Getting A Grip On The Financials

[chucksabr]

I want to bounce this off some of the experts here to make sure I am understanding correctly the revenue versus expenditure equation for the typical OOTP franchise.

Let's look at 2011 defaults.

Revenue
National Media: $80,000,000
Local Media: $60,000,000
Merchandising: $30,000,000
Gate Receipts: $63,693,000 (1)

Expenditures
Scouting: $7,260,000
Player Dev: $7,260,000
Players: $99,185,000 (2)
Coaches: $1,927,900 (3)

Total Revenue: $233,693,400
Total Expend: $115,565,900
Profit: $118,127,500
Profit Margin: +50.5%

My question for the experts is, does this pass the smell test? A 51% profit margin for the average franchise? Am I accounting for everything the game accounts for, and if not, what am I missing?




(1) 33,249 average attendance * $23.65 average ticket price * 81 home games
(2) Player average salary * 25 players
(3) Average coaches salary * 8 coaches. I know there are only five coaches, but the general manager draws a salary not reflected in the Financials area, so I am swagging a salary for him of 3x the average coach.

[Cinnamon J. Scudworth]

You're saying those are the 2011 historical defaults in OOTP itself? Yeah, that looks off in general to me. While you've left off some small expenses like draft expenses and minor league coaching staffs, the issue in OOTP is that if you aren't careful, you can get bad outcomes by using "accurate" revenue numbers because real life MLB franchises have costs that OOTP simply doesn't account for.

[BoSoxFan2]

Alright, then let's compare it to a somewhat average team-- say the Cleveland
Indians financial details here. So they make $186M in revenue yearly, or roughly 80% of the OOTP average. They spend $82M on players, or 83% of the OOTP average. If we assume that coaches follow the same trend, then yes it does seem reasonable, although once you factor in the cost of the Stadium in real-life there goes about $10M a year for building it, plus maintenance, and all the crews you have to hire, plus the hot-dog vendors and such, not to mention advertising, the profit margin drops significantly.
Let's do two teams just to check the calculations- how about an above-average- say the Red Sox, and a below-average (budget-wise), say the Rays.
The Rays:
Revenue: $167M(71%)
Player Costs:$81M(82%)
If we add on the OOTP average numbers for the rest of the costs it puts total expenditures around $98M(85%).
This puts the OOTP Profit Margin at 41%.
Factoring in debt and the stadium profit drops to ~30%.
Ballpark some salaries in there and ~20%ish profit.
Forbes says: ~6% in 2012, about 12% in 2013.
Now the Red Sox:
Revenue:$336M(144%)
Players:$176M(147%)
So yes it does look like OOTP ratios are correct for what it factors into account, even though there is much more to go. Looking at the Forbes site, Boston's final margin has been up and down, recently around $25M a year- or 7%, but sometimes as low as -5%.

[chucksabr]

Originally Posted by Cinnamon J. Scudworth

You're saying those are the 2011 historical defaults in OOTP itself? Yeah, that looks off in general to me. While you've left off some small expenses like draft expenses and minor league coaching staffs, the issue in OOTP is that if you aren't careful, you can get bad outcomes by using "accurate" revenue numbers because real life MLB franchises have costs that OOTP simply doesn't account for.

I think draft expenses are probably baked into scouting and player development. I'm not sure how to account for minor league coaching staffs.

As for your last comment, I don't know how I can be careful if I'm only trying to work with all the information available to me. My question is, am I accounting for all the financial information the game makes available to users? if not, what am I missing?

Originally Posted by BoSoxFan2

Alright, then let's compare it to a somewhat average team-- say the Cleveland
Indians financial details here. So they make $186M in revenue yearly, or roughly 80% of the OOTP average. They spend $82M on players, or 83% of the OOTP average. If we assume that coaches follow the same trend, then yes it does seem reasonable, although once you factor in the cost of the Stadium in real-life there goes about $10M a year for building it, plus maintenance, and all the crews you have to hire, plus the hot-dog vendors and such, not to mention advertising, the profit margin drops significantly.
Let's do two teams just to check the calculations- how about an above-average- say the Red Sox, and a below-average (budget-wise), say the Rays.
The Rays:
Revenue: $167M(71%)
Player Costs:$81M(82%)
If we add on the OOTP average numbers for the rest of the costs it puts total expenditures around $98M(85%).
This puts the OOTP Profit Margin at 41%.
Factoring in debt and the stadium profit drops to ~30%.
Ballpark some salaries in there and ~20%ish profit.
Forbes says: ~6% in 2012, about 12% in 2013.
Now the Red Sox:
Revenue:$336M(144%)
Players:$176M(147%)
So yes it does look like OOTP ratios are correct for what it factors into account, even though there is much more to go. Looking at the Forbes site, Boston's final margin has been up and down, recently around $25M a year- or 7%, but sometimes as low as -5%.

Are there any line items anywhere in the game that account for concessions, maintenance, advertising, one-off expenses like stadium upgrades and the like? If so, where would those be? If not, how can I account for them?

[chucksabr]

OK, I did a study of this issue by creating a brand new standard major league set in the year 2013.

Here are the team revenue and expenses settings for the average team in this league that appears under Game Setup/Financials, set up in the way I have it above:

Revenue
National Media: $25,000,000
Local Media: $25,000,000
Merchandising: $10,000,000
Gate Receipts: $60,750,000

Expenditures
Scouting: $6,000,000
Player Dev: $4,000,000
Player Payroll: $100,000,000
Coaches: $1,600,000 (3)

Total Revenue: $120,750,000
Total Expend: $111,600,000
Profit: $9,150,000
Profit Margin: +7.6%

(Side note: huge, huge difference in projected non-gate revenue from what I saw in my other game. This game assigns an average of $50,000,000 in media and merchandising to the teams; the already-running fictional game I was maintaining that I looked up 2011 numbers within assigned teams an average of $170,000,000 in non-gate revenue. I have no idea why there could even be such a huge discrepancy. But that's not the point of this post.)

I simmed out a season as commissioner, through the playoffs, and took a look at the financials for each team and averaged them out.



First thing I notice is how close expenditures are. My estimates from team settings was $111.6MM; actual was $105.8MM. So in general, I don't think I have to worry about my league's teams overspending profligately versus my projections for them.

I also notice that while actual revenues are off projections to a greater degree than expenses are, it's not wildly off (unless you consider 22% to 25% higher wildly off), and it's off to the good side instead of the bad. Plus, I am able to see that each revenue stream is off projections by roughly the same amount as the other streams: $58MM in actual media versus $50MM in settings (+16%); $12.4MM in merchandising versus $10MM (+24%); and $76MM in ticket sales versus $60MM (+27%). That's manageable. The playoff revenue accrues only to ten teams, so you'd have to consider that a bonus and nothing to project for.

One thing I am not quite chuffed about is that the report on actual revenues and expenses are broken out in a different manner than in the team revenue settings. I'd like to know what the actual breakout on national and local media is rather than lumping them together; and I would like to see the player expenses broken out by payroll, scouting and player development the way it is in team settings.

Nevertheless, I think I can conclude that when I create up my league and manually set revenue and expenses in team settings in Game Setup/Financials, I can feel pretty confident that actual revenues and expenses will cleave manageably close to team settings, and that the league won't fall apart because of some rogue financials that are not accounted for and are therefore uncontrollable.

Put another way, I don't have to worry about my teams spending themselves out of business on things I had no idea were there. That's the main thing I wanted to get my arms around.