Sam Mellinger

Royals are cashing in by the millions, and what they do with the money is critical

With their playoff run, the Royals are bringing in more money. But what will owner David Glass (right), general manager Dayton Moore (center) and team president Dan Glass do with the cash?
With their playoff run, the Royals are bringing in more money. But what will owner David Glass (right), general manager Dayton Moore (center) and team president Dan Glass do with the cash? The Kansas City Star

Every night the Royals host a playoff game, they make a little more than a million dollars. That’s pure profit, money the team did not put into its 2014 budget.

They made seven figures for the American League Wild Card Game at Kauffman Stadium and seven figures for the American League Division Series game, according to club sources, and they will make another seven figures for Monday’s game three of the American League Championship Series. More ALCS games, possibly World Series games, would mean even more money.

So it’s not just the Royals’ standing around baseball that’s being boosted. It’s their bottom line, too.

And it’s not just their history that’s being rewritten. It’s their future, too.

That’s true whether this wild ride ends with a parade or a loss. However it finishes, the Royals will be in a better position than they’ve enjoyed at any point in recent memory.

Depending on how far they go in this Major League Baseball postseason, and how many home games they play, the Royals could make more than $10 million that they hadn’t planned on earning.

Chairman David Glass and general manager Dayton Moore have been consistent in saying they view 2014 as the beginning of a window in which they can consistently compete for championships. They’ve said that knowing their top starting pitcher, James Shields, is almost certain to leave as a free agent this offseason.

It’s critical that this unexpected windfall is reinvested into the team.

That means Glass must give Moore the freedom to play next season with another franchise-record payroll, and Moore must use the opportunity to improve the Royals’ best team in a generation.

The Royals made a small and calculated risk in playing this season with a $92 million payroll. Simple math says they should be able to spend $100 million or more next year.

That would’ve been just the 17th-highest payroll in baseball this year, but it represents a remarkable rise for a team that played the 2011 season with a $36.1 million payroll — lowest in the majors that year.

The opportunity and incentive — more on the incentive later — are both here in a way that hasn’t been the case for years.

The dollar figures used in this column are based on conversations with people inside and outside the organization who are familiar with baseball’s playoff payout structure, and the Royals’ own financial situation.

The formula is complicated, and the payouts are different for a game one than they’d be for potential game sevens (teams get a bigger chunk in the later-round games), but clubs can sometimes bank $12 million to $15 million for a playoff run that includes the maximum number of games in each series.

The money will not change the Royals’ stature as one of baseball’s small-revenue organizations, but it could push them toward the middle third.

Along with profits from a season in which the team drew its most fans since 1991, the Royals should be in a position to play the 2015 season with what would be the sixth franchise-record payroll in the nine years since Moore was hired.

The Royals drew 1,956,482 fans this year, and internally they are expecting 2.1 million or more through the turnstiles next year. Their $92 million payroll this year ranked 19th in baseball. Even with increased attendance, before the playoff money, the Royals figured to be among the bottom four in revenue.

People familiar with baseball’s financial structure say the Royals operate around a break-even point annually. That does not take into account the skyrocketing value of Glass’s franchise.

Payouts from playoff games are just part of the increased revenue the Royals can expect. Playoff success means greater attendance, and more concessions and merchandise sales.

The Royals’ leaders often make comparisons to how the Minnesota Twins built themselves from an afterthought to a perennial playoff contender in the early 2000s. The Twins first made the playoffs in 2002 with a $40 million payroll, then jumped the next year to $55.5 million. After the Tampa Bay Rays made the playoffs in 2008, they increased payroll from $43.7 million to $63.3 million. The Washington Nationals went from $92.5 million to $118.3 million after making the playoffs.

There are many factors at play here besides playoff revenue, obviously, and it’s also true that teams like the Brewers and A’s have kept their payrolls steady the year after making the playoffs.

But the Royals have an important incentive to make reasonable increases in their spending — to push their payroll closer to the middle of baseball’s hierarchy. They want to ensure this success that’s been eight years in the making lasts as long as possible.

Their horrendous television contract, a deal that runs through 2019, makes this even more urgent. The Royals earn $20 million or less from that deal each year, a fraction of many teams they’re competing with even as their broadcasts have set multiple ratings records this season.

If the Royals can keep their TV ratings high for the next few years, there is hope inside the organization that they can renegotiate and extend that contract a few years before its expiration. The best way to increase TV ratings, of course, is to win games, which means the Royals could actually make money in the long term by spending money in the short term. That approach worked for them this year — no matter the perception, a $92 million payroll could easily have led to the team losing money this season — and could work as a bigger play as well.

None of this changes the enormous likelihood that Shields and designated hitter Billy Butler will be gone next year. Shields will probably draw offers of up to $20 million per season for four or five years. Butler has a $12.5 million team option that is a virtual lock to be declined, and the Royals have been steadily moving away from him in their long-term plans.

Including Butler’s buyout and other factors such as pitcher Luke Hochevar’s pending free-agency, the Royals should have a little more than $25 million coming off the books to go along with a possible increase in spending. But they are also obligated or likely to pay around $20 million to $25 million in raises to players such as outfielder Alex Gordon, catcher Salvador Perez and first baseman Eric Hosmer.

There are a lot of moving parts here, but the vast majority of the money coming off the books will be used on keeping other pieces of the team together. That means any free-agent signing, or a trade that takes on money, would have to be funded by an increase in payroll.

That’s where this playoff run will continue to shape the franchise. The Royals will have more money than usual, and an increasing financial and competitive incentive to spend it.

Already, this playoff run has changed so much about the Royals. But the best part may be yet to come if the organization uses this success to improve its future.

To reach Sam Mellinger, call 816-234-4365 or send email to smellinger@kcstar.com. Follow him on Twitter: @mellinger. For previous columns, go to KansasCity.com.

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