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Crains Detroit Business article on Tigers' finances and revenue streams

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This came to my attention from the Bless You Boys blog. It's a very interesting read. It details where the money comes from and where it goes.

Here is their link:

In signing Fielder, Ilitch isn't stretching dough - Bless You Boys

And here is the direct link to the article:

http://www.crainsdetroit.com/article/20120129/FREE/301299952/in-signing-fielder-ilitch-isnt-stretching-dough

"Owners bring in big-name players in hopes of increasing ticket sales, sponsorships and other revenue items, so that it can pay for itself. They often do," said Michael Rapkoch, president Addison, Texas-based Sports Value Consulting LLC.

That's how Fielder and the other top-dollar contracts will be paid for: "It's going to come from an increase in ticket sales and sponsorships. That's where the money is going to come from," Rapkoch said.

When news of the signing broke on Tuesday afternoon, the team was swamped with interest from fans, team officials said.

For example, the team's season ticket staff stayed until 8:30 p.m. on Tuesday handling calls, said Dave Dombrowski, Tigers president, CEO and general manager.

Mike Ilitch, 82, said he had no qualms about investing so much money in a single player, giving him the most lucrative contract in Detroit sports history.

"I go by my instincts like everybody else does in business, and my instincts told me this is going to work out just fine," Ilitch said. "I don't have any concerns. I'm not nervous about it."

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Illitch gets it. To succeed in business you have to be willing to spend money and take risks. Also he is

skilled at cross marketing between his various ventures. Even when the Tigers are dropping 30 million in

losses, he's still getting fat from the remaining holdings.

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The article said that the season ticket office remained open until 8:30 pm tuesday as a result of the signing. I'm curious if the season ticket packages will be put on hold by the beginning of the season like back in 07 (iirc), due to being sold out?

As to the spending...it was my opinion that once the NHL put the salary cap in, the revenue for the Wings seems constant, even though cost of business dropped significantly. It seemed at that time, is when Illitch started to spend more on the Tigers. I would argue that he uses his profits from the Wings to subsidize the Tigers (related to DaYoopers comment above)..

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So the Tigers in 2007 (the yr after playoffs) and 2008 (the yr of thethe last big FA signing) averaged about 38k per game, about a 18% increase over 2011. That would be roughly equivalent to increasing the payroll by 20MM over 105MM.

I realize that seat sales is only one part of the empire, and I understand we're in a different economy, but this still seems to suggest that they should and will jack up prices of seats and merchandise to pay for the product. And I hope Mr I can renegotiate his radio and TV deals soon too.

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I believe merchandise sales from all teams are pooled and distributed evenly. I don't remember where I read that.

I think prices will rise as demand increases. I expect demand to increase as the tigers continue to be a championship contender.

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I can't imagine fox will be all that motivated to just give the tigers more money while their current deal extends through 2016 or so already.

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I can't imagine fox will be all that motivated to just give the tigers more money while their current deal extends through 2016 or so already.

I wonder if such long-term deals are common in local TV markets.

Also, there's got to be some kind of out-clause...at some point the penalties become worth it to break the contract.

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I don't know if they are common, but that's what it is, at least according to the article.

Edited by Shelton

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an out clause could be complicated due to, apparantly, it being a deal among all 3 clubs. I imagine the Pistons, in their current state, would be even worse off in terms of negotiations.

Shelton, I think you are right about Merchandise sales. I believe the split is between MLB and the Player's Association and the MLBPA's cut is then evenly distributed, meaning all those Inge jerseys benefit Don Kelly as much as Inge.

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It would be cool it Ilitch could establish his own regional sports network, but I'm not sure the Detroit market can handle it at the moment.

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Financial terms of the Fox Sports contract were never disclosed, but it is known that the Tigers, Detroit Red Wings and Detroit Pistons each inked decadelong deals with the network in 2007 and that collectively they are worth $1 billion.

Though I'm not sure if it would be better than the security of having the Fox contract. Just an idea.

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Would love to hear his thoughts on getting the Red Wings a new arena, and how serious he is about it. I love the Joe and will miss it once it's gone, but the idea of a new building downtown is exciting.

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an out clause could be complicated due to, apparantly, it being a deal among all 3 clubs. I imagine the Pistons, in their current state, would be even worse off in terms of negotiations.

It seems to me (I could be wrong) that these were three separate deals. Here's a trade magazine article at the time that also seems to *suggest* separate deals:

FSN Detroit Nets Pro Sports Three-Pointer - 2008-03-19 08:38:00 | Multichannel News

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I believe merchandise sales from all teams are pooled and distributed evenly. I don't remember where I read that.

I think prices will rise as demand increases. I expect demand to increase as the tigers continue to be a championship contender.

I think there's an exception for merchandse you sell at the stadium itself. My memory is a bit foggy, but I remember something like if the Tigers sell a Fielder jersey in Comerica Park, they get to keep all the profit and don't have to share the revenue.

If so...buy your jersey at the park itself, because that money goes to pay for the payroll...and not to slacker teams like the Royals who just profit off the revenue sharing.

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If so...buy your jersey at the park itself, because that money goes to pay for the payroll...and not to slacker teams like the Royals who just profit off the revenue sharing.
WWOD ?? Sorry, couldn't resist! :wink:

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I think there's an exception for merchandse you sell at the stadium itself. My memory is a bit foggy, but I remember something like if the Tigers sell a Fielder jersey in Comerica Park, they get to keep all the profit and don't have to share the revenue.

If so...buy your jersey at the park itself, because that money goes to pay for the payroll...and not to slacker teams like the Royals who just profit off the revenue sharing.

A quick google search indicates that you are correct. What I read mentioned a 50 mile radius in which the revenues are yours. I'm not sure if that means the shop down street counts toward the tigers or if it just means that the tigers could open up shops in malls or whatever. I am also not sure if the 50 miles applies only to point of sale. It could apply to goods sold online and delivered within the radius, but I think that might be too difficult to track.

Either way, stuff bought at the stadium does not have to be shared.

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I believe merchandise sales from all teams are pooled and distributed evenly. I don't remember where I read that.

I think prices will rise as demand increases. I expect demand to increase as the tigers continue to be a championship contender.

I have no proof of this, but I would bet it is basically split with all the teams with slightly higher percentages going to the teams who pay more.

Instead of 3.33% going to every club I would bet it slightly weights based on payroll...something like .01. It would not mean a lot more, but it would give a little more to the clubs who spend.

So you basically come out having every team getting around 3% with some getting 3.9 and some getting 3.1 or something like that.

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I think there's an exception for merchandse you sell at the stadium itself. My memory is a bit foggy, but I remember something like if the Tigers sell a Fielder jersey in Comerica Park, they get to keep all the profit and don't have to share the revenue.

If so...buy your jersey at the park itself, because that money goes to pay for the payroll...and not to slacker teams like the Royals who just profit off the revenue sharing.

I have been eyeing all that signed memorbila they are selling (base plates, bats, gloves etc) at the field...has that been there the whole time? I recall seeing that booth behind home plate with all that swag the last few years or so, but cannot recall if it was there before that.

Anyway it gives me more reason to buy something now. I need to start stacking up for my eventual man cave in my eventual new house.

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One of my friends called me up yesterday. He told me that he finally succumbed to his wifes wishes and threw away his Cecil Fielder t-shirts just a few weeks before they signed Prince. He was kicking himself for keeping them 15+ years, and throwing them out weeks before he could have brought them back out!

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Pro Sports team owners have additional revenue streams that usually "dwarf" what their "vanity" investments bring in. Think, Steinbrenner, Cuban, Wrigley..... Money is not an issue in this case, relatively speaking.

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