The Braves’ Profits Provide Glimpse into Baseball’s Books
Major league baseball teams closely guard their financial information. They have no problem talking about how much money players make, but they prefer to be more circumspect when disclosing the revenue teams take in or the scale of the profits owners make after those players have been paid and expenses accounted for. Because baseball’s ownership is a fairly insular group composed mostly of individuals and privately held businesses– and because there relatively few franchise sales to use as gauge–teams have been largely successful in preventing their financial information from going public. The Atlanta Braves present an exception.
Liberty Media, perhaps best known for its subsidiary SiriusXM Satellite Radio, purchased the Braves in 2007 for $400 million. Two years ago, they began offering stock in their separate divisions, which means the public can buy shares in the Braves as well as the real estate holdings around the stadium. It also means that, as a publicly traded company, the public is entitled to more information regarding the team’s finances than is typical. As I wrote in 2016, the club disclosed an $18 million loss in 2014 before depreciation and amortization. They were on the plus side in 2015 by about three million dollars before recording losses of about $20 million in 2016. During those three seasons, the team averaged 90 losses, with an average annual attendance of 2.1 million fans and a payroll just over $116 million per season. The financial losses in 2016 were largely attributable to a huge international signing class, most of the players from which were later declared free agents after MLB’s investigation into Atlanta’s signing methods.
But focusing exclusively on a team’s year-by-year profits obscures the financial reality of owning a baseball team because it doesn’t address the most profitable aspect of team ownership: the value of the franchise. Based on the calculations above, the Braves lost about $45 million from 2014 through the end of 2016. But Liberty Media CEO Greg Maffei has admitted profits weren’t always the main consideration for the Braves, indicating that “historically, the measurement was we didn’t lose money.” Maffei’s remarks are consistent with statements from another team owner, Rogers Communications, which owns the Toronto Blue Jays, though the Blue Jays’ financials are harder to trace because Rogers owns a whole host of assets along with the baseball team. Per Forbes:
The media giant’s CFO, Tony Staffieri, said at a conference that Rogers wants to “surface value” from the Blue Jays, which he said is a “very valuable asset for us that we don’t get full credit for.”
For the Blue Jays, “surfacing value” would likely come in the form of realizing the profits from selling the team, as Rogers might not be getting “credit” if the team isn’t reaping huge profits. Then there’s the matter of Rogers also broadcasting Blue Jays games, which might further cloud the revenues from the baseball team. (The Braves used to benefit from some of that same confusion back when Ted Turner owned the club and TBS showed Braves games, but the financial model has shifted, and the Braves now have one of the worst local television contracts in baseball.) It is clear the calculus of franchise ownership is more complicated than mere gate sales.
For quite some time, the Braves’ goal was simply not to lose money, something Liberty Media could afford to do because the value of the franchise kept rising. While the Braves seem to have lost $45 million in operating revenue from 2014 to the start of 2017, Forbes estimated the club has gained $770 million in value, from $730 million in 2014 to $1.5 billion before the start of the 2017 season. Even if there are reasons to be skeptical of the precision of Forbes’ numbers given how closed off baseball’s books are, we can look to franchise sales over the past 30 years and see that teams have generally enjoyed an average annual gain (even after accounting for inflation) of 8%. Based on Forbes’ 2018 estimate of the Braves’ franchise value of $1.625 billion (and accounting for the team’s $2.5 billion market cap, which includes the real estate around the new stadium), the team has seen an annual increase in value of 11-16% after inflation.
The 2017 season saw the Braves open a new ballpark and increase their attendance by half a million people (to 2.5 million). The club also saw profits of $49 million despite no significant changes in spending. This past season, the Braves had a payroll of about $130 million and again drew 2.5 million fans en route to making the playoffs. The team’s profits doubled as a result, increasing by $50 million, which coincidentally is the amount teams received for their portion of the MLBAM sale to Disney. These types of profits might have changed the attitude of Braves ownership, who some had previously thought might be preparing the club for sale. This speculation was in sync with Liberty Media’s own business philosophy as Maffei has indicated: “Liberty has been a company that has tended to move through assets.”
