Currently, there is one player on the Houston Astros that is making over $1 million – pitcher Erik Bedard. The Astros as a team have a record of 43-86, the worst in Major League Baseball. Yet at the same time, the low payroll and soaring TV revenues are helping to make the team the most profitable in the league. Astros’ owner Jim Crane has something to do with it as well.
Houston Astros are the most profitable team in baseball
Crane took over the team in 2011. Of the 270 Major League Baseball teams who have taken the field since 2005, none have finished with a worse winning percentage than Houston’s. Despite this fact, the team is estimated to pull in $99 million in operating income this season. To give you an idea at where that figure stands around the league, that is nearly as much as the combined estimated operating income of the previous six World Series championship teams. How do they do it?
Jim Crane cuts payroll expenses
Perhaps the slashed payroll is why the Astros have the worst record in Major League Baseball. Over the course of this season, the team will pay its players an estimated $21 million in salary and bonuses. That is down $56 million from the 2011 season.
The Houston Astros have also cut active payroll to under $13 million, a league low. To put that in perspective, the Yankees have nine players on their roster that are individually making more than the Astros. Even so, Jim Crane expects that to change”
“Once our minor league system is filled in, we’ll move up into the top five or 10 in payroll.”
Crane has also taken part in “crowd pleasing”. Since becoming the owner, he has introduced fan-friendly policies like allowing food and drinks into Minute Maid Park. Fans cannot argue with that, nor can they argue about seeing their hometown Astros on SportsNet Houston.
One of the best TV deals in baseball
The more you read about sports rights, the more you realize how much of a game changer they can be. The Astros current deal with Comcast is worth $80 million per year. Not only that, but they are bringing in nearly $40 million from other television and radio deals.
The Astros own 45% of CSN Houston, the Rockets own 33%, and NBC Universal owns the rest. It is becoming increasingly common for sports teams to take equity stakes in the networks who buy their rights. Derek Baine, an analyst at SNL Kagan who covers sports media, explains the situation:
“Sports rights are escalating astronomically, so ideally, on a team you want to be benefiting from anybody who is in there trying to take a piece of margin out of it. It’s a way you can generate big fees while still capturing some of the upside if they ever get sold. Because when they get sold, they go for pretty big valuation also.”
Because the Astros are the majority stakeholder in the network, they absorb most of the $63 million lost by the network last year. Those losses are in part due to a lower subscription rate in the Houston area. Even so, the Astros would still have an estimated operating income of $71 million.
As the team looks to build for the future, owner Jim Crane can figure out exactly how and where he wants to spend the money they are making now. It’s clear the team is doing well, even if they’re not doing so well. What are your thoughts on rebuilding sports teams?
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