The Braves Made Some Money in 2021
As the lockout wears on, team financials have repeatedly been called into question. Are teams making money? What about if you ignore franchise value? Commissioner Rob Manfred recently claimed that owning a baseball team has been a worse investment than investing in the stock market, a claim that was quickly challenged by outside observers. Last week, Liberty Media, the principle owner of the Atlanta Braves, announced their 2021 financial results, shedding some light on the financial state of the league.
The Braves enjoyed a banner year in 2021. Per their filing, they turned a profit of $104 million. That’s full-year OIBDA, or operating income before depreciation and amortization. That brings their four-year operating income, including the pandemic-marred 2020 season, to $193 million.
OIBDA sounds like a great big pile of financial jargon, and it is, so let’s talk about what all of that means. Operating income refers to the money that the team has left over after it takes in all its revenue and pays all of its costs. More specifically, it’s revenue minus the cost of goods sold minus other operating expenses. If a team sells 100 hot dogs for a net $800, that’s $800 in revenue. If they paid $20 to buy those hot dogs in bulk, that’s $20 in cost of goods sold. If they pay the vendor who sells those hot dogs $15, that’s $15 in other operating expenses. Voila – $765 in operating income.
The Braves haven’t provided line-by-line explanations of their operating income, but the statement provides a rough guide. The team made revenues of $526 million in so-called “baseball revenue” in 2021. Per their release, that comprises ballpark operations (tickets, concessions, retail, and suites), local broadcast rights, and shared MLB revenue from broadcast rights and licensing. They also made $42 million in “development revenue,” mostly rental income from The Battery, the mixed-use retail area surrounding the ballpark that the team owns.
To make that money, the team spent $457 million dollars, split between $377 million in “other operating expenses” and $80 million in “selling, general, and administrative expenses.” The exact split there doesn’t matter; that’s just the sum cost the Braves paid between salary and purchases. It also historically includes revenue sharing payments, but their exact status is in flux this year, and I won’t claim to know whether the Braves have debited future payments against their income or chosen not to count any revenue sharing costs, as they’ve only provided a top-line view of their financials.
The “BDA” part of OIBDA covers depreciation and amortization. These aren’t real monetary outlays; they’re accounting-based estimates of how much value a company’s assets lost over the course of the year. If you buy a factory for $100 million dollars and plan to use it for 20 years before it becomes worthless, the tax code (and generally accepted accounting practices) allow you to spread that decline in value out over those 20 years via depreciation, $5 million per year.
The Braves haven’t broken their depreciation and amortization costs out, but they amount to $72 million in total. Based on their descriptions of depreciation and amortization over time, the likely line items are the stadium (the Braves put in $201 million of the $622 million budget to build Truist Park), depreciation related to The Battery, and costs related to international player contracts. Additionally, the roster depreciation allowance allows teams to depreciate the purchase price of the franchise for tax purposes – so for baseball teams, “depreciation and amortization” could mean anything at all.
This is a ton of financial talk, but the upshot is simple: the Braves made a lot of money operating the team in 2021. That makes sense – they made extra money due to hosting postseason games – but it also says a lot about the health of an average major league franchise in 2021. The Braves recorded the second-highest average attendance in 2021, largely due to relatively lax COVID restrictions. Combine that with roughly average ticket prices, and we can infer that the Braves made roughly $50 million more than the average team in in-stadium revenue last year, with perhaps $10 million more due to playoff games.
Meanwhile, the Braves did a little worse on their local TV deal than average, at least according to Liberty Media CEO Greg Maffei. “It’s one of the lowest fees out there,” he told the Atlanta Journal Constitution in 2019, referring to the deal that will continue until 2027. “We knew that when we bought (the Braves) from Time Warner. It was one of the longest and lowest.”
You don’t have to take his words as gospel, particularly given that the contract reportedly exceeds $80 million per year. Even if you assume the deal is close to the average for the league as a whole, the Braves certainly made more money in revenues in 2021 than the average team, due to both their high attendance and their postseason run.
