By Thomas Boswell
Thursday, October 1, 2009
The Nats' final home game of the year Wednesday combined all the paradoxical and troubling threads of a season in which the team had the game's worst record and saw attendance drop 22 percent. Yet these same Nats, who will certainly receive revenue-sharing funds from other clubs this winter, operate on such a low budget and possess such a healthy bottom line that they are the financial envy of most other franchises.
The combination of Nats potential, both as a team and a market, has stood in contrast all year to the team's deluge of 103 losses. All that was illustrated, to an almost ludicrously degree, by a Justin Maxwell walk-off grand slam to sweep the Mets before 23,944. That two-out, full-count blast in the ninth off New York reliever Francisco Rodriguez brought cheers but also a hard question. Why are such moments, which make addiction to baseball go viral in any town, so rare here?
As Washington's obvious promise has been thwarted by its gruesome won-lost reality, resentment toward the way the Nats do business, already prevalent in Washington, is now spreading through the game. This offseason may be the juncture at which both local fans, as well as executives throughout the game, decide if the Lerners are responsible baseball citizens.
The Nats, who clinched the game's worst record on Wednesday thanks to a Pirates win, are on the verge of becoming a lightning rod of criticism, especially by big-market teams that pay into the game's huge revenue-sharing pot, according to numerous baseball sources contacted over the last three months.
"You're probably going to see revenue-sharing reform pretty soon," an American League executive said. "It's usually small-market teams like Pittsburgh that are the issue."
The Pirates, who have fielded 17 straight losing teams yet concede they have made a profit in each of the past six seasons, exemplify the business model: keep the payroll tiny, lose a ton of games every year, yet turn a profit thanks to revenue sharing and then claim it's the only way to survive in a tiny market.
But the Bucs have an excuse: Their metropolitan market -- like Denver, Baltimore, Cincinnati, Cleveland, Kansas City and Milwaukee -- is less than half Washington's size (No. 9 in the United States).
If the Nats keep operating as they have, they'll be seen as the only top-10 market with the gall to act like a bottom-five town.
When Major League Baseball ran the Nats, the Lerners inherited a 2006 payroll of $63 million that many considered skimpy after the Nats averaged 33,000 fans in '05. Yet the Lerners cut that budget immediately to $37 million and have not returned to $63 million. One consequence is that Forbes magazine ranked the Nationals the second-most profitable team in baseball in '08.
Even with the recent contracts to Adam Dunn, Ryan Zimmerman and Stephen Strasburg, the Nats' payroll will still plummet from $61 million this year to $40 million in current '10 obligations, close to dead last in baseball.
The Nats' position: We won't tell you anything about our finances, but just wait 'til next year.
"We are tremendously excited. The next big step is right there to be taken," said President Stan Kasten, who speaks for the team. "This is not a great year if you want a [free agent like CC] Sabathia or Mark Teixeira. But the players who are available are just what we need: a veteran starter in the rotation, two more arms in the bullpen and a middle infielder who helps our defense.
"We can do those things. We just have to do those things."
Actually, the Nats could afford to do all this and more. The bullpen arms they talk about don't include a costly closer. Add an $8-million-a-year right fielder if you want, too. (They won't.)
The paradox of the Nats was apparent in their final homestand. In nine games, at which you might expect empty stands, the Nats averaged 22,990 fans vs. their average of 22,719. Same old story: Some of us were the incorrigible core; some came to see a popular foe (Dodgers); and 85,174 arrived last weekend just because the weather was nice and, well, it was the last baseball this year.
Baseball awarded the Lerners such a popular core American product, still relatively affordable, and the District built them such a pretty new ballpark, that they can't keep people away. Attendance ranked above six teams, and if the average had been just 1,000 higher (as it might be once Strasburg arrives), the Nats would have been ahead of 10 teams. Factor in the Nats' big-market ticket prices, and they stand right in the middle of baseball in gate receipts.
To see how well the Nats are doing, even though the Lerners' public position is that they will "take no money out of the team" in the first 10 years, compare them to the Pirates: Since the Lerners took over, the Nats have outdrawn the Pirates by 1.4 million fans and, at higher ticket prices, produced about $100 million more in gate revenues. The Nats' local TV revenue (about $24 million a year) is also far higher.
On the other hand, the Lerners paid far more for the Nats, and borrowed more money, a debt that must be serviced.
The Nats provide no information on how they define "taking no money out of the team," except Ted Lerner's comments to me twice that he considers debt service as a cost. Kasten adds that Forbes magazine's '08 ranking of the Nats as the second-most profitable team in baseball is "way off." How so? No detail. Sorry.
Such privacy is their corporate right, but it's hardly forthcoming from a family that presented itself as a long-term partner with the District in the civic-minded attempt to revive Southeast with baseball as an expensive core catalyst.
Kasten assures me I can't possibly grasp the Nats' high finance. He even threw up his hands in exasperation, a new touch.
"That shows how much you don't know," Kasten said.
Here's one theory: After speaking with executives of other teams about their borrowing structures, one approach is to secure highly leveraged term loans with revolving lines of credit and then to amortize principal in the manner of a mortgage; that way, owners can claim to take little or no money out of the teams while still building their equity (and thus their own net worth).
Unlike the tiny-town teams, the Nats are a franchise with a defining choice to make. But it won't be psychologically easy. Teams such as the Padres have argued that, unless you are one of the sport's traditional "haves," it's not a winning business proposition to add tens of millions to payroll to build a better team. Ironically, the way the game is structured, it's safer and easier to be a lousy cheap club, but be ensured a decent buck.
Kasten vows that the Nats still have the same big-market dreams they proclaimed three years ago when the Lerners brought a team back to their home town, claiming they would build a franchise worthy of "the most important city in the world." The Dunn, Zimmerman and Strasburg deals are merely first tastes. Just wait -- but not long. That's their pitch.
No Washington team has lost more than 106 games since 1909 -- 100 years ago. The Nats could still reach 107 this weekend.
If the Lerners keep their promises, that is an opportunity that should never, ever come again.