Archive for Business of Baseball

Forbes published their list of the 50 most valuable sports franchises in the world yesterday, with the Yankees coming in fourth at $2.5 billion. They trail only European soccer clubs Real Madrid ($3.44 billion), Barcelona ($3.2 billion), and Manchester United ($2.81 billion). The Dallas Cowboys are fifth at $2.3 billion and the Dodgers are sixth at $2 billion.

“The Yankees are the most valuable non-soccer team in the world with a worth of $2.5 billion,” writes Kurt Badenhausen. “TV is driving the value of the Bronx Bombers. Fox exercised its option to increase its ownership of the Yankees’ regional sports network, YES, to 80% earlier this year (Yankees Global Enterprises, which is majority owned by the Steinbrenner family retains 20%). As part of the deal, the programming rights fee for the Yankees starts at $105 million (including the amortized value of a $400 million upfront payment) and will hit $350 million a year by 2042.”

The Yankees were ranked as the most valuable franchise in baseball by Forbes for the 17th consecutive year back in March. Forbes estimated the team’s value at $2.3 billion in 2013, $1.85 billion in 2012, $1.7 billion in 2011, and $1.6 billion in 2010, so it’s going nowhere but up despite the mediocrity on the field for the last season and a half. I can’t imagine what the asking price would be if the Steinbrenners ever decided to sell the Yankees. Maybe $4 billion?

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The Yankees have extended their player development contract with the Triple-A Scranton franchise through 2018, the team announced. The four-year extension is the maximum allowed. “We are excited. When we brought the franchise affiliation here in 2007, we told everyone we were here to stay and we meant business. We couldn’t be in a better place,” said Brian Cashman in a statement.

After a lengthy affiliation with the Columbus Clippers, the Yankees moved their Triple-A franchise to Scranton for the 2007 season and they’ve been there ever since. It’s a win-win relationship. The Bombers get to keep their extra players 90 minutes away and the Scranton franchise gets the marketing and business perks of being associated with the Yankees. Definite no-brainer and the extension was just a formality. There were no rumblings of moving the Triple-A squad elsewhere.

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The Yankees and White Sox continue their four-game series later tonight, so here are some links to help pass the time before the long holiday weekend.

Ichiro Wants To Pitch
Ichiro Suzuki has adapted to his new role as an extra outfielder very well so far, and he told David Waldstein that if the opportunity arises, he’d like to get back up on a mound at some point before his career ends. He pitched in the 1996 All-Star Game in Japan (video above) and would like to give it another shot. “Fastball and slider, but like all Japanese pitchers, the splitter is my bread and butter,” he joked. “If they need 100 pitches, I would have to get stretched out.” Obligatory “he couldn’t be worse than Alfredo Aceves!” joke goes here. Needless to say, Ichiro pitching needs to happen before the end of the season.

Reinsdorf Unhappy With Search For New Commissioner
Bud Selig is retiring after the end of the season, yet the search for his replacement has been unusual, according to Michael Schmidt. No search firm has been hired, a list of internal and external candidates has not been put together, and most meetings and interviews have happened in secret. The belief is Selig wants MLB COO Rob Manfred to take over, and ChiSox owner Jerry Reinsdorf is not happy because he feels the owners should conduct the search for the next commissioner since they have the most at stake. Reinsdorf has long been a Selig supporter but he’s also been very outspoken about labor relations and making sure things are fair for both sides. He’s right when he says Selig should have little input into the next commissioner because Selig has little to lose.

The Value Of Draft Picks
Over at Hardball Times, Matthew Murphy put together an in-depth analysis looking at the value of draft picks in today’s age, as teams get better at scouting and developing players (part one, part two, part three). There is some pretty gory math in the first two parts, but the third is a nice and neat recap. Long story short: the first five picks of the draft are insanely valuable (duh), but after that there’s very little difference in expected production between picks 6-10 and, say, 20-30. (The Yankees pick 55th overall this year and the expected value of that pick is about $4.5M in 2014 dollars.) There are a lot of teams who would benefit on the field from forfeiting a pick in the back half of the first round to sign a qualified free agent that aren’t doing it. Draft picks are both super important and overvalued.

