The television rights party in baseball continues to boost team values. Bottom line: the average MLB team is now worth $811 million, 9% more than last year. For the first time there are five teams--each with lucrative deals with regional sports networks--worth at least $1 billion.
The increase in team values is more than double the 4.4% gain in average revenue per team, to $237 million last season, because new local television deals for the Los Angeles Dodgers ($8.35 billion, 25 years) and Seattle Mariners ($2.5 billion, 18 years) begin this season, while the Philadelphia Phillies' new cable pact ($5 billion, 25 years) begins with the 2016 season.
Forbes team values are enterprise values (debt plus equity) and include completed television deals that begin in the future, but exclude the equity interests in other assets the team may own, such as regional sports networks or concession businesses. Revenues and operating income figures include all revenue and expenses for each team and its stadium where applicable.
The New York Yankees, worth $2.5 billion, are baseball's most valuable team, as they have been each of the 17 years Forbes has compiled this scorecard. The only other U.S. sports team worth more than $2 billion is the Dallas Cowboys ($2.3 billion) of the NFL. Including the annual average of the $400 million upfront payment the team got for agreeing to sell its controlling stake in the YES Network (full disclosure: I am co-host of the RSN's Forbes SportsMoney show) to News Corp (now 21st Century Fox), the team raked in over $100 million in cable money last season, by far the most in baseball.
Even after kicking in $95 million towards the league's 34% local revenue sharing pool and their $64 million PILOT bond payments for Yankee Stadium last season, the Bronx Bombers led the league in revenue ($461 million). But there is clearly pressure on the Yankees to regain their form on their diamond: the team finished in fourth place in the AL East last season and missed the postseason for only the second time since 1994. A drop in ticket revenue last season resulted in overall revenue falling by $10 million from 2012, and in November Moody's lowered their outlook on the bonds from positive to stable, while leaving its investment grade rating unchanged.
The Dodgers place second on our list with a value of $2 billion. The team inked an $8.35 billion, 25-year television deal with Time Warner Cable that was signed off on by MLB earlier this year and begins with the 2014 season. Although SportsNet LA, the new RSN created to televise Dodger games, is not available yet in over two-thirds of the team's television market, TWC will pay a total of $210 million to the Dodgers this year--$84 million as a "rights fee" and $126 million for the "value" of the RSN, including a branding fee.
The TWC deal justifies the $2 billion paid by Guggenheim Partners for the Dodgers two years ago, although the team will not keep as much of its television bounty as it wanted. The Dodgers argued with MLB that only the rights fee portion of the deal, which increases at a 4% annual rate, should be subject to the league's 34% revenue-sharing system. Baseball argued that a precedent had been set at the time of the Texas Rangers new cable deal and that because TWC has assumed most of the risk around the channel and promised to cover affiliate fees from distributors who refuse to carry it, all of the money should be subject to revenue sharing. A compromise was reached whereby roughly half of the RSN "value" payment--$1.9 billion in total--will be included in MLB's revenue-sharing pool.
No surprise that the Dodgers ($235 million) and Yankees ($204 million) have by far the biggest 2014 opening day payrolls.
The remaining members of the billion-dollar club are the world champion Boston Red Sox ($1.5 billion), Chicago Cubs ($1.2 billion) and San Francisco Giants ($1 billion).
Full List: Baseball Team Values
Special Report: The Business Of Baseball 2014
The Red Sox own 80% of NESN, the RSN that paid the team over $65 million in rights fees last season. The Cubs, who own 25% of Comcast SportsNet Chicago, raked in $60 million in local television money from the RSN and broadcaster WGN combined. WGN's deal with the Cubs expires after this season while its pact with CSN Chicago runs through 2019. Two different end dates makes a new deal complicated, but sports banker Scott Milleisen of JPMorgan believes the Cubs are in line for a television rights fee package worth an average of around $200 million a year given the Philadelphia Phillies recently came to terms on a 25-year, $5 billion deal with Comcast SportsNet Philadelphia that will begin in 2016. The Giants, meanwhile, have an innovative television deal with CSN Bay Area that gives the team a cut of the RSN's advertising revenue and a 30% stake in the network. With the team's television ratings up, after winning the World Series in 2010 and 2012, the Giants pulled in over $65 million in local television money last year.
Only three teams fell in value over the past year: the New York Mets, Houston Astros and Miami Marlins. The Mets, down 1% to $800 million, are still going through a period of austerity with an $85 million payroll after the Bernie Madoff debacle. Attendance at Citi Field has fallen for five consecutive years. The team refinanced $250 million of debt and is no longer taking on water under the leadership of GM Sandy Alderson. The big calamities are the Marlins (down 4% to $500 million) and Astros (down 15% to $530 million). After taxpayers built the Marlins a new ballpark, the team punished them by putting a shoddy product on the field. No wonder attendance collapsed last season despite one of the cheapest big-market ticket prices in baseball. The Astros' RSN, Comcast SportsNet Houston, was placed in bankruptcy protection in February. As a result, the Astros received only $29 million of the $56 million in rights fees due from the RSN.
Heading into this season the Marlins and Astros field baseball's lowest payrolls ($48 million and $45 million, respectively), with both teams more than $50 million below the league median payroll of $105 million.
MLB's average operating income (earnings before interest, taxes, depreciation and amortization) fell 26% in 2013 to $9.7 million per team, from $13.1 million the previous year. But that is nothing to be alarmed about. Remember: the name of the game is to upload as much revenue as possible to the team's holding company and download as much expenses as possible from the parent company to the team. Moreover, baseball's new national television deals with Fox, TBS and ESPN, which begin this season, are worth a combined $1.55 billion a year--twice as much as the previous deals.
The players are also cashing in on baseball's gusher of television money. On opening day, the average salary is projected to be between $3.95 million and $4 million, with the final figure depending on how many players are put on the disabled list by the time opening-day rosters are finalized at 3 p.m. Sunday. That translates to a rise of 8% to 10% from last year's opening average of $3.65 million, and would be the largest increase since 2006, or possibly even 2001.
According to baseball executives, when Bud Selig became commissioner he told the owners he wanted to be judged by how team values increased during his tenure. Now in the last season of his 22-year run, we give Selig his final scorecard. Selig, who became baseball's interim commissioner in 1992 and took the helm full-time six years later, is retiring in January. How did he do?
In 1992, the average baseball team was worth $110 million, according to the Economic History of Major League Baseball, meaning team values have increased seven-fold, or at a 9.8% compound annual rate since Selig became interim boss. Since 1992, the S&P 500 stock index rose at a 7.1% (9.2% with dividends reinvested into the index) annualized rate. After adjusting for inflation, team values increased at a faster clip under Selig than any of baseball commissioner who served at least five years, save Kenesaw Mountain Landis.
What at about the other sports? Using team values published by my former employer, Financial World, the average NFL team value was $129 million in 1992 compared with $1.17 billion today. Football's 10.5% annual rate of return beats Bud. But the NBA and NHL fall short. The average basketball team has increased at an 8.8% annualized rate since 1992, to $634 million. Hockey team values have increased 9.1% annually, to an average of $413 million.
That's a pretty darn good scorecard to depart with, commissioner.
