What the Braves Can Tell Us About MLB’s Financial Losses in 2020
Losses have come to dominate the narrative when it comes to baseball finances over the past year as the world has struggled to deal with the COVID-19 pandemic. With just a 60-game schedule and no fans in the stands during the regular season, revenues dropped precipitously. The losses have been called “historic” and “devastating” by commissioner Rob Manfred and “biblical” by Cubs owner Tom Ricketts. Separating hyperbole from reality is difficult when there is little concrete information to contest bald assertions from interested parties, and the refusal of those parties to divulge any of their info invites skepticism. As a result, we need to turn to the Braves, who are traded publicly and issue quarterly reports about their finances, to get a better sense of the picture league-wide.
This is not the first time we’ve taken a look at Atlanta’ finances, though 2020 represents a radically different year, with operating income (Adjusted OIBDA) totaling around $150 million in 2018 and ’19 combined. Before taking a broader look, let’s run through the third quarter, which includes July, August and September, aka the regular season. During this time, the team played 60 games, including 30 at home. Baseball revenue stood at $102 million, half that of what came in during the third quarter in 2019. Due to paying players pro-rated salaries and not having fans at games, expenses (which include the Battery development outside the park) also dropped, from $167 million to $104 million. If we assume that The Battery, with $8 million in third quarter revenue, is a breakeven proposition at the moment, that means that on an operating basis, the Braves’ turned a $6 million profit during the season despite having no fans in the seats. While MLB might claim teams lost money for every game played this season, the Braves are the only club with any amount of transparency regarding their finances, and they didn’t.
In 2018 and ’19, the Braves generated between $2.5 million (’18) and $2.7 million (’19) per regular-season game played. In 2020, that number fell to $1.7 million, though if you account for the decrease in spending, they made just as much money on a per-game basis this year as they did the year before. But before we start to account for the missing games, let’s first consider how that’s even possible.
The Braves’ baseball revenue principally comes from national and local television deals plus gate receipts. We know the last number is zero. We also know that in a normal season, Atlanta makes $83 million in local television revenue. If we pro-rate that number for the season that was just played, we end up at around $33 million, leaving around $69 million to come from MLB’s central office. Assuming every team received roughly the same amount, we are talking about $2 billion comprised mostly of national television revenue. That’s also roughly the amount players were paid this season, including playoffs and benefits. While we can’t know for sure, it certainly seems likely that adding a bunch of national games during the week on FOX and FS1, combined with the additional Wild Card broadcasts on ESPN, ABC, and TBS, meant that MLB made roughly as much on national television deals as it would have in a normal season, and that those figures alone paid for player salaries.
Three months is not an entire year, though, and once we factor in the other nine months, we can start to see how MLB lost money. In the second quarter of 2020 (April, May and June), the Braves’ baseball revenue totaled $5 million; that same period brought in $198 million in 2019. Expenses went down from $146 million to $37 million, and while that drop helps offset the losses some, there’s still a huge gap between those quarters. A change is not the same as a loss, however, as the second quarter of 2019 saw $62 million of operating income (Adjusted OIBDA). Comparing revenues and expenses, the Braves’ had just a $26 million loss in what would have been the first three months of the season. Add in the $6 million in gains during the actual season, and Atlanta ended up losing $20 million over that period.
That figure doesn’t square with Manfred’s claims of losses five times that high, but there’s more to it than that. The money a team makes in the regular season helps cover its losses during the winter. In the first quarter, the Braves were down $25 million, and while the fourth quarter of 2020 isn’t over, the last two years have seen them down a total of $34 million in those periods. So if we speculate an operating loss (Adjusted OIBDA) of $20 million for the rest of 2020, the Braves would have been down $65 million for the entire year, though that’s without accounting for the potentially tens of millions extra in tax benefits due to those unusual losses.
Here I should note I used adjusted OIBDA as that is the Braves’ preferred way to look at their operations. From their report:
“Liberty Media defines Adjusted OIBDA as operating income (loss) plus depreciation and amortization, stock-based compensation, separately reported litigation settlements, restructuring, acquisition and other related costs and impairment charges. Liberty Media believes Adjusted OIBDA is an important indicator of the operational strength and performance of its businesses by identifying those items that are not directly a reflection of each business’ performance or indicative of ongoing business trends.”
