Defending the Marlins

Few people are high on the Florida Marlins’s business practices. Since the club’s inception in 1993, it has had three owners who have employed a build-’em-up then tear-’em-down strategy. In addition, the team has consistently threatened to move from the Miami area to another locality unless taxpayers help build a new stadium for the team. Current owner Jeffrey Loria has received much of the criticism for the club’s stingy reputation. And though he can expect a new stadium in 2011, he is keeping payroll low for now.

A new stadium means the notoriously frugal Marlins plan to increase their payroll, but not until the team moves into the new park.

The Marlins’ payroll for 2008 is projected to be around $20 million, the lowest in the league and $10 million lower than last season.

“It’s a function of revenues, and we were not really able to derive any revenues out of this facility,” Loria said of the team’s current home, Dolphin Stadium. “As we get closer to the (new) stadium, those things will change. We need to be in that facility.”

Count Maury Brown as one of those who is disgusted with the Marlins’s current operation.

On the player payroll at $20 million, that would be $5 million less than what the club will receive in revenue-sharing, which is projected to be $25 million. Apparently, a “function of the revenues” is to make a mockery of the revenue-sharing system, and do a good bit of profit making.

Forbes estimated that the Marlins posted $43.3 million in operating income last year. That operating income included earnings before interest, taxes, depreciation and amortization. How did the Marlins rate in terms of operating income – a measure of profit – compared to their other 29 counterparts? They were first with the Dodgers in second at $25.5 million, a difference of 41 percent.

Cut your margins enough (low player payroll) and regardless of whether you have embarrassingly low attendance by rolling out a team of made up with what can best be described as replacement level players, take in a healthy level of revenue-sharing, and what you have is a prime example of Jeffrey Loria and David Sampson living on corporate welfare.

As much as I dislike Loria’s tactics for obtaining public funding, I think he is getting too much blame. After all, though his behavior seems juvenile, it worked: he’s getting a $500 million stadium for a third of the price. Why spend your own money when you can spend someone else’s? It’s the voters and the politicians who deserve the blame for giving in. But this is beside the point.

While the Marlins are not spending great sums of money on their players, they have actually put decent teams on the field. Since Loria became the owner in 2002, despite spending 45% less than the league-average payroll, the Marlins have been a .500 team with a World Series title. Teams with similar average wins over this time include Seattle (81 wins, +20% payroll), Toronto (80 wins, -15% payroll), New York Mets (80 wins, +42% payroll), and Cleveland (82 wins, -27% payroll). In terms of payroll frugality, only Tampa Bay had a lower payroll (-65%) while averaging a league low of 64 wins. Pittsburgh (70 wins, -42% payroll) , Montreal/Washington (76 wins, -36% payroll), Milwaukee (72 wins, -36% payroll), and Kansas City (65 wins, -35% payroll) had similarly-constrained budgets, yet were much less successful than the Marlins. Spending less certainly helps profitability, but you have to give Loria credit for not putting replacement players on the field.

Team	% +/- Lg. Mean	Mean Wins
TBD	-60%		64
FLA	-45%		81
PIT	-42%		70
WSN	-36%		76
MIL	-36%		72
KCR	-35%		65
CLE	-27%		82
SDP	-25%		79
COL	-24%		75
MIN	-23%		89
CIN	-23%		75
OAK	-22%		91
TOR	-15%		80
DET	-11%		71
BAL	-4%		72
ARI	-1%		79
CHW	3%		85
TEX	5%		78
HOU	5%		85
PHI	12%		86
STL	17%		91
SFG	17%		85
CHC	20%		79
SEA	20%		81
ANA	24%		91
ATL	26%		92
LAD	33%		85
NYM	42%		80
BOS	64%		94
NYY	139%		99

While some of this might be luck, I think good management explains most of the difference (see Chapter 7 of my book). Some of that money not going to player payroll is going to baseball operations devoted to scouting young talent that is cheap. And because this practice yields substantial savings over signing expensive free agents, then this is a good use of funds. At least the Marlins deserve credit for putting a better team on the field than most teams with similar budgets.

