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	5.7.05 It was recently reported that the Kansas City Royals made a profit of $3 Million last year.  That was in a season in which the team lost more than 100 games.  That is pretty impressive, imagine how much they could make if they put a good team on the field and people actually went out to see them. While that last sentence is flippant and sarcastic, there is some truth to that notion.  There is an age-old axiom in business that states that you have to spend money in order to make money.  The Royals payroll is the second lowest in the league this year at about $36 Million (the Yankees, meanwhile are over $200 Million).  Is it any wonder that they are the worst team in the baseball, and that their attendance has been pathetic? The Royals have a plan, and truth be told, it is a pretty good plan.  They are rebuilding their team from within, using inexpensive young players that have plenty of talent and potential.  It takes several years for major leaguers to become eligible for salary arbitration and eventually free agency, so the Royals can continue to pay these guys peanuts until that time expires.  The plan is to bring these youngsters along and, when they mature and become solid major leaguers, then the team tries to add one or two veteran free agents to solidify the team and make a run at the playoffs.  It is a good plan, but also a plan that destines the Royals to be losers in the short-term. So what could the Royals do to be competitive in the short-term, while still building for the future with younger players?  I think the mistake is cutting the payroll as far back as the team has.  I understand that the team wants to make a profit and I also believe that they should be trying to make a profit - it's a business, not a charity, after all.  However, expenses are only one component of profit - income is the other.  If the Royals were to put a competitive team on the field, enough more fans would attend games to make up for the increased spending.  History tells us that this is true. Royals attendance had been steadily decreasing from 2000 (20,715 average attendance) to 2002 (16,334 average attendance).  Then, in 2003, the Royals surprised the baseball world by having some success, winning 83 games.  They drew an average of 21,974 fans that season.  Last year the Royals were terrible, but there was some holdover from 2003, allowing them to draw 20,512.  So far this season the Royals have averaged 16,804 fans to their games.  The Royals are 7-20 on the year so far and it doesn't look like they will do much to interest more fans in attending games. This recent trend holds up over longer periods of time as well.  In the 1980's the Royals were a successful franchise on the field, with an overall winning percentage of .529 (and a World Series victory in 1985).  During that decade they were also successful at the box office, averaging 26,334 fans per game.  In the past ten years (1995-2004) the Royals winning percentage was a woeful .434 (and no playoff appearances) and their average attendance was 18,724.  If it seems obvious that a winning team will draw more fans, well, it should be.  But instead the Royals complain that Kansas City is a market that can't support a major league franchise.  But history contradicts this - the city will support a team if you put a winner on the field. But, does my theory hold up that if they spent more, enough people will come to pay for the additional expenses?  Well, since we know that the Royals made $3M last year with a $36M payroll, we can use that as a baseline.  [Note: this discussion will be crude because we don't have all of the relevent information, including revenue from advertising which increases with attendance, additional costs to support additional attendance, etc.  For the sake of argument, we'll assume that these things cancel each other out.]  Now, lets increase the payroll to $50M.  That's $11M that will have to be made up just to break even. One thing the Royals do well is keep the costs down for their fans.  They have the second lowest average ticket price (below $13 a ticket) and the lowest average amount spent per ticketholder at a game (about $30).  In our crude analysis then, each additional fan equates to $30 of revenue for the team.  To get to $11M, we need an additional 4,526 fans at each game.  The Royals attendance last year was 20,512 per game, so we would need at least 25,038 fans per game to support a $50M payroll.  This is lower than the average attendance during the 1980's in Kansas City. Now the question is: Would a $50M payroll be enough to make the Royals competitive enough to bring in those fans?  Obviously, there is really no way to answer that question definitively without actually trying it.  My guess is that the answer is no.  The Royals won 83 games in 2003 and only drew 21,974 fans.  I'm not sure that a $50M payroll would get them much more than 83 wins. But, and here's where management must have faith, success breeds success.  