With the increased profits, it looks less likely Liberty will sell in the immediate future. From Tim Tucker’s piece in the AJC:
“Look, I think there is a lot of good stuff that is going to go on at the Braves that we’d like to remain involved with for a period,” Liberty Media CEO Greg Maffei said. “That includes for the buildout of The Battery, all of the development around there. That includes, frankly, the fact we are well set up for on-field performance with very attractive contracts.
“We are making money now at the Braves at a pretty serious clip, where historically the measurement was we didn’t lose money,” Maffei said. “That’s only going to get better as you approach the time when we renew in 2027 on our (regional sports network) deal. So all of those (factors) set up well to suggest – not that we’re going to hold (the Braves) 10 or nine more years – that there are a lot of positive things happening. … I don’t think we’re in the exit mode today.”
It is useful to put Atlanta in a broader context. While the Braves moving into a new ballpark opens up new revenue streams, most teams have relatively new ballparks. The 2.5 million fans the Braves have drawn in attendance in each of the past two season is good, but the team also ranked outside the top 10 this past season. Add in one of the worst local television contracts in the game and a $130 million payroll, and the Braves had $100 million in profits last season. If a team with close to average ticket prices and attendance took in $100 million in profits with their payroll, it isn’t far-fetched to think that there are teams with significantly higher payrolls but better attendance and television deals also making a tidy profit as well.
We can act as if team owners are just typical business people trying to turn a profit, and of course some resources across the league do vary. But if the Braves’ finances are any indication, the profits some (and perhaps many) owners have seen the past few years could represent a significant change from even a decade ago. The business of baseball is booming, and the new $5.1 billion deal with FOX is an indication that the business is not slowing down. Last year’s chilly winter for free agents caused no growth in payrolls despite increased revenues. It’s fair for players to be concerned about their declining share of revenues. When middle-of-the-road franchises go from breaking even to turning big profits on top of big gains in franchise valuations, it’s not too hard to imagine the piles of cash underneath the owners of the bigger-market clubs.
Craig Edwards can be found on twitter @craigjedwards.
“So all of those (factors) set up well to suggest – not that we’re going to hold (the Braves) 10 or nine more years – that there are a lot of positive things happening. … I don’t think we’re in the exit mode today.”
I miss Ted Turner. Having such a soulless owner (literally or figuratively???) that talks about your team that way is disheartening. I mean, I’m an adult and I know the score, but it still just feels wrong when you hear it out loud.
You miss Ted Turner? So you don’t remember Ted Turner. Be soulless it’s better than interfering with operations and making the team worse
I was too young for that Ted Turner, which admittedly would suck. I started watching the Braves in 1989, so after a couple of years, the Ted Turner Braves were pretty great to root for, and of course that was because he got less involved in the day-to-day. But he was a guy that actually cared about the team. You can have both a guy that cares and a guy that leaves the baseball part to baseball people. That was the later Ted Turner.
Turner bought the team in the 70’s and was a very hands on owner. Many times that was to adverse affects.
If you want a baseball team to be successful, then run it like a business. Players are resources you use as you need. The bottom line is wins and profits (hopefully hand in hand).
The fact that Donald Sterling was able to make an absolute fortune off of the Clippers, both in annual profits and in appreciation of the value of the franchise, is proof that winning games and earning profits do not need to correlate with each other.
Baseball has ALWAYS been run like a business. What do you think its long history of labor wars were about?
No, its proof that the NBA is a cartel, inside of which it’s virtually impossible to NOT make stunning annual profits whilst enjoying high rates of appreciation for the brand and the license.
You’re on the right track, but you’ve stopped midstream in your train of logic. Lets go through it.
1. The fundamental goal of a corporation is to drive returns on investment for shareholders
2. In order to efficiently drive returns, a corporation must maximize the value of its assets. (this is where you stopped)
3. In order to maximize the value of your human capital assets, you must exhibit effective management techniques. (While this premise has been demonstrated conclusively over the course of literally thousands of years of human existence, errors in human capital management continue to be the single largest driver of corporate failure in the modern age)
I’ll provide some context.
If you were to buy a professional baseball team tomorrow, and in your introduction speech to the players, say
“I’m thrilled to be your new owner, I don’t expect to be very involved in day to day operations, I just want the team to appreciate in value by 500 Million dollars over the next 5-6 years so I can sell. No need for me to set up any one-on-ones. Frankly, you guys are all just resources, and I expect we’ll sell most of you off for fresh assets in the near future. Thanks, go win a bunch of stuff”
Your team would likely not appreciate in value as quickly as it otherwise might.
