Monday, August 26, 2013

Astros to net $99m in operating expenses

An article from Forbes this morning says the Astros are on pace to net $99m in operating income for the 2013 season - "more than the estimated operating income of the previous eight World Series champions - combined."

Crane and the Astros did not respond to Forbes' requests to discuss finances and rebuilding strategy.

Forbes:
(Crane) will likely use some of the cash flow to pay down the reported $275 million debt he took on when buying the team. He financed the purchase with a $220 million loan from Bank of America and assumed $55 million of debt from a previous loan with Major League Baseball, according to the Sports Business Journal.

Forbes' valuations and estimates of operating expenses aren't always right on the money (see what I did there?) but you can bet the basic premise - which should come as no surprise - is that the Astros are making a lot of money this season. 

I'll have some thoughts on this later, after the next cup of coffee. 

But for now:

5 comments:

Anonymous said...

Any gnashing of teeth over this is short-sighted. It's been established that a ton of FA spending would not have made the 2013 Astros a playoff team; then if so, no difference between just missing the playoffs and being dead last... when the primary goal is being competitive in the future. Roll back, develop minors, address debt, and put the organization in a position to be competitive in 2015+. That said, if the payroll is still below $30m in 2-3 years, THAT'S when you call BS on the low payroll. This all makes sense in the big picture. And as Crane said and the article mentions, once the foundation is fixed and the minors are refreshed, Astros will be top 5-10 in payroll. Don't crucify them now for not doing today what they clearly have made plans to do tomorrow.

Reuben said...

Huuuuge points for the Duck Tales gif.

Anonymous said...

"Any gnashing of teeth over this is short-sighted. It's been established that a ton of FA spending would not have made the 2013 Astros a playoff team; then if so, no difference between just missing the playoffs and being dead last... when the primary goal is being competitive in the future."

It is also short-sighted to weaken the brand needed to insure the long-term revenues he plans to eventually deploy.

All year long, the true fans, those smart enough to see Crane's brilliance, have continually stated that winning doesn't matter, unless of course you can make the playoffs. During this same time, while losing has become an ethic, the club is unable to market itself. No TV now. Maybe no TV in the near future, and if so, probably at a price which which reflects a depressed fan base rather than a price commensurate with a hopeful, enthusiastic one. Very few fans at the stadium. No buzz. No positive coverage.

In short, being unwilling to make even modest investments in the team has most likely cost Crane the long-term revenues needed to support a top-five payroll. Three cheers to his genious.

MoleBoy said...

I don't blame Crane for his approach. He already had to borrow the money to buy the team so he needs to pay off that debt. Signing high priced free agents this year would not have done much (if anything) to improve the team. It would have simply taken money out of their coffers to pay down the debt. Once he's paid off the loan (or a significant piece of it), the team won't have to make as much because it will all be profit. Right now it's not "profit," but "operating income" since the money the team makes right now is being used to pay off the loan. This seems like the smart way to operate for the time being.

Crane knows that eventually they will have to spend money to increase the value of the team, which is ultimately where the investment pays off. Once they secure the number one pick again this year, I think they will see this offseason and the next as the time to go out explore signing some actual difference makers. If there is no significant spending increase by the end of next offseason, then I will start to get worried.

Anonymous said...

The Astros lost $23 million dollars as an equity partner of Comcast Houston, but Comcast paid them $80 million dollars this year.

I like this business. I want some.