Sports biz: Wheeling, dealing and winning
The 1970s “Saturday Night Live” character Chico Escuela, played by comedian Garrett Morris, was best known for a signature line delivered in halting English: “Baseball” – or beisbol, as he pronounced it – “has been very, very good to me.”
As far as I know, none of the owners of the Colorado Rockies makes a habit of mimicking Morris’ exaggerated Dominican accent. But thanks to some savvy wheeling and dealing by Major League Baseball, the same expression applies to all of them today.
Led by CEO Richard Monfort, the Rockies’ ownership group has benefitted mightily from membership in the exclusive 30-team collective that is Major League Baseball. Independent of win-loss records, pitching ERAs, clever promotions and stirring fireworks displays, the Rockies owners have watched their team values soar as huge TV rights increases, handsome investment returns and the rising success of an advanced media operation have inflated revenues and economic valuations.
The latest “Business of Baseball” report from Forbes magazine reflects the shared contributions of these resources. When the Oakland Athletics see their market valuation soar by 46 percent in the space of a year, you know somebody’s at the top of his economic game. (OK, they made the postseason, but still, I’ve been to that ballpark, and it’s not exactly palatial.)
Here’s what’s happening. Teams like the Rockies still depend on live ballpark attendance, concession sales, merchandise sales and local media rights deals for most of their revenue. So to a large extent, they’re responsible for their own economic destiny. What’s changed are the shared revenue sources that every team gets to enjoy, regardless of whether the bats go silent or the hot dogs go unsold.
At the top of this list is a new national TV rights agreement that kicks in next season. Taking advantage of a competitive market among national television channels, MLB negotiated deals with Fox, ESPN and TBS that will bring in $12.4 billion over the next eight seasons. That’s double the amount from a previous rights deal. Most of the proceeds are shared equally by teams.
That’s not all. A rising star in baseball is the league’s Advanced Media unit, which is way ahead of other major professional sports leagues in exploiting the new possibilities of digital media. I’m one of the millions of subscribers who pays $99 or more per season for live online streaming of every out-of-market regular-season MLB game (the Rockies are excluded locally), which is why my daytime productivity tends to suffer from April through September. Last year MLB Advanced Media generated $650 million in revenue, Forbes reports. Again, most of that gets distributed evenly among teams.
Together, these shared revenue contributors deliver more than $40 million a year in revenue per team after accounting for league funds. In the case of the Rox, $40 million is equal to roughly one-fifth of the team’s total annual revenue, which Forbes estimates at $199 million (a figure Monfort told the Denver Post was “more than a little high.”) Before the opening pitch of any season between next year and 2021, the Rockies can book the equivalent of $50,000 in revenue per home game, whether anybody shows up or not.
The kicker is an added net worth boost from an investment fund maintained by MLB on behalf of its teams that has generated handsome returns, inflating the book value of individual teams.
The scoreboard shows every MLB team was a winner last year. Thanks in part to MLB’s contributions, average team value – what Forbes calculates as the amount a team could fetch in an open market sale – rose by 23 percent. And the eye-popping $2 billion paid for the Los Angeles Dodgers by an investment group underscores the possibilities of major market values.
The Rockies, of course, won’t come close to that amount, but the team did enjoy an estimated increase in value last year – a terrible season on the field – of 16 percent, elevating the team’s estimated worth to $587 million, 25th out of 30 teams. Like we said, baseball has been very, very good to the Rockies.
Oops! Reader Andy Blumenthal pointed out an error in a column about a decline in snowboarding’s popularity: There is no “Powder Keg” ski trail at Copper Mountain. My bad.