The Oakland A’s Relocation And Business Plan Is Haphazard At Best

In early September, limited financial details of the A’s finances came to light. In looking at Major League Baseball’s bigger picture, it paints a portrait that shows a rush to relocate, questionable business practices, and if truly accurate, begs the question of why Rob Manfred and the owners are thinking about expansion.

My article, which showed financial details at a high level, explained how owner John Fisher claimed he was projected to lose $40 million in 2023. The information provided by a baseball industry insider with intimate knowledge of the A’s finances at an investor level showed the actual projection to be $39.322 million in cash flow after nearly $3 million in capital expenditures.

If the details were meant to somehow give a sympathetic voice to how Fisher has been running the A’s and the decision-making to relocate to Las Vegas, it seems to have done anything but. Instead, it shows a club that, even if the numbers were entirely reflective in its accuracy (sports economists have questioned them), it would show that not just the A’s, but many of the clubs in the league are simply loss leaders propped up by the league to provide a schedule. If the A’s, and others with low attendance, have been running in the red with massive subsidies, what does it say about the overall health of the league?

Everything – with the hulking mess of the Oakland Coliseum the exception – points to a club that has made snap decisions, and self-inflicted their woes by blaming roster construction on costs, even though at $60 million they rank dead last by nearly $10 million. And when the league’s draft structure gives low-performing clubs the highest picks, the A’s have complained the draft bonuses – some of which are below slot – are a burden on the bottom line. As one National League exec said to me, “They seem to be throwing their hands in the air.”

The financial details I published showed that business expenses are projected to be $225.012 million for 2023, up 18.3% from 2022 when they totaled $190.195 million. This after reportedly being in the red every year since 2017. At the same time, with revenue sharing now beginning to flow in, the A’s will be subsidized $86.075 million in MLB centralized revenue for the year.

But what is baffling is the sudden jump to Las Vegas. If the A’s and league think all their problems go away by relocating, there are serious questions to answer.

As a scathing feature piece by ESPN details, Fisher and the A’s were a scant $36 million from making the funding goal for the Howard Terminal site – a $12 billion project for a ballpark village on 55 acres. Instead, fueled by the fear of losing revenue-sharing if something concrete was not in place by Jan 15 of 2024, the A’s jumped to Las Vegas.

Making Las Vegas work comes with its own open questions. The A’s will get $68 million this year in local media rights. San Francisco/Oakland/San Jose ranks #10 by designated market size (DMA) while Las Vegas ranks #40. Maybe Fisher and the other owners realize that they won’t be getting that much in Oakland when it comes time for renewal due to the media rights bubble bursting, but then how do you think that revenue stream is going to be in Las Vegas?

Maybe the A’s are looking at making up the media rights losses in other ways. Based on the financial information I saw, between 2017 and the end of this year, the high water mark for sponsorships and advertising was $12.007 million in 2019. That revenue stream has dropped more than half to $6 million projected for 2023. There’s little doubt that the A’s will see a vast opportunity for sponsorships compared to what they have garnered in Oakland, even with the Golden Knights and Raiders chewing into the potential pool.

And while attendance projections have been pie-in-the-sky for Las Vegas, should the A’s work deals with the hotel-casinos for packages that would include tickets to games at the A’s new ballpark, then even at the discount the A’s would have to give, they could make that up in other ways at the ballpark.

But this is all whataboutism. Based on the ESPN story, the relocation application is short on any details. The ballpark – just 9 acres in projected size – would be just one-half acre larger than the site of Target Field, home of the Twins. That site is the smallest in the league, but is open-air and doesn’t come with the roof the A’s say is coming in Las Vegas and needed.

In all of this, there has been no relocation fee levied against the A’s. The apparent reason is John Fisher couldn’t pull the money together to make it happen. Why is relocating the A’s to Las Vegas smarter than bridging the gap that was in Oakland and letting Las Vegas be an expansion market where at least a new ownership group isn’t saddled with a bad track record? The A’s say they’ll invest when they get out of the red in Las Vegas. As the practice with the ownership of the San Jose Earthquakes has shown, actions speak louder than words, and the actions in San Jose haven’t been the best.

Subsidies

In speaking with more than one baseball executive, the general takeaway is not just the A’s, but many small market teams, require subsidies from the other larger revenue-making clubs. While all of them said that player payroll costs attributed to that, none of them saw an outright salary cap or significant penalties around the Luxury Tax as anything that could occur, even with a protracted lockout against the players.

If the A’s are losing money, and it’s not their fault, and scrambled to Las Vegas because they fear losing revenue sharing, and the Rays are staying in St. Petersburg where they will gain a ballpark village but still be getting revenue sharing…. even if the amount of subsidies by the large market curbs and somehow lowers due to increased local revenues, the question of expansion has to be asked.

Rob Manfred has said to me and others that Major League Baseball is a “growth industry.” But, looking at expansion markets, even with throwing Oakland back in the mix, all of them are small. Nashville, Salt Lake City, Portland… they would all be revenue-sharing payor markets. Maybe the up to $4 billion in expansion fees eases this. Maybe regional realignment reduces travel costs when the league gets to 32 teams. Maybe the additional playoff teams boost national TV rights revenues.

Maybe.

The bottom line is the A’s business model is haphazard. The relocation effort is woefully short on details. If the A’s financial information is accurate it’s an inditement on MLB’s structure and begs the question as to why expansion makes sense. If we see that the A’s have lost money every year since 2017, even with the pandemic years thrown out, these low-revenue making clubs are seeing increased central funds, plus revenue-sharing, and are still losing money? If so, how is this a healthy industry?

The A’s financial information wasn’t the key to explaining John Fisher’s plight. Instead, it showed glaring flaws that Rob Manfred and the league’s owners need to seriously contemplate as they look to move into the next chapter in baseball’s long history. Not every club is under such disfunction. But in a $11 billion industry, why should there be any dysfunction at all?