5:15 pm Jul. 26, 2012
The Philadelphia Phillies have had, by any measure, a miserable year.
They currently occupy last place in the National League East, with a 44-54 record. This is quite a comedown from last season's 102-60 mark, and a clear departure from their five consecutive playoff appearances from 2007-2011, two National League pennants and a World Series victory in 2008.
Accordingly, this year's contending teams have swarmed around the Phillies, and a number of players are on the block ahead of the non-waiver trading deadline on July 31. Shane Victorino, Jimmy Rollins, even Cliff Lee could be available.
But in seeming contrast to that effort, the Phillies signed Cole Hamels to a six-year, $144 million contract extension this week. In fact, there's little reason to think that the Phillies, who outspent the Mets on player salaries this season, $172 million to $91 million, are going to relinquish that massive financial edge anytime soon. In fact, the gap is only going to get bigger.
So what exactly are the Phillies up to? See television revenue for details.
On the field, the biggest difference between Hamels and Victorino, Rollins and Lee is their ages. Hamels is 28; Victorino 31, Rollins and Lee are both 33. Chances are fairly good that the latter three are beyond their prime years, with all three showing significant signs of decline in 2012.
Hamels, on the other hand, is just as good as ever. And the ability to acquire a pitcher like Hamels is extremely rare, usually requiring a massive trade of young assets to get it done. So if the Phillies forsee a 2-3 year window to rebuild, and would want to add a pitcher like Hamels to that effort, all they've done is add Hamels first. That makes the Phillies better on the field now and in the immediate future, which is important, again, due to television revenue.
By dealing Victorino, the Phillies would largely cover the raise Hamels will receive via his new deal in their 2013 budget. By dealing Rollins, they'd more than cover it, while getting rid of a shortstop rapidly exiting the age when shortstops are usually capable of providing much value. By dealing Lee, they could be selling just before his massive contract moves from a bit of an overpay to an albatross, though Lee is likelier to rebound than either Victorino or Rollins.
None of these moves are likely necessary to keep the Phillies from aggressively moving to add younger, in-prime players in the near-term, let alone in the medium-term. The Phillies are on pace to draw more than 3.6 million fans in 2012, almost as many as they drew in 2011. Their season ticket base is fairly static, with most fans signed on for multi-year commitments.
The Mets, by contrast, are on pace to draw around the same 2.3 million fans that led to losses of $70 million in 2011. And even that understates the team's revenue problem, since they are drawing the same total, but charging far less for tickets this year, meaning the same attendance results in much less revenue.
And the Phillies have another massive payday still to come. They are currently the highest-rated major league team in terms of viewership of their games, in the league's fourth-largest market. But their local television revenue is comically small: they earn just $25 million per season from it, through 2015. The Mets earned $68 million in revenue from their below-market deal with S.N.Y. in 2011, and that number escalates gradually to $83 million by 2015. Still low, but well ahead of the Phillies.
To get a sense of how much the Phillies' revenue is likely to jump when they sign that new deal, the Texas Rangers, with lower ratings in a smaller market, recently signed a deal that will pay them $150 million per season over the next 20 years, plus an equity stake in the network. The Los Angeles Angels of Anaheim, who share Los Angeles with the Dodgers; Philadelphia belongs to the Phillies alone.
The kind of six-fold or seven-fold jump the Phillies are about to receive in TV revenue means they can afford to spend on Cole Hamels, and be big players in the free agent market. It also probably means, to maximize their ratings and keep attendance at current levels, they can't afford not to.
And the Mets will remain stuck in that below-market deal, thanks to a little-reported aspect of their minority share sales to S.N.Y. that extended their deal with the network beyond its 2015 expiration date.
To truly make this work at maximum advantage, the Phillies need to keep winning, so the return they can get on a Lee, or Rollins, or even a Victorino deal is important for a team in need of more young talent.
However, the television revenue alone will more than cover any dip in attendance for the Phillies. When a financial advantage needs to be brought to bear upon an acquisition, the Phillies aren't likely to be going anywhere. And the results should continue leaving the Mets in the dust, as long as they are trapped in their present financial circumstances.