January 17, 2005
Kingdom Cub
Byron Clarke is writing a nice Cubs Blog, TheCubdom.com. Today he has a nice set of charts showing the values of the major league clubs based on Forbes Magazine rankings over the last four seasons. The articles don't make it clear, but it appears that Forbes is not counting TV properties in the value of the clubs. The Red Sox owners paid around $700 million for the club, but Forbes values the franchise at $533 million. If anyone knows the answer to that question, let me know.
Also, if you look at the table from which Byron extracted the data, you see very high annualized rates of return for the clubs, many in double digits. Only the Indians have a real negative rate of return (although I have to wonder about the N/As). The Yankees have been a very good investment for George Steinbrenner. They were purchased for $20 million in 1973, of which George put up $500,000 of his own money. Now, they are worth over $800 million. My guess is that if you actually put them up for sale, they'd get close to $1 billion. All the revenue sharing in the world is not going to change the fact that the Yankees have $800 million in equity with which to play. That's why they can keep pushing payroll higher and afford to pay the luxury tax.
Even Bud Selig had over a 9% rate of return on his investment in the Brewers (9% is what you get long term in the stock market). The Forbes rate is based on a value of $174 million, and Bud and company are getting $223 million for the franchise. In general, a major league team (if you're willing to be in it for the long haul) is a pretty good investment.
Posted by David Pinto at
08:39 AM
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With regard to your question about the value of the
Red Sox, I saw one recent item that may relate.
Richard Sandomir's column, NYT, Jan. 6, 2005 (I
saved the article). End of the article: Tom Werner
said that although they own NESN, "the earnings...
do not flow to the team. I know people think we're
more robust because of the success of NESN, but
we're not." Elsewhere in Mr. Sandomir's article, are
facts that indicate that the Yankees don't really have $800M in equity. Someone else is a 40%* owner of YES. In the spring of 04, they took another
$225M loan to "help finance losses, provide working
capital, and consolidate debt." It is quite clear that
the Yankees don't have nearly the spending free-
dom that many assume. Too many use it as an easy excuse. Also, Sandomir says they're about to
privately finance a new stadium. Many of us re-
member hearing the news about a year ago that
George had fainted. I just mention that, because this whole thing is delicately perched atop one
man's vision, & could change in a second. He
has made & lost a lot of money; right now he is the
only owner who is and has been willing to take money out of his own pocket over an extended period of time just
to win. Would the group that owns the Mariners do
this? Never, and they've said so. Would Pohlad,
Moores, or Hicks do this? No. Are they able? Most
definitely. Could other owners take on partners,
as the Yankees have? Yes. Lastly, I think YES will
be a drain on the Yankee enterprise. *This figure
I got from Forbes.
Susan, don't forget that if the Yankees build a new stadium they become exempt from the luxury tax. That will save them a bit of cash to help build the stadium.