While depreciation serves to lessen the tax burden and strengthen owner claims of the sport not being profitable, it has little to do with a baseball team’s performance and is unique from depreciation generally. We could also include interest expense or income tax benefits, though for the Braves from 2017 to ’19, the two essentially cancel each other out.
The Braves losing around $65 million isn’t insignificant, and though the actual amount is likely smaller than that thanks to taxes, we can use that figure to extrapolate around the league. Since Atlanta has a slightly better than average local television deal and ran a slightly higher than average payroll last season, the team’s gains and losses should be pretty similar to the league as a whole. You might hear about teams that have lost a lot of money due to the importance of fans and attendance, but keep in mind, the Braves’ revenue was $262 million in 2016 — their last year in their old ballpark, with total attendance around two million fans. In the first three years of the new ballpark, they averaged 2.6 million fans and $409 million in revenue. Atlanta may have lost nearly $300 million in revenue compared to a year ago, but the team’s overall losses are likely to be less than a quarter of that amount.
There’s not much reason to think that the rest of baseball is doing any worse. The Braves don’t own a portion of their RSN like many other teams do, so they couldn’t recoup any of the losses to local television revenue. While there is certainly risk in owning a sports network, Sinclair — which owns or co-owns the networks broadcasting two-thirds of the teams in the majors — has indicated that any rebates received from teams will exceed those rebates paid to cable distributors and projects revenues will exceed expenses (adjusted EBITDA) by more than $850 million on their regional sports networks this year. As far as franchise value, stock in the Braves is down just 8% from where it was this time a year ago despite those huge losses in revenue. The recent sale of the Mets to Steve Cohen also speaks to the long-term optimism regarding the business of the sport.
Some teams might have lost more than the Braves and some teams might have lost less, but that doesn’t mean we should ignore prior gains. From the beginning of 2019 to the end of 2020, the Braves are down a total of just $11 million. Since the start of 2018, with the same fourth quarter assumption, they are up by a total of $83 million. If the Braves are like the rest of baseball, then MLB has generated around $2.5 billion in adjusted operating income over the last three years despite the pandemic and a shortened season.
Even if the Braves are a little better off than the rest of the sport, $2.5 billion is a heckuva cushion before MLB really starts operating at a deficit over the short term. The owners are welcome to keep their books closed, and they probably should, but their public claims of devastating losses don’t match up with the only verifiable financials out there. Losses are a story. They don’t need to be the story.
Craig Edwards can be found on twitter @craigjedwards.
It’s almost as if owning a major professional sports team is a risk-free money faucet for the ultra rich.
Not sure what your point is. US Stocks have been nearly “risk-free money faucets” (some big draw-downs but overall way positive) for all investors for 35 years. Commenters have shown here repeatedly that the 15 year return on the S&P has been about equal to the 15-year rise in MLB team values.
The point here is the Braves lost $100M this year ($65M if you only include operations as Craig does above). They lost both in the off-season when no revenues were coming in and during the season when revenues were coming in. Why? Attendance counts for 40% of revenue and then 62% of the regular season was eliminated. So owners lost 78% of revenues while players lost 62% of their pay. Yes, owners saved on ballpark expenses but game attendance is designed to turn a profit, so recouping their expenses only mitigates their losses.
As tomerafan points out below, multiplying Craig’s loss figure for the Braves of -$65M * 30 teams gives $1.95B league loss. Using -$100M loss figure which includes interest expenses, MLB lost $3B. Total league revenue in a normal year is $10.5B, so yes, a $3B loss could accurately be described as “historic” or “biblical.”
What you call “historic” or “biblical” is actually quite inconsequential.
Sure there was an operating loss this year overall but these are still immensely valuable commodities. If I owned a travel agency in Manhattan, I probably would have taken a loss this year but I could just sell the property and make a huge profit. If any MLB owner put their team up for sale right now, there’d be a line of suitors. Owning an MLB team truly is a risk free venture with all the revenue sharing and brand loyalty associated with sports teams.
