Successful Rays May Still Be 'Cash-Flow Negative'

Baseball fans coast-to-coast could always tell when the Rays were coming to town: The ballpark freebies got better.

The marketing staff would break out, say, the local superstar's bobblehead toy in an effort to draw crowds that Tampa Bay's ballclub couldn't. If the Rays weren't much of a draw in St. Petersburg, they were like the plague on the road.

No more, says Rays President Matt Silverman: "Looking ahead to this year, I do think you'll see fans coming to the park to see our club when we're visiting."

Coming off a World Series appearance, and a decade after they debuted, the Rays are finally generating buzz. Attendance was way up last year as the team marched toward the American League championship and played deep into the postseason. Also way up were TV viewers, merchandise sales and most other measures of business success.

This year, the team will try to capitalize on its remarkable 2008 season with a business strategy of expanding the fan base throughout Florida, enhancing its sponsorships with businesses and building the season ticket-holder base.

Still, the team expects a slight operating loss in 2009 because the player payroll is 42 percent bigger and, of course, there's a recession on. At least the Rays are building from a position of strength.

Here's a look at the team's business outlook:

•Attendance: Even with money from broadcast rights, merchandise royalties and other sources, tickets bring in more than half the team's revenue, Silverman said.

Home game attendance at Tropicana Field soared 30 percent last year, from 1.4 million fans in 2007 to about 1.8 million last year. That's good news, but it still doesn't put the team much beyond the middle of the pack among the 30 major league teams.

Most teams coming off a World Series appearance average about 2.5 million fans the following year, said Mark Fernandez, a Rays senior vice president and chief sales officer.

That may be a little ambitious for the Rays, so the team is using 2 million fans as a goal this year. By comparison, the New York Yankees draw about 4 million fans a year.

Even to hit 2 million fans, the Rays will need to keep up the momentum to counter the recessionary blues. This week, The Associated Press noted that Major League Baseball is expecting an attendance decline of up to 7 percent.

A team with a compelling worst-to-first story like the Rays might expect to benefit from its success for another five years, said Vince Gennaro, a consultant to the Cleveland Indians and sports management lecturer at Columbia University in New York City.

For example, after its World Series win in 2005, the Chicago White Sox saw the season ticket-holder base roughly double. That five-year effect could fall short if the team suddenly starts losing, he said.

"This is the year, 2009, where the 2008 performance should pay off financially," Gennaro said.

The team raised the price of tickets this year, $1 to $2 for the cheapest tickets and by larger amounts for better seats.

•Broadcast rights: Last year, the Rays saw a big increase in TV viewership. One of two TV stations that carried Rays games, Fox Sports Florida, drew double the households, from about 31,000 in 2007 to about 62,000 last year, said Steve Liverani, the station's general manager.

Neither Liverani nor the Rays would discuss how much money is trading hands for broadcast rights.

This year, the team ended its contract with the Ion television network, which carried 67 games last year, and is moving those games to Sun Sports. Both Fox Sports Florida and Sun Sports are owned by media giant Fox. On the radio, the Rays are switching from one Clear Channel property, WHNZ, 1250 AM, to another, WDAE, 620 AM.

•Team sponsorships: You might think corporations would rush to partner with a Cinderella team like the Rays, but so far that hasn't happened to any great degree.

With the recession and companies cutting sponsorships, the Rays expect sponsorship revenue to be flat, or slightly positive, Fernandez said.

•Merchandise royalties: It doesn't have a Red Sox Nation fan base yet, but the Rays saw some modest gains in merchandise sales last year.

Where the Rays accounted for a measly 0.3 percent of all Major League Baseball merchandise in 2007, the team generated 1.1 percent of sales last year, said Matt Powell, an analyst with merchandise tracker SportsOneSource.com. The Yankees were the league leaders, accounting for 20 percent of all team gear sold.

Overall, even with its fortunes rising, the Rays may be "cash-flow negative" this year, with more money going out than coming in, Silverman said. The team was cash-flow positive last year, he said.

The player payroll rose from about $42 million last year to about $60 million for the upcoming season. The team's signing of former Philadelphia Phillies slugger Pat Burrell, who will earn about $16 million over two years, is part of the increase, Silverman said.

"It's difficult to project to make that up on the revenue side," Silverman said.

If nothing else, the 2008 season should cause the Rays' value as a corporate entity to jump from near the bottom of the pack.

The Rays won't give specific financial figures, but Forbes magazine projects earnings and team values every year and estimates the Rays earned a $29.7 million operating profit in 2007, according to its April 2008 edition. Silverman wouldn't confirm the magazine's estimate.

Forbes hasn't yet released its 2009 baseball rankings. The magazine also estimated the Rays' value at $290 million last year, good for 29th place, just ahead of the Florida Marlins.

Silverman insisted the ranking doesn't matter.

"It's not relevant," he said, "because the team is not for sale."