On the other hand, the Braves ran a payroll roughly $20 million higher than the overall league average. A back-of-the-envelope calculation would say they made roughly $40 million more than the average team in 2021 – though of course we don’t have the books for other teams to check that math against, and we don’t know what the team spent on non-major-league baseball operations relative to the rest of the league.
As you might expect, the team lost money in 2020. That year, they were likely roughly average – they ran a lower payroll, and no team made money on attendance. In 2018 and ’19, the Braves made money at a roughly average rate as well – they didn’t enjoy the same COVID-restriction-based attendance advantage and also didn’t win the World Series. If you’re looking for a rough idea of how teams fared from 2018 through ’21, using the Braves’ numbers and lopping off $40 million from their results last season isn’t a bad start. That would tell you that the average team has made roughly $145 million in operating income over the past four years, even including a disastrous 2020.
Operating income doesn’t include exceptional items like the sale of BAMTech in 2017. This estimate might also overstate average MLB profits because the Braves own the mixed-use development around their stadium and profit from that. But as a ballpark estimate, I’m happy with saying that Atlanta looks something like the median team, perhaps skewing slightly more profitable, if I had to pick a direction.
This year, the Braves netted a bit of cash; they made $62 million dollars in cash flow on “operating activities.” They didn’t offset it with other purchases; they spent $25 million on “investing activities” and made $22 million in cash on “financing activities” — in plain English, by issuing debt. In 2019, the most recent “normal” season, the team netted $75 million in cash flow from operating activities. They spent $107 million on investing activities, but took in $54 million in cash from financing activities.
What does this mean? For one thing, teams can be technically correct in saying they didn’t make any money, so long as they invest as much as they make. I previously covered the mechanics of profiting without cash inflows, but broadly speaking, plowing profits into capital improvements or new ventures is a good way to increase franchise value without a cash profit. It’s a standard practice, and no doubt most teams in baseball operate similarly. More importantly, though, the Braves were able to scale back their cash expenditures and turn cash-flow positive in a single year. That’s impressive resilience considering the previous year’s losses.
Looking at OIBDA, using the Braves’ framing of it, is a reasonable way to consider team revenues. Depreciation and amortization are unreliable as measures of actual profit, particularly for teams with publicly funded stadiums or who were sold in the last 15 years. They’re unreliable even outside of professional sports teams, but particularly so given the byzantine rules that even rule-following teams adhere to and the chance for semi-legal nonsense. If you want to know how teams are doing, follow the OIBDA. Sure, it’s not as catchy as “follow the money,” but it has the benefit of being more correct.
How is baseball doing financially? Right now, not great – the sport is in a lockout, so there’s no money coming in. When the game returns to the field, however, I expect that teams will continue to do quite well for themselves. Perhaps they won’t all be as profitable as the Braves, but there’s plenty of room to do worse than Atlanta financially and still excel. With increased stadium capacity across the board next year and the potential for new gaming revenue, the future looks bright.
Ben is a writer at FanGraphs. He can be found on Bluesky @benclemens.
How does that OIBDA compare to what Liberty Media might make in other investments? Does this shed light on the statement Manfred made a while back as true, false, or somewhere in the middle?
Well, Liberty Media bought the Braves for $400 million in 2007 and were estimated to be worth $1.875 billion in 2021 by Forbes, an annualized return of 10.85% (assuming no cash in or out). If Liberty Media had bought the stock market (S&P 500) in January 2007, reinvested all dividends, and then revalued its investment in December 2021, it would have earned 10.48% per annum. That sounds pretty close, but because of compounding it’s about $90 million over 15 years, and also doesn’t account for whether or not the team owners pulled any cash out of the business over that period (which is what earning $185 million in OIBDA over 4 years would suggest).
Also, that Roster Depreciation Allowance is an utter farce. This is exactly the kind of thing allows billionaires to avoid paying taxes and instead shifts the burden on to people earning salary and wages.
Can you clarify what you mean when you say “shifts the burden on to people earning salaries and wages”?
The big problem with this analysis is that it relies on Forbes despite so much evidence that suggests you should not.
