Mar
24

Biz Notes: It’s good to be the richest

By

It’s not quite breaking news to announce that the Yanks are Major League Baseball’s most valuable team, but when Forbes announced its club valuations on Wednesday, the numbers were staggering. Not only are the Yanks Major League Baseball’s top franchise, but they are by a whopping 86 percent.

The Yankees, says Forbes, are worth $1.7 billion while the Red Sox are number two at $912 million. The Yankees allegedly generate over $427 million in revenue and turn an annual profit of $25.7 million. Nice work if you can get it, eh? Coming in last on the list are the Pittsburgh Pirates with the A’s and Rays right behind them.

Fans of the Bombers don’t need Forbes valuations to drive home the lucrative nature of business in the Bronx, but these figures — estimates because baseball doesn’t open its books — certainly contextualize the revenue stream. In fact, no other team even approaches the Yanks’ revenue figures as Boston earns $272 million annually. Just to compete with the Yankees, the Sox lost $1.1 million last year.

When we sort the list by operating income though, the Yankees slip a few places to seventh, and the teams ahead of them are mostly surprising. The Padres and Nationals lead baseball operating income; both clubs top $35 million before interest, taxes, depreciation and amortization. The Marlins and A’s, two clubs that earned headlines for raking in the dough without investing on the field, both made over $20 million in income last year.

In a blog post on the valuations, Forbes senior editor Kurt Badenhausen discussed the Yanks’ financial edge. He writes:

Yankee Global Enterprises is a three-engine money-making machine. The baseball team generated $325 million in revenue from regular-season tickets and luxury suites in 2010. Sponsorship revenue at the stadium is $85 million annually thanks to deals with PepsiCo, Bank of America, MasterCard, Delta Air Lines and others.

The YES Network, the team’s 34%-owned regional sports channel, is the most profitable RSN in the country and had over $400 million in revenue last year. The Yankees own a stake in Legends Hospitality Management, which manages stadiums, and generates $25 million in operating income. The enterprise value for the Yankees, YES and Legends is $5.1 billion.

In a sense, that certainly begs a question: Should the Yankees be at all worried about a budget? The numbers suggest that perhaps they shouldn’t, but the numbers don’t illuminate internal pressures both from within the organization or from the Commissioner’s Office.

Baseball’s Debt Bombs

In addition to the franchise valuations, Forbes also unveiled an extensive piece on debt disasters within baseball. Nathan Vardi and Monte Burke rehash the stories concerning the Dodgers and Rangers, focus a bit on the Mets and highlight the cash-starved Diamondbacks and Padres as well. Owning a baseball team is a sound long-term investment, but turning a profit and winning is no sure thing outside of the Bronx.

Jeter’s jersey still sells

The 2011 season will be Derek Jeter‘s 16th as a full-time player, and yet, his jersey still sells like hotcakes. As Major League Baseball announced yesterday, Derek’s No. 2 is the most popular choice among fans purchasing Majestic jerseys. A-Rod (9) and Mark Teixeira (11) are the only other Yanks in the top 20, and somehow, Jacoby Ellsbury‘s jersey ranked 16th last year. Joe Mauer, Roy Halladay, Chase Utley and Cliff Lee rounded out the top five last year.

Categories : News
  • Plank

    Selig, derisively known as “the Steroid Commissioner” for the blind eye he turned toward the artificial bulking up of the players throughout the 1990s and early 2000s

    I truly, truly, truly do not want to start a steroid debate, but has anyone ever heard Selig referred to as that?

    • http://riveraveblues.com Mike Axisa

      Never.

    • CountryClub

      I’ve never heard him called that exact name. But plenty of writers and also fans that I know kill him for supposedly turning a blind eye to roids. These people think it’s a permanent black mark on his tenure.

      I’m not sure if they’re right or wrong. But I do know that he tried to get testing in MLB well before Congress got involved. The union would have none of it.

      • Plank

        I know people think that, but I was just surprised to see it written like it’s his common nickname. I’m gonna have to call BS on that one.

        • Plank

          For the record, I was in an earthquake in Thailand while writing that message and I decided to finish the post before seeking shelter.

          I’m okay though.

  • Frigidevil

    I know for a fact that Ellisbury’s jersey sells primarily because girls in Boston are in love with him.

    • Gonzo

      Explains why Youk is not on the list.

    • Brian in NH

      After Ellsbury first made it to the big leagues, for some odd reason “Jacoby” was one of the most popular boys names for babies born in and shortly after that season. People here have an irrational love for a fragile player who’s essentially Brett Gardner (slightly higher average, slightly lower OBP, similar OPS and OPS+, similar defensive capabilities and base running skills, though ellsbury is probably a little better on the bases)

      don’t get me wrong, I like brett gardner, and he has value as a player, but I don’t have an irrational love for him. Do any of the ladies that frequent this site have it? Maybe Jacoby is better looking? idk

  • Brett

    I always thought operating income included depreciation/amortisation. The Forbes website says it doesn’t so who am I to argue.

    • bonestock94

      I’m pretty sure you add depreciation back into the cash flows to get net operating cash flows.