I agree with your points, but would note that you can’t accurately describe anything as “biblical.” It’s an adjective without specific meaning other than “large-scale,” an equally non-specific but accurate term that lacks the hyperbolic character of “biblical.”
As Craig demonstrates, a one-year special circumstance has wiped out a couple of years’ worth of profits for baseball owners. There are owners in many pandemic-affected industries who would envy their circumstances.
And, of course, there’s the factor that nobody likes to see billionaires crying poormouth. These are temporary business setbacks for people who can easily afford the loss. There have been no reports of owners looking to bail out of the sport.
Net result: Little if any sympathy for owners. I think that was his point.
‘Biblical’ may be hyperbolic, but it does lend connotations to losses being mainly out of their control in this unusual circumstance. In this case, I don’t find it as damning and mischaracterizing of the league as it is likely an opportunity for easy criticism of the owners to disagree on the inconsequential rhetoric. This ado I find to be a luxury of sports reporters as they are aware of the readers’ natural inclination to agree against those they envy, inclining me to think a bias pervades when like articles surely should express solely the conditions of league matters relevant to the consumers. This shouldn’t be misconstrued as support for owners. As in tranquil times, they deserve little to no support at best as they have plenty of money to prop themselves up; however, there is a time and place, as these are, when we must refrain and hold some compassion.
In all, I fully understand the dislike, a sentiment abundant across sports, one I often agree with, of billionaire owners, and there shouldn’t be any care about their plights and maybe even laughs at their expense. It is our lot that we are fortunate the woe is about aspects finite and non-threatening surrounding this ‘freak’ circumstance allowing us to be so capricious towards them without consequences when they are letting us know they are hurt and that the cost-curtailing choices, potentially unfair to our favorite binkies and our entertainment, are needed. It is an irony that this hatred of ours forgets or fails to figure, as a child does to a parent, we are ultimately tied to the owners’ baseball endeavors and their willingness to keep spending their money. Our stakes give us this tolerance that we interpret as freedom to throw our support. And so we can dislike when it serves to further our parity to them. Only when it all comes crumbling down does it matters to care for the owners; to conserve our Baseball, what brings us together that we all love, that our interests truly align. So, in the fairness of this disaster, we should learn to be a little more compassionate to those that keep the sport alive as it is no fault of their own what we experience. We need them to have these rich, healthy bellies to keep overspending on this game so we can get the full benefits. Criticizing these gluttons in times of need for conservation is hypocritically failing to remember our own consumption of baseball.
Do you know about the “enter” button?
and to think baseball fans aren’t anything but conformists these days smh
was this disagreement just because it was not the consensus?
It really doesn’t surprise me that it was Ricketts who used the “biblical” term, because he certainly picked a bad time to start a regional sports TV network. Combine that with a highly paid team, and attendance normally over 3 mil a year, and you get some biblical losses. And it’s been widely reported that Ricketts took on a lot of debt with his Cubs purchase, so he was already under water even before the pandemic.
If it is true that team values rise at similar values as the S&P, that doesn’t much matter because the owners are leveraged and those expenses work into the liabilities side. Not to mention that the franchise value does not account for profits that the owner takes out of the franchise prior to sale. That’s way too simplistic. MLB ownership is basically like owning a bank that is too big to fail. Sports teams won’t ever lose large profits because it is way too easy to socialize losses and the public will always bail them out. If one “public” won’t, another will.
Why would team values be correlated to the S&P? Teams are ultra-rare commodities especially valued/prized by the uber-rich. With teams having sold in recent years we have seen the immense appreciation in values.
If you’ve gotta have one whatever the cost, and you’ve got the funding to do so, a price tag of $750MM isn’t going to scare you off even if it should “only” cost you $650MM based on some valuation model. There’s only 30 of those pricey baubles to be had after all, and if you won’t pay the piper some other dot-com magnate, sheik, or media conglomerate gladly will.
(Perhaps the Iron Sheik if we’re lucky.)
As the pandemic illustrates, nothing is truly risk-free.
Now I see why I get so many downvotes on some of my posts…we have people that view the world like this; unrealistic yet political.
