Braves Print Money for Liberty Media

Generally speaking, exactly how much money baseball teams make on an annual basis isn’t public knowledge. We can take a look at the sale of MLB franchises and know that when they are sold, teams generally make 8% annually after accounting for inflation. Profits are more difficult to decipher because owners don’t want to disclose just how much money they make, though they are sometimes quick to trumpet an operating loss. The absence of many owners claiming losses is arguably deafening, but in addition to that silence, the publicly traded Braves report their revenues every year. Over the last two seasons, they have provided Liberty Media with nearly $150 million in profits.

Baseball ownership hasn’t traditionally been an avenue for massive yearly profits. In 2001, MLB self-reported unaudited numbers to Congress after MLB’s antitrust exemption was threatened. They had announced that two franchises might be contracted, and that drew the ire of the elected representatives in Washington. It’s fair to take these numbers with a grain of salt, but on average, teams lost around $5 million per year from 1996-2001. MLB did not have a great television contract during that time, but revenues have skyrocketed since then, with significantly better TV deals (both locally and nationally) along with increases in attendance and ticket prices.

Even so, when Liberty Media purchased the Braves in 2007, it wasn’t necessarily an expectation that the club would turn a profit every year, at least according to Liberty Media CEO Greg Maffei a year ago. It was that lack of profits that made many speculate that Liberty wouldn’t be holding on to the Braves for a long period of time, but they’ve had a change in philosophy, with huge profits affecting their previous strategy.

A year ago, the Braves reported $442 million in revenue, with $404 million of that baseball-related and $38 million from business development on the real estate surrounding the stadium. Expenses are not separated in the same way, but that totaled $348 million, giving the team $94 million in profits before writing off most of that in amortization and depreciation to avoid tax liability. That amount likely includes a $50 million payment for the MLB sale of BAMTech in 2018. Compared to Forbes’ numbers, which do not include the $50 million from BAMTech, they estimated the Braves’ revenues at $344 million, which is fairly close to the quarterly report numbers and a profit of $71 million, which would also be right in line with the team’s report assuming that business development expenses were fairly close to revenues. Forbes’ numbers do come with some skepticism given the closed-off nature of MLB teams’ books, but they come pretty close with the Braves.

The 2019 season was another banner year for the Braves on the field and off. As Liberty explained in their release:

For the full year 2019, baseball revenue grew primarily due to increased ballpark operations revenue driven by higher attendance as well as growth in local and national broadcast rights. Development revenue grew modestly in the fourth quarter primarily due to increased retail tenant rental income. For the full year 2019, development revenue was flat despite the absence of revenue from the residential portion of the Battery in the current year due to its sale on October 9, 2018.

Baseball revenue grew from $404 million to $438 million. The team drew 100,000 more fans in 2019 and played an extra home playoff game. The comment regarding an increase in local broadcast rights is an interesting one. I had previously indicated that the Braves had one of the worst local television deals in baseball. The club was able to renegotiate their contract in 2013, and those negotiations were more fruitful that I had imagined. Per an AJC article by Tim Tucker:

“It’s … 83 million dollars, rising to, like, 113 (million) in 2028,” Liberty Media CEO Greg Maffei said during a presentation at the Moffett Nathanson Media and Communications Summit in New York last month. He later clarified that the final year of the deal is 2027.

That figure is roughly double my previous estimates and gives the Braves considerably more money to work with than once thought. The club’s profits ended up at $54 million, similar to the 2018 figure without BAMTech money. The team was able to turn a good profit despite a significant $74 million increase in expenses. From the release:

Revenue growth was more than offset by growth in operating expenses due to higher player salaries, increased baseball operations costs related to the new spring training facility and higher player development costs, increased obligations under MLB’s revenue sharing plan and higher concession related costs due to increased attendance.

Construction on the Braves’ new spring training facility began in late 2017 with public financing covering roughly half the total cost and the club responsible for an estimated $50 million. Team payroll increased close to $20 million according to our Roster Resource pages once buyouts are included. The “increased obligations under MLB’s revenue sharing plan” is another interesting wrinkle. The Braves jumped from a revenue sharing recipient in 2018 to a team paying into revenue sharing in 2019, one of 16 teams to do so (with the Mariners somehow also making that jump last year). While there are ways to massage revenue-sharing numbers with stadium debt and interest payments, it’s fair to assume that the Braves’ revenue in 2018 at around $350 million without BAMTech money was fairly close to average for MLB teams.

The Braves have a brand new stadium that’s going to contribute to increased revenues and their television deal is better than once thought, but overall, this is a fairly average baseball team in terms of revenue and attendance and they made more than $50 million in profits with an average payroll. We can talk about issues that make the Braves different and unique from other franchises, but their similarities are tough to ignore. The business of baseball has undergone a drastic change over just the last half-decade, and how that business is analyzed must change as well. MLB payroll has been mostly stagnant over the past four seasons as revenues have risen. Moralizing the issue might not be imperative to all, but when it comes to player moves, salaries, and team payrolls, recognizing it is a must for accuracy and truth.

