The Disconnect Between Franchise Values and Player Salaries
Yesterday, the Miami Herald reported that Jeffrey Loria has an agreement in place to sell the Marlins for $1.6 billion, a more than 10 fold increase in franchise value from the $158 million he paid to buy the team in 2002. If the team actually sells for that $1.6 billion total — and, according to follow-up reports, the final sales price hasn’t been agreed to, and there’s a long way to go between handshake agreement and the actual transfer of the franchise — Loria will have made an 18% compounded annual return on his initial investment.
That’s the kind of annual return promoted by scam artists and ponzi schemers, luring in investors with promises of huge returns that never materialize. An 18% annual return over 15 years that actually materializes is a huge business success, and Loria’s cash-out will serve to make him even more extraordinarily wealthy.
And as Ken Rosenthal wrote last night, these franchise valuations are not going to go unnoticed by the player’s association.
Oh, it’s good to be an owner.
Granted, it’s also good to be a player, but the most recent collective-bargaining agreement, with its modest increases in luxury-tax thresholds, already seems to be stifling salary growth.
The sale of the Marlins for $1.6 billion, or even a lesser but significant sum, would only reinforce to the players that they should be getting more, setting the stage for labor friction in the future.
If you’re one of the free agents that got roundly rejected by the market this winter, and then you see Loria walking away with a $1.5 billion profit on the sale of the team, it’s certainly easy to connect the dots and say that there’s something wrong here. But as easy as it is to hate Jeffrey Loria for the way he’s run the Marlins since buying the team, it’s also important to remember that people buying into MLB franchises right now are purchasing more than just a collection of baseball players.