These numbers actually validate what Manfred said. Now, one can argue whether Manfred is using the right metrics, and that’s an interesting topic of conversation. But what he said is that operating losses were between $2.8Bn and $3Bn. Operating losses would include interest expense on debt and exclude the tax benefit of the losses.
(Yes, there is a tax benefit to losses. There is also income tax to be paid in profitable years. Consistency is needed in considering the long-term economic model; those who have consistently looked to pre-tax operating income in profitable years should be consistent in loss years.)
It seems that your numbers above validate that the Braves operating losses were >$100M including interest expense. On a sample size of one, that hits Manfred’s point.
Again, that’s not to say that his measurement is the most accurate measurement of the short-term financial health of the sport, or of individual teams. I’m simply saying that these data points, in a sample size of one, seem to validate what he actually said.
Yeah, obviously teams are valued based on cash flows, and when sold are levered based on those cash flows. Not having the local revenue (~40%) will have an impact.
The problem is not that Manfred is pointing out losses, but that he’s framing it as the beginning of the end for baseball unless they gut the minors, enforce a salary cap, adopt an NBA playoff structure, and prevent games from going more than 10 innings
I’m assuming that typical MLB revenue pre-pandemic is somewhere around $10-11Bn, based on the last three years. Teams reportedly now have $8.3Bn of debt, collectively. And I would suspect that the debt is not evenly distributed but, rather, is concentrated, and I would suspect that some teams are carrying debt that is in excess of 100% or 150% of their full-year normal revenue. And those teams don’t expect “normal” revenue in 2021 because they don’t expect fans will return to ballparks for the full season. And they have no idea what the salary structure of the sport will be under the new CBA in 2022, the next time that league revenue might be back to “normal.”
No one needs to cry for the owners… but there is no doubt that these losses are historic in size and scope and are unprecedented in the history of the sport, and that it’s got to be really, really hard to develop a budget for a business when your industry lost $3Bn on operations in 2020, has no idea what top-line revenue will look like in 2021, and has no idea what the labor agreement will be in 2022 and beyond. End of baseball? Probably not. End of an owner or two, or maybe a source of dispute and fracture within an ownership group? Much more likely.
Imagine having an investment where you only have a calendar-year loss during a pandemic. Then again, the S&P 500 is up for the year.
To be fair, remove the big 5 tech companies and the S&P has barely moved this year.
Except that the S&P is the S&P because of the companies it includes; one wouldn’t ask how the Dodgers would fare without Seager, Bellinger, Kershaw, Buehler, and Betts
I would ask that, and it’d probably be about even with the Padres
“Remove all the good things and there’s only bad things!”
It’s inappropriate to compare valuations (which consider all future year anticipated cash flows) to single year operating results. They are related but it’s apples-oranges to compare directly.
The real question in my mind is why aren’t more media outlets pressing MLB, owners, and Manfred himself about their lies? It seems like eg Ricketts or Middleton claims outrageous things about their finances and they go unchallenged outside of things like this, that are largely servicing a market who knows owners are lying about everything anyway.
Middleton never said anything, Bill Madden incorrectly reported him as having said something, which the newspaper had to issue a correction over.
Why everyone is falling over themselves to believe the erroneous reporting of a known picket-crossing scab is beyond me. Bill Madden is an anti-labor dope and knowing him, he probably heard some $2 billion number and thought he could turn it into a sob story for owners without understanding what the number actually was.
OK, remove that particular example from the discourse and insert any other instance of owners claiming losses, because my comment is about that writ large.
Cool downvotes. Great discourse. You guys rule.
This commentariat is one of the most bizarre on the internet.
I mean, we already knew they were going to lose money. If anyone doubted that, they shouldn’t. The question was whether they were going to lose money per game played (e.g., they would lose more money over 55 games than 50). And I don’t think this helps us answer that question.
What would be more interesting is to look at how much each team likely lost in 2020 and then see if we can figure out how that will impact their behavior this offseason.
“The question was whether they were going to lose money per game played”
Why are we still talking about this?
Owners are selfish, not stupid.
