SF Giants owner mentions profits before anything else in press conference

SF Giants executive chairman Greg Johnson wants to break even, not add high-priced talent. Or pay the luxury tax.

The SF Giants announced the hiring of new manager Bob Melvin and an extension for team president Farhan Zaidi Wednesday. But arguably the most significant moment came in comments by executive chairman Greg Johnson. The gist? After Zaidi seemed to hint at payroll restrictions earlier this year, Johnson reiterated that fans shouldn't expect the team to start spending money alongside the highest payroll teams in the league.

Among extensive comments about the Giants' bad financial circumstances and the foolishness of rival teams to spend big on free agents, Johnson said that the ownership's goal was to "somewhat break even."

Johnson said that the team was unwilling to go over the luxury tax to sign free agents, something the team hasn't done since 2017. In their history, the Giants have gone over the competitive balance tax line three times, paying out $8.8 million between 2015-17.

"I think it depends a lot on who we target," Johnson told reporters. "When you look luxury tax, one year number you could go past that if you had to, but I don't think it's something we want to do for a long period. I think if you look at the teams that have jumped up in free agency, they didn't really have great years this year, so not sure there's a direct correlation there."

Johnson's conclusion is highly suspect when you look at the recent history of free agent deals. Last year's National League Championship Series saw the Philadelphia Phillies, who signed Bryce Harper to a massive free-agent deal in 2019, face the San Diego Padres, who signed Manny Machado to a big free-agent deal two weeks earlier. This year, the Phillies spent big on free agent Trea Turner and returned to the NLCS, helped by great pitching from 2020 free agent signing Zack Wheeler.

Meanwhile the Texas Rangers are headed to the World Series led by free-agent acquisitions Corey Seager and Marcus Semien, along with pitcher Nathan Eovaldi. Both Texas and their ALCS opponent, the Houston Astros, brought in big-money pitchers in trades at midseason, too, in Max Scherzer and Justin Verlander.

By contrast, the Giants under Farhan Zaidi haven't signed a player to a free-agent contract longer than three years. The highest-priced player they've acquired in trade is Zack Cozart, but taking on his $12.167MM contract was the price for obtaining infield prospect Will Wilson. The team immediately released Cozart, which Johnson must have regretted considering how much money he could have saved when player salaries were pro-rated after the COVID-19 pandemic canceled half the season.

There's been just three free-agent deals of more two years since Zaidi took over. Mitch Haniger signed for three years and $43.5 million (the third year is a player option), Anthony DeScalafini signed for three years and $36 million, and Tommy La Stella signed a three-year deal for $18.75 million.

Even though the Giants released him two years into the deal, La Stella was the fifth-highest-paid player on the team last season.

Johnson made it clear what the ownership group's priorities are. They want to win. As long as they're turning a profit.

"We also represent a group that our goal is to somewhat break even, which is somewhat a challenge in this business," Johnson continued. "But everybody I can tell you from the ownership side, the goal is to win and that's why we are doing everything we can."

The Giants have suffered a downturn in attendance the last few years. There are a few factors. First, the South of Market area, and downtown San Francisco in general, is no longer as populated as it was before the pandemic, with more employees working from home. When the Giants moved weeknight start times to 6:45 PM in 2018, that made it more difficult for out-of-town fans to make the first pitch.

But the Giants' ballyhooed Mission Rock development has also affected attendance - and the team's finances. The site has had run into troubles in its development, from delays to reworking office buildings as life science labs. The upside is that some office buildings are getting "superloos" for a "premium restroom experience," though we would argue that advertising the quality of the toilets doesn't inspire confidence about a real estate project. 

The cost of the mixed-use development is estimated at $2.5 billion, while the construction sacrificed at least 600 parking spaces, making it much more difficult for fans to reach the games. But with office demand dropping as well as San Francisco rent prices, the team might be anticipating a much smaller return from their massive real estate investment than they expected.

As far as "breaking even" goes, that often simply depends on accounting. According to a report from Forbes, the Giants made a profit of $74.9 million in 2022, the second-largest profit in baseball. That's a lot better than "somewhat breaking even."

Johnson might note that the staggering profit came after the wild success of 2021, after attendance rose by nearly 10,000 fans per game. But perhaps the relatively consistent attendance in 2023 after the team again neglected to spend big has reassured ownership that the team - worth an estimated $3.7 billion - can generate comfortable profits without payroll investment.

While ownership insists that they'd only go over the luxury tax for a year at a time, SF Giants fans would be thrilled if they even approach the luxury tax level one season. But based on Johnson's comment, don't expect more than one big free-agent prize like Shohei Ohtani. Unless he's willing to take a three-year deal - with a player option.