Royals Authority

Deconstructing The Process

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We don’t hear much from Royals owner David Glass. That’s probably a good thing, given his penchant for infuriating an already frustrated fan base. He usually grants a couple of interviews a year. One early in the spring, one at the end of a usually disappointing season and he will generally talk around the All-Star Break.

Royals beat writer Any McCullough sat down with Glass this week in Minneapolis. The Star published the entire Q&A online, which is a really good thing. As per my usual, I’ll grab a couple of snippets and we can discuss.

“I thought we’d be more consistent. At times, we’ve played extremely well. At times, we’ve played not so well. It’s the inconsistency that has surprised me. But we’re in a good position, I think, to make a run for the playoffs. If we have a good second half, there’s no reason why we can’t be in the playoffs.”

That pretty much sums up the season to this point. For me, the key to this comment is packed in the middle. “But we’re in a good position, I think, to make a run for the playoffs.” That may be stating the obvious as the team is 2.5 games out of the second Wild Card spot, but it’s nice the owner sees his team in position. (You know how I feel.) I know we treat everything Glass says with a healthy does of skepticism, but this is an expectation I don’t think we’ve heard from ownership at this point in the season. Yes, he’s allowed GMs to make some late season acquisitions in the past when the team was on the fringe of contention, but I don’t think he’s ever come out past the midway point of the season and proclaimed that they are in a good position to make a run for the playoffs. That’s usual the stuff we hear in March, when everyone is saying they have a shot at contention.
“I think they’ve (Dayton Moore and Ned Yost) both done a good job. Dayton is one of the best baseball people I know, and I’ve been around a lot of them for the last 60 years. And I think Ned is a very good manager. I think that he continues to grow as a manager. He’s got the balance that you need, as far as being a players’ manager, and also holding them accountable. I think that he does that.”

Is this a vote of confidence? I don’t think so, for the simple fact the Royals aren’t circling the drain at this point. In other words, Glass doesn’t need to give his management team a vote of confidence. Although we can disagree on this point.
“The one thing I’ve learned about Ned and Dayton both is they are as obsessed with winning as I am. All three of us have a real problem when we lose.”

How do you react when you lose?

“Not very good. You wouldn’t want to be around me.”

There are a couple of themes that run through this interview. One is “obsessed with winning.” It appears a couple of times in the transcript.

As I mentioned at the open of this post, Glass doesn’t speak much. My theory why this is, is because he’s extremely unpolished and has a penchant of saying some really crazy stuff that only serves to fan the flames of the fan base’s perception of negativity toward him. Except I didn’t read anything crazy in this transcript. He seemed almost… Coached. Is it possible, that after nearly 20 years at the helm in various capacities of this franchise that he’s finally had some media coaching.

I don’t just want to win, I’m OBSESSED with WINNING, dammit!

The second response above just kind of cracks me up. I don’t buy it.

“I think Dayton’s done a good job of putting this team together… And he and Dan (Glass) work closely together. Both of them believe that we’ve got a good enough team to win the division. In my mind, watching the team and interfacing with them, I think we’re good enough to make the playoffs. We just need to crank it up and make it happen.”

I pulled this quote because I think it’s another example of where Glass has received some PR coaching. Moore and Dan Glass work closely together? I’ve never been impressed with Dan Glass. Ever. However, he is the next in the ownership line. Dad is greasing the skids for his son. If there’s success, Dan Glass will damn sure get a portion of the spotlight. Second, Glass mentions he not only watches the team, he “interfaces” with them. This is always a criticism about Glass and his ownership. Many see him as an absentee owner, content to watch the team from afar, if at all. I don’t know that I’ve ever bought into that narrative. I also don’t know that it matters. Do we really want the owner heavily involved? Hire your baseball people and stay the hell out of the way. It seems Glass has been doing that since Moore was hired. But he’s not detached.

“Our objective has always been to try to break even. I guess you’ll have a year where you might make a little. But you might have years where you lose money. Over a period of time, we’d like to come close to breaking even, at least. And you try to fit it into that framework. But if you have an opportunity to win, you consider doing almost anything.”

More coaching.

I’ve been on Glass for years now about what exactly represents the break even point. Last November, he was deservedly ripped when he talked team financials.

But this is the new David Glass: Hey, we make money some years, we lose money some others. He learned to avoid specifics. Good student.

What would it mean to you for this team to reach the playoffs?

“It would mean that Dan and I picked the right people to do the job. Kansas City deserves a winner. It’s a great baseball town. The people in Major League Baseball still talk to me about the All-Star Game here, and how the cooperation they got from the Royals, the way the fans supported it, the way the city supported it, is unique. Better than what they were accustomed to experiencing.

“They rave about Kansas City and the fans and the city and the organization. It’s a great baseball town. And these fans deserve in the playoffs. They deserve to be able to support a winner. And if you go to The K, and we’re playing, and we’re playing well, and it’s an exciting game, and you’ve got a big crowd, it is really fun to watch how much they get into the game. It’s not like they’re just kind of casual fans. They get excited about it.

“They deserve it. All of us deserve it. I’m a fan, too.”

