Payroll budget is 50% of revenue

[AngelsLakersFan]

17 minutes ago, Stradling said:

If they lose money that often then they absolutely deserve to be the highest paid employees, as they are risking the most.  

You might think but it usually doesn't work out that way. A lot of investors are happy just to be involved with the biz. Tech startups are comparable. Early stage funders put up a lot of money for a relatively small percentage of ownership that very often doesn't pay out until the reach an IPO (where it pays out yuuuge).

[AngelsLakersFan]

13 minutes ago, Jeff Fletcher said:

Arte also said most small market teams spend about 50 percent of their revenue and the large market teams spend more like 40 percent. 

That's interesting. I wonder if he is talking about post revenue sharing revenue. With annual $100m gifts from the league you gotta think a lot of these small market teams aren't spending much, if any, of their own cash (9 teams at $105m or less last year).

[Docwaukee]

 

5 minutes ago, AngelsLakersFan said:

That's interesting. I wonder if he is talking about post revenue sharing revenue. With annual $100m gifts from the league you gotta think a lot of these small market teams aren't spending much, if any, of their own cash (9 teams at $105m or less last year).

even the lowest revenue team starts by putting in over 60 mil.   If they get 100 back, that's a max of 40mil in return.  

[Docwaukee]

13 minutes ago, AngelsLakersFan said:

You might think but it usually doesn't work out that way. A lot of investors are happy just to be involved with the biz. Tech startups are comparable. Early stage funders put up a lot of money for a relatively small percentage of ownership that very often doesn't pay out until the reach an IPO (where it pays out yuuuge).

Arte isn't merely an investor though.  He's the primary owner.  To me, there's a big difference.  And an MLB club is hard to compare to a tech startup.  

I'm not sure Arte is taking a hefty salary or not, but his net gain in terms of team value, tax deferred monies etc. is likely going to be much more than any one individual player.  A 2% increase in the value of the team every year from 2bil starts at 40mil.  

I realize the discussion was in regard to his salary, but he's likely taking money in via ways to avoid paying taxes anyway.  

[floplag]

14 minutes ago, Dochalo said:

Arte isn't merely an investor though.  He's the primary owner.  To me, there's a big difference.  And an MLB club is hard to compare to a tech startup.  

I'm not sure Arte is taking a hefty salary or not, but his net gain in terms of team value, tax deferred monies etc. is likely going to be much more than any one individual player.  A 2% increase in the value of the team every year from 2bil starts at 40mil.  

I realize the discussion was in regard to his salary, but he's likely taking money in via ways to avoid paying taxes anyway.  

I would imagine in this case he isnt taking a salary as he has nothing to do with day to day operations, he keeps the profits, bit different.  Most owners i know in business dont pay themselves a salary, they simply keeps whats left after paying everything else. 

[AngelsLakersFan]

1 hour ago, Dochalo said:

 

even the lowest revenue team starts by putting in over 60 mil.   If they get 100 back, that's a max of 40mil in return.  

Ok it isn't fair to classify it all as a 'gift' but the teams are putting up 31% of their revenue and getting ~$100m back. 

Here's a current snapshot at the bottom 10 payrolls...

If you look at TB, their payroll is 50% of the revenue sharing amount, and they still have ~70% of their revenue on top of that. That has to be a near $0 revenue team unless they are way below 50%. If they were at 33% their pre-share revenue would be around $70m ($80m gift).

Pit, Baltimore, and Miami are at about 60% of their revenue sharing amount, with ~70% of their revenue left. For that to balance to 50% of team revenue their pre-share revenue would have to be about ~$30m ($90m gift). Unlikely.

These teams around $100m, at 100% of their revenue sharing amount, still with ~70% of their revenue left. Puts their pre-share revenue around $140m which I can believe ($60m gift). A team like Oakland would be around $85m. The Angels around $335m.

Most likely the bottom 4 teams are running almost entirely on revenue sharing money.

 

[AngelsLakersFan]

26 minutes ago, floplag said:

I would imagine in this case he isnt taking a salary as he has nothing to do with day to day operations, he keeps the profits, bit different.  Most owners i know in business dont pay themselves a salary, they simply keeps whats left after paying everything else. 

