Baseball Team Valuations

N

nerdattax

New member
Joined
Jun 18, 2026
Messages
0
Reaction score
0
http://www.forbes.com/lists/2008/33/biz_baseball08_The-Business-Of-Baseball_Value.html

So what sort of absolute valuation would you use here? Clearly they aren't discounting future operating income.
 
CFA_Halifax Wrote:
-------------------------------------------------------
> The Nationals look a bit high, no?


I honestly thought the Nationals would be close to the top. They've got a brand new stadium paid for mostly by the government, they've got a huge fanbase. Just looking around the DC area, they've sold an obscene amount of merchandise. And they've got the makings of an elite farm system. In 10 years, the Nationals will be pushing the value of the Red Sox and Mets, no doubt. Too bad it's a private entity otherwise I'd be buying as much stock as possible. But the best way to make a bet on the Nationals is to buy up surrounding real estate in the current less-than-desirable neighborhood the new stadium was built in.
 
nerdattax Wrote:
-------------------------------------------------------
> http://www.forbes.com/lists/2008/33/biz_baseball08
> _The-Business-Of-Baseball_Value.html
>
> So what sort of absolute valuation would you use
> here? Clearly they aren't discounting future
> operating income.


Yeah, I'd actually like to know the method of valuing these teams, especially the ones that ran significant operating losses like the Yankees and Red Sox and how one could infer an increase in value over last year in spite of the losses.
 
Baseball teams tend to sell for between 2-3 times revenue, and that appears to be the rough methodology they're using. Adjustments can be made for things like size of fan base, stadium deals, owning your own TV rights (Yanks, among others), and you can throw a premium in there for ego buyers (think pending sale of the Cubs).

I don't believe those operating income numbers for one second. Either Forbes is doing a terrible job estimating, or those numbers are some sort of tax numbers they've obtained. Baseball teams are allowed to write off a lot of expenses you wouldn't think they could because of funky accounting rules related to their anti-trust exemption.

Washington teams always seem to get a premium, not sure why. The Skins are probably the most valuable team in sports, save for maybe a few of the top European soccer teams.
 
If you read the article that accompanies the table that nerdattax linked to, it explains that the operating income figures do not include the TV networks owned by teams. The Yankees (YES network, 100% owned) and Red Sox (NESN, 80% owned) generate huge amounts of income from these businesses. They can run the "baseball team" aspect at a loss because they are able to more than make up for it with TV.

Note that the Mets are listed as very profitable. They do not own SNY, which broadcasts their games, and as a result the licensing revenue and income is probably included in the Forbes figures, although the article is ambiguous about this.
 
I guess that begs the questions of why more teams don't do this. Rogers broadcasts alot of Jays games, though not all of them.
 
More teams don't do it because they aren't as popular and it takes some capital to start a TV network. Rogers is sort of a different animal in that they are a broadcasting company that moved into baseball ownership, rather than the other way around. If the Royals (no disrespect, KC fans) started a TV network it would undoubtedly lose money. Better to license to Fox Sports and generate a small profit. As for the more popular teams like the Angels, Nationals, Phillies, Giants, etc. I am not sure why they don't give it a shot.
 
The Twins created Victory Sports One back in the fall of 2003 for this purpose. They spent the whole offseason trying to negotiate with TimeWarner, DirecTV, Dish Network to air the 2004 season. All the major cable and satellite companies balked at paying another $2-3 per user for the channel. As a result, the upper midwest didn't see a Twins game on TV for the first two months of the season. Fans were livid. It didn't help that the owner was already regarded as the cheapest in MLB. In late spring or early summer the network shut down and games returned to FSN North. It ended up costing the Twins a ton in lost TV revenue and it cost the owner a ton to start a network only to shut it down 6 months later. Plus it was a PR disaster.

That's why the small and mid market teams don't do it. As for the larger markets, it would probably work out a lot better.
 
Twins tried a few years ago. No one would pickup the channel because they wanted YES type rates for it, but all they had were the Twins and MN high school sports. Also they had Twins demand for it, not Yankees demand for it. The NY metro area could have 2 more baseball teams, and each of the 4 teams would still have a larger fan base than the Twins.
 
kkent Wrote:
-------------------------------------------------------
> CFA_Halifax Wrote:
> --------------------------------------------------
> -----
> > The Nationals look a bit high, no?
>
>
> I honestly thought the Nationals would be close to
> the top. They've got a brand new stadium paid for
> mostly by the government, they've got a huge
> fanbase. Just looking around the DC area, they've
> sold an obscene amount of merchandise. And they've
> got the makings of an elite farm system. In 10
> years, the Nationals will be pushing the value of
> the Red Sox and Mets, no doubt. Too bad it's a
> private entity otherwise I'd be buying as much
> stock as possible. But the best way to make a bet
> on the Nationals is to buy up surrounding real
> estate in the current less-than-desirable
> neighborhood the new stadium was built in.



You forgot to account for the Belliard Discount. Any team that starts Ronnie Belliard (the fattest 2Bman ever) has to strade at a significant discount.
 
haha, yeah, well, our team is atrocious--absolutely repugnant--so I don't really care right now. I'm a fair-weather fan except for my alma mater.
 
A few tidbids:

-Baseball teams transact based on revenue multiples. The multiples are not derived as much from profitability as they are from lease terms, stadium economics, market demographics, sponsorship roll, and buyer/seller motivation. Numerous adjustments must be made. But if you do it well, you can come up with a reasonably tight range. Also, multiples are being skewed upwards by the value of MLBAM, which each team owns 1/30th of but aren't included in their revenue results.

-You don't necessarily have to pay to set up a regional sports network. Partner with a cable company and they'll pay you a significant signing bonus and give you an equity interest (along with your rights fees). But that's more for big-market teams. Teams in small markets are forced to accept rights fees only.

-Forbes' data is bad. Having seen the real data, their "best estimate" data is off by a large amount for some teams. Also, I'm unsure if they make any sort of adjustments for the structure of the transaction (asset vs. stock deal and the associated tax consequences of each).
 
You must log in or register to reply here.
Back
Top