Re: rates of return. I agree with your point that, based on those numbers, the growth in the value of the Braves outpaced the S&P 500 over that time frame, even if I have issues with some of the Forbes valuation methodology. However, I would think the Braves are in the upper-third of the league in terms of profitability. I continue to believe that part of what’s “lost” in the current argument is that the league is thinking about their mean team and the two Central Divisions while critics think of the coastal teams and champions.
That’s not to say that owning a baseball team is a “bad investment” as Manfred said. He’s way off base. But I do think it’s an accurate statement that the average team well under-performed the stock market on a pure IRR calculation.
As far as the Roster Depreciation Allowance… it’s not popular, I get it. But the theory is worth considering. If I buy a factory, I get to depreciate it. If I buy certain intangible assets, I may get to depreciate it. The RDA says that a *portion* of the price that a buyer pays for the team is allocated to the inherent value of the underlying contracts at the purchase date. Yes, the owner gets to deduct the actual salary costs as salaries are paid. But the RDA allows the owner to recover the cost of their original investment over time, as a tax deduction, similar to what is available in other businesses.
But the key that doesn’t get mentioned…. if the owner then re-sells the team during their lifetime, they recoup the RDA as income because the deduction lowers their cost basis in the team. Unless you die holding the team and get the other-hot-button “step up in basis at death,” the RDA is a *timing* difference for tax purposes — more deductions while you own, more income when you sell.
You would pay tax when you sell them team, so you would be paying tax on the recouped RDA income as well, right?
Correct. The “recapture” of depreciation and amortization deductions at sale generates tax, unless the business has declined in value.
For example, if I buy a team for $1Billion, and then take $100 million of cost recovery deductions (depreciation and amortization), my adjusted cost basis is $900 million. If I sell the team for $950 million, I have $50M of gain ($950M proceeds minus $900M of adjusted basis), not $50M of loss ($1M original cost minus $950M proceeds).
(We’ll ignore more advanced tax topics like inside and outside basis.)
The only exception to this rule is if the owner is an individual and dies. All property receives a “step up in basis” to FMV at date of death. Prior depreciation deductions are wiped away in this analysis. That’s the only situation where an RDA is not recouped and taxed upon sale of the team if the team is sold at a profit.
So depreciation & amortization is basically a scam that allows corporations to artificially deflate their bottom line is what it sounds like to me. They get to write off the entire up front cost of equipment/facilities/whatever when it’s initially purchased and then write it off again in each subsequent year for the expected usable life of the stuff. And then when it’s replaced the entire process repeats. Man, I wish I could double dip that way on my taxes by writing off the purchase price of my house in addition to the mortgage interest over the life of the mortgage, or the price of my car for the life of the loan.
They don’t get to write it off in year 1. They spend the cash in year one and then recognize the expense over the life of the asset.
Still seems like double-dipping to me. Up-front cost written off in year 1, then that same up-front amount written off again on a prorated basis for the expected usable life. It sounds like something lobbyists inserted into the corporate tax code to minimize liability rather than anything that could be construed as a legitimate cost.
Every business in America and I think on earth can depreciate to free up cash flow. Without it almost no business would be profitable.
The point is that it’s not written off in Year 1. Most businesses would actually prefer to write it off in Year 1 but are explicitly excluded from doing so (this is time value of money at work).
Here’s the process:
Year 0: Build factory for $100 million with lifespan of 10 years. Assets of corporation = $100 million
Year 1 – 10: Factory produces goods worth $10 million. Write off $10 million in depreciation. Net income = 0
At the end of 10 years: Total revenue = 10 x $10 = $100 million. Total expense = 10 x $10 = $100 million. Assets of corporation = $0
Depreciation is the annual process of reducing asset value to zero, rather than recording long-lived assets as an expense at the time they are purchased. It’s a very legitimate cost to the business, it’s just not a cash outlay on an annual basis (the cash outlay was upfront).
And, money is more valuable now than in the future. Your hypothetical corporation couldn’t do anything ELSE with that $100 million now that it spent on a factory, but it doesn’t get the deduction till 10 years from now.
Depreciation is a disaster for investors compared to the alternative of being able to write an investment off as a business expense when you spend it.
Corporate America would LOVE to eliminate depreciation from the tax code and have it declared that a capital purchase is simply a business expense.
