More Than A Pastime: MLB Franchise Values Continue To Set Records

Author

Michael Beach
July 30, 2020

Blue light special: Some economists predict that the value of baseball franchises could drop by as much as 20%!

The bull case for increasing franchise values: The average Major League Baseball franchise increased by 4% YoY to $1.9B!

MLB franchise value (YoY growth) according to Forbes:
1) 2018 – $1.65B
2) 2019 – $1.78B (↑ 8%)
3) 2020 – $1.85B (↑ 4%)

Top five MLB franchises by value (YoY growth):
1) New York Yankees – $5.0B (↑ 9%)
2) Los Angeles Dodgers – $3.4B (↑ 3%)
3) Boston Red Sox – $3.3B (↑ 3%)
4) Chicago Cubs – $3.2B (↑ 3%)
5) San Francisco Giants – $3.1B (↑ 3%)

The bear case for increasing franchise values: The current sale of the New York Mets could be the canary in the coal mine.

Bids by Steve Cohen for the New York Mets (% change):
1) Feb-2020 – $2.6B
2) Jul-2020 – $2.0B (↓ 23%)

Quote from Marc Ganis – President @ Sportscorp Ltd:“Baseball team values are a question mark.  There’s always been a gap between what somebody who is selling thinks a team is worth and somebody who might be buying thinks it’s worth. That gap is greater today. There’s an expectation among prospective buyers that there’s a meaningful reduction in value across the board.” 

Bottom line: The Ricketts family purchased the Chicago Cubs during the 2009 financial crisis for a then-record of $700M.  That franchise is now worth $3.2B!

Growth comparison between 2009 and today:
1) S&P 500 (minus dividends) – ≈ 2.5X
2) Chicago Cubs – 4.6X

Big question #1: What is driving this increase in franchise value?

Quick answer: Total revenue and profits are growing despite a drop in both attendance and TV viewership.

Total revenue (YoY growth) for Major League Baseball:
1) 1992 – $1.2B
2) 2007 – $6.1B
3) 2018 – $10.3B
4) 2019 – $10.5B (↑ 3%)

Average team profit (YoY growth) for Major League Baseball:
1) 2017 – $29M
2) 2018 – $40M (↑ 27%)
3) 2019 – $50M (↑ 25%)

Big question #2: How does Major League Baseball make money?

Source of revenue for Major League Baseball:
1) Game Day – $4.1B (39%)
2) National – $3.1B (29%)
3) Local Media – $2.2B (21%)
4) Sponsorship – $1.1B (11%)

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