Unofficial 2014 MLB Players Census
The folks at Best Tickets put together an unofficial census of 2014 MLB players. It includes things like salary information, number of years in the league, player size, countries and states of origin, race data, education levels, age distributions, all sorts of fun stuff. Check it out. I was (very) surprised to see which state produced the most big leaguers per capita.

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Forbes released their annual franchise valuations yesterday, and for the 17th straight year, the Yankees are the most valuable franchise in the game. At $2.5 billion, they are more valuable than any other franchise in American sports (Dallas Cowboys are second at $2.3 billion) and $500M more valuable than the Dodgers, who rank second among MLB clubs. The Red Sox are third at $1.5 billion while the Rays bring up the rear at $485M.

“Including the annual average of the $400 million upfront payment the team got for agreeing to sell  its controlling stake in the YES Network, to News Corp (now 21st Century Fox), the team raked in over $100 million in cable money last season, by far the most in baseball,” said the write-up. “Even after kicking in $95 million towards the league’s 34% local revenue sharing pool and their $64 million PILOT bond payments for Yankee Stadium last season, the Bronx Bombers led the league in revenue ($461 million).”

The Yankees lost nearly $60M in ticket sales last year and their revenue dropped by $10M overall, so the franchise’s value did not increase as much as it could have with a strong season. Forbes estimated the team’s value at $2.3 billion in 2013, $1.85 billion in 2012, $1.7 billion in 2011, and $1.6 billion in 2010. Bloomberg estimated the franchise’s value at $3.3 billion back in October, for what it’s worth.

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Via Brian Costa: The Yankees lost approximately $58M in ticket revenue this past season according to publicly available financial documents the team must file with the city as part of the bonds agreement for the construction of the new Yankee Stadium. Ticket sales and suite licenses totaled $295M in 2013, down from $353M in 2012, $377M in 2011, and $384M in 2010. The team attributes the revenue drop solely to missing the postseason.

“What this clearly shows is that the Yankees’ whole financial equation is built around winning. If you take that away, they become mere mortals from a financial standpoint,” said Vince Gennaro, president of SABR and consultant to MLB teams. That $58M, which doesn’t include lost concession revenue, is greater than what the club would reportedly save by getting under the luxury tax threshold in a given year. That might explain why the team has suddenly reversed course and gone on a spending spree after talking about getting under the threshold (and making moves to make it possible) for the last two years.

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Via Susan Latham Carr: The Yankees have reached an agreement to relocate their High-A Florida State League affiliate out of Tampa and up the road a hundred miles or so to Ocala. We first heard the team was in talks with the city of Ocala last December, after plans with Orlando fell through. “I think it makes a lot of sense. It’s a good quality-of-life-type venue,” said Ocala mayor Kent Guinn.

The agreement is in place but the deal is not yet final. Staff will present the agreement to the Ocala City Council tomorrow, where they will also discuss plans for a new $45 million facility. The new building will be used for more than just baseball and will be paid for by a half-cent sales tax increase over the next ten years. The tax hike and several other things must be voted on before the deal is finalized. Preliminary polls show the public is in favor of the deal. If everything goes smoothly, the relocation could be complete in time for Opening Day 2016.

Josh Leventhal says the relocation of the High-A squad will not change anything regarding Spring Training. The Yankees still have 12 years remaining on a 30-year contract that locks them into Steinbrenner Field in Tampa for Spring Training. The Yankees are looking to move their High-A affiliate out of Tampa to improve the market. They currently have to compete with the Rays, the NHL’s Tampa Bay Lightning, and various collegiate sports. High-A Tampa averaged 1,827 fans per game this past season, fourth highest in the historically attendance-starved FSL.