“1. The fundamental goal of a corporation is to drive returns on investment for shareholders
2. In order to efficiently drive returns, a corporation must maximize the value of its assets. (this is where you stopped)
3. In order to maximize the value of your human capital assets, you must exhibit effective management techniques. (While this premise has been demonstrated conclusively over the course of literally thousands of years of human existence, errors in human capital management continue to be the single largest driver of corporate failure in the modern age)”
Congratulations! You get it!
are you really saying that the notion of ‘human capital management’ is ‘thousands of years old’? woof. i know neoliberals are ahistorical, but… woof, that’s a helluva take.
are you really saying that the notion of ‘human capital management’ is ‘thousands of years old’?
No, I’m saying that evidence that human capital mismanagement leads to failure goes back thousands of years. Its kinda like how its true that washing ones hands with lye in the year 1600 would help prevent bacterial infections, even though they didn’t know about bacteria at the time.
i know neoliberals are ahistorical,
1. I’m not a neoliberal, if pressed I would say that Keynes came the closest to a correct unified theory of macro-economics
2. Neoliberals are no more inherently ahistorical than any other group of humans
that’s a helluva take
Again… that wasn’t my take. And even if it were, it is not central to the point I was making. This is what’s referred to as creating a straw man.
Keynes ftw
The fundamental goal of a PUBLICLY OWNED corporation must be to drive return on investment for shareholders–that’s a legal mandate. A privately owned corporation can do whatever the hell it wants. We see this a lot in media, where the owners sometimes just want to break even and have the prestige/influence of owning a big player. Also the Tigers under Mike Ilitch.
I would actually step even farther than this. We only assume that the sole purpose of public investment is a monetary return, but my comment was intended to illustrate the absurdity of this notion, and to point out that one only needs to keep thinking a little bit along the same train of logic to realize that a single-minded drive towards monetary returns is actually self-defeating in terms of achieving maximized monetary returns.
And he signed Hogan and Macho Man when they already had Steve Austin.
Well that’s stunning.
“I mean, I’m an adult and I know the score, but it still just feels wrong when you hear it out loud.”
The score has always been about the bottom line – and “what have you done for me lately?” – but you’re right, it is jarring to hear it expressed so openly.
Stay at home mom Kelly Richards from New York after resigning from her full time job managed to average from $6000-$8000 a month from freelancing at home… This is how she done it
…….
???USA~JOB-START
How are their profits after you subtract revenue sharing proceeds?
As far as I’ve been able to tell, they only received revenue sharing the last year of the Ted.
Baseball teams are both trophy assets that go up in value regardless of their profitability and they do become very profitable when a team (1) WINS and (2) MOVES INTO A NEW STADIUM.
Because the Braves won the NL East and moved into a new stadium, they have been able to (1) sell more tickets, (2) raise prices on those tickets, (3) sell more sponsorships at higher prices, and (4) ring up more sales at The Battery (which I gather is an entertainment complex attached to the new stadium). And because they’ve been able to win without throwing tons of money at over-the-hill FA’s, profits have exploded.
For people who are worried that MLB players are underpaid at $4.52M average salary, the booming business of baseball should be good news: the average salary will continue to rise as it’s gone up 30% in just the past 4 years! The only issue is more of that money will go to younger players (as Jeff Sullivan has suggested by raising the major league minimum in the next CBA) and not to above age 30 FA’s.
For those worried that the Braves are making too much profit, have no fear: at some point they will be bad again and the stadium not so new. It does seem, however, though that merely breaking even is too low a bar even under those dire circumstances as the team will still turn a profit.
It would be interesting to know how the median salary for players moved over the same time horizon. The 30% rise in average (mean) over 4 years sounds good, but unless we know how the median moved, the average could just be reflecting large salaries by a few players as opposed to being representative of all players.
Why would it be a bad thing if the deemed better players were capturing most of the additional money spent on salary?
Correction: they become profitable for a very short amount of time after a stadium move if all of the stadium is paid for by public money.
The new stadium effect is very short lived, just ask the marlins. Everyone wants to visit a new stadium but after a few visits the novelty has worn off.
There’s a few things going on here that are Braves-specific.
