Annually, the Forbes “Business of Baseball” reveal is one of the bigger pre-season events. How much is each franchise worth? How much revenue did they bring in last year? How much debt do they carry? Which teams shifted in which direction? Forbes has just released its iteration for this year, and it’s full of interesting – albeit estimated – data points.
The timing is particularly interesting, given last week’s large financial piece on the Cubs here at BN. For that reason, there aren’t really any huge surprises in Forbes’ piece – as far as the Cubs are concerned, anyway – but it’s still interesting to see the overlaps, if nothing else. There are also a number of interesting bits from around baseball.
- The Cubs’ franchise value comes in at $1.2 billion, a healthy bump over last year’s $1 billion mark. Why the increase, despite reduced revenue, political headaches, and a deep rebuild? Well, the best guess here is that Forbes is pricing in the anticipated dramatic increases in revenue that are coming soon. The TV deal market, in particular, has burgeoned even further in the last year. Also, you just have general appreciation in the baseball market.
- The Cubs’ revenues for 2013 are estimated at just $266 million, which is a decrease from its 2012 estimate of $274 million (and is dramatically lower than Bloomberg’s $320 million estimate for 2013). The Cubs’ “operating income”, therefore, shrunk to $27.3 million. Recall, “operating income” is not “profit” – it is earnings before interest, taxes, depreciation and amortization. For the Cubs, that figure has to be high enough to cover their debt service payments (currently $30 to $35 million) and to stay in the good graces of MLB’s Debt Service rule. All things consider, given the estimating involved, the Forbes figure lines up pretty closely with what you’d expect to see. Perhaps the Ricketts Family had to go out of pocket slightly to cover the Cubs’ debt service payments in 2013, or perhaps Forbes is a little light on the operating income figure.
- In case you needed any further evidence that “operating income” is not the same thing as profit: the Yankees had an operating income of negative $9.1 million in 2013, according to Forbes. And, unless you labor under the obscene misapprehension that the Yankees are losing money, you know that these figures do not tell the whole financial story.
- Interestingly, the Cardinals had 2013 revenue of $283 million and operating income of $65.2 million according to Forbes. And yet I don’t suspect we’ll see too many stories emanating out of St. Louis about its money-grubbing owners who merely want to pocket profits. (And, to be clear, I’m not saying that either: the Cardinals, like the Cubs, have fairly substantial debt to service, and could have a number of other one-time expenses into which they’re putting that operating income)
- The more important point in that last bullet is the revenue: the Cardinals brought in more of it than the Cubs last year. Obviously the Cardinals deserved every dollar they brought in last year, but the point adds further color to idea that the Cubs – currently – aren’t raking it in as impressively as some would have you believe.
- Indeed, many teams you might not expect were right there with the Cubs in revenue, or much higher: Yankees ($461M), Dodgers ($293M), Red Sox ($357M), Giants ($316M), Phillies ($265M), Rangers ($257M), Angels ($253M), and Braves ($253M). Together with the Cubs and Cardinals, that’s a full 1/3 of the league that was in the $250 million+ revenue range. Some day, the Cubs will be able to exercise a revenue advantage over most other teams, but that day absolutely not today.
- After years of listing the Cubs’ debt at $580 million, Forbes now has the figure at $420 million (I reported it as $425 million, for purposes of MLB’s Debt Service Rule). My understanding is that the debt has not been paid down in a significant way since the original Tribune Company transaction in 2009 (although it has been refinanced), so I believe what we’re seeing is a recharacterization – from Forbes’ perspective – of some of the Cubs’ debt that is held by the Ricketts Family Trust. As I wrote last week, that debt, unlike bank debt, is favorable to the Cubs, and doesn’t really drive any of the financial issues in which folks are interested.