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So where does the money go?


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#1 dude

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Posted 14 October 2019 - 06:29 PM

Was thinking about this a couple of weeks ago as we've had a number of these discussions and people (team, media, fans) try and align resources against some value.

 

Is there any space where everyone is telling the truth? 

 

1) We've seen Peter Angelos say this any number of times over the years and it was reiterated (not by him specifically) recently...that they (the Angelos') don't take money off the team.

 

2) The recent MASN settlements have exposed some numbers that we should feel comfortable using as reasonable facts. 

 

3) We know what the Nationals (related to #2) are spending on payroll (including what the Orioles have spent on payroll in recent years) so unless you believe the Nationals (Orioles too in '15-'16-'17) are spending a LOT more than than they generate then there is is significant capacity that the Orioles aren't using (even if the Nationals can afford incrementally more based on attendance or other revenue streams)

 

4) There's only so much you can spend on Organization infrastructure.  If you want to believe that the Orioles need to somehow save money (for example, on Villar or other ML payroll, whatever) the only way that could be true is if there is another significant expense (like 30--50M) coming out somewhere....

 

...but if #1 is true and #4 is true....then where does that money go?

 

MLB has jumped franchise values to crazy levels (you see big spikes for all teams after '14 and after '16).  The real value of teams isn't in year-over-year profit, but the windfall you get when you sell the team. Teams have a floor value simply based on the generation of national revenue outside of what the teams do.  Teams control (and share) their local revenue.

 

Regardless of your view of the value of rebuilding, we should all agree that there's a consequence to rebuilding that minimizes (at least short-term) Franchise Value.  Elias has made several comments this year about getting all of the fans back, etc, as the Orioles have bottomed out their local revenue sources to all-time levels. (lowest OPaCY attendance by a lot and lowest MASN viewership).

 

While that change may not much of an effect during a sale of the team, is there a case where minimizing Franchise Value has value?

 

We also know that, given PGA's failing health in recent year(s) that there's been/is/will be pressure to identify the Orioles' transition from him to ??? (presumably one of his sons)

 

The MASN dispute has also dragged on and while there's been a judgement (still some questions) about the 2012-2016 time period, it feels like there's still a lot of uncertainty in creating a stable profile across both teams.

 

If you wanted to make all of the above pieces fit into a reasonable scenario....does resource accumulation for Estate Taxes fit all of the boxes?

 

I am certainly not an Estate Tax expert (or anything close), but...I'd guess that the current Franchise Value of the Orioles far exceeds anything the Angelos' considered in terms of estate planning 10 years ago.  If you were planning for a 800-900 million valuation and now the Franchise is worth 1.3B (or more if they were operating at capacity) then there has to be some real accounting (math accounting, not accountability) that has to happen.  I think it's been said that the Angelos family doesn't have significant cash wealth.  Much of it is wrapped up in assets, the most significant which is the Orioles.

 

John and Lou certainly don't have any income stream not tied to their dad's assets (at least not significant ones...just is what it is).

 

Seems like the argument for a lower Franchise Value (versus a more robust one, like in a sale) and the uncertainty of MASN leads to a better valuation in Estate settlement.  There's probably a lot of rules in there and in the Estate planning that get covered, but certainly better for lower valuation than a higher one...right?

 

The Angelos family could certainly be aggregating Orioles profits away from the team to create the pool necessary to avoid losing the Franchise (or selling off parts of it, maybe losing control).  That's doesn't necessarily violate the statement that they are taking profits off the Team.  They would be using those resources to keep the team.  

--------------

 

Maybe?  Any better thought on how everything we know could make sense?

 

If true, would you care?

 



#2 bmore_ken

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Posted 14 October 2019 - 10:45 PM

The short answer is we don't know. We probably never will know. And since we're not owners it's truly none of our business.



#3 weird-O

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Posted 15 October 2019 - 06:24 AM

The short answer is we don't know. We probably never will know. And since we're not owners and it's truly none of our business.

True, but it makes for a boring conversation, during the off season.