I think that the theory is that it ‘s supposed to incentivize investing in new equipment and facilities, but in the case of baseball teams it’s not at all clear to me what it’s supposed to incentivize. Probably in other industries too.
As an accounting major and a bank examiner for 31 years, your statement is completely wrong. There is no such double dipping. The initial entry to book a purchase will be for the balance sheet to add an equipment asset. Generally, the offset to the asset is a reduction in cash and the addition of a liability to show whatever financing was used.
So they write off the entire purchase price as a business expense at the time of purchase, and then they write off the entire purchase price on a prorated basis for the expected usable life, and then they write off the purchase of the replacement, lather rinse repeat.
How exactly is this not double-dipping? The depreciation isn’t an expense, and it isn’t a loss. It’s just a legal way for companies to artificially reduce their on-paper profit for tax purposes. It’s perfectly legal and a widely used practice, but neither of those negate the fact that it’s just counting the same expense twice.
There is no such thing as writing it off twice. You are incorrect on this point. AICPA promulgated “generally accepted accounting principles” for the purpose of fairly and consistently reporting the financial condition of a business entity. No double counting in GAAP. Federal government has depreciation standards for tax purposes. No double counting there either.
Once the asset is on the books, the company takes into account the lifespan of the asset. Take a car for a simple example. Company buys it for $50,000. Day of purchase, it goes on books for $50,000. But every year that goes by, the car is worth less. That’s a loss of value. This is why companies show depreciation. It lowers the value of the asset and lowers the company’s income to reflect the loss in value. There are generally standard depreciation assumptions. But you also have Federal tax standards for depreciation. That’s why the topic can get both complicated and allows elements of judgement . But under no circumstances can a company write off the asset twice.
I have to quibble because I hate the car example, even though it gets used all the time. Accounting depreciation is cost allocation. You’re allocating the cost of the asset over it’s expected useful life. It isn’t intended to reflect the market value of the asset, and if the asset is something the business intends to sell (and is material) you’d need to stop depreciating and adopt some flavor of mark-to-market inventory accounting.
Your main point is entirely correct, though.
I was trying to put it as simply as possible for a poster who did not appear to have a background on this topic. I think the rest really is a quibble and that’s fine. Just not going to be entertaining to discuss.
“So depreciation & amortization is basically a scam that allows corporations to artificially deflate their bottom line is what it sounds like to me. They get to write off the entire up front cost of equipment/facilities/whatever when it’s initially purchased and then write it off again in each subsequent year for the expected usable life of the stuff.”
As someone who has studied and worked in finance and accounting my entire life, your understanding of depreciation is completely erroneous as pepper69fun says. There are different depreciation methods that may be used and a company has some leeway to select their methodology, but in no circumstances do you “write off an asset and then write it off again.”
…that’s not how it works at all. I would highly recommend doing some research before forming opinions.
Not a scam. The depreciation and amortization rules prevent businesses from writing off all of the purchase price in year 1 by forcing them to spread the it over the useful life of the asset.
It’s the opposite.
Instead of being allowed to write down investment expenses in year 1, the tax code requires you to split that write down over a longer period more closely matching up to the duration of the investment.
Thanks for that commentary, really excellent summary. One question I have though is about the assertion that “Depreciation and amortization are unreliable as measures of actual profit” I mean, they did pay $201M for the stadium. whether or not you or i think that’s fair, that should factor in. why is depreciation an unreliable means of accomplishing that?
““Depreciation and amortization are unreliable as measures of actual profit” is a weird statement to make on the author’s part. Neither is intended to measure profitability or be a proxy for profitability. They are simply tools used to write down the cost or value of tangible assets (depreciation) or intangible assets (amortization) over the useful life of those assets. They can be employed by both profitable and unprofitable enterprises.
You can nickel and dime little things about depreciating an asset that still has value down to zero, or things like that. There’s also the fact that if you spent a bunch of money ten years ago on something, that doesn’t affect whether you’re profitable in this year. But most importantly in this case, baseball teams get to depreciate the purchase price of the team, which is bonkers. I don’t know the exact schedule, but Liberty paid $450 million for the Braves, which means that if they used linear depreciation over 15 years they’d get to “lose” $30 million a year in depreciation of purchase price.
