What Happens When You Spend Big, But The Players Still Lose?

Landon Hemsley (SMBA ’15) looks at what happens in the event that a professional  team increases their payroll to spend their way out of a poor performance, but the team still comes up short on the field.

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“This team is awful.”

“There’s no where to go but up.”

“There’s always next year.”

These are things fans say when their team is down. These are also things fans say all the time. In fact, someone is probably saying (or thinking) those words right this very minute.

Despite the depression, fans remain hopeful that someday in the future their team can be successful. The first law of the sporting world is, of course, bad teams get good, and good teams get bad. (Except for the Chicago Cubs. Seriously. They’re exempt.)

But most teams are not like the Cubs. A great number of teams, hoping to turn things around, invests in high-profile players that attract crowds, bring in dollars and generate wins. This is how the Lakers, Yankees and the other high-rollers of the world typically do business. They try to buy their success, especially when things are down, and the fact that their ownership doesn’t care how much they have to spend to get wins makes that ok.

Take, for example, Toronto FC. The Canadian MLS club went out over the offseason and dropped multiple rolls of bills on US Men’s National Team player Michael Bradley, former English national teamer Jermaine Defoe and Brazil’s goalkeeper Julio Cesar. According to the Toronto Star, the plan was that the money the team “invested” in players would increase team wins, drive sponsorship revenue, ticket sales, and ultimately make the $120 million Toronto FC spent on stadium renovations worth it.

The team went on to lead a mediocre (at best) campaign. As of this writing, TFC is hovering just outside MLS playoff position. Defoe has declared he wants to go back to England. Julio Cesar is long gone. The team fired its entire coaching staff last month. And now the Bank of Montreal, Toronto FC’s jersey sponsor, is jumping ship, though it says it will still keep the naming rights on Toronto FC’s stadium.

BMO’s exit is a huge deal. The main revenue streams for most sports teams, beyond tickets, are media rights, advertising and corporate sponsorships. The fact that such a high-profile sponsor is getting out the game right when the club needs them the most makes the club’s revenue woes that much more pronounced. At the very least, it makes Defoe’s $111,000 per week price tag look something like a waste (especially because he wants out of Toronto), not to mention the $6.5 million per year that TFC is paying to Michael Bradley.

It’s doubtful that TFC brass signed Defoe and Bradley thinking that the team would go from worst to first in a single season, but it’s just as likely they thought the team would make it’s first playoff appearance this season. Multiple executives were quoted to say they expected improvement in both wins and revenue.

The extent to which the club was truly counting on increased revenues from improved on-field performance to continually finance the operation is unclear. What is clear is that if they were betting the farm on Michael Bradley and Jermain Defoe saving them financially, then they chose to learn the first law of sports business the hard way. Bad teams get good and good teams get bad. Clubs can’t count on on-field performance to sustain revenues.

Any team that does will eventually find itself in a bind.

For a more in-depth article on Toronto FC’s bad financial season, read this article in the Toronto Star.

 

One Reply to “What Happens When You Spend Big, But The Players Still Lose?”

  1. Tampa Bay Rays are a counter example in the Joe Madden era. A relatively low-spending team battling in the AL East and besting the NYY and BRS, teams that outspent the Rays 3- or 4-to-one. It would be an interesting study to figure out how they did it.

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