I'm not a billionaire so I haven't looked into it, but I imagine it just depends on what his accountant says will limit his tax exposure best.

[gurn67]

The team has gone up in value about $100,000,000 per year on average since Arte purchased the team. I'm sorry, but I don't give a rat's ass on whether he loses a few million dollars, or even a few tens of millions of dollars per year. He can cash this franchise in for over 1.5 BILLION dollars more than he paid for it right now and that number is going up every single year.

[Docwaukee]

5 minutes ago, AngelsLakersFan said:

Ok it isn't fair to classify it all as a 'gift' but the teams are putting up 31% of their revenue and getting ~$100m back. 

Here's a current snapshot at the bottom 10 payrolls...

If you look at TB, their payroll is 50% of the revenue sharing amount, and they still have ~70% of their revenue on top of that. That has to be a near $0 revenue team unless they are way below 50%.

Pit, Baltimore, and Miami are at about 60% of their revenue sharing amount, with ~70% of their revenue left. For that to balance to 50% of team revenue their pre-share revenue would have to be about ~$30m. Unlikely.

These teams around $100m, at 100% of their revenue sharing amount, still with ~70% of their revenue left. Puts their pre-share revenue around $140m which I can believe. A team like Oakland would be around $85m. The Angels around $335m.

Most likely the bottom 4 teams are running almost entirely on revenue sharing money.

 

I'm not sure that Arte's number of 50% of revenue is correct.  If the yankees spent 40% of their revenue, they'd have a near 300m payroll.  

from Forbes, I saw TB having a revenue of about 220m.  I am not sure that's a pre or post revenue sharing calculation though.  My guess is that it's pre in that Forbes likely doesn't have the details to be able to calculate that in.  

[AngelsLakersFan]

14 minutes ago, Dochalo said:

I'm not sure that Arte's number of 50% of revenue is correct.  If the yankees spent 40% of their revenue, they'd have a near 300m payroll.  

from Forbes, I saw TB having a revenue of about 220m.  I am not sure that's a pre or post revenue sharing calculation though.  My guess is that it's pre in that Forbes likely doesn't have the details to be able to calculate that in.  

I would think the forbes calculations were after revenue sharing. That number puts TB at ~$170m before getting their revenue sharing check. That check would be about $51m, aka, their stated payroll.

[LAAMike]

A rather large issue ignored is the after tax profit of the business.  Depreciating players contracts is very helpful in avoiding taxation which is where a great deal of the value of the franchise comes from.  

[GrittyVeterans]

Now let's discuss the massive increase in equity of the Angels franchise since Arte bought the team. 

[Taylor]

Just now, GrittyVeterans said:

Now let's discuss the massive increase in equity of the Angels franchise since Arte bought the team. 

Not bad for a billboard salesman.

[nate]

That is just player payroll, right?

You have to add in the cost of stadium staff, scout staff, front office staff, security, travel, taxes, coaching staffs, and much more that I am not thinking of I am sure.

Also, Arte is probably making a decent amount, but a lot of it probably just goes into the Angels coffers, which only increases the teams value.

[Dtwncbad]

11 hours ago, LAAMike said:

A rather large issue ignored is the after tax profit of the business.  Depreciating players contracts is very helpful in avoiding taxation which is where a great deal of the value of the franchise comes from.  

I read this multiple times and I am not sure what on earth you are talking about.

[eaterfan]

4 hours ago, Dtwncbad said:

I read this multiple times and I am not sure what on earth you are talking about.

I'm not a CPA, but I've read about this. Basically the player contract can be treated as a depreciable asset. So they get to pay a salary expense and take a depreciation expense. It doesn't effect revenue, but it lowers net income and taxable income.

https://sabr.org/research/roster-depreciation-allowance-how-major-league-baseball-teams-turn-profits-losses

Here's an article.

[Erstad Grit]

You guys act like the other 50% goes to Arte personally.

I'd assume by payroll he meant  MLB roster or 40 man. Maybe minors too who knows. 

Other bills outside of MLB payroll  includes admin, insurance, improvements/patience, all the rent a cops, and stadium workers, scouts, etc.

