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Friday, February 13, 2009

Economics and the Phillies

After Ruly Carpenter sold the Phillies, Bill Giles headed up the team. Giles was a career baseball man, well-liked in his upper class Main Line community, but a man prone to major public-relations gaffes. For the longest time he referred to the Phillies as a "small market" team, trying to justify the team's failure to spend significant dollars to field a winner. Giles either forgot or didn't know that Philadelphia is one of the five or six largest media markets in the country, and, as a result, became the object of disappointment, scorn or derision, depending on one's fervence as a fan or a writer. The Phillies weren't a small-market team, they were just being small-minded.

As the team grew closer to building Citizens Bank Park, they grasped what many of us knew -- Philadelphia fans will go to a cow pasture to see a winner, but they won't go to a palace to see a loser (case in point: when Veterans Stadium opened, attendance wasn't overwhelming because the team was terrible). So, as the opening of CBP approached, the team signed a big-name free agent, Jim Thome, both to signify its committment to upgrading the team and to put people in the seats.

Fast forward to today, and I find the following irony: the team has increased its payroll by about 30% over last year's, with the payroll coming it at about $130 million. So, the team that refused to spend money during boom times all of a sudden opens its pocketbook during the deepest recession in at least a quarter of a century. That's impressive, and the Phillies have done a good job of signing its stars to reasonable contracts (okay, most of them are reasonable; Ryan Howard's is stratospheric).

I heard on ESPN radio today that Phillies' president Dave Montgomery indicated that the fans are part of the reason for the team's ability to spend more. Even in this economy, the team has sold 3,500 more season tickets since last year. So, if you do some math and multiply 3,500 by 81 (the number of home games) by say $27.50 (the average price per ticket -- and that's a guestimate), the Phillies' ticket revenues will be up by $8,000,000 over last year's. Suppose, further, that each person sitting in those seats spends $15 at the park on food and other concessions, and that's an extra $4,250,00 (again, a guestimate). And, then, suppose that fans bought an extra $5,000,000 of merchandise because of the World Series win (another guess) Finally, suppose that the team will make an extra $5,000,000 on advertising revenue, even in this economy (precisely because advertisers will focus spending their money in the places most likely to get the best -- and happiest -- audiences). Lo and behold, you have an extra $22,250,000 to spend.

And, you don't have the exposure to the Bernie Madoff scandal, like the Mets' ownership does.

Next year, the Phillies won't have the following obligations:

1. $3 million on Jim Thome's contract (which they're paying this year).
2. $6.375 million to Geoff Jenkins;
3. $9 million to Adam Eaton;
4. $3.75 million to Pedro Feliz.
5. Whatever they're paying to Matt Stairs.

They will have some more money to spend; however, Brett Myers' contract expires after this season, and Jimmy Rollins' contract expires after the 2010 season. Plus, if they were to let Jenkins and Stairs go, they'd need a lefty bat off the bench, and if they were to let Feliz go, they'd need a third baseman. Finally, Shane Victorino will be eligible for arbitration once again after next season, as will Joe Blanton.

Put differently, it would appear that the Phillies' payroll, now at about $130 million, will be at least that much next season as well.

All typos are mine.


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