If the Marlins can build a good core with cheap players, why doesn’t its front office fill out its roster with quality free agents in order to make a stronger bid for the post-season? Another point that I want to make is that Marlins fans don’t seem to be as sensitive to winning as other major-league franchises. Thus, buying free agents doesn’t yield the return at the turnstiles like it does for other teams.

The first figure below maps all major league teams’ attendance and wins since the 1994–1995 strike.

Marlins vs. MLB

The Marlins’s data points are bordered in red and labeled with the year of observation. The graph also displays a linear prediction of attendance based on wins for the Marlins (red) and all other teams (black). The Marlins observations lie below the major-league average and its slope is flatter.

The second figure tracks the Marlins’s attendance and attendance predicted by the typical attendance yielded to non-Marlins teams in the year of observation. That is, I estimated what the Marlins’s attendance would have been if fans had reacted to the games the team won based on the typical response in other markets (Attendance = f(wins, vector of year effects); estimates corrected for serial correlation).

Predicted Attendance

On average, the Marlins took in an average of 869,000 fewer fans than predicted. In 2003, the year that the Marlins won 91 games and won the World Series, the team attracted 1.1 million fewer fans than expected. In 2005, the Marlins increased their payroll by 43%: attendance increased by 8% and still their attendance was 25% below the average attendance for other teams.

In light of the the team’s current on-field situation, fiscal restraint in terms of player salaries seems to be the smart move. The front office looked at the team and felt the chance of this team winning the World Series was slim, so it traded away Miguel Cabrera and Dontrelle Willis for talent that will help the team win in the future. The Oakland A’s did the same thing by trading Nick Swisher and Dan Haren. Dumping expensive veterans for prospects is normally considered a smart strategy. The team’s new strategy is to win back fans with a new stadium and continuous core of farm products to keep the team consistently competitive at a high level.

Based on the low win-sensitivity of Marlins fans, I can understand why the owner does not want to put more into payroll. This isn’t to say that Marlins ownership isn’t partially responsible for alienating fans by holding a fire sale after winning the 1997 World Series and posturing for public subsidies; but, these actions cannot be reversed. The front office has learned that simply throwing money at free agents won’t bring the fans back.

13 Responses “Defending the Marlins”

  1. Jason S. says:

    MLB made a gigantic mistake when it put any teams in Florida. Who knew that neither city would support their team? Even when the Marlins went to the playoffs, nobody started going to the ballpark until September, at which time the entire city of Miami pretended that it had always supported the Marlins throughout the season. Right. I remember seeing the stadium half empty as late as August when the Braves would play there during the seasons when the Marlins made the playoffs. Atlanta gets dumped on for a “bad sports city” but the fact is that even winning doesn’t put butts in the seats until September for the Marlins. So JC is right when he says the owner is smart enough to know that it’s not going to make money to throw money at free agents. Nobody is going to go to the games anyway.

    I wish MLB would just move both teams elsewhere, but that’s not going to happen. So both cities will get stadiums that they don’t deserve at huge public expense to support teams that nobody cares about.

    As one of my friends pointed out to me, the Marlins have won the World Series twice since the Braves last won it. Given that, it’s kind of hard for me to criticize the Marlins’ approach since it’s led to 2 World Series wins.

  2. Maury says:

    Thanks this, J.C. Great stuff.

    The problem with the Marlins has always been a case of providing whiplash to the fanbase. Winning WS Championships has little value when placed against the backdrop of slash and burn moves by both Loria and Wayne H. In short, fans will have difficulty in making an emotional investment in teams year-after-year. In short, by not allowing for any consistency, coupled with a young franchise, the erratic behavior (both good and bad) is poor business. A new stadium better come with some sense of normalcy for the Marlins or fans will continue to be wary of making an emotional investment.