The fact that they were trying to get less regular season games answered this question a long time ago.
While, it’s irrelevant for the time being, it won’t be when teams won’t be able to have one of the following things in March and April: (1) People in the stadium at all, (2) fewer people in the stadium, (3) the ability to project enough confidence to convince people to come to the stadium at anywhere near 2019 levels.
In any case, this question was not answered. The goal wasn’t just to get less regular season games. It was to get to the playoffs, where their profit margins were obviously much higher. And that creates considerable ambiguity.
The point is, these numbers aren’t detailed enough to answer the question that kicked this whole question off. Or if they are, I’m missing something.
(also, as long as we’re at it, I should say it’s also undeniably true that some owners lost money on a per game basis, and that was also clear before the season started; the question was whether owners collectively would lose money on a per-game basis. so from that perspective, having one team’s data is not necessarily that helpful, although with more detail we could figure out how it worked for one team and use that to inform the rest)
sadtrombone in Dec 2020: “we already knew they were going to lose money. If anyone doubted that, they shouldn’t.”
Craig Edwards in May 2020 (https://blogs.fangraphs.com/after-years-of-profits-mlb-owners-ask-players-to-subsidize-potential-losses/): “it is worth noting that the owners ON THE WHOLE [emph added] might break even or potentially profit if they stick to the deal agreed to in March, and pay players on a pro-rated basis.”
sadtrombone in May 2020 (in response to owners’ claims that they would lose money, in comments to this post: https://blogs.fangraphs.com/parsing-mlbs-claim-of-a-4-billion-loss/): “Every time the MLB says something like this, all my union ears hear is: If you’re this desperate, then we have way more leverage than you and we’re going to get something really, really good out of this.
“I think they’re probably lying, but if they really are this desperate let them prove it by showing what they’re willing to give up.”
So yeah. Everybody knew. We were all on the same page back then, and those of us who were proved conclusively wrong by subsequent events have no need to revisit their previous arguments. /snark
You also never mentioned the hundreds of millions of dollars worth of debt they are still having to pay off.
I feel like you think this is some “gotcha” comment but there’s no need to discuss it when Manfred’s own comments only refer to operating income which doesn’t care about interest expenses. This is an important note because if Manfred brings interest expense into the conversation, they then have to start discussing all of the tax benefits they create by taking a loss this season which hurts their “woe is me” narrative they are trying to create.
To be honest, a lot of this stuff is over my head, but to say the Braves only lost 65 million is flat out wrong.
Why?
Not sure I am following the math.
So it sounds like baseball revenue is normally roughly 400 MiO in a normal regular season (from the piece, 204 MiO for Q3, 198 MiO for Q2 based on quotes: “Baseball revenue stood at $102 million, half that of what came in during the third quarter in 2019”, “In the second quarter of 2020 (April, May and June), the Braves’ baseball revenue totaled $5 million; that same period brought in $198 million in 2019”).
And the piece also says 2020 baseball revenue for Q2 and Q3 was 5 MiO and 102 MiO respectively. So a loss of around 293 MiO in revenue for Q2/Q3, taking television into account – from the article
“The Braves’ baseball revenue principally comes from national and local television deals plus gate receipts”.
Also from the article, expenses for Q2 2020 were down 109 MiO (“Expenses went down from $146 million to $37 million”), and Q3 down 63 MiO (“Due to paying players pro-rated salaries and not having fans at games, expenses (which include the Battery development outside the park) also dropped, from $167 million to $104 million”)
So in the affected quarters revenue down 293 MiO, expenses down 172 MiO, so a loss of ~120 MiO for Q2/Q3.
So were expenses reduced by 100 MiO for the remainder of the year? Probably not in Q1 as was not clear until late in the quarter what the effect of the pandemic would be on the season.
I am sure I am missing something but not clear to me how what makes up the missing 100 MiO.
They were up 100 M in 2019 during that time so that plus-100 minus 120 is just the minus 20.
Still not quite following. For 2020 they are down 120 MiO, correct? Maybe I am dense but not seeing how 2019 factors in if all we are doing is determining the losses for 2020.
