Copyright 2014 The Atlanta Journal-Constitution
The Atlanta Journal-Constitution
Of roughly $267 million that the Braves guaranteed four of their prized young players in lengthy contract extensions this month, more than 70 percent will be paid after the team is scheduled to move into its new stadium.
The rapid signings of first baseman Freddie Freeman, shortstop Andrelton Simmons, starting pitcher Julio Teheran and closer Craig Kimbrel --- all to contracts that extend beyond the move to Cobb County in 2017 --- underscore the Braves' expectation of an economic home run in a stadium that will be built in part with taxpayer money.
"Really, as far out into the future as I can see, I see us raising payroll every year," Braves chairman and CEO Terry McGuirk said in an interview with The Atlanta Journal-Constitution. "Yes, part of that thought comes from the optimism and the lack of uncertainty that the new world brings to us."
One of baseball's big spenders in the 1990s, the Braves sharply reduced their player payroll for the 2004 season, saying they had overspent for too long. The payroll has fluctuated in a narrow range since then and remains lower for 2014 than for 2003.
But this month's signing spree has brought hope to many Braves fans that the team once again will compete economically, at least in retaining exceptional homegrown players, even as salaries soar around Major League Baseball.
The Braves guaranteed $135 million to Freeman for eight years, $58 million to Simmons for seven years, $42 million to Kimbrel for four years and $32.4 million to Teheran for six years. (The Braves also signed right fielder Jason Heyward to a new contract, but that is for two years and thus unrelated to the stadium.) The contracts also give the team the option to extend Teheran and Kimbrel for an additional year.
In 2017, when the Braves expect the new ballpark to generate sharp increases in revenue, Freeman, Simmons, Kimbrel and Teheran will make a combined $47.8 million. In all, $193.8 million of the $267.4 million guaranteed in the four contracts --- 72.5 percent --- will be paid after the stadium opens.
The Braves were able to negotiate such backloaded deals because the later years are the ones in which the players otherwise could have been free agents.
For the 2014 season, the Braves' payroll budget is $100 million. That's up modestly from last season but below the team's peak of $106 million in 2003.
McGuirk, who has final say over the team's budget, would not disclose a projected payroll for 2017 --- in part, he said, because the economics of the stadium and the planned adjacent mixed-use development are a work in progress.
"We don't know exactly how it's all going to turn out between here and 2017," McGuirk said. "We're doing something that has never been done before. We're not only building a stadium with all the promise that brings, but we're building this mixed-use environment around it that we're going to have a major hand in. That contributes to what we can do."
The Braves will partner with a group of real estate developers --- two groups have been chosen as finalists --- on the privately funded shopping/entertainment/residential complex. The Braves' stake in the development "won't be on the same balance sheet as the baseball team" but will generate revenue that will benefit the team, McGuirk said.
The new ballpark and development won't push the payroll as high as baseball's biggest spenders, the New York Yankees and Los Angeles Dodgers, who currently spend more than twice as much as the Braves on players.
"We're not New York or L.A., which have opportunities of revenue generation that cause them to spend $200 million-plus on teams," McGuirk said.
Aside from the stadium, the Braves' revenue already is on the rise. Early last year, the team reworked a portion of its local TV deal. That change led to a revenue increase of $20 million in the first quarter of the year, team owner Liberty Media disclosed in a financial report, adding that the Braves expected ongoing increases from local broadcast rights. The current annual value of the local TV deal is not known.
Large increases also are on the way from MLB's new national TV contracts, which reportedly will provide each team an additional $25 million per year on average (although less than that in the first year of the contracts).
The Braves may use some of the increased TV revenue toward building the stadium, projected to cost up to $672 million. Cobb County is on the hook for $300 million and the Braves for the rest.
"Certainly everything we have (available) right now is contributing to the building of the stadium," said McGuirk, who acknowledged that the team will take on debt.
The Braves control the stadium's naming rights under terms of the deal with Cobb. Unlike at Turner Field, named for former team owner Ted Turner, the Braves intend to sell the name to a corporate sponsor. Typically, teams use naming-rights revenue toward the cost of construction or debt service.
