On Sunday, January 18th the New York Daily News reported that there were multiple changes made to various ownership committee changes at these past winter meetings. One of which included naming Fred Wilpon, whose family owns the New York Mets, as the head of the finance committee. According to MetsBlog.com, as the head, Wilpon is now responsible for “conducting hearings on league investments, changes in ownership, and stadium revenue and financing issues, among other things.” From the perspective of any Mets fan, the response will be one of shock and surprise. However, for those not familiar with the Wilpons’ situation, here is a quick recap as the past five years have been the epitome of financial disaster.
The answer is very clear. From 2009 to 2014, the New York Mets payroll dropped 34%. (The only team with a larger drop is the Houston Astros, where Jeff Lunhow is in the process of completely rebuilding the team and organization). This ranked them as the 23rd highest payroll in 2014, behind the likes of the Milwaukee Brewers, Kansas City Royals and San Diego Padres. What’s more odd about this situation is that the Mets – as of March 2014 were the ninth most valuable team in baseball and consistently brought in revenues in the upper tier of the league.
To respond to the situation I wanted to see what the correlations between team value, revenue, payroll, and winning. From the correlation matrix below which present data from the 2009 to 2013 seasons (all information is not yet available for 2014), there is a very strong relationship between the value of the team, team revenue, and payroll. This all makes sense because rules for investing show that a company is just the value of all future payments that it receives. Winning percentage during the same time period is less correlated with the other variables, but still at over 30% with payroll and revenue.
What is most interesting to look at is how the Mets have performed financially compared to their competitors. The following table shows the percentage change from the 2009 season to the 2013 season for team value and revenue and change in payroll from 2009 to 2014:
The table is quite lucid. The average team value since 2009 has gone way up while the Mets have managed to drop in value over the same time period. Revenues have increased across the league whereas the Mets have seen a double-digit decrease in revenue over the same time period. And despite the fact that the average payroll is up 40%, the Mets have managed to cut their payroll almost 46%. If the Mets could afford to increase their payroll instead of continuing to add debt that needs to be paid off and adding to the money already owed to investors of Bernie Madoff, the Mets could definitely find ways to improve their team. But luckily, Paul DePodesta and JP Ricciardi are leading the analytical front in the front office and finding ways to affordably improve the team. They managed to sign Michael Cuddyer and get the team poised for a 2015 post season run.
Also on the team are at least eight Major League-caliber starting pitchers such All-Star Matt Harvey returning from Tommy John surgery, reigning NL Rookie of the Year Jacob DeGrom and top prospect Noah Syndergaard. If all is successful and the Mets are able to fill the stadium and bring in larger revenues, there is no doubt that they will once again be able to spend more money. However, with so many debts hanging overhead and an owner who can’t handle his own finances in charge of the league financial issues, it will be more impressive if they can manage to get everything in order. In good news, the players know how to manage their finances and afford the team’s $1,000 off-season workout that the team is charging their own players.
Payroll data – http://www.stevetheump.com/Payrolls.htm
Team Valuation and Revenues – http://www.bizofbaseball.com/index.php?option=com_wrapper&Itemid=126What the Brewers Got for Gallardo
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