Economic downturn may not hurt Bucs
Budget won't be affected; free agents might become affordable
PITTSBURGH -- No one would contest that the economic downturn is primed to have an effect on the baseball world. In fact, in many cases, it already has.
Teams have become more reluctant to dip into their pockets for high-priced free agents. Some clubs have had to halt acquisitions altogether because initially projected payrolls can no longer be financially supported. Many teams are bracing for a sharp decline in attendance.
The degree of the economic effect is very much an unknown in many respects. However, members of the Pirates' upper management team insist that the club is in position to weather the economic slowdown with potentially minimal effect.
The ability, president Frank Coonelly said, for the Pirates to minimize the hit from the current economic turmoil is in large part due to the foundation of financial stability that owner Bob Nutting has created since taking over as the principal owner in January 2007.
Under Nutting's direction, the Pirates have regained strong financial footing and have refocused their budgeting process to ensure that uncontrollable external factors do not affect the organization's ability to meet revenue expectations.
"We don't budget on a hope and a prayer that we are going to exceed all expectations in attendance and if we do that, then we will hit budget," Coonelly said. "We budget conservatively so that we know that we're going to be able to afford the players that we sign and all the other investments that we need to make."
That hasn't always been the case with the Pirates, who found themselves in financial quicksand early this decade. In 2003, the Pirates had endured losses accumulating to $30 million in three seasons at PNC Park. And the club was forced to shed payroll in order to meet Major League Baseball's requirement of a minimum 60-40 ratio between earnings and debt.
It was because of that that the club had to take the unpopular move of trading away a talented, young third baseman by the name of Aramis Ramirez for little return in 2003.
Such a drastic move, though, is no longer a necessity for the club. And the goal of the organization is to ride out this wave of economic uncertainty in a way that payrolls and budgets will not have to be reduced.
"We have always been prudent and careful and economically responsible," Nutting said. "That's one thing that I worked very hard on early on to make sure that the team was on a stable platform."
As a result, the economic instability is "not going to require us to change our plan at all," Nutting added.
Both Nutting and Coonelly said that the projected payroll for the Pirates in 2009 will not have to be reduced.
"We looked at our budget at the time when the economy was at the earlier stages of the downturn and budgeted accordingly," Coonelly said. "We have not changed our budgeted payroll number, and we believe that we will continue to be able to afford what we budgeted."
According to figures from the Commissioner's Office, the Pirates finished 2008 with a payroll of $50.8 million. The club budgeted for a slight increase in that payroll for 2009 and has not changed that figure.
Coonelly also confirmed that there are no plans to cut back on the budgets for the amateur draft or international signing bonuses. Both of those budgets have seen significant increases since Coonelly assumed his post in September 2007.
"I think you've heard us talk ad nauseum about how important those are for us and how critical those investments are to our clubs," Coonelly said. "We got good return on those investments last year. That's an area where we have to be putting our resources."
No matter how firm the financial standing of the club has been these last few years, it still doesn't make the Pirates immune from what's going on with the economy. Every business will be affected because every family is in some way affected.
This reality isn't lost on the Pirates' front office and marketing team, which have made changes to attract families despite hard economic times. The largest focus has been in ticket sales.
For the seventh straight season, the Pirates did not raise ticket prices for season-ticket holders. Every other Major League club has had at least one price hike during that span. Individual game ticket prices, too, remained the same as they were in 2008.
This offseason, the Pirates also introduced more affordable season-ticket plans, including one as low as $399. An extended payment plan was implemented to allow fans to spread payments over many months. And the organization has reintroduced "Buc Night," where fans can attend the Pirates' April 15 game in selected seats for $1.
"We have creative entrepreneurial sales teams that have been focusing on how we can deliver value to the fans," Nutting said. "In this economy, we're just going to have to find every way we can to add value to the fan experience."
As a result of new affordable season-ticket plans, the Pirates are actually keeping pace with last year's season-ticket renewals, said Coonelly. The Pirates president also reported that total number of season-ticket packages sold is higher than at this time last January.
Despite solid season-ticket sales, attendance remains a concern. Attendance totals in Pittsburgh have decreased each year since 2006. Last season, the Pirates drew 1,609,076 fans, which was the second-lowest total in eight years at PNC Park.
The struggling economy coupled with the fact that the Pirates have not had a winning season since 1992 would seem to be ominous for any attendance improvement this year. However, Nutting and Coonelly both expressed optimism that because of the creative ticket plans and promotions, attendance totals will not suffer.
"For us to be successful long-term, we need to be well over two million people," Coonelly said. "In challenging times like this, most clubs would be satisfied with flat attendance. We are still looking to improve.
"We know that we need to take several steps to get to where we need to in attendance," he added. "And we'd rather make those steps this year rather than in another year or two years when the step is higher."
While the Pirates have put significant thought into how to make the game experience affordable, no one can ignore the effect that the team's on-field performance will have on those attendance figures. A team that wins draws fans, and there is some public pessimism about the Pirates' chances this season.
But the economic downturn could potentially help Pittsburgh improve its squad. Nearly 100 free agents remained available at the start of the week, a total unseen at this point in January in years past. Some teams have publicly said that they are no longer spending. Others are unwilling to meet the salary demands of these players.
Consequently, there will be a shift in the next few weeks when players are going to have to settle for less than they had hoped. At that time, teams like the Pirates that may not have been in the hunt for certain free agents could suddenly see them as affordable enough to take a chance.
General manager Neal Huntington confirmed at PirateFest over the weekend that he is continuing to scour the free-agent market for affordable impact players.
Jenifer Langosch is a reporter for MLB.com. This story was not subject to the approval of Major League Baseball or its clubs.