For some reason the mainstream media kind of likes to have a go at the fans from time to time. We’ve been portrayed as impatient, irrational and stubborn. My counter is to root for a team that hasn’t played a meaningful game in 29 years. Glass may be pandering to the fans here, but let’s be honest, that’s something he kind of needs to do. I don’t mean pandering in the pejorative. What Glass said is not heavy-handed. He’s paying tribute to us in this quote. We’re knowledgeable and passionate. We “deserve” it.

I can’t disagree with that.

Finally, at the end of the quote above, Glass mentions that he’s a “fan” as well. Four times in that transcript, Glass mentions he’s a fan. I’m telling you, the investment in his media coaching is paying dividends.

Overall, I enjoyed the interview. Which is a strange thing to write when it comes to Glass. He comes across as tuned into the situation with his team and is an owner who is largely hands-off in letting his baseball people run the show. I won’t go so far as to call him a “model” owner. I will give him credit for learning on the job. And that’s something.

Big news this week as Forbes released their annual look at the valuations of baseball teams. I know, I know… Financials, dollars, blah, blah, blah. This may not be the most exciting post you’ll read this week, but to me, how the Royals (and other teams) go about their business is as important as the prospect rankings. We’re a small market. This stuff matters.

Anywho, included in the report was something that should have made you sit up and take notice, no matter how you feel about ledgers and spreadsheets. Here, according to Forbes, were the most profitable teams in baseball in 2011:

So the Glass family banked a cool $28.5 million last year. Wow.

As always, we need to have a little perspective. How does that number compare to past seasons? Here’s a table going back the previous five years.

Why the huge leap? According to Forbes, revenue went up only a million dollars last year. From $160 million in 2010 to $161. Most of it has to do – as Clark mentioned yesterday – with payroll. The Royals saw their expenditure on player contracts nose dive thanks to the trade of Zack Greinke, the retirement of Gil Meche and the overall youth movement which featured cost-controlled contracts. And like Clark said, they didn’t go cheap. They went young. Big difference.

What’s interesting, there’s very much a plan in place about the amount of money ownership would like the Royals to post in the Operating Income side of the ledger. It seems extremely obvious the Glass family would like to hit an operating income number somewhere close to $10 million. Hey, I’m a free market capitalist. Glass owns the team, it’s his right to make money. It’s a good thing he’s turning a profit. As long as he sinks that windfall into an area of the team. Maybe hire a few more scouts. Or beef up the Latin America academy. Hell, he could reseed the Little K.

Besides, where ownership really makes their money is in the value of the team. About 10 years ago – when Glass officially bought the club – the Royals were valued at just under $100 million. Glass paid $96 million. Of course, there’s the whole situation with the Kauffman Trust and the question of whether or not the Glass family can make a profit, but throw that out for just a moment. Under normal circumstances, if Glass put the team up for sale right now, he could expect a profit of at least $255 million.

For 12 years of ownership. That’s $21.25 million per year. The value of his initial investment has returned over 350%. You know how everyone thinks they should have bought Apple stock 12 years ago? If you couldn’t get in on Apple, you should have bought yourself a baseball team.

Payroll

Looking ahead to 2012, I don’t expect the Glass family to rake in a similar profit. If only because the payroll is going up. Thanks to Cot’s Contracts, here are how things stand with my mythological 25 man roster.

My roster has 12 pitchers and 13 hitters. I left Chris Getz and Danny Duffy off the list, as I think both open the year in Omaha. The more I think about it, Bourgeois and Maier are backups in the outfield, Betancourt is the super utility guy (ick) and Pena/Quintero are the catching tandem. I’ll also go out on a limb and hypothesize that the Royals will assign specific catchers to each starter like they did last year. It seemed to work well enough. That gives Pena three starters and Quintero two. Or vice versa. Giavotella opens the year as the starting second baseman, but loses his job to Betancourt in May.

For the rotation, while I still have serious doubts, Mendoza has certainly earned a shot. The starting five looks like Hochevar, Sanchez, Chen, Paulino, Mendoza. Your bullpen has Broxton as the closer and Holland as the set up man. I’d flip-flop that, but you know that the Royals love Broxton’s pants experience. Crow is in the setup mix. Mijares is a definite lefty and Collins is forcing his way into the conversation, but for now I’m leaning Teaford. The pen rounds out with Coleman.

Or the Royals could deal for a 5th outfielder and blow up my whole roster.

(By the way, the payroll also includes Sal Perez and Joakim Soria, who will open the year on the DL. Players with guaranteed contracts who start the season on the DL are counted as part of the Opening Day payroll.)

So it looks like the Royals Opening Day payroll will be right around $60 million. That’s up from last year’s $36 million. And pretty darn close to their all time record of $72 million set on Opening Day 2010. See how that works? Low payroll means increased profits. And I don’t even have an accounting degree.

So if we’re still thinking about profit, by boosting payroll by $24 million, most of that will go away. If I were a betting man, I’d say that at this time next year, Forbes will peg the Royals at around $8 million for Operating Income in 2012.

In other words… Back to normal.

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