The constant narrative of Arte being cheap is so old and not based on facts. 

 

 

[eaterfan]

34 minutes ago, Erstad Grit said:

You guys act like the other 50% goes to Arte personally.

I'd assume by payroll he meant  MLB roster or 40 man. Maybe minors too who knows. 

Other bills outside of MLB payroll  includes admin, insurance, improvements/patience, all the rent a cops, and stadium workers, scouts, etc.

The constant narrative of Arte being cheap is so old and not based on facts. 

 

 

While people on here were making it sound like Arte is pocketing $150 million each year, I think criticism of Arte's spending can be fair. I'd imagine he's making a pretty good return even with all the expenses you point out. I'd imagine he and some family members probably make a decent salary "working" for the Angels which contribute to some of the expenses you mention. Add to that the increase in franchise value each year and Arte is doing great. 

Arte can treat the Angels like an investment, it's his team. But the goal of baseball is to win and it's fair to point out that Arte is treating the Angels like an investment. I don't think people are expecting Arte to lose money (cash) year after year, but I'd bet he can increase payroll by $50+ million pretty easily and not lose money. I don't think he was going to be forced to take out a mortgage to sign Manny Machado. I'm sure Arte wants to win but it's just that he wants to make money more.

[LAAMike]

Eaterfan - thanks for the link to an informative article.  The RDA (Roster Depreciation Allowance) is actually an amortization as the assets in question are "intangible".  The results are the same - an interest free loan (as the amortization reduces the basis which will be recaptured when the team is sold) which will allow the team to spend more on payroll or a pass through (if the ownership is a Subchapter S) to Arte to reduce his personal taxes.  

[AngelsLakersFan]

21 hours ago, Throwman91 said:

In baseball your best player does not win you that many games, your manager and GM doesn't either.   Baseball is a collective effort and there are so many moving parts and injury/performance/union risks.  An entity risking hundreds of millions of dollars and not taking the lions share would be convoluted.  It comes down to who is investing and risking the most, the players are guaranteed money, the coaches managers and employees are guaranteed their money, the owner is not.  Nobody but the owner/s have something to lose.  And you make my point, movie stars/directors shouldn't be taking home the lion's share with the knowledge that few movies become hits, the risk outweighs the reward for the financier.  Trout is not worth 40MM, but Arte is taking that risk to keep his team relevant in a dog eat dog world, he deserves every penny of profit he makes over anyone else.

The owners are guaranteed more than anyone else.

[Dtwncbad]

23 hours ago, eaterfan said:

I'm not a CPA, but I've read about this. Basically the player contract can be treated as a depreciable asset. So they get to pay a salary expense and take a depreciation expense. It doesn't effect revenue, but it lowers net income and taxable income.

https://sabr.org/research/roster-depreciation-allowance-how-major-league-baseball-teams-turn-profits-losses

Here's an article.

If I read that correctly, the percentage of the purchase price of the franchise designated as the amount to acquire the players (and their contracts) is depreciable over 15 years.

Moreno has owned the team for more than 15 years so he is past the "double dip" of both expensing the salaries AND depreciating that "player contract rights" acquisition portion of the purchase price when he bought the team.

The opportunity for the next owner to double dip for 15 years does exist, and this increases the value of the franchise, but this detail you are talking about is not helping this team to be more profitable right now.  The 15 year period for Moreno's purchase of the Angels is over.

Edited February 20, 2019 by Dtwncbad

[Docwaukee]

6 hours ago, Dtwncbad said:

If I read that correctly, the percentage of the purchase price of the franchise designated as the amount to acquire the players (and their contracts) is depreciable over 15 years.

Moreno has owned the team for more than 15 years so he is past the "double dip" of both expensing the salaries AND depreciating that "player contract rights" acquisition portion of the purchase price when he bought the team.

The opportunity for the next owner to double dip for 15 years does exist, and this increases the value of the franchise, but this detail you are talking about is not helping this team to be more profitable right now.  The 15 year period for Moreno's purchase of the Angels is over.

they also get to amortize individual contracts as intangible assets as well.