The latest Forbes Valuations of MLB teams is out, and teams keep rising in value:
Upshot: The average baseball team is now worth $744 million, 23% more than a year ago and the largest increase since we began tracking MLB finances in 1998. During the 2012 season, revenue (net of stadium debt service) rose 7%, to an average of $227 million per team. Operating income (earnings before interest, taxes, depreciation and amortization) per team fell 9%, to $13.1 million, mainly due to higher player costs and stadium expenses.
That fall in operating income is fine. Owners of team would prefer to make their money through increased valuation, since they don’t need to pay taxes on that money, but they can tap the value through lines of credit. MLB should really send a thank you note to the inventor of the DVR.
In addition:
A hidden gem: baseball’s investment portfolio. After MLB sold the Washington Nationals–which the league had acquired in 2002 for $120 million–to the Lerner family for $450 million in 2006, the profits from the sale were parked in Baseball Endowment L.P. (BELP), of which each of the 29 teams that had owned the Expos had an equal share (those assets were subsequently transferred to a new BELP, which is owned equally by all 30 teams). MLB also rolled in a portion of baseball’s Central Fund, which distributes the revenue from the league’s equally-shared national television and radio, Internet, licensing, merchandising and international deals.
The gross amount of Central Fund revenue for each team in 2012 was $50 million, but the league kept $7.5 million (the money belongs to the teams and is booked as an “account receivable” on their balance sheet). Commissioner Bud Selig oversees the fund. BELP has invested in hedge funds and the league has earned double-digit returns on its investment portfolio. Each team now has Central Fund and BELP investments worth $40 million to $45 million combined.
But the Marlins had to sell off their team. 🙂 Cities should be reminded of this endowment the next time a team wants to build a stadium.
This is, of course, good news for fans. Baseball can afford to invest in infrastructure and development. That should mean we should continue to see the best talent from around the world playing in the major leagues.
The fall in operating income is strange. Players salarys are roughly 50% of gross income and players salaries are growing only 3% or so. How do they get a drop in operating income of 9%? Surely it can’t be stadium expenses. Can it?
Pft » Energy prices are high, and it takes a lot of energy to run a stadium, especially the ones under climate control. Feeding the team, traveling, staying at hotels all have gone up. I can see where that would take a huge chunk out of the budget.