Once the new ballpark opens, McGuirk expects "virtually all" stadium-related revenue streams to grow.
Although the stadium will have about 9,000 fewer seats than rarely filled Turner Field, "I expect our average attendance to go up quite dramatically," McGuirk said. He cited the surrounding development as one reason.
The Braves' expectations are realistic, although not a given, sports business experts say.
"These days, (the adage of) 'if you build it they will come' is nowhere near as prevalent as it was in the past," said Bernie Mullin, CEO of Atlanta-based sports-management consulting firm The Aspire Group and a former executive with the Hawks, Thrashers, Colorado Rockies and Pittsburgh Pirates. "Now, people have been there, done that, seen that.
"It really depends on how excited the market gets by the new stadium and the amenities in it. Because, let's face it, Turner Field is a good ballpark. It's not like they're moving from a dump."
Still, if the new stadium excites the market, the Braves could "realistically" expect to increase revenue from ticket sales, food, beverage, parking and in-stadium advertising by 35 percent to 50 percent, Mullin said.
That would require a confluence often delivered by new stadiums: sharply higher attendance, at least for a few years, despite sharply higher ticket prices.
The Braves have said they expect a sustainable increase in attendance in part because the stadium will be nearer the majority of their ticket buyers. On the other hand, the team faces a risk that in-town fans might not follow it to the suburbs.
"That's what makes this move more complex than others," said Josh Pitts, a professor of sports management and economics at Kennesaw State. "They're not just building a new stadium in Atlanta, they're moving apparently closer to the fan base. So we might expect the positive benefits (customarily associated with a new stadium) to be even greater."
It all hinges on the experience the ballpark delivers, Mullin said. "Baseball attendance is driven by how many games the average fan comes to," he said. "If they go to 4 1/2 games per season on average instead of 3 1/2, it has a huge impact on attendance and all the revenues related to that. ... Traffic access getting in and out is going to be a massive factor in the Braves' ability to increase frequency of attendance and drive revenue."
Even without a new ballpark on the horizon, McGuirk said, the Braves would have endeavored to retain their highly regarded collection of young players.
"It was paramount we had to sign this group to build for the future, especially given the modern economics of the game where ... free agency is so inherently inefficient," he said.
The stadium plan, though, provided financial comfort and upped the stakes.
"Part of the magic of a new stadium is that you have an opportunity to give your fans a chance to fall in love with your team and your ballpark all over again," McGuirk said. "It's an opportunity you have to take advantage of.
"This in itself doesn't get us to the promised land," he said of the contract-extension spree. "We believe this is the first step and a major step toward building teams that are going to be dynamic and competitive at the highest levels for a long period of time."
FOLLOW THE MONEY
The Braves this month have signed four players to contracts that extend beyond the planned opening of a new stadium and mixed-use development in Cobb County in 2017. A breakdown of those contracts (incentive bonuses not included):
Signing bonus: $2.875 million
2014: $5.125 million
2015: $8.5 million
2016: $12 million
2017: $20.5 million
2018: $21 million
2019: $21 million
2020: $22 million
2021: $22 million
Total: 8 years, $135 million
In new stadium: 5 years, $106.5 million
Signing bonus: $1 million
2014: $1 million
2015: $3 million
2016: $6 million
2017: $8 million
2018: $11 million
2019: $13 million
2020: $15 million
Total: 7 years, $58 million
In new stadium: 4 years, $47 million
Signing bonus: $1 million
2014: $7 million
2015: $9 million
2016: $11 million
2017: $13 million
2018: Club option for $13 million or buyout of $1 million
Total: 4 years, $42 million guaranteed; 5 years, $54 million if option is exercised
In new stadium: 1 year, $14 million guaranteed (including buyout); 2 years, $26 million if option is exercised
Signing bonus: $1 million
2015: $1 million
2016: $3.3 million
2017: $6.3 million
2018: $8 million
2019: $11 million
2020: Club option for $12 million or buyout of $1 million
Total: 6 years, $32.4 million guaranteed; 7 years, $43.4 million if option is exercised
In new stadium: 3 years, $26.3 million guaranteed (including buyout); 4 years, $37.3 million if option is exercised