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#4 weird-O

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Posted 15 October 2019 - 06:48 AM

One thought I have is, lower payroll, and the associated lower attendance and viewership, doesn't equate to lower franchise value. MLB and it's individual owners factor overhead/debt into the equation, when calculating the value of a franchise. 

 

As for estate planning, it seems unlikely that Peter set up a transfer/trust fund in 2009, and left it sitting static for a decade. I'm willing to give him credit for being a savvy businessman who wouldn't be that short sighted. That's not to say I disagree with your supposition that money is being skimmed off the top, to bolster the trust fund and keep it in line with current estimated franchise value. 

 

Something that doesn't seem to be considered in these discussions is, the Angelos family only owns the majority of the team. If the franchise is valued at $900M, only his portion of that is changing hands, so the tax hit wouldn't be on the full value of the team, just the portion going from father to sons. I realize that is all obvious info. But since I never see it explicitly expressed in articles/blogs/here, I thought I'd mention it. It's always just written about as one lump sum value.


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#5 BSLSteveBirrer

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Posted 15 October 2019 - 08:33 AM

Not sure what the point of the thread is in the first place? Baseball is a business. They can run it the way the want, within legal bounds. They can do whatever they want with the revenue, within legal and league rules criteria. If fans don't like the way they run their business (such as tanking, not spending enough on payroll, not building a "competitive" team) then do like do with any other business you don't like. Dont give them any of your money.


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#6 weird-O

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Posted 15 October 2019 - 01:53 PM

Not sure what the point of the thread is in the first place? Baseball is a business. They can run it the way the want, within legal bounds. They can do whatever they want with the revenue, within legal and league rules criteria. If fans don't like the way they run their business (such as tanking, not spending enough on payroll, not building a "competitive" team) then do like do with any other business you don't like. Dont give them any of your money.

I agree with your opinion that we have the option to not patronize a business, if we don't like their business practices. But it's difficult to put a pro sports team in that category. If I don't like Whole Foods, I can always go to MOM's. If I don't like Kislings, I can go to Looney's. If I don't like how they operate the O's or Ravens, I don't have any other options. I suppose that's why pro sports teams are referred to as public trusts. There's an implied obligation to the fans to provide a quality product, with the understanding that there will be ebb and flow years.   


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#7 Mackus

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Posted 15 October 2019 - 01:55 PM

I agree with your opinion that we have the option to not patronize a business, if we don't like their business practices. But it's difficult to put a pro sports team in that category. If I don't like Whole Foods, I can always go to MOM's. If I don't like Kislings, I can go to Looney's. If I don't like how they operate the O's or Ravens, I don't have any other options. I suppose that's why pro sports teams are referred to as public trusts. There's an implied obligation to the fans to provide a quality product, with the understanding that there will be ebb and flow years.   

 

Well said.


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#8 BSLSteveBirrer

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Posted 15 October 2019 - 05:22 PM

Yes sports are a bit different. But you still have the ability to not spend you money on O's games or products. The real problem lies with the MLBPA. They don't want a salary cap so salaries go crazy. Have a salary cap and a salary minimum. Then you have a start to putting owners on the hook for what they do with that money.

 

And for the record you most certainly do have options. Nobody says you can't be a, God forbid, Yankee fan. Or go sailing on the Chesapeake. Or a thousand other things.


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#9 BSLRobShields

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Posted 15 October 2019 - 06:15 PM

A salary cap doesn’t solve issues
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#10 bmore_ken

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Posted 15 October 2019 - 06:34 PM

Not sure what the point of the thread is in the first place?

Me either but consider the source.



#11 bmore_ken

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Posted 15 October 2019 - 06:36 PM

I agree with your opinion that we have the option to not patronize a business, if we don't like their business practices. But it's difficult to put a pro sports team in that category. If I don't like Whole Foods, I can always go to MOM's. If I don't like Kislings, I can go to Looney's. If I don't like how they operate the O's or Ravens, I don't have any other options. I suppose that's why pro sports teams are referred to as public trusts. There's an implied obligation to the fans to provide a quality product, with the understanding that there will be ebb and flow years.   

