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.

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TKDC
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TKDC

It’s almost as if owning a major professional sports team is a risk-free money faucet for the ultra rich.

Shalesh
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Shalesh

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.”

RMD4
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RMD4

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.

Alby
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Alby

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.

DangerfieldFoghorns
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DangerfieldFoghorns

‘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.

ba5000
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ba5000

Do you know about the “enter” button?

DangerfieldFoghorns
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DangerfieldFoghorns

and to think baseball fans aren’t anything but conformists these days smh

was this disagreement just because it was not the consensus?

Bob Warja
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Bob Warja

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.

TKDC
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TKDC

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.

Jason B
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Jason B

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.)

Alby
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Alby

As the pandemic illustrates, nothing is truly risk-free.

opinionatedfan
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opinionatedfan

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.