  3. Marc Schneider says:

    Having lived in Miami, it’s probably fair to say it’s not a great sports town and MLB made a mistake by simply making the simplistic assumption that large Latino population = support for baseball. But, your argument is sort of like the guy that killed his parents and pleaded for mercy because he was an orphan. Unless the Marlins take some action to show that they are doing more than just milking the franchise, the alienation will never go away even with the new stadium. Logically, your argument that their is no significant correlation between attendence and wins might make sense but it ignores the bitterness that the Marlins have generated with their tactics. In the short run, you may be correct that the Marlins’ business practices make sense, but in terms of building a long-term fan base, it makes no sense. They have to start cultivating some sense of community investment in this team before the move into the new stadium, not after. And there is no guarantee that, given the location of the new stadium (the site of the old Orange Bowl, which is a pit) that people will simply flock to the new ball park. Unless the team makes some effort to reclaim the fan base, it’s all going to be pointless. I don’t think anyone expects the Marlins to have the Yankees’ payroll but they need to show the fans that they care even if some of the moves aren’t great baseball moves in the long-run, as the Nationals did by resigning Dmitri Young, a fan favorite.

  4. Maury says:

    To add what I did prior (by way of iPhone, which was a grand experiment, to say the least)…

    The attendance graph is telling. As Marc Schneider put so well, community investment is needed. The stadium is about garnering more revenues for ownership, and you hope they funnel it back into player payroll.

    As to the market itself… When I asked Fay Vincent as to whether expansion in the ’90s was done to offset the collusion payments. I wrote in part, “There is the perception, real or otherwise, that expansion was done to offset the losses incurred over collusion in the ‘80s. What is your perception of that issue?”

    Vincent replied, “Well, I think it’s absolutely correct. Indeed, I don’t think there’s any doubt about it. Look, each owner had a $10 million bill and there were about 26 clubs before expansion and 30 at the moment, then $280 million, let’s say $10 million a club – they didn’t have the money. So they did what most would business do, they sold stock, they sold interest in the clubs, in the expansion clubs. In my day two of them – Miami and Denver. And that money, which was vital, paid off their collusion debt. Without it I think baseball would have had a very serious time.”

    Back to the point you are making J.C… You write, “Some of that money not going to player payroll is going to baseball operations devoted to scouting young talent that is cheap.” It would be good to know how much is going to where it is supposed to go. Kevin Goldstein has exactly two prospects in his Top 100 from the Marlins: OF Cameron Maybin at #10 and RHP Chris Volstad at #88. That doesn’t exactly point to solid investment in player development.

    The bigger question is, is it the job of high-revenue making clubs such as the Yankees and the Red Sox to pay entirely for the Marlins player payroll? It’s a mockery, what the Marlins are doing. If one person in MLB can be found (outside of Loria and Sampson) that will rationalize what the Marlins are doing, it would be a mean feat.

  5. dfc says:

    It seems to me that a large part of the reason for the flat slope is the slash-and-burn strategy. Generally one reaps the (bulk of the) rewards of a world championship the year after doing the winning. If you burn that team to the ground in the offseason, you eliminate almost all chance of reaping those rewards. So I don’t see how that isn’t a self-inflicted wound.

  6. Mr Lomez says:

    While I agree with a lot of what is said here, I take serious umbrage with the following:

    “After all, though [Loria’s] behavior seems juvenile, it worked: he’s getting a $500 million stadium for a third of the price. Why spend your own money when you can spend someone else’s? It’s the voters and the politicians who deserve the blame for giving in. But this is beside the point.”

    Really? You can accuse Marlin fans of a lot of things but giving in to Loria isn’t one of them. For 5 years Miami has fought tooth and nail with the Marlins over this deal while Loria has rejected multiple lesser offers, including a $325mil stadium, and consistently floated a possible move to San Antonio or Las Vegas over the city’s head as leverage. Should we also blame Sonics fans for NOT giving in to Clay Bennett? Furthermore, that you say the financing of the stadium has little bearing on the issue of how Loria spends his revenue-sharing money is not quite true, since Loria has repeatedly used Miami’s ostensible indifference towards the Marlins, his evidence for which is precisely the city’s unwillingness to fund a stadium, as an excuse to keep the Marlin’s payroll to a bare minimum. What kind of precedent is this setting? Now cities have to fund new stadiums not only to keep their teams in town, but to ensure a good faith effort from ownership to at least try to put out a quality product every year? In my mind, the Marlins’ practices, despite the team actually winning, represent a lot of what’s wrong with professional sports.

