It’s not about the money with the Boston Red Sox
Fenway Sports Group is the name given to the conglomerate that includes the Boston Red Sox, other professional sports teams, a television network, and numerous real estate holdings, to name a few of their highly-successful ventures. Principal owner John Henry also owns the Boston Globe.
The tentacles of this business octopus spread far and wide, with the empire now valued at $9.8 B by Forbes magazine, in case anyone wishes to shake the seat cushions for some spare change. The Red Sox team is valued at $ 9 B trailing just the Dodgers and Yankees in team value. How times have changed in a blink of a fiscal eye. A step back to the beginning.
The first notable attempted purchase was to extract Alex Rodriguez from the Texas Rangers in a transaction scuttled over money. A-Rod was willing to head to Boston – PED’s and all – with a salary adjustment. The plan fell into the historic wastebin when MLB was not ready to allow the necessary contract adjustments despite principal owner John Henry’s scouring Boylston Street for deposit returns.
Since that watershed in Red Sox history, the team has consistently flirted with the luxury tax, swallowed a large amount of dead money, shopped the foreign markets, and continued to add more babbles to the corporate structure. How good were the finances? They were willing to dish out about $100 MM sans contracts to sign Daisuke Matsuzaka and Yoan Moncada. A World Series and continual sellouts will do that. They had the money and the credit to expand their empire and put quality and exciting products on the field. Now another change in direction.
A battle is being fought with the fiscal ledger as Boston attempts a reset to sanitize its budgetary past. To spend or not to spend would be a statement by an accounting Shakespeare, and all signs lean towards not spending or at least careful spending.
The Red Sox organization is a labor-centric business that labor cost is market driven. The team has been on the sidelines with the exception of Trevor Story, and the idea is now cost-effective players (cheap) and building up a depleted farm system. Maybe the future on both counts will be more productive than in 2022?
Businesses invest in the product since competition will cut you to pieces without product development. I doubt few of us are using a TRS-80 or driving a Pinto. Conversely, you must give those buying tickets and paying cable fees something of value.
The Red Sox’s decision-making regarding Rafael Devers and Xander Bogaerts will become instrumental in that area of PR and product. The great fiscal reset does not seem to concern the Dodgers or Yankees that have blissfully exceeded the luxury tax, and Boston has nudged over that precarious line – so what?
There are two courses of action, with one starting to pay up for quality on-the-field performers. The second is what we have seen this season: An occasional splashy signing, trolling the baseball landscape for bargains, and relying on a productive farm system.
This is not about the money.
The Red Sox organization has a significant cash flow with MLB TV rights, streaming services, local cable, and revenue sharing. FanGraphs estimates the Red Sox team receives $120 MM from NESN, which is not subject to revenue sharing. They just may be meeting payroll before a ticket is even sold with the various media rights.
Bogaerts and Devers’s future will be determined by money, and the Red Sox can let Bogaerts test the market and then make a compatible number. A pure player decision, and the same will eventually apply to Devers. If management takes the position, they lose either over money; I won’t buy it. Let them make a different case.