The Braves Made Some Money in 2021

© John David Mercer-USA TODAY Sports

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 Twitter @_Ben_Clemens.

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11 months ago

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?

11 months ago
Reply to  Claydv

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.

11 months ago
Reply to  theorioleway

Can you clarify what you mean when you say “shifts the burden on to people earning salaries and wages”?

11 months ago
Reply to  theorioleway

The big problem with this analysis is that it relies on Forbes despite so much evidence that suggests you should not.

11 months ago
Reply to  theorioleway

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.

11 months ago
Reply to  tomerafan

You would pay tax when you sell them team, so you would be paying tax on the recouped RDA income as well, right?

11 months ago
Reply to  tbwhite67

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.