Yearly Cashflow vs Real Profit
95 losses per year vs 116 wins, easy squeezee :- )


Once again, for those who just joined us :- )  consider the following rental house:

Sale Value + $300,000
Debt (mortgage)

- $200,000

Original purchase price 200,000
Monthly rent incoming + $1,500
Monthly debt service (mortgage)

- $1,200

Monthly cashflow ("profit") + 300


Looks pretty simple?  The newspapers report my "profit" as $300 per month, or $3,600.

Actually my "profit" was $50,000, amigo.  I bought the house 2 years ago for $200k and now can sell it for $300k.  The appreciation is what you care about.

Now you want me to show that I'm losing money on this dream rental house?

Sale Value + $300,000
Debt (mortgage)

- $200,000

Original purchase price 200,000
Monthly rent incoming + $1,500
Monthly debt service (mortgage)

- $1,200

Monthly payments to mortgage - $1,000
Year's payments to improvements - $6,000
New value of home after improvements $350,000
Monthly negative cashflow "profits" - $1,200
Yearly loss (instead of "profits") - $8,400


Easy squeezee.  Now I actually made $100,000 last year, but the papers report that my "profit" was an $8,400 loss.


You might say, "But you can't spend that $150,000 in equity."  Of course you can.  It's called a line of credit.  Banks can, and routinely do, extend these to MLB franchises.  In the 10's of millions of dollars.

It's just that if you do take out a 2nd mortgage on the above house -- say $50,000 -- then your eventual profit (cash at close) is down from $150,000 to $100,000.   And you're the kind of guy who likes looking at $150,000 on paper, not the kind of guy who likes to buy a boat.


Point #1:   Forbes at this link does show the M's as "middle of the pack" as far as 2013 cashflow.  (Many times they've been number 1, while losing 95 games.)

But!  Check the debt/ratio column.  WOW!  The Mariners' debt ratio is only 2%?   

The M's have simply plowed yearly cashflow back into things (such as debt paydown) that increase the eventual PROFIT when they sell the franchise.  They are simply the type of franchise that prefers to look at huge equity on paper (value of the franchise) rather than spending money (say, on Nelson Cruz).


Point #2:  the M's operating income ("yearly profit", sic ) has been impacted by the fact that they have run their product into the ground.  They used to draw over 3,000,000 fans, you know.  The rental house no longer draws a nice rental payment because the roof is falling in.

Doesn't matter.  What's $100 more or less in rent?  I'm looking at my equity in the house, which is $100,000, not $100.


Point #3:  teams AVERAGE -$12M per year in negative cashflow, but most can easily go to -$40M or even -$80M, as the Dodgers have.  The Mariners could easily raise payroll by $50M, never mind the new TV deal.


So when they pass on the cleanup hitter they need, keep it in mind.  It's because they don't want their debt ratio to go from 2% to 3%.  Not because they would have to dip into personal checking accounts.

I'm not saying the Mariners are the devil, because they like a clean balance sheet more than they like baseball.  I just wish people would stop saying that the Mariners' hands are tied on payroll.  





As I noted earlier today, the Mariners' problem is priorities, not intelligence. They prioritize good PR, a really impressive balance sheet with low risk, and an annual profit to keep Nintendo happy. They do not prioritize winning. Or even massively improving the value of the franchise through the addition of player commodities.


The orgs hands are not tied with respect to payroll flexibility but the GM's certainly are.


The M's don't win because organizationally they are significantly more risk averse than the competition. Every year they can point to the fools that made a Faustian bargain and then fell on their face, while blissfully ignoring that the teams that actually succeed accept risk. In the world of gaming, it is possible for xbox, playstation, and wii to all make money and thumb their noses at the silly failures of the wannabes, but in baseball enough teams see 85 wins as a failure that they will all take enough risk to insure that five of them will be better than the risk averse M's 9 seasons our of 10. *Bah humbug*

jokestar's picture

I think they took a well reasoned risk in signing Cano to $240,000,000.00. And it looks like they're really close to fielding a play off contender. Hindsight is 20/20, but at the time, Cruz was coming off a 50 game suspension for PEDs as well as hitting in that bandbox in Texas. Nobody knew if he could keep producing, a lot of people were complaining about his lack of defense, and a lot of people didn't want him because of the PED use. Still, like you say, it'd been great if they had signed him.

M's Watcher's picture

With Cano, the team signed a superstar that would put fans in the seats now, while taking on the risk that he might not be worth it near the end of the deal. Then again, he could be a bargain near the end, as salaries escalate along with revenue. He might end his career at 1B/DH, but that wouldn't be the end of the world. Recall Paul Molitor.
As for Cruz/Hart/Morales in 2014, they all carried risk/baggage. Yes, we're all looking back in hindsight, but that is all we have. It's up to Jack (and ownership) to choose wisely looking ahead, and they didn't. Others chose better, and the Oreos for one are still playing in October.

