Editing Openai/6938a81d-f398-8000-b994-839c297c3f08 (section)

=== Assistant: That’s a really interesting — and difficult — question. ===
That’s a really interesting — and difficult — question. In principle, the bigger value of Cincinnati Reds (≈ US$ 1.325 billion in 2025 Forbes<ref>{{cite web|title=Forbes|url=https://www.forbes.com/teams/cincinnati-reds/|publisher=forbes.com|access-date=2025-12-10}}</ref>) gives owners more financial flexibility, but how much more they “could” spend on payroll while remaining profitable depends on many variables (revenues, other costs, debt service, etc.). Below is a rough, reasoned estimate of the leeway — and the caveats.

==== - For 2024, Reds revenue (net of stadium-debt and revenue-sharing adjustments) was ≈ US$ 325 million. Forbes<ref>{{cite web|title=Forbes|url=https://www.forbes.com/teams/cincinnati-reds/|publisher=forbes.com|access-date=2025-12-10}}</ref> ====
* Their reported “player expenses” for 2025 are about US$ 161 million. Forbes<ref>{{cite web|title=Forbes|url=https://www.forbes.com/teams/cincinnati-reds/|publisher=forbes.com|access-date=2025-12-10}}</ref>
* That puts their 2025 payroll at roughly 49–50% of revenue (161 M ÷ 325 M). Actually some reports say they spent ≈ 42.6% of 2024 revenue on payroll. Blog Red Machine<ref>{{cite web|title=Blog Red Machine|url=https://blogredmachine.com/reds-spending-gap-small-market-rivals-getting-downright-humiliating|publisher=Blog Red Machine|access-date=2025-12-10}}</ref>
* Their operating income (EBITDA) in 2024 was about US$ 29 million. Forbes<ref>{{cite web|title=Forbes|url=https://www.forbes.com/teams/cincinnati-reds/|publisher=forbes.com|access-date=2025-12-10}}</ref>
* By 2025 the franchise value has appreciated significantly since the purchase price in 2006 (US$ 270 M) to the current ~US$ 1.325 B — a roughly 5× increase. Forbes<ref>{{cite web|title=Forbes|url=https://www.forbes.com/teams/cincinnati-reds/|publisher=forbes.com|access-date=2025-12-10}}</ref>

==== Because of that increase in value — and presumably improved long-term financial stability — the Reds could likely afford to increase payroll somewhat and still stay profitable, assuming revenues remain stable or grow. Here’s a rough estimate: ====
* If the Reds maintain a similar profit margin (i.e. keep EBITDA around 10-15% of revenue), they could probably increase payroll until total player expenses approach 55–60% of revenue — maybe around US$ 180–195 million annually (i.e. ~$20–35 M more than now).
* In a more aggressive but still plausible scenario (crew invests in growth, increases marketing, attendance, media deals), they might push payroll to ~US$ 200–220 million, if revenues grow accordingly.

Why is this plausible?
* Many MLB teams historically spend well over 50% of revenue on payroll. Yankees Savant<ref>{{cite web|title=Yankees Savant|url=https://yankeessavant.com/the-business-of-baseball-part-ii-profits-and-losses/|publisher=Yankees Savant|access-date=2025-12-10}}</ref>
* If the franchise value and revenue-generating ability continue rising (with media rights, ticket sales, merchandise, etc.), the “break-even” and profitability thresholds shift upward.

==== - Franchise value ≠ annual cash flow. A high valuation reflects long-term asset value, brand, market size, and expectations — not necessarily current cash flow or liquidity. ====
* Other expenses matter. Player payroll is only one part of total costs (front office, ballpark operations, staff, benefits, debt service, capital expenditures, etc.). A large payroll increase might still push the team into a loss if those other costs rise or revenues stagnate.
* Competitive-balance / luxury-tax thresholds. In Major League Baseball (MLB), spending too much may trigger luxury tax penalties — adding effective cost beyond the payroll itself. Wikipedia<ref>{{cite web|title=Wikipedia|url=https://en.wikipedia.org/wiki/Major_League_Baseball_luxury_tax|publisher=en.wikipedia.org|access-date=2025-12-10}}</ref>
* Uncertainty in revenue growth. Much of the ability to expand payroll depends on whether revenues (ticket sales, media/TV deals, sponsorships) increase. If those lag, higher payroll could be risky.
* Ownership philosophy. Even with financial headroom, the team’s owners may prioritize long-term value, debt reduction, or profitability over short-term competitiveness — meaning they may choose not to maximize payroll.

==== - Conservative “safe” payroll ceiling: ~ US$ 180–190 million ====
* Aggressive but still possibly sustainable ceiling (with revenue growth): ~ US$ 200–220 million

That would represent roughly a 25%–35% increase over current allowances, without pushing the franchise into obvious trouble — assuming stable or improving revenues.

If you like, I can model a few scenarios for the Reds’ finances (e.g. low-growth, medium-growth, high-growth) and show projected profit/loss vs. payroll ranges over the next 5 years.
Would you like me to build that model for you now?