  • Plank

    The Yankees valuation without including the value, revenue, and debt of YES is like giving someone’s weight without including their upper body. The Yankees play games with their debt load by putting it on the channel so they show very little debt, but looking at the entire picture, it’s much higher.

    Still, the Yankees, and every other team should be spending much more on players (or charging fans less (but that will never ever happen.))

  • Joey

    Hey guys, there is one more open spot in the RAB Conference South League™.

    League ID: 52615
    Password: riveraveblues

    Draft is Sunday, March 27 at 9:30 PM EDT (6:30 PM PDT).

    Had to delete my team, not going to have near enough time to update daily and didn’t want to be unfair to anyone else in the league by being relatively inactive. Have fun, I had a good time last season

    • Joey

      Shit just realized this isn’t an open thread, sorry, please delete Ben, will repost in the off topic thread and tomorrows open thread if necessary. Thanks

  • Januz

    What is interesting about the Forbes numbers is it actually underestimates the worth of the Yankees & Red Sox to MLB. If you throw in merchandise sales, where the Yankees & Red Sox are 1 & 2 in sales (And everything is shared equally), and National TV, where a huge percentage of the contract (From the Network point of view), is paid with the expectation of a team like the Yankees, Red Sox, Phillies, etc being in the playoffs. Another factor is road attendance, where guess who are the top two draws in the sport? Ask Tampa and Baltimore about the importance of the Yankees & Red Sox coming to town. They are not drawing flies to their games without them.
    The concept is similar to college sports, where big schools (Notre Dame, Texas, Michigan, Ohio State, USC, Florida & Alabama), drive College Football ratings, and put fannies in the seats (Which is why the Vanderbilt’s, Baylor’s & Purdue’s of the world are glad to play them (Even though they will usually lose 42-14)). Here is another example: Those people who follow Penn State (Like Mike Axisa & myself), or Big Ten sports, know Penn State got a huge donation which allowed them to build a new hockey facility, and bring men’s & women’s hockey up to the varsity level. More importantly (For this discussion), this allowed the Big 10 to create a Conference for Hockey (Big 10 by-laws require six teams). Previously, there were five: Minnesota, Michigan State, Ohio State, Wisconsin, and (Most importantly) Michigan. Currently, smaller schools like CCHA members, Western Michigan, Lake Superior State & Bowling Green make a good chunk of their money when schools like Michigan come to town (Michigan, Michigan State & Ohio State are currently CCHA members). Now it will be far less often (Since 20 games of the Wolverines schedule will be Big 10 Conference games (Not to mention non-conference HOME games)). On the other hand, a start-up program like Penn State (Along with the other schools) will be getting $8m a year from the Big 10 Network (Which is far more than a Lake Superior State will be getting).
    These examples illustrate, that the economic power of certain teams, can make or break a sport. In this context, the Yankees & Red Sox are worth far more than even the Forbes numbers.

  • Skip

    Holy cow, the Yankees paid $119 million in revenue sharing last year.

  • Brian in NH

    You’d be surprised how self reliant smaller schools can be with their college hockey teams. If you have a good product and a passionate fan base the seats sell themselves, you don’t need to rely on Michigan coming to town. Tiny Merrimack College (North Andover, MA) has just over 2,000 students. Last weekend they played at the TD Bank Garden for the Hockey East playoffs against my UNH Wildcats (not a big school either but considered a heavyweight in college hockey). I was there and it was amazing how many fans showed up for Merrimack (who trounced UNH…sad panda). Schools like UNH, Maine, Boston University and Northeastern all likely lose money on most of their sports, but Hockey revenues pay for scholarships for women’s hockey and other sports (Hockey East also has an RSN deal with NESN to televise games so theres that added revenue). Yes adding Penn State and Big 10 hockey (along with the Big 10 network) will be huge, but don’t undersell the Merrimacks, Unions, Nebraska-Omahas, RITs and Western Michigans of the world. They pack their barns every weekend and while it helps having a Big 10 school come to town they certainly don’t need it they way you make it out.

    • Jimmy

      RPI can pack 5500 people in their field house per game when the team is playing well. College hockey is mainly under the radar nationally, but its a great level of play and does generate a lot of revenue for their schools. If you go to a game at St. Lawrence or Clarkson, very small Division I venues, the places are always packed.

  • Zack

    The Diamondbacks are cash strapped due to all the money they still owe former players.
    Ironic that the World Series that is still my worst memory as a Yankee fan is the one thing that has hampered the diamondbacks.

  • lordbyron

    After reading the Forbes article, it’s good to know that major league baseball is ‘merely an amusement and not a commercial enterprise.’

    • http://danielslifka.wordpress.com Jerome S.

      some billion-dollar amusement…

  • CountryClub

    If the Yanks profit truly is around 25 mil annually, I have no problem with them having a budget. For all the money they spend, they should be allowed to turn a decent profit.

    • Plank

      YES network has profits comparable to the Yankees. To be fair, that is equally credited to Mike Francesa and to Yankee broadcasts. The Yankees team probably has a profit of $25M, but the owners probably see profits of over $100M.

      • Plank

        I meant revenue comparable to the Yankees. Their expenses are lower and therefore their profits are much higher than the team itself.