In the past, the Braves tended to take paper losses by declaring as much depreciation as possible. This minimized tax liability. For example last year in the first year of the new stadium, they took a significant depreciation hit for the increase in the value of executive stock options because new stadium had increased the franchise value. (Taking a depreciation because of appreciation – ironic.) This year the incentive favors maximizing profit because they had been running up against the MLB debt rule that says a team with stadium debt should limit debt to 12 times profit. The debt is currently in the $620M-$630M range, and that $100M profit cited in the article doesn’t include the 4th quarter. Last year they lost about $40M in the 4th quarter. This year’s 4th quarter may be quite different with the playoff appearance and the sale of apartment buildings, but they’ve given themselves some room to make sure they turn enough profit to get in compliance with the MLB debt rule. If there’s extra left at the end of the year, they can pay down principal on debt or put it towards building phase 3 of the Battery.
While the Braves’ TV deal is terrible, the Battery is generating $40M/year in revenue, and the stadium naming rights that they didn’t have access to at the Ted are thought to be $10M/year. That’s $50M/year in revenue streams that they didn’t have 3 years ago.
What are the penalties for non-compliance with the debt rule?
If MLB chooses to step in and enforce the rule, they can wield veto power over expenses or suspend the owner, but a number of teams have been in non-compliance before (at one point it was as high as 11 teams) and the rule hasn’t been enforced as long as MLB believed the team was making a good faith effort to get into compliance. They did enforce the rule against Frank McCourt when he owned the Dodgers.
I would love to see some analysis on the Blue Jays, with the richest owners in baseball who happen to own the TV Network, and TV viewership that is about TRIPLE the second place team that is written off at a fraction of its real value.
Me too, but IIRC, every attempt to nail down their real value is awash in hypotheticals and really rough guesses. For instance, you’re simply left estimating what they could/should get in a TV deal because, like you noted, there are literally no comps available. Likewise, you can’t even find a proper accounting of all the ways in which Rogers uses the Jays as a platform to market their other products, so those possible dollar amounts are also wild guesses. I’m not even sure how the Dome would factor into the analysis – is it technically owned by the Jays or directly held by Rogers?
team could easily rock a payroll in the Dodgers/Yankees/Red Sox class, (edit) and still make crap tons of cash.
The Jays probably have the highest revenue potential in baseball. In a good year, they can draw more fans and TV viewers than any other team (and the TV numbers can really blow away any other team’s). But in a bad year, attendance and TV ratings can plummet. The revenue difference in a bad year vs a good year can easily be well over $100M.
The last time the Jays had an extended period of being competitive, they were able to sustain the highest payrolls in baseball. There is no reason to believe that could not also be the case of the Jays are able to sustain relevance again.
For years, Rogers reported the team ‘paid’ $36 M per year to the Jays for broadcasts rights. I believe that was a number that was agreed up on with MLB and its probably in the best interest of both Rogers and MLB to settle on a low number. If the Jays were not owned by Rogers and the team could field competitive offers for the broadcast rights, they would certainly get a lot more than $36M/yr.
Rogers also owns the Maple Leafs, which are a lot more valuable and focus more spotlight and resources. They also operate is a very different market, which is why they don’t agree not to blackout Toronto, Ontario or Canada on MLB.tv Jays games.
The TV link is also misleading. Rogers gets all the money, but that doesn’t mean the Jays do.
The $50mm from the MLBAM sale isn’t really on-going profits. The received a one-time payment for selling part of the business, which means their share of MLBAM profits in the future will be less than it otherwise would have been. Net of this they made a $50mm profit. That doesn’t seem excessive for a business worth $1.5b, especially taking into account that they lost an equal amount from 2014-16.
There are 2 types of sports franchise owners. Those that are in it for the profits and those that are in it for the prestige. The prestige owners don’t care about profits and just want to win a title, think Mike Ilitch with the Tigers. They hope that the value of the franchise rises faster than their cumulative operating loses. Unfortunately, the only way for them to recognize any profit is to sell the team but then their prestige is gone.
As other comments have noted, profits can be manipulated. I work in accounting and it is possible to show any amount of profits or losses that the owners want to see. In my opinion, the best measure of any company is cash flow. Either the company is generating excess cash or it is burning cash.
