Wilpon’s Mets are still shrinking

Fred Wilpon. (Screencap via mets.com)
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In the New York Post, Josh Kosman reviews the finances of the Mets, and finds that Fred Wilpon's settlement of a Bernie Madoff-related suit against him didn't solve his financial problems. (In fact the settlement probably only happened because of those financial problems.)

Kosman also finds that the $240 million Wilpon raised in minority ownership money, a sale the owner famously attributed to "uncertainty" from that Madoff lawsuit, is all gone.

According to Kosman, the Mets lost $70 million in 2011, and they are on track to lose $23 million in 2012. 

The difference between 2011 and 2012 was a massive reduction in team payroll, from $143 million in 2011 to $91.6 million in 2012, representing slightly more than the difference in losses between the two years.

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So Wilpon and his partners are cutting losses by cutting salary.

Attendance is down somewhat from 2011 levels, though comparable, thanks to numerous ticket discounts and creative marketing. Clearly, lawsuit or no lawsuit, the Mets aren't drawing enough to even break even on their own; it took all of Wilpon and his partners' profits from S.N.Y. to break even in 2012.

The problem is that it's hard to see how they get out of this cycle. Absent a turnaround in play with a corresponding increase in attendance, team revenue isn't changing. Which in turn makes it hard for them to go out and get the players they'll need to contend.

Kosman points out that if the Mets can cut their losses further in 2013, the deficit from the team would drop accordingly. Since the Mets expect to clear about $21.5 million from S.N.Y. again next year (quick math: about $65 million in profits, minus the $43.5 million due in debt against Citi Field each year), a $15 million deficit from the team means $6.5 million in profit.

But how to reduce these losses is problematic. The only way the team managed to do so in 2012 was by reducing salary. And as I've previously written, the salaries owed in 2013 already, along with raises in arbitration, leaves essentially no room for any additions, let alone the kind of raises to R.A. Dickey and David Wright that would induce them to sign extensions that would keep them with the Mets beyond the 2013 season.

The Mets can clear $16 million from next year's payroll by picking up Wright's option, then trading Wright this winter (or, I suppose, by simply not picking up the option, though that would make no sense). They can clear $5 million by doing the same thing with Dickey.

Of course, those savings would presumably be offset by the cost of losing the team's best and most popular players, in terms of the toll it would take on attendance and marketing.

Jeffrey Toobin's contended that 200,000 fans are worth $25 million to the Mets; Forbes estimated more conservatively $23 in revenue per fan. Either way, the resulting drop would eat into the team's 2013 revenues considerably.

Right now, the Mets' plan appears to be to maintain salary at 2012 levels, while hoping some increase in attendance, perhaps fueled by tying season ticket sales to the 2013 All-Star Game. Both the 2012 Royals and 2011 Diamondbacks experienced bumps of about 100,000 fans in their All-Star Game seasons by doing the same thing.

That might help. But simply increasing attendance by roughly 100,000 would put the Mets back at 2011 levels, when the team lost $70 million. How much further would payroll have to drop to put the Mets in the black if those numbers stayed the same?

Without the prospect of further help from Major League Baseball, the Mets might be doing well just to hang on to what they have in 2013.

After that, many onerous salaries, like those owed to Jason Bay and Johan Santana, will be gone, and the Mets have exactly one salary, Jonathon Niese at $5 million, on the books for 2014. So their prospects for making some money get better, if they're content to keep reducing salary.

If they keep Wright around at $20 million per year and Dickey at $10 million per year, both conservative numbers, they'll only owe $35 million to three players. Players like Ruben Tejada and Ike Davis can earn a decent amount in arbitration if they develop and stay healthy, while replacing them at first base and shortstop will cost real money if they don't. How they'll fill most of the remaining everyday lineup is unclear, given the absence of position player prospects no more than a year away other than Wilmer Flores, who is a third baseman, it appears.

If the pitching prospects pan out, they can field a team for more like $60 million without any improvements. If Dickey and Wright leave, they'll have to come up with a third baseman and top-tier offensive threat, along with a number one starter.

But once again, that's assuming fans keep coming in 2014 at roughly the same levels they did in 2011, 2012 and (the Mets hope) 2013. 

The Mets are staring down the barrel of approximately $320 million left from the $430 million debt against the team (the Mets paid off $110 million of it from the $240 million in minority sales) due back in June 2014. It is awfully difficult to see how an ownership group simply holding on can pay back that massive debt; the trustee suing Wilpon and his partners on behalf of the Bernie Madoff victims settled in large part because he didn't believe they could pay him the $83 million awarded to him in a pretrial ruling anytime soon. Presumably, if ownership can convince its debtholders to roll that debt over, it will be at a higher interest rate, cutting into any new surplus from the shorn salaries even further.

Wilpon might hang on. But for as long he does, it seems, the Mets will be a big-market team with a small-market payroll.