White Sox should be budget conscious

Rick Hahn could be working with a $25 million dollar budget this offseason. - Jonathan Daniel/Getty Images

Jeff Lamb of BP Wrigleyville wrote a great piece breaking down the incredible revenues the Chicago Cubs are earning, while unearthing how they are investing some of those revenues since Theo Epstein became President of Baseball Operations. Generating $302 million in revenue after the 2014 season, that total could reach $320 million or more after the final numbers are tallied for 2015. Allowing the team to expand payroll and add to the core with much needed starting pitching.

Meanwhile on the south side, White Sox fans have plenty of ideas on how to get the team back on track. Thanks to the overwhelming success of The South Side Sox Offseason Project, many scenarios have been played out. Including the most recent transaction in which the White Sox declined the $10 million option on Alexei Ramirez. While we wait to hear the reason's why (or wait for Ramirez to sign a lesser deal), the Sox so far have added $9 million dollars more to the piggy bank for spending this offseason.

Still, the Sox really don't have enough to sign the marquee free agents, like Jason Heyward or Yoenis Cespedes. Lack of funds is a common frustration for fans who don't understand how a team that resides in the third largest US market can't spend the necessary money. Based on numbers reported by Forbes magazine back in March, the White Sox generated $227 million dollars, tied for 20th in all of Major League Baseball (Cubs were 6th). I've copied the same table that Lamb used on BP Wrigleyville, but with the White Sox numbers.

Year Revenues Player Expenses

Operating Income

Non-player operating expenses
2006 157 86 21.7 49.3
2007 173 102 19.5 51.5
2008 193 108 30.6 54.4
2009 196 126 13.8 56.2
2010 194 113 26.4 54.6
2011 210 119 27.6 63.4
2012 214 138 10.8 65.2
2013 216 115 22.9 78.1
2014 210 132 -2.7 80.7
2015 227 112 31.9 83.1

Totals in Millions of dollars. Source: Forbes

Edit: Muzzkill has also posted a table that includes percentages of the 40 man payroll to revenue.

Good news: revenue has grown 53% in the last 10 years. Which is impressive considering that the White Sox attendance and media ratings are constantly in the bottom 10. Especially in 2015, when the White Sox suffered the greatest television ratings change for all of Major League Baseball and only 105,000 more fans attended games despite the season ticket blitz during the holidays.

The White Sox on average spend 58% of revenue on player expenses (salary + benefits+bonuses) in the past 10 years. A significant change in investment has been on non-player operating expenses (NPOE) since Rick Hahn took over as GM. NPOE covers costs for front office personal, scouts, facilities, in-game entertainment, etc. The increase in funding could pay off in the form of better players coming through farm system. Three year average (2013-15) has been 37% of revenue is contributed to NPOE, which is equaling to $80.6 million a year. That's $19 million more a year than what the Sox were investing from 2010 to 2012.

Something to note is a significant difference between what Forbes reports in player expenses and what we learn from Cot's in player payroll. That gap has been a difference of $8 to $13 million with Forbes being higher. For example, in March of 2012 Forbes reported player expenses at $138 million. Cot's reported the final 40 man 2011 (October) payroll at $125.8 million. Perhaps there is an additional cost we don't consider when trying to figure out what the final payroll number is.

Let's say that number is true for this offseason. Revenue stays the same at $227 million and the White Sox plan to spend 58% of revenue on player expenses, which equals to $132 million. Remove the benefit totals, say $8 million, and the salary target is now $125 million. A $7 million dollar increase from Opening Day 2015 and after declining Alexei Ramirez's option, the White Sox payroll obligations would be around $100 million if they tender contracts to all arb-eligible players. Leaving $25 million to spend in Free Agency or take on salary in trades.

Why are the White Sox restricted? Couldn't they spend 70% of the revenue on salaries like the Detroit Tigers did this previous year and hope to build a winner? Sure, that player expense budget would be $159 million and with $20 million coming off the books next season (John Danks and Adam LaRoche), one could build an argument that they should. Yet, if revenues don't increase after these moves substantially, that could come back to bite the Sox later down the road. Say when its time to sign new deals with Jose Quintana or Chris Sale.

The White Sox are making money, just like everyone else in baseball. It's not enough, though, to merit have a player payroll of $140 million or more. Especially if the franchise is committed to invest more into NPOE. As we have seen recently in Kansas City, Pittsburgh, and the Chicago Cubs that return on investment could be huge. Just needs time to develop.

GM meetings start on November 9th where trade rumors will be born and possible free agent destinations will be zeroed in. I expect Hahn to be aggressive and creative this offseason like last year. Just not as aggressive as fans want it to be.

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