Sure you do. The Phillies, Eagles, Skins, and Nationals are driving distance



#12 Mackus

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Posted 15 October 2019 - 07:16 PM

Sure you do. The Phillies, Eagles, Skins, and Nationals are driving distance

Everyone can fan how they want, but only valid reason to abandon your team in my book is if they move.

I guess adding a second rooting interest isn't as bad, but not something I'd be able to do.

#13 BSLSteveBirrer

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Posted 15 October 2019 - 09:04 PM

I have been an Os fan for longer than most on here and will be one till the day I die (not saying I am a better fan or anything like that, just that I am older than most....lol). And while I may really dislike some things that ownership does they have no obligation to do what I think or any of us for that matter.

 

Its fine to be disappointed but again what is the point of this thread? Is ownership doing something illegal? Is ownership not following MLB rules? Or are some just unhappy that they aren't spending money that you think they should?


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#14 mdrunning

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Posted 16 October 2019 - 12:02 AM

One thought I have is, lower payroll, and the associated lower attendance and viewership, doesn't equate to lower franchise value. MLB and it's individual owners factor overhead/debt into the equation, when calculating the value of a franchise. 

 

As for estate planning, it seems unlikely that Peter set up a transfer/trust fund in 2009, and left it sitting static for a decade. I'm willing to give him credit for being a savvy businessman who wouldn't be that short sighted. That's not to say I disagree with your supposition that money is being skimmed off the top, to bolster the trust fund and keep it in line with current estimated franchise value. 

 

Something that doesn't seem to be considered in these discussions is, the Angelos family only owns the majority of the team. If the franchise is valued at $900M, only his portion of that is changing hands, so the tax hit wouldn't be on the full value of the team, just the portion going from father to sons. I realize that is all obvious info. But since I never see it explicitly expressed in articles/blogs/here, I thought I'd mention it. It's always just written about as one lump sum value.

From what I could find, Angelos owns roughly 80 percent of the franchise. The last valuation I could find of the Orioles was in a 2017 Forbes article, which places the team's value at $1.175 billion. Either way, it's going to present a difficult situation to the sons to try and retain the franchise upon their father's death.

 

It's my understanding that the sons have few, if any, income sources beyond their father's business interests. Should Angelos pere leave the team to the sons upon his death, much of his non-Oriole assets are certain to be drained away in estate taxes. That would likely put the sons in a financial bind to come up with the necessary resources to run a team which is only now beginning to address its state of disrepair. Where the Orioles stand right now, ownership will have to make significant investments which might not pay off for several years, or until the team is sold again. 

 

I'm sure Angelos has made sure that his sons will be well taken care of after he's gone. But whether or not he has the confidence in either to run the Orioles is unknown. But if the above financial scenarios do indeed come to pass, it's unlikely the other MLB owners would approve the transfer, most likely based on competitive concerns. 



#15 weird-O

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Posted 16 October 2019 - 07:03 AM

From what I could find, Angelos owns roughly 80 percent of the franchise. The last valuation I could find of the Orioles was in a 2017 Forbes article, which places the team's value at $1.175 billion. Either way, it's going to present a difficult situation to the sons to try and retain the franchise upon their father's death.

 

It's my understanding that the sons have few, if any, income sources beyond their father's business interests. Should Angelos pere leave the team to the sons upon his death, much of his non-Oriole assets are certain to be drained away in estate taxes. That would likely put the sons in a financial bind to come up with the necessary resources to run a team which is only now beginning to address its state of disrepair. Where the Orioles stand right now, ownership will have to make significant investments which might not pay off for several years, or until the team is sold again. 

 

I'm sure Angelos has made sure that his sons will be well taken care of after he's gone. But whether or not he has the confidence in either to run the Orioles is unknown. But if the above financial scenarios do indeed come to pass, it's unlikely the other MLB owners would approve the transfer, most likely based on competitive concerns. 

