The Braves have set a player payroll budget of $94 million for this year, leaving them with several million dollars still to spend, the team’s chairman and CEO said.
Terry McGuirk, in a wide-ranging interview with The Atlanta Journal-Constitution in his Turner Field office, also said team owner Liberty Media has expressed no intention of selling the club in the near future.
And on another significant note, McGuirk disclosed that the Braves are locked into 25-year local TV contracts that will prevent the franchise from cashing in on Major League Baseball’s trend toward dramatically higher telecast rights fees.
The issues of payroll, ownership and TV rights are integral to the business of the Braves or any major professional sports franchise. Here is more of what McGuirk had to say about those topics:
Payroll
McGuirk defended the Braves’ payroll, which ranks near the middle among MLB teams and has drawn sharp criticism from some fans during an off-season that has seen the team make no major acquisitions.
He said the Braves have “a little over $90 million right now” committed toward 2012 salaries and will reach the previously undisclosed $94 million budget, up slightly from last year, with acquisitions before or during the season.
“We will be spending 94 this year,” he said. “We’ve got a lot of young guys to look at in spring training. There are still decisions to be made.”
McGuirk said a $94 million payroll is the maximum amount supported by the Braves’ projected revenue, contending the team will operate at that level with “no profitability, no free cash flow.” The Braves ranked 15th in MLB in attendance last season, about the same as in payroll.
McGuirk acknowledged that a $94 million payroll “will look more like $84 million in actual players on the ground” because the team will pay $10 million toward pitcher Derek Lowe’s salary, even though Lowe — ineffective last season — was traded to the Cleveland Indians in October.
McGuirk made no apologies for the Braves’ payroll, which was barely half as large as NL East winner Philadelphia’s last season, or for their absence in recent years from competing for top-dollar free agents.
“I think this team is on a glide path where it has the ability with all our youth to be good for a long period of time, continue to raise enthusiasm in Atlanta and drive revenue and allow us to spend more on the team,” he said.
“In a way, I almost relish when one of our competitors goes in the free-agent market because it’s so inefficient and such a bad use of dollars,” he added. “You almost never get the value out of a free-agent market expense. We all have limited dollars to spend, so if someone in wasting those dollars in a competitive situation, it helps us.”
McGuirk said the Braves remain deeply rooted in their philosophy of building through the minor-league system.
“I think that is part of what the quiet this winter reflects — a real confidence in our minor-league system,” he said. “I wouldn’t trade our young people for any team’s youth corps. I think the state of the franchise is extremely positive.”
Ownership
Liberty Media’s 2007 purchase of the Braves — a deal driven by its tax benefits for the Colorado-based conglomerate — included a commitment not to sell the team for at least 4 1/2 years. That pledge, made to MLB as a condition of its approval of the unusual transaction, expired in December, freeing Liberty to sell the Braves whenever it chooses.
But McGuirk said, “We talk all the time, and there’s just no indication whatsoever of a sale. They are very satisfied with the ownership. It’s no secret that part of the purchase had to do with a much larger tax-based deal, but there’s just no need to sell.”
As part of its 2007 deal with MLB, Liberty agreed not to have an operating role in the team, designating McGuirk as what MLB calls the franchise’s “control person.”
McGuirk indicated that Liberty, like many owners of sports teams, accepts the lack of cash flow in the expectation that the franchise’s value will rise over time.
“We do exist in a world where if you operate this way for a few years and if you were to sell the team, it does seem to be worth more,” McGuirk said. “Exactly why is an unknown, but it’s part of the economic system.
“You certainly take a chance when you deploy the amount of money it takes to own a franchise and you don’t make money during the time you own it. You better be fairly certain you’re building the franchise in a credible way so it will potentially be worth more.”
Liberty is a publicly traded company, and McGuirk acknowledged that can make for a fluid situation.
“It’s hard to predict, but there’s no pressure [to sell],” McGuirk said. “Public companies, when they do poorly, have different pressures. Liberty has done extremely well and is a very successful company. ... Public companies are public companies, but there’s nothing to indicate that any sale could be happening in the near future.”
TV rights
A big story in the business of baseball this winter has been the rapidly rising rights fees for local telecasts of games. The Angels’ and Rangers’ recent TV mega-deals were credited for those teams’ expensive acquisitions of free agent first baseman Albert Pujols and Japanese pitcher Yu Darvish, respectively.
McGuirk expects the trend to continue, but said the Braves will not be in position to benefit from it in the next two decades.
“Whenever old [TV] deals are up and new deals get realized, there are big jumps in value. I have predicted that, knew it was coming,” McGuirk said. “And I think we have an undervalued local rights [deal].
“That being said, we inherited a deal that was done under [previous owner Turner Broadcasting/Time Warner] a little over four years ago, before the sale, that lasts out through 25 years. So there is no opportunity for a different deal than the one we have. Every single set of games on the different networks that we are seen on [Fox Sports South, SportSouth and Peachtree TV] are all 25-year deals or thereabouts.”
McGuirk said the deals call for “cost-of-living type increases” each year, but contain no options for renegotiation.
“They were at-market deals when they were done, but the market has changed,” he said. “We will have to look elsewhere for the increases that we will need in revenue to continue to build this franchise. It’s what the owners at the time decided to do, so we have to live with it. ... It’s nothing to be ashamed of, but it’s not going to be these newer deals where there is cash up front.”
Asked if the TV contracts will be a competitive disadvantage for the Braves over the next two decades, McGuirk said: “Let’s just say it won’t be an advantage.”
