What the Braves Can Tell Us About MLB’s Financial Losses in 2020 by Craig Edwards December 1, 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.