What if the Indians Are Turning a Profit?

When news leaked this weekend that the Pittsburgh Pirates—the losingest team in professional sports—have been turning a profit for the last three years, baseball fans were asked an uncomfortable question.

Is it acceptable for a team to lose games at an unprecedented rate and still make money?

And it got me thinking about the Indians, who are pretty good at losing themselves these days.  It would seem just that if a team loses games, then it should lose money too.  What other incentive would there be to win?  And if there’s no incentive to win, where does that leave us as fans?

Which brings me to our problem: what if the Indians are making money, rather than losing it?  Where does that put us, as fans of a team that we finance—both directly (through ticket sales) and indirectly (through tax-payer funded subsidies)?  Let’s assume, for the sake of argument, that the Indians are making money. 

For reasons that should become clear, I think this is a pretty safe assumption.  Further, let’s use the Pirates as an example.  In 2007 and 2008, the Pirates made about $15 million in profits each year; last season, ownership declared about $5 million in profit.  So over a three year period, ownership averaged just under $12 million per year in profits.

In the Pirates’ case where did these profits go?  Did ownership get to pocket the $35 million?  Not really.  According to a report in the Pittsburgh Post-Gazette, nearly all of the “profit” was used to pay the team’s tax bills.  In fact, “[n]o ownership dividends were paid […] and Mr. Nutting [the team’s owner] took no salary or management fee.”  In other words, the profits were used to pay bills.

But in our assumption, let’s assume that Larry Dolan has made about $12 million per year from owning the Indians during the last two years—that, as an owner, his fee is $12 million per year to keep the team semi-functional and in Cleveland.

If that were the case—if Larry Dolan were making money off a losing team—where does that put us?  As fans?  As customers?  As tax-payers?

What I’m about to write is not a pleasant statement on professional sports: but I hope the Indians are making more than $12 million per year.  I really hope so.

Why?  For one, I’m an Indians fan, and whether I like it or not, the Indians are in the business of making money.  That’s what “professional” means.  They do it for the money.  The players.  The management.  And yes, the ownership too.  The whole system of MLB—despite what Bud Selig might suggest—is designed to make people rich.  Some of those people are owners.  So if the Indians were losing money, they’d be doing the opposite of what they were designed to do.  In that case (like any dysfunctional business) there’s a real possibility that they could be contracted or relocated.  I don’t want that to happen.

Furthermore, the more money an owner makes, the more likely the team can spend.  According to Forbes, guess which baseball team is the most valuable?  You got it: the New York Yankees.  Even more, the 10 most valuable teams have all made a League Championship series in the last 10 years.  So it seems that winning and profitability are not at odds, but linked.  The more a team wins, the more profitable it can be.  So it would seem odd that a team would want to lose games, in order to make money.  The most profitable teams are the winners.  For that reason alone, I want the Indians to be profitable.  Obviously this doesn’t solve the you-have-to-spend-money-to-make-money problem, but it does seem clear that winning is, ya know, better than losing.

Still, something about this position rubs us the wrong way.  Like I said above, it seems fundamentally unjust that a business (like the Indians) that is bad at what it purports to do (winning games) should be making money.  In what other line of business is such incompetence rewarded?  Shouldn’t bad teams lose money?  Instead, it seems they still manage to make more in a year than most of us will in a lifetime.

In this vein, Scott asked on twitter whether there’s any accountability left in a system where awful teams can continue to post profits.

Accountability is a funny word.  In some sense, losing teams are likely to post lower profits (at least in MLB; you can’t say the same for capped leagues that essentially channel money toward ownership), so we are in a system where winning is financially rewarded.  But in another sense, if the Dolans are happy pocketing $12 million per year with a loser (again, hypothetical), then there really isn’t any accountability: they can do this ad infinitum without ever trying to field a winning team.  As fans we can’t change ownership.  We can’t fire general managers.  So our loyalty is used against us: we are prisoners.

So we’re back to the same question: should bad teams lose money?  More specifically: should the Indians be losing money?

In a perfect world, perhaps so: they should be punished.  But in this world?  No.  Because if the Indians lose money, they might go under.  They would go bankrupt.  They would likely cease to exist.  We like to think of an owner who loses money shaping up, spending to build a winner, and turning everything around.  But that’s not the way it works: when real business owners lose money, they close their businesses.  It’s as simple as that.  You don’t operate a business that is fundamentally unprofitable.

To prevent this from happening, MLB has certain rules in place—revenue sharing comes to mind—that serve to keep teams afloat, even when they lose games (and fans).  From MLB’s perspective, it is not acceptable to allow its assets (its teams) to wither and die, so the system enables all teams to make money, whether they win or not.  It’s just a matter of degree.

This might disgust you.  In some ways, it disgusts me.*  On the other hand, I want the Indians to exist long enough to win again.  I believe that the front office wants to win, and has a plan.  Call me foolish.  I’ve been called worse.

*I should say here that nothing disgusts me more than tax-payer funded stadia.  I don’t buy, not for a second, that a professional sports team pays its tax-payers back by simply selling tickets and foam fingers. It’s one thing to use fans (who, in my mind, are customers) to make money.  It’s another thing to use everyone in a given city or state—often against their will. People who don’t like baseball should not be forced into funding something they fundamentally do not care about.  If you don’t believe me, read this.

And so yes, I hope the Indians are making more than $12 million per year.  The fact the Pirates “only” made $5 million last season would scare the bejeezus out of me were I a Pittsburgh fan.  That’s about how much money than Jhonny Peralta made this year: they’re barely able to pay their taxes.

Is any of this just?  No it isn’t.  But nobody ever said being a sports fan has much justice to it.  We can certainly wish it were otherwise.  We can gnash our teeth about the inequities of the sports world.  We can even stop buying tickets to send a message.  But what I want is for the Cleveland Indians to succeed in a system that makes it difficult to do so.  And, as much I have to say it through clenched teeth, that means that I want them to make money.