director of Lehman Brothers' sports practice, said baseball's numbers are believable. "Bud Selig, in his own way, is trying to warn people that these losses are real, but nobody believes him," he said. "I've seen some of the books and he's telling the truth. If a strike cancels part of the season and the playoffs and the World Series, some marginal franchises will be filing for Chapter 11 bankruptcy."
A MLB Players Association official declined to comment on the new estimates.
Although Forbes had estimated in March that MLB had an operating profit of $75 million and 20 of 30 teams were profitable in 2001, an analyst that has already studied this year's numbers says that the sport is clearly deep in the red. Hadrian Shaw, a sports analyst with Kagan World Media -- a media research firm -- estimated that MLB will have a net operating loss of $360 million this year, with just four teams earning a profit.
"It has a lot to do with the economy," Shaw said. "Less people are showing up at the park, which not only impacts ticket sales, but also your concession revenues as well."
If a strike occurs and the playoffs cancelled, estimates have MLB paying back Fox more than $200 million. That's not including what the network could try to get back from a loss of advertising revenue, which could exceed another $200 million.
Galatioto says the league will lose at least $300 million more in gate revenues should the season not resume after a work stoppage.
The war chest assembled by the owners is reportedly $210 million, but baseball officials believe a work stoppage could cost at least double that amount. The owners would then have to borrow, which will not be easy. Banks let franchises loan money based on half their team's value, but Galatioto said that some teams are close to reaching their limit, if they haven't already. Owners can also be loaned money based on their own personal net worth.
"The problem is that the owners are relatively less wealthy than they were 10 years ago," Galatioto said. "So there's more stadium debt than ever before and these owners are worth less and less as their stocks plummets. That's why you've got a formula for disaster."
Darren Rovell, who covers sports business for ESPN.com, can be reached at firstname.lastname@example.org.