Bloomberg News analysts spent nine months pouring over data prior to publishing their findings on October 23. The conclusion: The average MLB team is worth $1 billion, more than 35% higher than previous estimates. Ten teams are worth more than $1 billion each. Those numbers pale in comparison to NFL team values, where all 32 teams are worth at least $1 billion. But the fact that so many MLB teams are worth as much as an NFL team came as surprising news to many analysts.
Not surprisingly, the Yankees topped the list at $3.3 billion. The Yankees are the sport’s most successful and most recognizable franchise, play in the largest market, had the highest team revenue in 2012 at $570 million, the fourth highest attendance in 2013 at 3.3 million, the highest average ticket price and own a significant portion of their regional sports network (RSN). The Dodgers rank second at $2.1 billion and are largely responsible for the higher overall valuations in MLB.
Last year when the Dodgers sold for $2.15 billion, Forbes had pegged their value at $1.4 billion. But the team was purchased through bankruptcy court, essentially a free market where the highest bid prevailed. Contrast that with the rigged sale of the Montreal Expos franchise in 2006. The team, which had relocated to Washington D.C in 2005, was owned by MLB at the time and Commissioner Bud Selig wanted the Lerner Family to own the franchise. MLB sold the team for $450 million, turning down several higher bids in the process. Bloomberg estimates the team is currently worth $850 million, almost double its purchase price a mere seven years earlier.
In addition to the Yankees and Dodgers, two other teams topped the $2 billion mark, the Red Sox at $2.06 billion and the Mets at $2.05 billion. Like the Yankees and Dodgers, both teams hold significant interests in their own RSNs. The Tampa Bay Rays, located in arguably the worst market in MLB and playing in the worst facility, finished 30th on the list with an estimated value of $530 million. Despite their recent on-field success, the Rays had the lowest attendance in the league last year.
RSNs played a significant role in determining franchise values. One reason for the Dodgers’ record price was the expectation of creating an RSN in the LA market. The average value of a team’s stake in a RSN was approximately $360 million according to Bloomberg. Of the ten teams valued at one billion or higher, only the Philadelphia Phillies do not own an interest in a RSN. However, their TV contract with Comcast ends in 2015 and the parties are in negotiations for a deal that is expected to pay the team at least quadruple the $35 million per year it currently receives.
In fairness to Forbes, Bloomberg included information that the former did not, such as a team’s interest in a RSN and each team’s interest in MLB Advanced Media (MLBAM), the league’s internet and mobile arm. Bloomberg calculated the value of MLBAM, which generates $600 million per year in revenue, at $3.3 billion, or $110 million per team. The subsidiary was formed in 2000 with contributions of less than $2.5 million per team from each of the 30 MLB teams.
Not every team was pleased with the Bloomberg report. San Francisco Giants’ President and CEO Larry Baer was disappointed with his team’s estimated valuation of $887 million and suggested a value in excess of $1.2 billion. Bob Rose, public relations director for the Oakland Athletics, was likewise critical of Bloomberg’s report, which valued his franchise at $590 million. He claimed that if the team was sold, it would fetch at least $700 million.
How reliable are the Bloomberg figures? That depends. The sale of sports franchises are unique in that, unlike the sale of most businesses, market value isn’t necessarily applicable. All transactions must be approved by team owners. That means the highest bidder is sometimes left on the sidelines. What we do know, thanks to Bloomberg, is MLB franchises are worth considerably more today than was thought to be the case a year ago.
Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He is a Professor in the Sport Management Department at SUNY Cortland and is a contributing author to the Business of Sports Network and maintains the blog: http://sportsbeyondthelines.com Jordan can be reached at email@example.com.