Factories and TVs and cars and such depreciate over time because they get worn out, and lose their value; no later purchaser wants a busted old car. Perhaps Liberty is providing a window into their plans for the Braves — run them into the ground and extract maximum cash in the interim, so the purchased asset drops in value over time vs. appreciates.
I’m joking about that, kind of, but it’s the only way I can think of that treating the purchase price as depreciable makes sense to my non-accountant brain. Of course team values appreciate!
Accounting rules do allow some subjectivity for the write off period and that could cause some complications when comparing profitability of different teams. I would have to do some research on the topic of writing off the value of a baseball team purchase. In most business purchases, you would book the assets and liabilities at current market value. Any excess is booked as goodwill and written off over time. That’s not abusive. But you do need to take into account that this is a non cash expense, which the article points out. It’s not that baseball owners are cheating in some manner, but it’s easy to mislead non educated financial statement readers.
Mostly correct, except that publicly traded companies are not allowed to depreciate goodwill, but must instead test it for impairment annually. GAAP now allows private and not for profit entities to elect to amortize goodwill over a period not longer than 10 years, but they aren’t required to.
cowdisciple, CPA
I’m learning a lot about the sorts of people who frequent FG. I am not surprised that a substantial number of people who like advanced baseball statistics also are accountants.
Yes, mostly correct. If not publicly traded, then entirely correct. But perhaps your expertise would be more useful to the fangraphs community if you were addressing Clemens contentions of a 100% writeoff of the entire purchase price being abusively used by baseball owners …. instead of picking nits with a different commentor that you have twice declared to be substantially correct.
I can say that I am not a CPA, but a CPA certification is hardly a guarantee that each individual is an expert on all areas of GAAP. The quality of CPAs varies from person to person just the same as any other field. If I only received a payment for every time I dealt with a CPA who was in error and had to back down, then I would have retired five years earlier than I actually did. I am confident that had we worked together that your work would have been flawless, of course.
Oh, I certainly don’t claim to be perfect, especially in areas (such as publicly traded companies and tax) where I haven’t practiced. I enjoyed your responses enough to chime in on a few minor details – no intent to offend!
As for writing off the purchase price of the franchise, corporate tax is not my area (by design). I wouldn’t characterise the application as abusive, since that appears to be the explicit intent of the code. It certainly seems like a narrow provision enacted specifically to benefit (and no doubt lobbied for by) billionaire team owners.
I suppose the idea is that the value is eventually taxed when the franchise is sold because the lower tax basis causes a larger profit. Billionaires are pretty damn good at either avoiding taxes like that or deferring them forever – who can say if it ever gets paid.
Just because something you invest in is profitable over time doesn’t mean it shouldn’t qualify for normal depreciation.
If you started a business consisting of one car that you rented out to people for profit, you could still depreciate the cost of that car.
You can make an argument that players (or more accurately, labor) don’t/doesn’t depreciate, which I would be sympathetic to, so perhaps there is some issue there to be explored. But the stadium definitely depreciates over time, as do many other things – buildings in the complex, etc. You can also argue that the “team” didn’t purchase all of the stadium, but that’s another argument about governments paying for stadiums, which I broadly disagree with. But that finger should be pointed at local politicians, not owners.
“Liberty paid $450 million for the Braves, which means that if they used linear depreciation over 15 years they’d get to “lose” $30 million a year in depreciation of purchase price.”
The general crux of your article is excellent, but your understanding of depreciation and amortization is a little amiss. Intangible assets – assets you can’t touch or hold, like the ownership of a baseball team – are subject to amortization, not depreciation.
Assets are generally only amortized if they tend to lose value over time. If you purchase an intangible asset for $450MM and after fifteen years the value of an intangible asset is expected to be $0, then you could essentially expense that purchase over the 15-year useful life, which as you said would be $450MM/15 = $30MM per year.
Tangible assets are depreciated because most lose value over time – like a car or a piece of equipment. Intangible assets are different – some lose value over time but many do not. If an intangible asset continues to provide economic value without deterioration over time – like a baseball franchise would – then it typically would not be amortized. In no sense are they “losing” $30MM a year in depreciation or amortization of their purchase price.
