(08-30-2013 09:09 AM)grol Wrote: Apparently the article that stated that Crane was making more money than the last half dozen WS winners combined was wrong.
Check this out.
Baseball is a funny business. There are many different ways to measure income. GAAP basis, cash basis, tax basis will give three different net income figures, and the size of the differences can be astounding. The one thing I've seen in print is a column by Leonard Koppett who somehow managed to get access to the books of the Red Sox for four years in IIRC either the 70s or 80s. At that point, to give you an idea of the magnitude of the numbers, they were looking at total revenues around $50 million a year and payrolls somewhere in the $20 million range, so probably around 1/3 to 1/5 what they are today for most teams. Anyway, what was truly remarkable (along with the fact that he actually got to look at the numbers, and more amazingly that he got to disclose them) is that for the four years he looked at, the SMALLEST annual difference between GAAP income and tax basis income was $20 million. Most years they were showing about a $10 million profit under GAAP rules and a $10 million loss for tax.
Now, it would not be reasonable to extrapolate that to say there is $60-100 million today between GAAP income and tax income today, because 1) a number of the tax breaks were plugged by subsequent tax laws, most notably the 1986 law, and 2) a lot of the differences depend on interest rates (I can explain how and why, and Hambone probably could, but it's a really complex rabbit trail that we don't need to go down here), and with today's minimal interest rates the numbers simply don't produce as wide a spread as they did in 1980. But there is still going to be some difference, and it's a big number. The range of variation for the Astros might not be as large as it is for some clubs, because a lot of it depends on how you treat player contracts for tax, and they don't have any big player contracts now. On the other hand, depending on how they allocated the purchase price, they could be getting some pretty huge timing differences from that, particularly in the early years under new ownership.
My point in explaining this is that when you say the Astros had $99 million (or whatever number) in operating income, you have to be very careful about what that number means. There are lots of ways to end up comparing apples and oranges, and one needs to be VERY careful about any general conclusions comparing team A's financial results to team B's. I would say that in any listing of any measure of income for 30 MLB teams, you are probably looking at 25 materially different methods of determining what that number means, and some of those differences are inherent in the structures of the particular acquisition deals.
I've looked at this at some length and had some discussions with other SABR members about it. I am a member of the SABR business of baseball committee. I also had a really lengthy conversation with Tom Hicks about a lot of these issues years ago. Based on what I know, I would believe that the correction article is far more accurate than the original one. Most of the points made in the correction are totally consistent with everything I know. In particular, I would say that any analysis that relies on $80 million of income coming from a source which lost $60 million is highly suspect--particularly when you have a substantial equity stake in the source.