M’s valuation drops
The new Forbes franchise value numbers (“Disputed by MLB since we started”) are out. Warning: annoying “welcome screen” ahead.
The M’s dropped 9% as years of losing and last year’s disastrous season caught up to them, along I presume with the expiration of the amazingly rich KOMO broadcast deal. Here’s the Mariners detail page which has some nice graphs but not a whole lot of useful information.
They do note “The team is having trouble selling season tickets and suites for 2009” (which we’ve talked about a little here). We saw last year there were just a huge number of no-shows, and it’s pretty clear the team took a huge hit when they decided not to renew.
The Yankees and Mets lead, which makes sense given that they have new stadiums to better exploit the richest media market in the country. But just behind them is the Rays, now valued at $320m after their turnaround. In relevant news, however, both teams are having trouble filling their super-premium-awesome seats, which makes it look on TV like people aren’t attending the games, which in turn makes me laugh. I’d feel bad, but I can’t. It’s bad enough Selig’s annoyed, but what are they going to do? Dropping the prices is going to severely piss off the people who already bought, but the teams aren’t going to want to give refunds to them.
What might end up the interesting story is the debt/value ratio. If you remember, a couple years ago Selig was trying to use this as a lever to drive down team spending. But it’s a lot harder to find financing compared to a few years ago (as Tom Hicks is discovering). If teams were carrying massive short-term debt expecting they’d be able to continually refinance, they could be in serious trouble in the next few years. It’s hard not to look at that chart of team debt and wonder how many of them could have issues.
Their comment on Griffey as fan draw is pretty good: “But what the team really needs is a baseball savvy GM to rebuild the franchise with young players.”
Note that the Rays come in 3rd (behind the Yankees and Mets) in percentage growth in value, not in absolute current value (in that category the top three are Yankees, Mets, and Red Sox; the Rays are 26th, and the M’s, despite their drop in value, rank 13th, just one spot lower than last year).
Certainly any teams that were relying on revolving short-term debt could be facing serious challenges as it comes due. (And not just the Rangers: here is a prediction that the Cardinals and Dodgers ownership could be in trouble, among others.) But something the accompanying article notes is that
So for the most highly-profitable teams, running a higher debt load is kind of a wash (provided the financing is already in place). It’s typical of the twisted economics of baseball that by taking on debt the Yankees can make the Royals less competitive.
Forbes also ranks Seattle as the nation’s #1 Most Miserable Sports City based on seasons of being teased by postseasons without championships.
Hey, cool, the Click to Edit feature is back. Good going Derek!
So, Tom Hicks is in default on his Rangers loan and possibly his Liverpool loan. What does this mean? It means that all of these numbers are pure fantasy. The money that disappeared out of the economy last year was just the kind of money that supported unsustainable values for sports teams. All those financial companies throwing tons of cash for naming rights? Not coming back. Watch the sponsorship on today’s Fox national broadcast, Yankees vs. Red Sox (great game, other than having to listen to Buck and McCarver, who can bore down a slugfest like nobody’s business). They’re second tier sponsors, plus you’re seeing a lot of promos for Foxsports.com (read: unsold advertising time).
So you have fewer people who have the financial wherewithal to buy clubs, you have less sponsorship, fewer luxury box and premium seat sales, fewer newspapers providing free (to the club) daily coverage.
I don’t think any team’s actual value, i.e., the amount an actual willing seller would pay for the club, increased this year, even the Yankees and Mets (whose difficulties selling their high-priced ticket inventory have been well-chronicled). Maybe the Rays increased because they weren’t worth much before, but they still play in a warehouse that’s indoors in one of the most gorgeous places on earth and they’re back in last place.
couldn’t they fill the seats for television by plunking needy kids or on-leave soldiers or other deserving folks into them?
Joser, the fact that the Yankees were using the terms of the Major League Agreement to pay their share of stadium costs on the backs of the other clubs was known before they signed the deal. It wasn’t talked about a lot, but it’s one of those loopholes that someone financially smart can drive a Mack Truck through. And the Yankees are pretty financially smart.
Yeah, that rule… man, what a giant F-U to the rest of baseball, huh?
Well, for one thing it means I’m very happy. I despise that guy, and not just for the stupidity of his A-Rod contract.
If you study what he and then Gov. Bush did to the former landholders on the periphery of what is now their stadium, you find something that would probably be illegal in any other country than Texas.
I would love to see that whole franchise disappear.
You’ll remember the Yankees voted against the revenue sharing system. Then they followed the old maxim, don’t get mad, get even.
I’d think a bigger F-U to the rest of baseball is Loria, who has now gotten more money in revenue sharing payments than he spent on the Marlins.
LINK
Loria’s certainly been well-rewarded for being Selig’s hooded executioner.
Well, the market for MLB teams is illiquid enough that any valuation is pretty speculative until a team changes hands. But a couple are on the verge of doing so, and from that you can make a relative valuation of the rest. And as imaginary as some of it might be, the fact remains that sports teams are the ultimate toy for old rich guys, more prestigious than big yachts or private jets, more fun than luxury homes and exotic cars, rarer than anything except Rembrandts and van Goghs. And there’s always another old rich guy wanting to announce his ascension into the ultimate dark-wood-and-cigar-smoke boys club. So even in a down economy, the ultimate examples of conspicuous consumption hold their value.
Yes, I was aware of that. And in fact it was widely discussed — at least in certain circles and places, like bizofbaseball.com — when the Yankees were still trying to put the deal together. It’s still worth pointing out, since it will have a significant impact on the competitive landscape for years going forward.
As for Loria, well, my views on him are widely known. Not only does he profit by receiving more in payments than he spends in payroll while claiming penury (and fires a “Manager of the Year” laureates who somehow created a winning team in spite of it), Loria also was “unable” to arrange a new stadium agreement for the first five years after he took over the team in 2002. Then, magically, in the sixth year a stadium deal comes together. Surely it’s just a coincidence that the terms of his loan from MLB forgave him $15M outright and the interest on the remainder if he was unable to get a stadium deal in five years?
Well-said.