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by deepzn
1188 days ago
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Sports teams' value is based on the brand. In terms of operations, they actually lose money for the most part, or it's not that profitable. I saw an interview with the Bucks owner Marc Lasry, who recently is selling his stake in the Bucks. The average NBA brand like the Bucks is worth around $3B right now. He bought his stake in 2011 for 150-300M. |
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"Anyone who quotes profits of a baseball club is missing the point. Under generally accepted accounting principles, I can turn a $4 million profit into a $2 million loss, and I can get every national accounting firm to agree with me."
There are all kinds of financial tricks one can play. I'm a baseball fan, so I'm going to lean on that sport, but I assume other sports do similar things. Let's say you are the Red Sox. Your parent company also owns 80% of the regional sports network (NESN) that broadcasts the bulk of your games. If you sell that TV contract to NESN for $1, then you just "lost" a hell of a lot of money. Except that money isn't lost at all. It just moves from the right pocket to the left pocket. Same thing with parking cars. Just start an external company to park the cars. Profits go to the company, not the team.
That's the real crux of the problem. Revenue not generated by the team isn't counted toward profitability. That's why most sports teams are advocating for mixed-use facilities. All of the profits from the surrounding businesses go to the owners, but are not reported on the teams financial books. This explains why the Red Sox and Cubs are investing so heavily in real estate around the stadiums instead of say locking up Betts, Bogaerts, and Devers to build a core around which to build. Or why the A's are balking at renovating their current location in Oakland instead of getting new land to build a mixed-use facility.
Then you see the expanded playoffs. Playoff games are sold as a separate TV deal, and all money (in baseball at least) is divided equally between the teams. It doesn't matter if your team is good or not, the owners share in bounty. The modern sports franchise sees profits independent of on-the-field performance. Separating revenue streams from the team itself means that you can paint a bleaker financial picture that isn't tied to reality.
A few teams (Packers and Braves) are public. Look at their financial accounts. Again, lots of legal (and commonly used) accounting practices will obfuscate the picture a bit, but these teams serve as a blue print for what is actually happening. The financial situation is never as bad as they say. Well, there have been a few exceptions like the Dodgers under McCourt or the Rangers at the end of the Hicks era.
I could keep going, but I'll end with this. Owners lie. The Cubs said they were facing biblical losses[2]. Yet, the same family was considering purchasing Chelasea FC. So much for being poor. More than just lying, the owners expect their colleagues to adhere to this lie. MLB owners are already angry with Cohen and the Mets [3] (I'd lump the Padres in here as well). Read the quotes from unnamed sources. The owners can afford to raise payrolls, but they don't want to. The party line is to cry poor. Owners who step out of line will face some sort of fallout from this.
[1] - https://www.cbssports.com/mlb/news/why-small-market-excuses-... [2] - https://www.forbes.com/sites/danschlossberg/2020/06/03/cubs-... [3] - https://www.cbssports.com/mlb/news/mets-offseason-already-ha...