We hoped you liked reading Braves Print Money for Liberty Media by Craig Edwards!

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Craig Edwards can be found on twitter @craigjedwards.

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ballskwok
Member
Member
ballskwok

Is $50M in unspent profits really that significant? They had a payroll of $135M per the RosterResource numbers, and $144M per Spotrac (which had them at the 15th highest payroll). Had they spent all of that profit on MLB payroll, they still would have had only the 5th highest payroll in the league and been under the luxury tax threshold. This seems to support that they were spending more or less in line with revenue (assuming MLB teams will always try to operate in a way to generate some profit, especially a publicly traded one).

dl80
Member
dl80

It means they are going to have a ton of payroll flexibility next year, if they choose to use it.

Melancon, Shane Greene, Hamels, Markakis, and Ozuna all fall off the payroll, and none of them are likely to be missed much, other than maybe Ozuna. That’s $65m in savings, and even if they have to give arb raises to Swanson, Camargo, Newcomb, and Soroka, I think they will have a lot of money left to spend.

ballskwok
Member
Member
ballskwok

Yeah, they definitely will. That seems like a good thing as opposed to a bad thing though.

Sn0wman
Member
Sn0wman

Unfortunately they’ll give yet another extension to Markakis so Snirker can continue playing him every day over superior players.

Logos
Member
Logos

Man, Markakis whiners are here too? Geez.

Logos
Member
Logos

All of those guys you named have played baseball with the Atlanta Braves except Ozuna yet Ozuna is the only one that will be missed??

MikeS
Member
MikeS

You assume they have no other sources of revenue that aren’t counted in these calculations. That is likely wrong. One problem the player associations have in sports where salary caps are set as a percentage of all revenues is that it hard to define “all revenues.”

They have a vested interest in the public (not to mention MLBPA) not finding out just how much money the team generates through ancillary revenue streams. Imagine how the next CBA negotiations would go if MLBPA found out that each team was making $100M off of, I dunno, air rights over the stadiums paid by United or something.

ballskwok
Member
Member
ballskwok

I’m just going by what the article reports, and wouldn’t assume they have other unreported revenue sources unless there is some reason to assume that. The reason the Braves finances are significant is they are publicly traded and so that’s why we have figures for them. They reported revenues from development surrounding the park.

Rick444
Member
Rick444

Bravo, the only person that realized that, that was the important point. Public .

Shalesh
Member
Shalesh

BATRA is a public company, so their books are open to the public and Craig provides the link. Provide some evidence of these “ancillary revenue streams” — what and how much they are — so that you’ll have more than your repetitive insinuations.

Craig is here to feed your suspicions anyway with howlers like this: “before writing off most of that in amortization and depreciation to avoid tax liability.” BATRA put ~$625M into Truist Stadium and Battery Park (Fulton County put in ~$425M into Truist), so D&A expenses are as legit as payroll as they are in every modern country in the world. The Braves had a great year on the field, opened a new stadium, and BATRA enjoyed huge cash flows as a result. Those cash flows are going mostly to amortize the $625M they fronted.

Rallyk
Member
Rallyk

Minor correction: It’s Truist Park, which is in Cobb County – not Fulton.

tung_twista
Member
tung_twista

Yeah.
“before writing off most of that in amortization and depreciation to avoid tax liability”
This line is so bad.
I know what you are trying to do here and it is very cringey.

misterjohnny
Member
Member
misterjohnny

As a publicly traded company, Liberty Media have to show their books and revenues must follow GAAP. Unlikely they are gaming it for public relations or even CBA purposes. They don’t have other entities that can earn the revenue instead of them, so the Braves revenue is legit.

Chaise Kahlenbeck
Member
Chaise Kahlenbeck

This.

Plus the statement regarding the write off of depreciation/amortization doesn’t necessarily support the “they should have spent more because they profited”. First, GAAP depreciation does not equal tax depreciation, so that number could swing wildly depending on what the actual assets were and the book/tax difference for assets placed in service previously. Second, mapping profits to player spending isn’t ideal either; instead, you should compare cash flow to player payroll.

Themaven
Member
Themaven

Absolutely correct.
Mr. Edwards does like to play fast and loose with facts.

TKDC
Member
Member
TKDC

This comment is nonsense. Obviously it would be Delta.

Idle Hands
Member
Idle Hands

This is America, in this country people love to complain about how much money other people should be spending or shouldn’t be spending on something as long as it’s not theirs. it’s specifically mentioned in the Articles of Confederation, how it didn’t carry over to the constitution escapes me.

williamnyy
Member

For a growth business, a 12% operating margin wouldn’t be great, but for a sports team, it’s pretty good (as an aside, the $54mn figure is OIBDA, not net profit, or even operating profit, which was actually a $40 million loss). Also, expenses are not broken out, and they could include payments to other subsidiaries or an allocation of corporate expenses that might be too steep. So, the answer to your question is relative. If an owner is in it to make a profit, 12% might not be so great, but if they are trying to win and/or build brand equity, that’s probably a nice number to hit.