Season ticket sales in 2004 jumped to over 10,000 after the successful 2003 season and the team drew 20,512 per game even though they lost over 100 games.  If the Royals had been able to continue the success of 2003, the attendance would undoubtedly have continued to climb.  With each season building upon the last, the fans will continue to come to games and attendance will steadily rise.  Maintaining a high attendance level through success on the field is a necessity for a successful baseball franchise. Here is where the Royals plan falters: if they build for a "window of opportunity" while allowing the team to flounder in the meantime, it will take several years for the fanbase to build back up.  By then, the window will be shutting and it will be time for another rebuilding session.  If, however, they spent $50M in payroll now and kept the team reasonably competitive, attendance would build so that when the window is open, the income would more than cover the costs of the team. So what should the Royals have done this past offseason?  Well, first of all, this is what their current lineup looks like: CF David DeJesus (second year player who is coming into his own as a leadoff hitter) 2B Ruben Gotay/Tony Graffanino (Gotay is a second year player with a lot of potential, Graffanino is a veteran utilityman) 1B Mike Sweeney (the only star on this team, he makes almost a third of the total payroll) DH Ken Harvey/Matt Stairs (Both are hefty sluggers; Harvey in his late 20's, Stairs in his mid 30's) RF Stairs/Eli Marrero (Marrero is a good utility guy in his early 30's) LF Terrence Long/Marrero (Long is at best a fourth outfielder) SS Angel Berroa (Third year player, Rookie of the Year two years ago) C John Buck (Second year player, should be solid) 3B Mark Teahen (Rookie, should still be in minors) The biggest holes last offseason were at the corner outfield positions and the team wanted someone to play third for a while to give Teahen time to mature in the minors.  To address those needs they signed Eli Marrero ($3.2M) and traded Darrell May (left handed soft tossing starting pitcher) and Ryan Bukvich (power reliever with no control and a cool name) to the Padres for Terrence long (who costs $4.875M) and they signed Chris Truby (horrible player) to play third. Truby broke his wrist in spring training, so he was a complete bust and now Teahen is playing in the bigs even though the team admitted they wished he could have started the year in AAA.  Paying Long and Marrero a combined $8.075M is a travesty.  Both guys should be fourth outfielder/pinch hitters.   Let's wipe their $8M off the payroll and try again.  They also signed Jose Lima to pitch at $2.5 M a year - we'll get rid of that, too and try again.  Now we are down to $25.5M.  First, I would sign Jeromy Burnitz and Jermaine Dye to play the corner oufield spots.  They each signed one year deals at $5M each.  We'll say the Royals had to pay a premium to get them to Kansas City because no one wants to play for a loser (another side benefit of keeping your team competetive on a yearly basis) and give them $6M each.  Now we are up to $37.5M.  Then I would have signed Mark Grudzielanek to play second base.  This allows us to keep Gotay and Teahen in the minors for one more year (keeping arbitration and free agency another year off) because we move Graffanino to third.  Grudz signed with the Cardinals for a year at $1M, we'll say he would have cost the Royals $2M.  Now we are at $39.5M. Now the Royals also need some help in middle relief.  Matt Mantei and Mike Myers (a righty and a lefty, respectively) signed with the Red Sox and Cardinals for a combined $1.5M or so.  We'll say they cost the Royals $2M to bring them in.  Now we are at $41.5M.  Now we've got $8.5M to have some fun with - I'd go for a starter to achor the rotation.  Let's see, Matt Clement signed with Boston for exactly $8.5M, but we'll assume he would want more to come to Kansas City.  They could have gone for Jaret Wright, Carl Pavano, Eric Milton, or Kevin Millwood, but I'd choose Odalis Perez.  He signed with his old team for $7M a year over 3 years, but if KC had waved $8.5M a year for three years, maybe he would have jumped. So here's what the team looks like with my moves that bring us to $50M: CF David DeJesus 2B Mark Grudzielanek 1B Mike Sweeney LF Jeromy Burnitz RF Jermaine Dye DH Ken Harvey/Matt Stairs SS Angel Berroa C  John Buck 3B Tony Graffanino SP Odalis Perez SP Zach Greinke SP Runelvys Hernandez SP Denny Bautista SP Brian Anderson RP Andy Sisco RP Matt Mantei RP Mike Myers CP Jeremy Affeldt/Mike MacDougal/Ambiorix Burgos I feel pretty confident that this team would be at least .500.  More importantly, this team allow a fanbase to build that would be capable supporting a team with a $50M or higher payroll on a regular basis.  It would also provide the Royals with a winning environment in which DeJesus, Gotay, Teahen, Buck, Greinke, Bautista, Sisco, Justin Huber, Andres Blanco, Billy Butler, and the other youngsters can mature.
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