  7. Greg says:

    I will repeat in here what I have been saying in my lively email discussion with Maury — Loria is doing this because he doesn’t have the wealth that the other owners do, and he needs to cough up $120 million in upfront cash when the new stadium opens. Since he appears to have no interest in taking on new debt or minority owners, he’s resorting to this scorched earth approach and hoping that JC’s premise above is correct.

    It’s a risky and, IMO, foolish move in the long term, but I see no evidence that this guy has the wherewithal to help bankroll a stadium without borrowing from a revenue stream (whether it’s current operating income, pledging future media revenue, etc.) which would otherwise accrue to player salaries.

    Makes me glad Portland didn’t fall for the Marlins’ dog-and-pony show. We already have AAA baseball.

  8. Andrew says:

    I think MLB’s collective bargaining agreement is to blame. There is nothing in place to prevent the shirking that Mr. Loria is exhibiting, and in fact, his actions are probably the most rational given the system that baseball operates with. I personally love what both Florida teams have done, and I do not understand why other franchises (KC, Pittsburgh) have not taken the same approach.

  9. Marc Schneider says:

    If I were the city officials of a city that was going to build a new stadium, I would at least insist as part of the deal that the team commit to investing in the product. In a lot of these places, the team has taken the new stadium and simply milked the revenue from it without really putting it into the on-field product. Even in St. Louis, which consistently sells out the park, the ownership has kept payroll down. IMO, this is outrageous. I suspect this is what will happen in Miami; the Marlins will increase payroll marginally–maybe even enough to have decent teams–but still not as much as the new revenue would justify and enjoy the additional profit while the taxpayers get screwed.

  10. Matt says:

    Is that graph really meaningful? Couldn’t it be made up of consistently high attendance/high win teams and consistently low attendance/low win teams that all have the same relationship between winning and attendance? As long as there is consistency between yearly attendance and yearly wins shouldn’t the MLB slope be biased upward?

  11. Suffering Miami Fan says:

    There is one thing that your graph does not take into account. The fans were unable to cheer on their team defending the title in both cases.
    the 1997 Marlins were destroyed, making fans wary of going to another game.

    Then, the 2003 team lost their catcher and first baseman, and the same Loria that had destroyed the Expos was threatening to leave Miami. Attendance did increase from 10K to 22K per game, but they again did a firesale.

    Only MLB stepping in to force him to stay in Miami. However, it takes YEARS to build up a fanbase. Tossing aside players every time the fans get attached to them leads to spurned fans. Once Bitten Twice Shy. Even the other expansion teams are averaging in the mid twenties. Had Wayne and Loria not stunned the loyal fans twice and then threatened to leave, I am sure that attendance would be in the mid to high 20s and perhaps even gotten to the low 30s.

    Think about it, instead of our players on Detroit, Boston, LA, NY, and Chicago, they would be pulling in fans for the Marlins.

    Check ANY team after a firesale, and you will see an attendance plummet.

  12. Baker says:

    It’s an interesting point you make, I am curious as to how you contrast your views on the Gwinnett County stadium with those on the Florida Marlins stadiums, it seems in both cases it is a direct wealth transfer from taxpayers to an individual and so should be opposed as nothing more than rent seeking behavior.

  13. Mark says:

    I fully agree. A lot of people accuse the Yankees of buying success. And yeah, the Yankees spend a lot of money and do well with it. But what the Yankees really do well is understand the game. Remember 1998, when the Yankees were arguably the best team in history? Their team was built of players who came up through their system and players they received from trades for their young players. Very few were free agents. And A-Rod, the ultimate high-price free agent, was originally bought by the Rangers for a quarter billion, and he didn’t help them win, because they needed pitching and not hitting. In addition to the Marlins, the Indians have done well with a low payroll. Money helps, but baseball smarts help more.