Mains: Baseball team ownership and rent-seeking
From SABR member Rob Mains at Baseball Prospectus on April 12, 2018:
Forbes has published its annual estimates of baseball franchise values and profitability. As usual, the buzz about the Forbes list has focused on two features.
- Baseball teams are worth a lot of money. Forbes estimates the aggregate value of the 30 teams is over $49.3 billion, ranging from $900 million for the Rays to $4.0 billion for the Yankees. Every single team rose in value last year, with increases ranging from one percent for the Pirates to 16 percent for the A’s.
- Baseball teams make a lot of money. Forbes estimates overall revenues of $9.46 billion and operating profits (defined as earnings before interest, taxes, depreciation, and amortization—EBITDA in finance parlance) of $889 million. That’s a healthy operating margin of 9.4 percent. All but five teams turned a profit last year, and two of the unprofitable teams—the Blue Jays (loss of $1.3 million) and Mariners (loss of $2.4 million)—had a loss of less than one percent of revenues. The Orioles ($26 million, 10 percent of revenues), Tigers ($46 million, 17 percent of revenues), and Marlins ($53 million, 24 percent of revenues) were the only clubs to suffer significant losses.
Those are valid observations, and some very talented writers have and will dissect them. I would like to look at the Forbes numbers from a different angle, though. As I have often written, admittedly repeatedly, arguably ad nauseum, I think the way to view a baseball team is as an investment, not as a going-concern business.
Read the full article here: https://www.baseballprospectus.com/news/article/39161/flu-like-symptoms-baseball-team-ownership-rent-seeking/
Originally published: April 12, 2018. Last Updated: April 12, 2018.