Earlier this week Fox Sports Ken Rosenthal suggested that when it comes to the Prince Fielder rumors you should ‘Follow the Money’. While Rosenthal brought up some great points, I think there are other areas that can be explored when it comes to the Nationals financial state. While the assumption of ‘following the money’ is to look forward (which we will), I think it is better to start with looking backwards.
This year the new look Miami Marlins with a brand new stadium are poised to spend nearly $200 million in payroll the next two years (they have already $157 committed and that doesn’t include any more signings, arbitration cases or minimum salaries, so it could be much higher). By comparison in the 4 years since entering their new stadium the Nationals have spent a combined $254 million in payroll (based on their opening day totals). The Nationals highest single season payroll ($68 million), is lower than what the Marlins are paying this year to the 10 players under contract ($74 million total, doesn’t include arbitration cases or minimum players). Now it made some sense for Washington to be frugal in their spending as they simply didn’t have the foundation that would have warranted bringing in a number of big name free agents.
Now though with a young cheap corps that includes pitchers Stephen Strasburg, Jordan Zimmermann, Gio Gonzalez, Drew Storen, and Tyler Clippard, as well as fielders Wilson Ramos, Danny Espinosa, Ian Desmond and Michael Morse, to say nothing of uber prospect Bryce Harper, the Nationals have the makings of a talented team that could contend for the next decade. Especially with established players Ryan Zimmerman and Jayson Werth in the middle of the Nationals lineup (assuming of course both return to form). With that much assembled talent, the Nationals are now in the perfect position to spend.
Now the counter-argument against signing Fielder this week has been, ‘well they won’t have enough money to afford Fielder, Werth and Ryan Zimmerman’ (Zimmerman is only under contract for the next two years). That simply doesn’t seem to be true. For one thing Werth’s contract shouldn’t scare the Nationals away from spending again. If one seemingly bad contract (and if Werth does improve it won’t be that bad for the next 3-4 years), stopped a team from handing out others, then the Yankees, Red Sox, Phillies, Cubs, Mets, White Sox, Angels and Dodgers wouldn’t have near the payrolls they have, because they all have multiple bad contracts that haven’t worked out in the past. By the same token they all have had really good contracts that have helped them reach the postseason.
Also, since the Nationals have been making money these last 4 years since Nats Park has been open, they do have some extra cash lying around. Don’t believe me? Well in the time the Nationals since the Nationals ballpark has opened, they have essentially made their payroll before selling a single ticket, concession or advertising space. The Nationals have spent roughly $254 million, but in that time they’ve made $29 million a year from their MASN contract, roughly $32 million a year from the MLB central fund (this is the even split between teams from their national TV and Radio deals, as well as Merch sales and media marketing). That is roughly $244 million, but the Nationals also have a local radio contract that is estimated to pay them about $2 million a year, so their total is about $252 million. Now in fairness there are 10′s of millions of extra dollars in expenditures for a MLB team each year. From player benefits, travel, coaching/management and scouting salaries, to say nothing of the MLB Draft signing bonuses. The thing is the 7.9 million fans the Nationals have drawn these last 4 years, and the revenue form sponsorship’s, concessions and their MASN ownership revenue, would probably cover Fielder’s contract even after paying for all expenses (meaning separate from their current payroll). Now that is unrealistic, as the Nationals have other areas where they can continue to spend money, but it shows that they could defray the cost of the Fielder signing, and increase payroll without a single dime being added to their revenues.
And again even if we momentarily ignore the argument of the ‘Fielder effect’ on ticket sales and sponsorship dollars, we see that the Nationals will be adding quite a few ‘dimes’ to their revenues. The Nationals MASN contract is up this year, and it is expected to ‘double or triple’ according to Rosenthal’s report (which makes sense given the explosion of RSN contracts for teams these last few years). While it is unclear what it will end up as, you are talking between another $30-60 million a year. On top of that MLB will be renegotiating their current National TV deals in 2013, and the industry expects that the deal could even be double. So that $32 million from the Central fund ($20 million of which comes from the TV deal) could quickly be over $50 million. And that doesn’t include the other part of the Central Fund increasing in the coming years as merchandise sales continue to climb, and the MLB Media Rights continues to become a more valuable property (i.e. streaming games, internet advertising etc.). That could add another $5-10 million (and that appears to be a very guarded estimate) added to the Nationals revenues. All told we are talking at least a $55 million per year, increase, and in actuality it could be closer to $90 million per year.
That is even before we get to box office impact of Fielder (though it should be noted that Fielder will help make the Nationals make a better case for tripling their TV deal and will increase MASN profits). As stated above the Nationals have sold just 7.9 million tickets the last 4 years, and have been under the 2 million ticket plateau since their opening season in Nats Park. Since that year, they haven’t been able to sell to even 60% capacity of their stadium (and remember that doesn’t take into account the fans that don’t show up, which drives down secondary sales like concessions). While more fan hype in general, and the likely debut of Bryce Harper, should draw the Nationals back up over 2 million fans this season, Fielder has a chance to do something that isn’t even in the Nationals wildest dreams; 3 million fans. While it seems ‘pie in the sky’ it probably shouldn’t be. The Nationals are in a very large market, made up of some of the wealthiest counties in this country. They have a huge base, made up of people who can afford it. The only thing they are lacking is the product on the field.
If the Nationals being a 84-86 win team are expected to draw in the low 2 million’s, is it that hard to imagine that the addition of a marquee talent, and say a 90-95 win total would bring them close to 3 million fans? In addition to the hype surrounding Fielder (and Harper) the Nationals should be right in the thick of the playoff hunt all year, and could make the Nationals the hottest ticket in town. In addition to the say $25-30 million in additional ticket revenue (again erring on the side of caution), the Nationals secondary sales would go up dramatically as well (not only would their be a ‘million more customers’, but plenty of those no-show tickets from years past would now actually attend the games). The addition of Fielder and the great audience he brings helps in another way as well, sponsorships.
While it is unclear just how much increase the Nationals could expect in sponsorship dollars, but it could be dramatic. While market size, regional income, and number of potential advertisers all factor into the size of the contracts (all things that are well in Washington’s favor), the star player effect, and audience size are both key components. By adding Fielder and fans both in the stadium and on TV, the Nationals can expect a significant increase in sponsorship dollars. Finally, Washington has yet to sell the naming rights to Nationals Park, which given their lack of success and a down economy it made sense to wait. But now, with a larger audience and a team that would look to be a perennial playoff contender, the Nationals could cash in and bring a significant naming rights contract.
All told when you ‘follow the money’ it is pretty clear that the Nationals won’t have any issues in affording Fielder and maintaining their current lineup, even without an increase at the box office. Now though is the time to strike for Washington, and they can lock up a young talent for the next 8-10 years, who can put this franchise on the map.