Part of the reason I ask is because I saw an ESPN article stating the Phillies lost 145 MiO for 2020 and it seemed high to me, but there was no supporting data as you have provided so hard to tell. But reading this it might be reasonable (higher payroll, no playoffs for the Phils).
Their adjusted operating income from 2019 went down about $120 million compared to where it was in 2019, which was roughly plus-100 million. The change resulted in them being down $20 million for those two periods.
As for the Phillies, the payrolls were only 10 million apart and local tv money was maybe $5 million different. The playoffs didn’t gain the Braves any money relative to the Phillies.
So did the lose 20 MiO in 2020 or did they lose 120 MiO? Not sure how “these two periods” or the 2019 operating income is relevant. The figures in your article seem to indicate that due to reductions in income partially offset by decreased expenses they lost 120 MiO for the year 2020.
If the 120 MiO loss is typical as it would seem to be then Manfreds claim of 2.8 to 3.0 billion in losses for the 30 MLB teams in 2020 is pretty plausible.
Add 15 MiO to the 120 MiO for the factors you mention and the Phillies claimed loss of 145 MiO is believable as well.
OK, I think I see now. There are other factors besides those in the revenues/expenses above that result in the true operating income. Factors presumably not changed by 2020s uniqueness that give income of +100 MiO/yr. Is this interest income, or investment income, or some other form of income? Maybe a combination of all of the above?
Sorry for the confusion, I am an engineer not accountant so it doesn’t get much more complicated then income = revenue – expenses for me.
Liberty Media as a whole totaled about $300M in operating profit for 3Q 2020 after accounting for the Formula 1 and Braves losses. Baseball teams don’t exist in a vacuum for any of their owners so why do we insist on treating them like they do? Many other businesses run divisions at a loss consistently because they have other, highly profitable divisions to offset those losses. Owners love to claim baseball teams are business so long as the reasons behind that claim benefit them.
The rules are ultimately different for incorporated and unincorporated entities. Corporations can indeed offset domestic income from one “division” against domestic losses from another. Unincorporated entities, such as LP structures common in sports franchise ownership, where the individual owners ultimately report their share of the income and pay the resulting tax on their personal tax return, do not ultimately provide the same treatment.
Feel free to dive deep into the passive activity rules of Internal Revenue Code Section 469 if you are having trouble sleeping tonight. But, generally, for individuals, losses from one trade or business cannot offset income from another unless the individual is “non-passive” (rough synonym: actively involved) with both businesses. It is a myth that real estate losses shelter other taxable income unless the individual is a “real estate professional,” and the courts have consistently held that being a real estate professional is virtually impossible if you hold another full-time job outside of real estate. (I’m oversimplifying. Passive income can be absorbed by nonpassive losses, just not the other way around. But I’m assuming the baseball owner is “nonpassive” in baseball, i.e. the loss-generating activity.)
Yeah, this is the thing I keep coming back to as well. I don’t think baseball ownership organizations are set up to just make money off of baseball anymore, and depending on what their other sources are could have either alleviated the loses or really doubled down on them.
For example, the Cubs owner saying the losses were “biblical” makes sense because – from my understanding – they used their past profits and leveraged the team for debt and bought up a bunch of the surrounding property in the area to develop and/or rent. I thought this was becoming a bit of trend with team owners (though off the top of my head only the Cardinals spring to mind as another example). And so you’d imagine an organization that was relying on a good chunk of their profit coming from things related to people coming near – but not in – the stadium taking a real bath in 2020. On the flipside, teams that make a good chunk of their profit by owning their RSN probably did ok.
Lots of people all over the world are having a very hard time, and being forced to make decisions that they otherwise wouldn’t of had to make. I feel for the minor leaguers, and for the fans of those minor leaguers. Tons of guys simply won’t get their shot, which for lack of a better word, sucks.
While clearly the owners lost money, the part that bothers people is they are using this as a reason to try and make large changes that they have wanted to do anyway, justified or not. You have to imagine this season will be slightly better than last year, but largely the same. Shortened, maybe 120 games or less, and fans only in select locations. The owners are likely expecting that as well. While I side with the players, it is sort of hard to blame the owners too much. They aren’t making the money they are expecting, and are unlikely to next year as well.
