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Baseball Team Values 2017 – Forbes
I have long believed that the vast majority of polls aren’t worth the paper their results are printed on (Hillary Clinton, I am sure, would agree).
Now, to reality. The average MLB team is worth $1.54 billion, 19% more than one year ago (to see the impact on the Forbes SportsMoney Index, click here). Values were driven higher by new local television deals that are increasing at roughly a two-fold rate, surging profitability, and the escalating value of Major League Baseball Advanced Media, the Internet and technology arm of MLB.
While over the past few years most of the new local television deals involved big market teams like the Los Angeles Dodgers, Los Angeles Angels of Anaheim, Philadelphia Phillies, Arizona Diamondbacks and Texas Rangers, the teams that will benefit from new agreements over the next few years are in mid-to-small markets.
The St. Louis Cardinals’ deal with Fox Sports Midwest, signed in 2015, begins next season and is worth $1 billion through 2032. In 2016, the Cincinnati Reds signed an extension with Fox Sports Ohio through 2032 that comes with an equity stake in the RSN and is worth more than twice as much as the previous contract. The Detroit Tigers, Miami Marlins, Pittsburgh Pirates, Tampa Bay Rays and Kansas City Royals should all be inking more valuable cable pacts over the next couple of years.
Long gone are the days when MLB was replete with teams bleeding cash. During the 2016 season, baseball’s 30 teams posted an average operating income (earnings before interest, taxes, depreciation and amortization) of $34 million, 52% more than the 2015 season (the previous record). Player costs (57% of the league’s operating expenses) did not increase as fast as revenue. In 2016, MLB’s 30 teams had aggregate revenue of $9.03 billion, 7.5% more than the previous season. But player costs–payrolls, signing bonuses (drafted players and international signings) and benefits–rose just 3.5%, to $4.56 billion in 2016.
By our count, only the Detroit Tigers (-$36.4 million), Dodgers (-$20.5 million), Miami Marlins (-$2.2 million), Baltimore Orioles (-$2.1 million) and Kansas City Royals (-$0.9 million) had operating losses last season.
There is no way to know if this trend will continue. The collective bargaining agreement that began with the 2017 season stipulates that the competitive balance “luxury” tax threshold on payrolls will increase from $189 million to $195 million for 2017, $197 million in 2018, then increase during the life of the agreement to $210 million in 2021. Tax rates for clubs exceeding the threshold are increased. What we do know at this point is that the average opening day payroll is 4.7% more this season than 2016.
Major League Baseball Advanced Media, owned equally by each of MLB’s 30 teams, was formed in 2000 with the dual mandate of providing baseball fans in all markets with great technology and creating a valuable asset. With new partnerships ranging from League of Legends and Discovery Communications, to ESPN and the NHL, to say those objectives were met would be a gross understatement. BAMTech (now two-thirds owned by MLB as a result of separate deals last year with Disney and the NHL) is worth around $3.5 billion, and MLBAM, excluding BAMTech, is worth approximately $12 billion.
Thus, baseball’s stakes in BAMTech and MLBAM likely contribute between $400 million to $500 million in value to each of baseball’s 30 teams. You can listen to my podcast with Maury Brown about the business of MLBAM here.
When looking over the numbers, keep in mind that revenue and operating income figures measure cash in versus cash out for the 2016 season (including playoffs) and are net of revenue sharing, stadium debt payments and MLB’s luxury payroll tax. Team values are enterprise values (equity plus net debt). Revenue and expenses of team-owned real estate (stadiums, stores, parking lots, etc.) owned by the team are included in our valuations, but the value of the real estate itself is excluded. We also do not include the value of regional sports networks owned by teams or their profits or losses. But we do include the rights fees (and pro-rated upfront bonuses) the RSNs pay the teams.
This is the twentieth rendition of our MLB valuations and the same number of times the New York Yankees have been baseball’s most valuable team ($3.7 billion). Short explanation: They generate the most revenue ($526 million). Full disclosure: I am co-host of the Forbes SportsMoney television show that airs on the YES Network and FS1.