The Athletics appear to be on the verge of leaving Oakland in what could be described as a sudden decision. … [+]
Limited details emerged about the Athletics' financial situation in early September, and the bigger picture from MLB paints a picture of a rush to relocate and questionable business practices that, if accurate, raises questions about why Rob Manfred and the owners are considering expansion.
In my article outlining the financial details, I explained how owner John Fisher claimed the team was expecting a $40 million loss in 2023. Information provided by a baseball industry source with investor-level knowledge of the Athletics' finances showed the actual projection was for cash flow of $39.322 million after capital expenditures of about $3 million.
If this detail was intended to lend a sympathetic voice to the way Fisher has run the Athletics and their decision to move to Las Vegas, it seems like a total disappointment. Instead, even if the numbers were completely accurate (something sports economists question), it shows that not only the Athletics, but many clubs in the league, are simply operating at a loss, propped up by the league to provide a schedule. If the Athletics and other teams with low attendance are operating at a loss on huge subsidies, what does that say about the health of the league as a whole?
Everything, aside from the colossal mess at the Oakland Coliseum, suggests the team made snap decisions and shot itself in the foot, blaming costs even as it ranked last by nearly $10 million at $60 million. And because the league's draft structure gives the best picks to underperforming clubs, the Athletics have complained that draft bonuses (some below slot) are a drag on revenue. As one NL executive told me, “They seem to be throwing their hands up.”
According to the financial details I released, operating expenses are projected to be $225,012,000 in 2023, up 18.3% from $190,195,000 in 2022. This comes after the team reportedly lost money every year since 2017. At the same time, revenue sharing is starting to flow in, meaning the Athletics will be subsidized by $86,075,000 per year from MLB concentrated revenues.
But what's puzzling is the sudden move to Las Vegas. If the Athletics and the league think a move will solve all their problems, there are big questions that need to be answered.
According to a scathing ESPN feature, Fisher and the Athletics had just $36 million remaining from their fundraising goal for the $12 billion project to build a 55-acre ballpark village on the Howard Terminal site, but the threat of losing revenue sharing if concrete steps weren't taken by Jan. 15, 2024 prompted the Athletics to jump ship to Las Vegas.
Making Las Vegas work comes with its own unresolved questions: The Athletics are due $68 million this year in local media rights fees, and San Francisco, Oakland and San Jose rank 10th in designated market size (DMA), while Las Vegas is 40th. Fisher and the other owners may realize that with the media rights bubble bursting, they won't be making as much money in Oakland when contracts come up for renewal, but then what do you think that revenue stream will be in Las Vegas?
It's possible that the Athletics are looking to make up for the loss of media rights in other ways. According to financials I've seen, their sponsorship and advertising high from 2017 through the end of this year was $12,007,000 in 2019. That revenue stream is projected to drop by more than half to $6 million in 2023. Even if the Golden Knights and Raiders are eating up potential cash, the Athletics will no doubt see bigger sponsorship opportunities compared to what they got in Oakland.
The Las Vegas attendance projections are fantasy, but if the Athletics could make a deal with a hotel-casino to create a package that includes tickets to games at the Athletics' new stadium, even if the Athletics have to offer a discount, they could make up for it in other ways at the stadium.
But this is all “whatever”-ism. According to an ESPN article, the relocation application is devoid of any details. At just nine acres, the proposed ballpark is just half an acre larger than the site of Target Field, the Twins' home stadium. That site would be the smallest in the league, but it would be outdoors and without the roof the Athletics say they'll build in Las Vegas.
In all of this, the Athletics were not charged a relocation fee. The reason is likely that John Fisher was unable to raise the funds to make the move happen. Why would it be wise to move the Athletics to Las Vegas rather than an expansion market that would fill the gap in Oakland and at least not burden the new ownership group with a bad track record? The Athletics say they will invest once they get out of the red in Las Vegas. As the ownership practice of the San Jose Earthquakes shows, actions speak louder than words, and their actions in San Jose were not the best.
Subsidy
In conversations with several executives, a common thread emerged: the Athletics and many other small-market teams need subsidies from larger, more profitable teams. All blame player salaries, but none believe a prolonged player lockout wouldn't also trigger big salary-cap and luxury-tax penalties.
If the Athletics are in the red, and it's not the Athletics' fault, and they rush to relocate to Las Vegas for fear of losing their revenue share, and the Rays stay in St. Petersburg and get the ballpark village but still get the revenue share…the question of expansion has to be asked, even if the amount of subsidy from larger markets is held in check and somehow reduced by increased local revenue.
Rob Manfred has told me and others that MLB is a “growth industry.” But look at the expansion markets, they're all small, even if you add Oakland back in. Nashville, Salt Lake City, Portland… they'll all be revenue-sharing payment markets. Maybe the ~$4 billion expansion fee will mitigate this. Maybe reterritorialization will reduce travel costs when the league is at 32 teams. Maybe national TV-rights revenues will increase with more teams in the playoffs.
perhaps.
After all, the Athletics' business model is ad hoc. The relocation plan lacks any detail. If the Athletics' financials are accurate, they're an indictment of MLB's structure and raise the question of why expansion makes sense. The Athletics have lost money every year since 2017, pandemic years not included, yet less-profitable teams get higher central funds and revenue-sharing payments and still lose money? If so, is the industry healthy?
The Athletics' financials weren't the key to explaining John Fisher's woes. Rather, they revealed glaring flaws that Rob Manfred and the league's owners need to think hard about as they navigate the next chapter of baseball's long history. Not all teams are this dysfunctional, but they certainly can't be in an $11 billion industry.