Mike Ilitch prioritized wins over profit, it’s true, but his formula only works when you have Miguel Cabrera & Justin Verlander, the MVP & CY Award winners, in their primes, and have Dave Dombrowski who knows exactly which of his prospects to trade for veteran stars.
I think that the profitable operation of a baseball team and WINS have been converging for a while as teams value their own young players and extend them, covet young and cheap and good players, and avoid expensive old players.
Revenue keeps going up, but the LT threshold is going up only to 206 million, then 208 and 210 million , what a terrible job by the union , expect a long labor dispute when the CBA expires
Again, no, there won’t be a long labor dispute. The Players were happy to achieve a 50/50 split in revenues in the last CBA. The Owners finally listened to their Analytics Dept who have been telling them for a while that FA’s aren’t worth their spend. Thus, the players only realized perhaps a 48/52 split. This is easy to remedy by simply raising the minimum salary.
One would think that there would be more publicly-available data on team finances given their total reliance on taxpayer dollars
One would be incorrect in that assumption
Cities only finance the stadium, in fact many cities own the stadia, like owning a museum, and then rent the stadium to a team. (I’m not sure that cities should do this, but I’d have to read more on the costs and benefits to be able to decide.) Why would a privately owned baseball team disclose their financial statements? I think it’s interesting for us as fans to know the numbers behind how the business operates (and am glad Liberty Media does), but they’d just be used as a cudgel for any particular agenda. Especially since, as our accounting friends say, the numbers can be interpreted in malleable contexts.
Well, my working theory (I am neither an accountant nor a lawyer) is that any business operating solely within the remit of an anti-trust exemption should be, at the very least, compelled to open up their accounts to public scrutiny.
It’s perhaps a radical idea too far, but I would imagine that it might have the support of, say, Teddy Roosevelt.
“Well, my working theory (I am neither an accountant nor a lawyer) is that any business operating solely within the remit of an anti-trust exemption should be, at the very least, compelled to open up their accounts to public scrutiny.”
Absolutely not. That’s intrusive nonsense.
How do those boots taste?
“Absolutely not. That’s intrusive nonsense.”
You don’t get to be a Libertarian while holding fast to government interference for your benefit.
So, you know, give up that little old anti-trust exemption, and your poor, molested owners can keep their books to themselves.
“You don’t get to be a Libertarian while holding fast to government interference for your benefit.”
LOL, I get to be whatever I want and what you think about that doesn’t matter to me even one little bit.
The anti-trust exemption seems to hold a lot of real estate in certain people’s minds. The MLB — like the NFL, NBA, NHL — is a natural monopoly. Cities don’t want multiple baseball stadia to support multiple leagues. Fans don’t want multiple leagues. The anti-trust status is irrelevant. No team should open its books because of it.
“The anti-trust status is irrelevant. No team should open its books because of it.”
You are correct, but the socialists disagree.
I’m holding Edwards responsible for the Brave’s stock gaining 3.5% today. Good show Craig!
That made me some money.
Liberty Media has a Braves tracking stock available if anyone is interested. It’s Liberty Braves Group Series A, NASDAQ: BATRA.
Craig, sorry but the article was confusing. I understand the appreciate of the core asset, I get the parallel books trick (running RSN books seperately an old Yankee trick). Then you say the Braves booked a loss from 2014-2017 but revenue increased? Obviously businesses manage to the bottom line so revenue going up is less consequential if costs go up at a greater rate. Also just because a club is publicly traded doesn’t mean their P&L is transparent – SG&L can hide a lot. The Forbes piece on the Pirates was pretty transparent and I’d recommend the read. I’ll reread on my Mac this evening- thanks for covering this topic.
Craig, again thanks for the thought provoking piece. I’m glad the NBA was mentioned. Let’s take the Cavaliers. Forbes valued them at $1.3 Billion at the beginning of the year, take a look at what tickets are going for this year versus last. I’d be surprised (and I admit I might be wrong…) if Dan Gilbert could get 75 cents on the dollar or $1.0 Billion. That tells us two things- Lebron James created a lot of that value, and owners (who risk cash flow) can lose that value quickly. Some owners can afford to operate in the red for longer periods than others. Clearly over time franchises appreciate, but not evenly or in a linear fashion (somewhat like the housing market).
