This is the 21st rendition of our MLB valuations. The New York Yankees have been baseball’s most valuable team (worth $4.0 billion) every year.
The gap between No. 1 and No. 2 is the same as the gap between No. 2 and No. 7. The Yankees are truly in a world of their own among the 30 MLB franchises.
Short explanation: The Bronx Bombers generate by far the most revenue–$619 million last season. The value of the Yankees has compounded annually at 15% since a group led by George Steinbrenner paid $8.8 million for the team in 1973. (Full disclosure: I am Managing Editor and co-host with Bob Lorenz of the Forbes SportsMoney television show that airs on the YES Network, FS1 and several Fox regional sports networks).
But the appreciation of the Yankees is not the best example of the breadth of baseball’s rising tide. That distinction belongs to the Miami Marlins, the team that is the exact opposite of the Yankees. The Marlins are tied with the Tampa Bay Rays for last in baseball with $219 million in revenue, lose a lot of money and have trouble drawing fans. Yet a group led by Bruce Sherman paid $1.2 billion for the team in October. That works out to a 14% annual increase from the $158 million outgoing owner Jeff Loria paid for the team in 2002.
The math becomes more challenging as prices increase. Our numbers show the average MLB team is worth $1.645 billion, 7% more than last year. Average revenue and operating income (earnings before interest, taxes, depreciation and amortization) for MLB’s 30 teams were $315 million and $29 million, respectively, for the 2017 season. Revenue was up 4.7% from 2016 mainly due to more television, premium seating and sponsorship money. Meanwhile, operating income was down 17% primarily because of more spending on marketing, player development and analytics.
Teams fall into four distinct groups:
The Yankees sit in their own group because they generate almost 20% more revenue than any other baseball team. The second group–Dodgers ($3 billion), Cubs ($2.9 billion), Giants ($2.85 billion), Red Sox ($2.8 billion)—are teams in big cities with very strong brands that transcend their markets.
The third group, with 11 teams—starting with the Mets ($2.1 billion) and ending with the Blue Jays ($1.35 billion)—includes teams missing at least one key attribute (new ballpark, on-field performance, market size, management) possessed by teams in the second group. But these teams have a shot at creating bigger brands and joining the second group if they can fill their holes.
The fourth group includes everyone else, beginning with the Padres ($1.27 billion) and ending with the Tampa Bay Rays ($900 million). These teams typically are hampered by at least two of the following: small or indifferent market, old ballpark, bad management. These team will never rise into the second group.
If you are surprised by our $1 billion valuation of the Miami Marlins given the team sold for $1.2 billion in October, here’s our explanation: The Sherman-led group made the only formal offer for the team and no other group with money was prepared to pay over $1 billion for the team.
But given Rob Manfred’s work since becoming commissioner of MLB three years ago, the Marlins could be worth more than $1.2 billion at some point. By doing new things like the Facebook streaming deal and the game in Williamsport between the Pirates and Cardinals, Manfred has sparked more interest in younger fans and brought buzz back to the game. Manfred also worked incredibly hard behind the scenes to make sure the new owners of the Marlins fortified their balance sheet with more cash than they needed to buy the team, and reducing the amount of preferred equity (really debt for all practical purposes) Sherman wanted to use. As a result, CEO Derek Jeter has more skin in the game than he originally wanted.
Team values are enterprise values (equity plus net debt) that include the economics of the ballpark but exclude the value of real estate itself. We also do not include the value of team-owned regional sports networks. The league’s ownership in Major League Baseball Advanced Media (100%) and the MLB Network (67%) and league’s investment portfolio are included in our values. In total, these three assets constitute about $425 million in value for each team.
Revenue and operating income (earnings before interest, taxes, depreciation and amortization) measure cash in versus cash out (not accrual accounting) for the 2017 season. Our figures include the postseason and are net of revenue sharing and stadium debt payments. Revenues include the pro-rated upfront bonuses networks pay teams as well as proceeds from non-MLB events at the ballpark. The non-recurring $18 million each team received in 2017 from the sale of a stake in BamTech to Walt Disney was excluded, as were profits or losses from team-owned RSNs.
To compile our figures, we speak with sports bankers, team executives and industry analysts. We review team documents and stadium leases to the extent we can get our hands on them.
Follow me on Twitter @MikeOzanian