Please read about the Roster Depreciation Allowance, which I linked to twice in this article. “It typically would not be amortized” is a great statement to make if you don’t know that sports franchises have a specific right to do this, but hey, they do, and there are plenty of places to learn how it works. Here’s the SABR article I linked to, there’s also a good ProPublica study of the same thing in the links!
https://sabr.org/journal/article/the-roster-depreciation-allowance-how-major-league-baseball-teams-turn-profits-into-losses/
So, is your argument about financial statement profit and loss, or is it about cash flow, or is it about how much income tax the owners of a team pay? Or all three? Because you’re conflating and mixing concepts from among those three different discussions.
The RDA doesn’t apply to 100% of the cost of the team when purchased. Fair value is applied to all hard assets first.
It’s also a timing difference. Liberty will pick up the deductions they took under the RDA when they ultimately sell the team. Deduction now, more income later. It’s called “recapture” in tax accounting parlance.
fwiw, I don’t have much faith that in the future teams will be signing better TV deals than the Braves’ current “a little worse than average” deal– declining popularity plus who gets cable anymore
I’m still trying to figure out how much the average MLB team (or any MLB team, really) makes per game before factoring in the postseason TV contracts. So far I’ve seen numbers anywhere from $1M to $4M per game just from tickets and stadium concessions / merchandise / etc. That’s a big swing.
I realize some of this also depends on whether you count individual team TV deals in there, and that in turn depends on whether there’s some clause that would void certain parts of the deal if games are cancelled.
Basically, I just want to figure out how much teams are giving up here by cancelling a game.
If it’s $1M per game, and teams aren’t paying the players but are paying a bunch of other things in fixed costs, and the average team payroll is about $110M, and there’s a little more they can cut back on without games themselves, that means they’re giving up something like $300K per game before considering any provisions in TV deals (which itself would be complicated if teams own some or all of their networks, as they might lose money even if the deal isn’t voided).
If they cancelled half the season, then, then teams would lose something like $26M right off the bat. And then there might be losses due to TV deals / ownership stakes in networks, and there’s also no guarantee that fans are going to flock to the park if a substantial amount of the season is cancelled. That’s not catastrophic but it’s also not good for owners.
Despite the noises they make, owners can afford to take a loss like that if it means a better CBA for them so they keep more of the revenue in the long run. Owners own teams for a lot longer than players play for them.
A proper estimate of per game profitability should include a prorated share of player salaries.
Right. If the average set of player salaries per team is $110M, and the owners would make $162M, then cancelling half the games would come out to (162-110)/2. There are other ballpark expenses in there somewhere though that they would save on that I’m not considering, so that might save them a bit more. And also some teams make way more money per game and spend way more money per game. Also, those averages could be completely off. If teams make $2M per game, or 500K per game, then that’s a different story.
I’m a business professor, and all I have to say is it’s not the responsibility of employees to make sure owners make money. If the owners are unhappy with their returns, they have the power to sell their teams and put those profits elsewhere. the players can’t really do the same. Owning a baseball team with revenue sharing seems like one of the lowest risk investments one can make. Even the Pirates are nowhere near going bankrupt. Return should represent risk. So, returns should be lower than the stock market returns. They are not taking the same risk particularly when the only true risk (players getting injured on big contracts can be 80% insured). The owners should stop whining, stop being greedy, stop doing long term damage to the sport, and settle! I want to watch games!
Owning a sports team usually strongly helps the other companies’ owners have do well. This is called a positive externality and all teams provide it to some degree. So the monetary gains of these owners receive are more than the income statement and balance sheets of the teams show. probably far more.
They can also use the team and stadium as an asset to borrow against. Since the teams have so far always gone up in value, they likely get incredibly low rates.
As a real life example of this, consider the Wilpons, and their purchase of the Mets. Prior to that, they were small time players in the NY real estate market (their own words). Owning the Mets opened doors to them that otherwise never would’ve allowed them to build the real estate empire that they did.
I would provide references for this, except as a Mets fan, I have vowed to never think of the Wilpons ever again, beyond this response. They’re gone, and good riddance.