So, why would a big corporation like Liberty be interested in the Braves if their margins aren’t great? A few reasons. The first is the asset value promises an outsized return relative to earnings. The second is the operating losses accrued to Liberty via the Braves have value because of how they are generated. By recording losses due to non-cash expenses like D&A, Liberty can offset its corporate-wide profit. Basically, the Balance Sheet is used to lower the tax burden. Finally, sports teams have brand value that can be leveraged in other areas, such as the Battery Atlanta project.

ballskwok
Member
Member
ballskwok

Yeah, just assuming they actually had $54M left over after all expenses (which I realize you can’t assume), I’m not sure this report says anything alarming about the revenue split between players/teams. As a middle of the pack club in terms of payroll and revenue, this tells us that the high end revenue teams are probably pocketing a bunch (offset by revenue sharing though) and the lower revenue teams are probably struggling without revenue sharing. Aside from that, it seems like the middle market clubs being able to compete while staying in the black is a good thing for the sport.

williamnyy
Member

The Braves are more like a top-10 revenue team than a middle-10. Also worth noting they are a net payer in the revenue sharing scheme. What the Braves’ financials show is baseball is a stable industry with a very strong cash flow profile and brand equity that can be leveraged across various other ventures. That stands in contrast to the idea that owners are over-burdened with costs and suggests players could be getting a larger share of the pie, and that will likely be the undercurrent of the upcoming CBA negotiations.

ballskwok
Member
Member
ballskwok

Hmmm. I’m not seeing that conclusion following from what you just said above.

williamnyy
Member

I laid out several ways that the owner of a baseball team can be enriched even BEFORE factoring in their operating profit, which, at 12%, would be a very nice cherry on top. What about that makes you think teams do not have the capacity to spend more money? I guarantee they would be doing so if winning games was more closely aligned to their bottom line (the absence of which is a much larger issue).

dukewinslow
Member
dukewinslow

For an “ought” take (what people “ought” to expect teams to do) this seems like a good one. Though arguably, as a publicly traded corporation, Liberty Media is extracting excess value that privately managed groups are unlikely to access (arguably). Basically, they’re gonna be better at making money off the team than (just an example) the Dolans

sadtrombone
Member
sadtrombone

I think this is more or less the right take. I don’t think (most) teams are making huge sums of money, but it sure looks like there’s a bit more left on the table for players.

ballskwok
Member
Member
ballskwok

I would agree there is probably money being left on the table. I’m guessing a lot of that has to do with the top 5 revenue teams though (and it’s being exacerbated partly by the luxury tax), and less to do with a team like the Braves running a $54M profit. And it’s not clear to me that there’s anything egregious about a team or it’s ownership pocketing a profit in this range.

williamnyy
Member

Egregious is a strong term, but if MLB teams want to on the one hand claim they are a public trust when it comes time to lobby for tax free financing or defend their anti-trust exemption, but then on the other hand assert their right to pocket profits on top of all of the other benefits that accrue to them, fans have every right to question the hypocrisy.

dukewinslow
Member
dukewinslow

it does seem weird to me that the Braves are a middle of the road revenue team, and maybe there’s some value in thinking about why that is (pretty big local market, massive regional market where it was the only show in town for a long time), but feels like a talking chop post

ballskwok
Member
Member
ballskwok

I was wrong about that point, they were 9th in revenues on the Forbes list linked in the piece, though they only took in $130M more than the last place A’s, as opposed to how much less they took in than the Red Sox ($172M), Dodgers ($205M,) and Yankees ($324M). They appear to be further away from the very top of the league than the bottom.

dukewinslow
Member
dukewinslow

Formula 1 is at 44ish million (though there’s a number I have zero trust in given how spread out that is internatiinally). Sirius is at FOUR HUNDRED FIFTY FOUR IN PROFIT (as of q3, first thing that came up when I searched it). Ironically, the Braves report massive losses for Q3 (think about why that is for a second).

Braves are a write off to lower liability, I think. It’s better when they win! Raises the floor. But F1 is their risky holding, and SiriusXM is the cash cow.

https://ir.libertymedia.com/news-releases/news-release-details/liberty-media-corporation-reports-third-quarter-2019-financial

dl80
Member
dl80

Plus there is essentially a zero percent chance of failure. Worst case, the team might lose $10-20 million dollars in a year, but the team is never going to go bankrupt or cease to exist. And the value is almost guaranteed of going up.

thornt25
Member
thornt25

Atlanta may also have a particularly healthy profit margin because they made the playoffs while having a mid sized payroll. This is a team with a lot of young, controllable talent and team friendly extensions (Albies, Acuna). Is $54m in profit really that obscene (the author called it “money printing”) for a team in such a healthy state? I’d imagine many franchises lose money when they have a team that’s performing poorly with a mid sized payroll, so 12% profit might be a high water mark for teams below the top 10.