To a degree, I think ‘rebuilds’ are a fairly recent phenomenon partially because of the shift in capitalists’ thinking in the neoliberal era. The focus, for the owner, is no longer on extracting profit from the operation of a franchise (or most any enterprise) it is on treating the franchise/enterprise like a particularly large asset. So long as the asset is rising in value (8% per year is quite a bit!) you are judged to still be ‘making money’… even as, with the example of the Braves above, they finish years deep in the red.
I put that in quotes because the amount by which the value of professional sports franchises has increased since about 1990, when neoliberalism came to power and popularity, is incomprehensible. For instance, Jerry Reinsdorf & partners bought the White Sox in 1981 for the low, low price of $19M, and the Chicago Bulls in 1985 for $9.2M. Today, the White Sox are judged by Forbes to be worth $1.5 billion (only 14th in the league!) and the Bulls at $2.6 billion, 4th in the NBA.
Sure, the Bulls went from a championship-less franchise to internationally iconic by a decade after Reinsdorf’s purchase, but the White Sox, despite breaking their own championship drought, remain largely anonymous to the general public; the second team in the Second City. That’s a full $1.5 billion worth of anonymity.
I have to say, I don’t trust this focus on and subsequent explosion in ‘value’ in the least. It feels inflationary at best, and a massive indictment of the foundations of neoclassical economics and its notions of where value comes from at worst.
That said, rebuilding is a business model. The ‘worth’ of the Astros, for instance, more than DOUBLED from $800M in 2015 to $1.65B today. Sure, the rebuilding process takes a bit longer than that, but patience with a rebuild means gigantic profits for owners once they win it all.
This isn’t about neoliberalism, it’s about the quality and cultural dominance of television over the same period, combined with sports’ emergence as the preeminent TV product.
Comparing the methodology for selling baseball in the 1980s to today makes it very clear where all that extra money is coming from.
What gibberish: a trophy asset going up in value while it’s annual operating performance is mediocre is “a massive indictment of the foundations of neoclassical economics “? Good god, where do they teach this stuff? Lol. Next time, just ask Timprov: he has the right answer.
And rebuilding is a baseball model. It’s how you get sustained winning.
this is just nonsense.
What’s not clear here is whether the numbers include interest payments, and how much debt Braves’ ownership took on to get into their new, suburban ballpark.
Also, I’m not sure it’s accurate to say “baseball is booming” given the total attendance numbers this past year (down 3M paid).
In any case, to judge whether the team is truly profitable you have to look at what the owners could have earned if they’d cashed in their chips ($1.625B, if Forbes’s guesstimates are in the ballpark) and invested the money elsewhere. That’s their “opportunity cost,” and it’s the ruler against which to measure these “piles of cash.”
Congress should mandate complete financial disclosure of each MLB team as part of the deal allowing them to maintain their anti trust exemption. I Wonder how many free tickets (not bleacher seats) members of Congress are given.
As for the Braves I would be interested in knowing how much tax they pay on that 100 million. Probably zip.
It’s not “the Braves.” It’s Liberty Media. And since they tell me that Sirius XM lost money, probably not as much as you would like and far more than I would like.
I don’t understand all the people so empathetic to major leaguers wallets while the player union continually doesn’t give a shit about minor leaguers and amateur players. I understand they’re not in the union. But the people who say they’re pro-labor and support major league players struggle for a larger share of revenue are also supporters of very wealthy people turning their backs on many people taking home wages that are below minimum wage. This leaves me so callus towards players and owners revenue split. My honest opinion is fuck major leaguers compensation, if they don’t have empathy for minor leaguers, I’m not gonna lose sleep if big leaguers take a pay cut.
I understand your sentiment- albeit with unfortunate use of vulgarity. Sports operate in an extreme of the entertainment model. A broad compensation pyramid with those attaining the top receiving compensation that often seems insane. But that’s how people decide to spend their entertainment dollars and fund the model. It is indeed the ultimate capitalist model. It comes down to the owners deciding if the current pursuit of a dream and minimal compensation are enough to keep the pipeline flowing. Generally players have less interest in the model’s long term health. In the case of baseball it’s bifurcated by the U.S. college system (where top athletes can get education costs reduced or eliminated) and the lower minor league system. You point out the lower minor league system is harsh for marginal athletes with a slight chance of making “the show”. I suspect their pursuit of a dream is similar to writers, dancers, actors, etc.