Thanks for sharing what you found. I was trying to find a breakdown of who owned how much of the O's, but I didn't find the answer. Here's a possible option to soften the blow. Wouldn't they be allowed to sell a portion of the team and add another fellow owner? If the 80% figure is right, they could sell of 29% of the club, and still maintain a controlling share. I'm just speculating, I have no idea how that works for an existing owner. 

 

In spite of the appearance that the brothers are charting a better course, I have no problem with the O's being sold and completely removing the Angelos family and their ownership group. Peter and Co. have done very little in the way of providing an interesting product over the decades. 


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#16 weird-O

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Posted 16 October 2019 - 07:07 AM

And for the record you most certainly do have options. Nobody says you can't be a, God forbid, Yankee fan. Or go sailing on the Chesapeake. Or a thousand other things.

 

 

Sure you do. The Phillies, Eagles, Skins, and Nationals are driving distance

I hear ya, but that's not really the same. You guys recognize the sentimental value of rooting for your home team, the team you grew up with. Those bonds aren't easily released and attached to another team, if that's possible at all.   


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#17 BSLSteveBirrer

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Posted 16 October 2019 - 07:44 AM

I hear ya, but that's not really the same. You guys recognize the sentimental value of rooting for your home team, the team you grew up with. Those bonds aren't easily released and attached to another team, it that's possible at all.   

Oh for sure hence my comment #13. But that doesn't change the fact that unless the owners are doing illegal things or tacking actions outside the MLB rules then this is all just whining....and we have been whining about this ownership for oh I don't know something like 25 years.....lol


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#18 Mackus

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Posted 16 October 2019 - 08:02 AM

Oh for sure hence my comment #13. But that doesn't change the fact that unless the owners are doing illegal things or tacking actions outside the MLB rules then this is all just whining....and we have been whining about this ownership for oh I don't know something like 25 years.....lol

 

The word 'whining' implies it's not well-founded, valid criticism.  I would strongly disagree with that take.


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#19 BSLSteveBirrer

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Posted 16 October 2019 - 09:43 AM

The word 'whining' implies it's not well-founded, valid criticism.  I would strongly disagree with that take.

 

 

Mackus would you be happy if the minimal payroll the O's ever had was say $130M? What about $200M/yr? The problem with that kind of thinking is that there is no right or wrong answer. Fan A might say he's fine with the former number while Fan B thinks it should be the later number, and Fan C thinks it should be even some higher number. So unless there are rules in place then the discussion is moot because there is no obligation on owners to meet any criteria and my number is no better or worse than anybody else's number. So its hard to say that anybody's thoughts are "well rounded, valid criticism" because there is no factual basis for making any claim one way or the other.


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#20 Mackus

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Posted 16 October 2019 - 10:00 AM

Mackus would you be happy if the minimal payroll the O's ever had was say $130M? What about $200M/yr? The problem with that kind of thinking is that there is no right or wrong answer. Fan A might say he's fine with the former number while Fan B thinks it should be the later number, and Fan C thinks it should be even some higher number. So unless there are rules in place then the discussion is moot because there is no obligation on owners to meet any criteria and my number is no better or worse than anybody else's number. So its hard to say that anybody's thoughts are "well rounded, valid criticism" because there is no factual basis for making any claim one way or the other.

 

I'd be happy if the Angelos family was putting every dollar earned from the team into the team.  Payroll could be low without drawing my ire if it was being saved and made available to be spent on the team over that year's revenue-supported budget later.  Only way I can support an owner making more than a modest profit off of their franchise is if that team is meeting every fan expectation from a competitive standpoint.  My firm belief is that franchises are not the property of their owners but belong to the cities and the fans with the owners as caretakers or stewards.  A few exceptions can be given for families that have owned the team since their inception, but any owner that purchased the team recently should know the drill.  If teams didn't have insane monopoly protections and operated as standard businesses, I'd feel differently and more capitalistically.  But they are not standard businesses so the owners don't get to profit off of them as if they were. 

 

That essentially every franchise in existence falls short of this doesn't change my opinion.






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