Frank McCourt bought the Dodgers and Dodgers Stadium for $430 M in 2004, mostly through debt financing. He and his wife used the team as a personal atm. During their divorce, McCourt drove the team into bankruptcy. In 2012, he sold it for $2B, and he retained stadium parking lots.
Then those profits would show up on the recipients’ statements.
As a business professor you understand that it’s politicians and the supreme court that gives MLB an anti-trust exemption, right? That’s what provides the owners with so much leverage. I know very few business owners that would turn down this opportunity (likely yourself included, unless you are perfectly altruistic).
Without that exemption, other teams and/or leagues could form, which would (theoretically) take away some MLB owner bargaining power. Some players have taken advantage of foreign leagues, for example, so the MLB owners don’t have complete power.
MLB is an imperfect market, enforced by law. That’s where the essentially riskless profits come from.
-Not a business professor, but an econ guy
Spoken like a tenured business professor who has a guaranteed income regardless of performance with no risk, and who apparently hasn’t run a business before.
Spoken like a bootlicker
fun fact: there was a ten year period where the memphis redbirds were a community run non-profit
Brings me back to the days when I was interviewing for finance internships wayyy back in college lol
Is the reason for using OIBDA instead of EBITDA here to solely separate Braves-related income/expenses within Liberty Media’s income statement?
OIBDA is just a method to compare the operating profitability of separate businesses by eliminating the affects of their capital structure. Two companies can have similar OIBDA but be in very different financial condition when their debt is factored in. One question I would have is, how much did the Braves pay for interest on debt in 2022? Interest expense is excluded from OIBDA.
Also, like the author says, OIBDA doesn’t mean they generated any actual cash.
Good article Ben. There is some useful information in the Liberty Media disclosures.
it is interesting that Ben and other MLB reporters seem to focus on total revenues and OIBDA instead of net income. Income Taxes are excluded from OIBPA as well as depreciation and amortization.
The pretax income for the world champion Braves was $31 million in 2021 compared to a pretax loss of $121 million in 2020. On an after tax basis, the Braves income for 2021 was roughly $20 million. This compares to the Braves player payroll and benefits of about $153 million per Spotrak in 2021. And Max Sherzer is guaranteed $43.3 million per year for the next 3years under his recently signed contract. So Max Scherzer makes more income than the franchise that just won the World Series.
in my view, both the owners and the MLB players are doing well, especially considering the pandemic and its impact on the last two years. Both should be grateful for their participation in baseball at the highest level, and their ability to reap the huge financial rewards the MLB provides. It is frustrating that the two sides have not reached a CBA compromise yet.
Hopefully both sides will recognize how lucky they are to be in these positions and reach an agreement soon.
The comparison of a business’ net income to an individual’s salary is not the best way to look at this.
-You compared post-tax income for Liberty with pre-tax wages for Scherzer. Scherzer’s marginal rate is almost assuredly 37% at the federal level (ignoring state rates). The corporate tax rate in the US is a flat 21%, once again ignoring state rates.
-By including the $43.3 million in the comparison, the equivalent figure on Liberty’s financials is top line revenue. That number is half a billion dollars ($568 million). The comparison doesn’t even include Scherzer’s cost of living.
All said, there’s a lot going on, but this is not a great way to compare the two situations.
not to mention that scherzer is literally the highest paid player and the whole point of the union making their stance is to have the guys making around 600k for one or two years (or less!) get better compensated.
That, too, is a great point!
Ok so I’m on board with your numbers
And from the contracts link page they spent 153MM on player salaries
How much of the 50MM/year (avg profit over the past 4 years) are the players entitled to?
Profit is after player salaries have been taken out, by definition the players are entitled to none of it, if they were it wouldn’t be profit. The correct question is how much of the revenue should the players get, not profit?
I looked at the historical OIBDA since 2015 and this is what I found.
2015: 5MM
2016: -20MM
2017: 2MM
2018: 88MM – Playoffs
2019: 49MM – Playoffs
2020: -53MM – Playoffs
2021: 104MM – WS Champs
I understand why the owners are fighting for more playoff teams as much as I don’t like it