Phillies aren't broke, but could use a little fixing

The Phillies are not in compliance with MLB rules that limit how much debt teams can carry. (David M Warren/Staff file photo)
The Phillies are not in compliance with MLB rules that limit how much debt teams can carry. (David M Warren/Staff file photo)
Posted: June 05, 2011

The Phillies are not broke. Let's start there.

The franchise is not in compliance with Major League Baseball rules that limit how much debt teams are allowed to carry in relation to their revenues. That makes the Phillies one of nine MLB teams in that predicament, according to a Los Angeles Times report Friday.

For those of us who see packed houses in Citizens Bank Park every night and hear how high the TV ratings have been, this seems a little jarring. When you see the messes made in Los Angeles, where the commissioner's office is monitoring the Dodgers' financial affairs, and in New York, where the Mets resorted to selling a chunk of the team, it is fair to worry if the Phillies can sustain their spendthrift ways.

Imagine that: a sports franchise that could be spending beyond its means to try to win. It is a remarkable transformation these Phillies have managed to make in just a few years. Once maligned for winning a single, solitary championship while becoming the first team ever to lose 10,000 games, the Phillies now manage to look good for screwing up their books.

That's what this really is, at least for now - a bookkeeping glitch that the Phillies should be able to rectify.

As MLB's Rob Manfred told the Times, "To take a snapshot of the number of noncompliant clubs at a point in time can be very misleading. With one or two exceptions, we see how teams are going to be compliant again in the short term, so we're not worried about them."

The "one or two exceptions," presumably, are the Dodgers and Mets - and possibly the Texas Rangers, who were in bankruptcy as recently as last year. The Phillies' situation isn't nearly as dire as the Mets' or Dodgers'. Evidently, it is better to project higher debt because you signed Cliff Lee than because you got swindled by Bernie Madoff or your team is collateral damage in an epic divorce battle.

But their "noncompliance" does indicate a potentially troubling gap between the Phillies' payroll - which jumped to nearly $170 million in 2011 - and their revenues. The team has essentially gotten caught in an upward spiral. The new ballpark led to more revenue, which was in turn reinvested in the players, whose success created more interest and excitement and revenue. It is to the Phillies' credit that they've continued spending to try to win and maintain that success, but there was bound to be a ceiling.

Have they hit it? And if so, what happens next? The answer probably lies in a favorite anecdote from the misty past.

Back in 1979, the Phillies set out to sign free agent Pete Rose. Bill Giles, then the team's executive vice president, famously went to the team's broadcast partners at PHL17. Giles argued that Rose would draw more viewers, so it was in the station's interest to kick in some money to help sign him. It worked, and Rose signed for $3.2 million. Over four years.

That money seems quaint now, but the principle is the same. The Phillies are locked into local TV rights deals with Comcast SportsNet and PHL17. The Comcast deal expires in 2015. The two deals combined paid the Phillies a reported $24 million last year.

That is a bargain for Comcast and PHL17, especially when you consider the Texas Rangers did a 20-year deal last September with Fox Sports Southwest for a reported $75 million per year.

If the Phillies aren't willing or able to create their own cash machine - that is, a cable channel like the Yankees and Red Sox have - then they are going to have get more from their broadcast partners.

Yes, they can raise ticket prices. The string of sellouts and the prices paid on the secondary market suggest they could get more. There would be some griping, but ultimately the tickets would get sold.

The Phillies haven't been inclined to squeeze every possible dollar out of their fans, though. And anyway, the real money is in the broadcast rights.

One problem: Comcast SportsNet doesn't exactly have a lot of competition. It would take a bold third party to step in and outbid the local cable monolith, and that can't happen until 2015, anyway.

The solution is probably in a new long-term deal with CSN. The Phillies' incentive is obvious: more money. CSN's incentive would be to lock the Phillies up before some other team's TV contract sets the market even higher.

The third alternative, of course, is for the Phillies to cut payroll by unloading stars. That could lead to an entirely different kind of spiral. Ask fans of the Pirates and Orioles how that turns out.

No, the Phillies aren't broke. That doesn't mean now isn't the time to start trying to fix them.


Contact Phil Sheridan at 215-854-2844, psheridan@phillynews.com, or @Sheridanscribe on Twitter. Read his blog, "Philabuster," at go.philly.com/philabuster and his past columns at go.philly.com/philsheridan

 

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