I’m going to dumb it down a little here so everyone can understand just how a business survives and what determines the value of your business for a resale or refinancing.
The profit of a company is based on the difference between revenues generated and operating costs.
In the case of the Mets, revenues include ticket sales, network support, merchandising sales, parking fees, vendor support money and a myriad amount of other secondary items.
Operating costs include depreciation and amortization[i], (in short form, depreciation is a term used in accounting, economics and finance to spread the cost of an asset over the span of several years. Amortization or amortization is the process of decreasing or accounting for an amount over a period of time), player salaries, stadium costs, maintenance, utilities, league fees, etc.
Like I said earlier… money in, money out.
What operating costs doesn’t include is corporate costs, salaries of officers and Board members, corporate luxury box maintenance, lavish meals in those three separate corporate boxes used by Fred Wilpon, Jeff Wilpon, and Saul Katz (yes, they each have their own luxury suite), corporate automobiles and aircraft, airline costs, or travel costs, etc.
(I remember one particular job I had working for a bank as a workout artist, liquidating radio properties. My “General Manager salary” was $130,000, but my corporate expense account that didn’t go to the bottom line was $20,000… a month.)
According to Josh Kosman’s report in early this month, which came out in the New York Post, the Mets are expected to “lose” $23million dollars this season.[ii]
Sandy Alderson already is on record that the loss last year was $60mil. (Eno Sarris/SB Nation reported it was $70millon[iii]
The Mets payroll was cut from approximately $143mil in 2011 to $95mil in 2012. That’s a reduction of $48mil.[iv]
So, they lost $60mil, cut salaries by $43mil, which leaves you a loss of $17mil… oops, nope, the loss reported is $23mil.
So, we still have $6mil more to go to turn black without removing a lobster from the menu in Fred’s luxury box.
On the basis of how I used to be reviewed, this isn’t that bad. In fact, it’s definitely online for a return to profit in 2013, even if the team continues to sell fewer tickets. Operating goals look to be easily achievable after the loss of Johan Santana’s $31mil and Jason Bay’s $21mil contracts. The safe approach would be to go into this season with the current salary structure, take it on the chin, and come out of it with an additional $52mil off the bottom line.
Instead, the approach seems to be that the Mets are going to increase the current payroll by $5mil (woop-dee-do), sell fewer tickets, lose more games, and wait for 2014 to roll around.
Based on that plan, 2014’s salaries will be in the $48mil range, the team will operate far above that, and additional players can be added through trades and free agency that will improve the team but still keep it profitable.
Look, I’m sure I’ve got something wrong here (I always do), but, in my world, it looks like the Mets will put a decent team on the field in 2014 and return to a profitable business under the Wilpon family.
So, there will be no reason to change the owners.
Isn’t that special?