March 12, 1995|By JOHN B HOLWAY
The inspirational story of 1994 was the Miracle in Montreal. In one of the smallest markets in the majors, the Expos won more games than any other team while spending less than any team except San Diego -- and essentially breaking even financially for their owners! (Financial World says they made a $13 million profit.)
How Expos did it
The Montreal management did it by spotting good 18-year-olds, signing them to low-price contracts, and nurturing them to maturity. Of course they'll pay for it this year, when their young stars' contracts run out: They'll have to start rebuilding again, aiming for 1999.
Cleveland was almost as shrewd. The Indians probably would have won the '94 American League pennant if the strike hadn't cheated them out of 11 home dates -- they were the best home team in baseball. In '93, even before moving into their new park, they were turning a tidy profit. It was surely even higher in '94. Their formula also was to sign youngsters early, but for slightly higher and longer-term contracts than Montreal offered. Thus all the Indian stars have another year on their contracts.
Buying stars
The Orioles' strategy has been to buy stars that other teams have developed. Last year they spent $11 million for Lee Smith, Rafael Palmeiro, Chris Sabo and Sid Fernandez. The O's had finished third in '93 without them; they finished third again in '94 with them.
Now the team wants the fans to pay for the Four Mistakes through higher ticket prices.
Dividing victories into payroll gives us a handle on baseball's smartest general managers, the men who got the most bang for the buck.
The worst were Tom Grieve of Toronto (now replaced by Baltimore's Bob Melvin), who spent a million dollars per win in '94. He was followed by Larry Himes of the Cubs (since replaced by Andy MacPhail of the Twins) with $900,000 per win.
The best was John McHale of the Rockies ($240,000 per win) and Bill Stoneman of Montreal ($270,000). San Diego came in at $480,000. In the American League, Cleveland's John Hart spent $300,000 per win; Baltimore's Roland Hemond was second best
at $500,000.
Great teams, low prices
The two best GMs all-around were Mr. Stoneman and Mr. Hart, who put great teams on the field, perhaps the two best in baseball, without spending their bosses into the poorhouse.
This leaves teams in a dilemma: Are they in business to make money or to win the pennant? It used to be the same thing. Not any more.
Is big-league ownership a hobby for sportsmen like Mr. Steinbrenner or Atlanta's Ted Turner, who buy a world champion as other men buy a Senate seat? Or is it an investment for a businessman like Mr. Angelos or Richard Jacobs of Cleveland?
The data show pretty clearly that:
* Spending big bucks on stars does not guarantee a winning team; it does lead to losses in the ledger.
* Saving money on payrolls means profits in the bank -- and a damn good general manager can still win a pennant on the field.
For those teams that do make money, baseball can be a spectacular investment.
Using Financial World's data, in 1993 Florida spent only $32 million in expenses and turned a profit of $28 million for an amazing profit of 87.5 percent. The most profitable teams, according to Financial World, were:
Florida, 87.5 percent
San Diego, 58 percent
Colorado, 42.5 percent
Cleveland, 42 percent
Baltimore, 38 percent
Montreal, 36.5 percent
(San Diego claims it actually took a loss in '93, and Montreal says it broke even. FW disputes them.)
All these teams turned handsome profits by holding expenses down.
There are only two ways to make a profit: increase income or cut costs.
Two factors put an effective ceiling on income: the size of the local TV market and the size of the park.
The TV market is a given. The Yankees can afford to charge $50 million; the Royals and Expos are lucky to get $3 million.
As for the park, six teams -- Colorado, Baltimore, Toronto, Boston, Cleveland and Texas -- are already bumping up against their ceilings. Buying exciting stars or winning the pennant won't bring them a dollar extra in income. Therefore, they have little economic incentive to buy a pennant.
Cutback on seats
Baseball, in its infinite stupidity, has ordained that Colorado can no longer sell 72,000 tickets to a game. Starting this year, in their new "intimate park," they will have only 45,000 seats. That gives the Rockies even less incentive to spend.
(There's a third potential source of income. Those teams that don't yet have skyboxes can beg their cities to build new parks and thus increase their revenues from that source.)
There's also a fourth source, but it's just a temporary quick fix. With expansion, each team will receive about $10 million from the new clubs. But after that's spent, the teams are back in the same stew pot.
On the cost side, administration and overhead are pretty much constant (except perhaps for cutting the general managers' salaries).
That leaves only only one other thing to cut: player salaries.
