What is the Value of Baseball Teams in 2019?

Presently, baseball is the most lucrative sport in America and has seen a constant escalation in the value of media. Teams now make a larger profit irrespective of their standings, which allows them to have the best of what they need to perform well.

In November 2018, Fox New signed a 7-year media deal for MLB beginning with 2022 season. The value is 50% more than what it is now in their current 8-year deal with baseball on an average right fee basis each year.

As per reports, the sports authorities will also get into profitable deals with Warner Media’s TBS and Walt Disney’s ESPN. The previous agreements of these two also end by 2021.

Although they deal with three networks, all of them will not double the value compared to previous agreements. However, even if the increase goes from an estimated amount of $1.55 billion to $2.2 billion, it will be huge.

MLB now adds streaming deals that weren’t seen earlier. For instance, at the beginning of this season, DAZN put up a live show every weeknight for their subscribers. The digital sports streaming platform, now features live look-ins onto the best action in MLB. They have a 3-year deal that amounts to $100 million per season and will offer on-demand MLB content along with live weekend rap shows for every DAZN subscriber.

P&L Statement

According to the P&L statement, 30 MLB teams generated a record of average operating income of $40 million during the 2018 season. These include earnings before taxes, interests, amortization, and depreciation. The amount was 38% more than the previous year. The season revenue of the previous year escalated to 4.8% to an average amount of $330 million per team. The player’s cost inclusive of benefits and bonuses was still $157 million.

The current bargaining agreement is about the change in competitive balance tax and international signing rules. This runs right from 2017 up to 2021 and is to be partly blamed on the slight drag of player’s spending. It also gives an emphasis on the analytics by teams. The teams are indeed showing that they can win without exceeding the tax threshold.

Profits of baseball

After winning the World Series last year, Boston Red Sox quite likely received the highest payroll of $12 million penalties for exceeding competitive balance tax threshold. Before them, it was the Los Angeles Dodgers to break the tax threshold that made it to the World Series in the previous season while cutting the payroll under the tax threshold.

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New York Yankees have won over 100 games and stands on the third position after Red Sox and Houston Astros. They have come under the tax section for the first time since 2002. The operating income for Dodgers was $95 million in the previous season and was highest in baseball. Such a value is a benefit to Dodgers as the owners are all set to sell small stakes of the team to limited partners. New investors plan to pay more since they believe that a dividend will more likely be higher than a capital call.

An average baseball team current is worth $1.78 billion – 8% more than what it was in the last year. Over the last 22 renditions of MLB valuations, an average team cost has gone up by an 11% compound rate of growth per annum. Similarly, the team values of both the NFL and NBA have gone up by 12% and 13% respectively.

The central revenue of MLB, which primarily includes national television money and shared equally, was $2.76 billion in 2018. On the other hand, the local revenue of ballpark and local television money was $7.29 billion. Thus, the pecking order of baseball is driven by sponsorships, local cable television deals, and tickets.

MLB Rankings

Over a period of time, the New York Yankees have been the most valued team and amount to $4.6 billion currently. Their local revenue in the previous year was $712 million. Not only was it the highest but also more than the combined value of the least six teams of Baltimore Orioles, Cincinnati Reds, Kansas City Royals, Oakland Athletics, Tampa Bay Rays, and Miami Marlins.

The Dodgers is valued at $3.3 billion, Boston Red Sox at $3.2 billion, Chicago Cubs at $3.1 billion, and San Francisco Giants at $3 billion. These four teams are all more than $3 million in value.

Note that the team values are the enterprise values which includes equity and net debt. It adds the economics of the ballpark but not the value of the real estate. Without clear information, it is not possible to include the equity value of regional sports networks acquired by the teams.

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The league’s ownership is in 100% in MLB Advanced Media, 15% in BamTech, and 67% in MLB Network. The values we added include the league’s investment portfolio and that is divided equally among all the 30 teams. These are the three assets constitute over a value of $400 million for every team.

The local heroes

Operating income and revenue, which doesn’t include taxes, interests, amortization, and depreciation, is measured by cash-in versus cash-out basis. It doesn’t work in an accrual accounting way and the change was seen in 2018 itself.

The value we added above includes the postseason scenario and includes a net of revenue sharing and stadium debt clearings. Revenues include distributed bonuses networks pay teams along with proceeds from non-MLB events at the ballpark. Each team received $50 million in 2018 as the stakes in BamTech was taken over by Walt Disney.

Final thoughts

Baseball will always be one of the most profit-making sport options in America. The cost of teams has significantly gone higher over the years and there is no way that it takes a reverse gear.

Media channels are also in the receiving end because more and more take interest in the game. The audience has a huge role to play and is not just limited to watching live matches by the field but also by streaming online content.

The value of the teams will be higher than ever by the 2022 season and must bring in better changes to add worth to every game. Let us wait and see how the role of media changes and what they bring to our platter.

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