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Via Peter Schwartz: The Yankees are currently valued at an estimated $3.28 billion, the highest of any franchise. The Dodgers are a (very) distant second at $2.1 billion. “The Yankees are as successful as you can possibly be,” said Lee Berke, a sports media consultant. “It’s the culmination of a perfect storm coming together: the nation’s number one market, professional sports’ most successful team and tremendously savvy and aggressive ownership.”

That $3.28 billion is broken down into the team itself ($2.09 billion), stakes in the YES Network ($932M) and MLB Advanced Media ($110M, same for every team), and related businesses ($148M) like Legends Hospitality. The team’s net loss in revenue sharing was $97M last year. The full breakdown, including revenue sources and whatnot, is available in this fancy infographic. The value of the Yankees has nothing but go up in recent years, from $1.6 billion in April 2010 to $1.7 billion in March 2011 to $1.8 billion in March 2012 to $2.3 billion in March 2013. What, you didn’t think the Yankees were losing money, did you?

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Via Darren Rovell: Robinson Cano has signed a multi-year deal with Pepsi to be the face of their national MLB marketing campaign. Pepsi been the league’s official soft drink sponsor for nearly two decades now. Cano will be a featured in an advertisement at some point during tonight’s All-Star Game.

“He represents the kind of athlete who is in the moment, has a great personality and connects with consumers,” said Heidi Sandreuter, Pepsi’s senior director of sports marketing. The deal is Cano’s first endorsement contract since hooking on with CAA Sports and Jay-Z’s Roc Nation back in April. In a statement released at that time, Robbie basically said he was looking for better off-the-field opportunities. Landing multiple years with Pepsi is a great first step, I’d say.

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Forbes released its annual MLB valuations yesterday, and for the umpteenth consecutive year (actually 16th), the Yankees rank as the sport’s most valuable franchise. Their $2.3 billion valuation is a) higher than any other club in U.S. sports, b) $700M higher than the second most valuable club (Dodgers), and c) more than double the fourth most valuable club (Cubs). It’s also up considerably from 2012 ($1.85B), especially with regards to 2011 ($1.6B) and 2010 ($1.5B). You can thank the YES Network and the new Yankee Stadium for that.

“The Yankees sold some of their interest in the YES Network as part of Fox’s purchase of 49% of the regional sport network in late 2012 and as part of the deal the team’s rights fee from YES will increase from $85 million this season to $350 million in 2042,” wrote the publication, meaning the team’s value is going nowhere but up. Forbes estimates the Yankees’ revenue at $471M and their operating income at just $1.4M, but Yankee Global Enterprises is far more profitable due to its other holdings. The team technically operated at a loss for about a decade before the new Stadium opened.

The Athletics, up 46% from 2012, saw their value increase more than any other club in the last year. At $450M, the Rays are the least valuable franchise in the sport while the Cubs ($32.1M) and Angels ($-12.9M) had the largest and smallest operating incomes, respectively. Revenue sharing throws a big wrench into those calculations, however. Baseball will be getting a big financial boost in 2014 when its new agreements with FOX and TBS kick in, doubling the money each team receives from national television broadcast.

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Via Steven Marcus: The Yankees will opt-out of MLB’s secondary ticket market agreement with StubHub and instead sign a new deal with TicketMaster. “Less fees, more fan-friendly,” said a source to Marcus about the arrangement, which is only partially true. TicketMaster will be more fan-friendly to season ticket owners because they’ll be able to get face value for their tickets through TicketExchange.

The Yankees haven’t announced anything yet, but a StubHub spokesperson confirmed they have opted out of the deal along with the Angels and Cubs. MLB’s new five-year agreement with StubHub was announced today. Team executives have openly complained about StubHub recently, claiming it artificially deflated the value of tickets and is unfair to season ticket holders. Team president Randy Levine even blamed the empty Stadium in the postseason on StubHub, which was pretty silly. I haven’t seen any firm details on the Ticketmaster deal yet so I don’t know how that will impact the secondary market, but info will trickle out eventually.

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