Jpax's picture

I honestly believe it as simple as the "Ownership" not wanting a known cheater. I know, he did the 'crime' and paid his debt to MLB, but our Ownership group wants good citizens. I am not sure why, but if you look at past experience, they got rid of Soriano, Freddy Garcia, The convicted rapist, etc., all because of perceived bad publicity. I think Z got one "get out of jail card" with the convicted rapist but they made him get rid of him. I truly believe they want 'Boy Scouts/Good Citizens' and will never sign any known PED users. (Mistake users (like Morse as a minor leaguer/Choi/etc. are one thing, but purposeful using is another in their eyes.
Of course, I may be all wrong.


I can't fault the M's for running a tight budgetary ship.  I would like them to spend a bit more, but it isn't my money.
I have a favorite breakfast place that could use some investment in decor etc. (still quite late 1960's) but I still go there.  I could choose not to, of course.
One might argue that the M's "owe" it to the community to spend more on payroll due to the public ownership of Safeco, a facility that they get to use for a substantial lease fee.  But that begs the question, "How much do they owe?"
Is $100M/yr enough to make it square?  $120M  $220M?  Of course, there is no answer here.
Asking them to spend "just" an additional $15M per year to make "we" fans content (or because they can "afford" it) eventually leads to greater "demands."  But the Angels spent double what the M's spent and barely got further.  The Dodgers' huge payroll didn't get them much further down the line, either.
Should the FO have paid Nelson Cruz the $16M it would have taken to get him here for two seasons?  I think several of us agreed at the time that 2 or 3 times $8M was pretty fair, I know I did.  But the concerns about a post-PED collapse were real.  I think the FO mucked this one up....but I can understand why. 
We paid a huge sum for Cano, and already had a likewise huge sum on the books for Felix.  We paid $10M for a closer and gave a bunch of millions for a gimpy rusty gate.
Mid-season we acquired an $8-$10M CF to replace the essentially free guy we had.
We did some spending.
The M's ownership structure has a philosophy and they stick to it, which probably isn't bad.  Spend wisely and eliminate debt is rarely a stupid business plan.    The nation could use a bit more of that, I think.
Rather than seeing us jump in for another $15MX3 for V-Mart, I would like us to extend Seager.  Paxton, too....probably. 
I always said a subsidized Kemp was a great addition, but at full dollar I would rather we trade for a "free" Souza or Grichuk and look for other places to spend the Kemp money. 
But I'm digressing....
The FO sets business policy, brands the team, and figures out how to maximize investment in a way that fits ownership parameters.
The GM operates within those goals and is tasked with fielding a "winner."  Every GM wants to spend more money, of course, because it isn't theirs, yet they benefit the most (in driving up their own dollar value) if those dollars are spent on talent and done so correctly.  So a GM's "approval" of signing Cruz isn't earth-shattering stuff and not much different than a GM's "approval" (in principle) of a contract with Cano.  GM's simply spend other people's money, mostly for their own real benefit.  the value of the M's doesn't increase by 100% if they win a WS, but Z's value likely does. 
My frustrations with the M's are less about "total" dollars pent and more about who got 'em and who else might we have got.  WFB?  A big overpay!  Hart?  That one didn't work out.  A 6-week delay in signing a RH bat?  Absurd. 
That kind of stuff.
So I will respectfully differ with the opinion that the FO/ownership has no idea how to spen their money simply because it is their money, after all.  Well, unless you're the Angels and bought Hamilton and Pujols.  Returns on those investments are already somwhat suspect.  They will get worse. Then I will tell ownership they were amazingly stupid.  But I will gladly beat on GM's who spend within budget and get the wrong dudes and on Managers who manage poorly (both based on my opinions, of course).
What I hoped for, back in March, was meaningful Mariner baseball into September.  We got it all the way until the final day of the season.  I can't complain much.
But in '15 I want a few more games, ones of the playoff variety. We're still RH'ed bats short.  Now let's go get 'em...within whatever salary structure the money guys give us.  If it doesn't increase from this year (it will a bit), then let's see Z get it done at the salary structure he's given. 
The money guys have given us (with considerable risk) two of the great players in the game for about 1/2 a billion dollars, total.  Any discussion on their being unwilling to pony up misses that greater point.

Add comment

Filtered HTML

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <blockquote> <code> <ul> <ol> <li> <dl> <dt> <dd><p><br>
  • Lines and paragraphs break automatically.

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.


  • Allowed HTML tags: <a> <em> <strong> <cite> <blockquote> <code> <ul> <ol> <li> <dl> <dt> <dd>
  • Lines and paragraphs break automatically.
  • Web page addresses and e-mail addresses turn into links automatically.