On a side note, expansion would help. C’mon Portland!
All the teams that relied on revenue sharing probably took a blood bath (and will next year as well as there is no revenue sharing for 2021). It seems odd in a piece about MLB revenues to not touch on this aspect. It’s why my Rays are talking about trading Snell and running <50M payroll. In every year except this one you can count on a big playoff revenue boost especially going to the WS. The Rays reported they lost money playing in the playoffs. I suspect the same for teams like MIA, OAK, and Milwaukee.
Also, keep in mind that the Braves took a hit from owning three of their full-season affiliates (Gwinnett, Mississippi, Rome).
Unless it happens several years in a row, it’s hard to feel sorry for owners. It’s not like it should be risk free and they’re still getting the equity growth.
Say I own a rental home. The house goes up in value and my tenant pays down the principal, maybe even pays enough to cash flow a few hundred bucks a month. If my tenant moves out and I can’t find renters for 9 months, that sucks for me but I’m still getting equity and over the long run it’s likely to work out assuming I can again find long term renters (and upkeep etc etc).
Happens all the time around the country. Happens with commercial real estate. Similar things happen in all kinds of areas of business and none are as protected (anti trust exemption, blatant collusion, etc) as owning a MLB franchise and I bet most aren’t as fun.
I don’t think anyone is arguing that they should always turn a profit, merely, that when payroll decreases league-wide pointing to “selfish billionaires” or whatever flavor of derision suits ones tastes belies fiduciary reality. When the players complain and the CBA comes up we’ll see real fireworks and people will go on about owners not losing anything when in reality they did and the players will have to bear this brunt as well.
We’ll see if the players try and have the cake and eat it too this year and next.
I hope they do. The players are the value. It’s not like teams can outsource or automated their labor expense like other businesses.
But like you suggested, I probably have a bias due to my political inclination.
“the players are the value”
Not really. I would argue most baseball fans are more loyal to a team than they are any player.
There’s a simple way to test if “the players are the value”: let them play pickup games in a local park and sell tickets… let’s see how much they make relative to what they make now.
“that sucks for me but I’m still getting equity”
That’s the wrong way to look at it. If you know you are not going to have renters, it is wiser to allocate your capital elsewhere – which is probably what a lot of baseball owners are doing.
“There’s not much reason to think that the rest of baseball is doing any worse.”
I have to disagree here. Without revenue sharing, smaller market teams are almost certainly worse off.
This is fantastic, Craig. Very well done.
Excellent article.
A major problem, however, is that this situation is not going to change much in the foreseeable future . These same owners/teams that lost money are more than likely going to take another hit this year. This mindset, alone, will depress the market.
To simplify: if Chicago stays shutdown, then the Cubs won’t make money. These decisions are unrelated to the Cubs and baseball, but they will impact the Cubs and baseball (as a whole).
Not owning the RSN is actually what saved them, not hurt them. TV revenues were cut harshly due to the reduction in games and national TV payouts. There were also a lot less advertising dollars earned from the network, and a significant loss of overall fan engagement (so less money made on merchandise also).
https://www.forbes.com/sites/mikevorhaus/2020/07/27/advertising-revenues-projected-to-decline-in-2020-worldwide/?sh=29f6eac32fcf
I agree with most of the article, including the guess that the Braves are near the midpoint of league losses. However, I would estimate that all of the teams that lost more than the Braves are the teams that normally have enormous TV and merchandise streams, like the Cubs. And the teams that never really had good media operations anyway (or had no ties to TV) were hurt a lot less, like the Royals, Braves, Rays, Marlins, etc…
Revenue sharing is a factor too, since the revenue sharing payouts are based on “official” TV revenues, not owned TV revenues. So again, Braves benefit more than teams that were relying on significant off-book revenues, because a smaller percentage of total revenue was lost.
And this is a non-sequitur but I would also guess that when MLB is announcing their total losses they are including the off-book losses from TV and other things that they have conveniently excluded in the past.
I am of course just speculating, but I work in finance, and estimating financial values are what I do all the time!