NEWSLETTER
With the postseason coming to a close and the financial state of the game squarely under the microscope, we’ve now got a baseline for how MLB says it did in 2020: terribly.
Per The Athletic, MLB says its teams collectively lost $3.1 billion in 2020:
MLB owners lay off hundreds as revenues plummet, drastically changing the sport https://t.co/YqcLdSrj6G
— Evan Drellich (@EvanDrellich) October 26, 2020
A combination of forces has motivated the owners to cut costs, none greater than MLB’s operating losses in a pandemic-shortened 2020 season. According to an MLB official, the league lost $3.1 billion in this pandemic-shortened season, and their EBITDA — earnings before interest, taxes, depreciation and amortization — showed a loss of $2.7 billion. MLB’s underlying financial numbers are closely guarded, making independent verification virtually impossible. The figures never include the money owners make from ancillary revenues, such as their stake in regional sports networks, for those who have one.
That would amount to around $100 million per club in losses this year, and tracks with earlier reporting that the Cubs lost $140 million in 2020. It’s easy enough to say that billionaire owners should simply absorb those losses and continue on business as usual, but (1) that isn’t realistic, (2) that doesn’t take into account cash flow, and (3) that doesn’t consider projected losses for next year, about which no one has any real idea. There’s also the fact that, while many owners have related and ancillary businesses (physical developments, regional sports networks, etc.), those businesses probably also had brutally bad years.
The other side of the coin: There’s always some play in those numbers, so you have to take it with a grain of salt. Also, as the Mets sale shows, MLB franchises still have absolutely massive valuations. So a $100 million loss in a given year might be more than made up in appreciation of the asset. Moreover, the recent long-term national TV contracts indicate outsiders are still betting, long-term, on the health of this sport. Plus, not every year comes with a massive loss – to the contrary, revenues have exploded over the last decade. It’s not as if lots of businesses weren’t hit hard this year, and getting through the next 18 months without cutting too dramatically could wind up being a smart investment in the future success of your organization.
All that is to say: yes, I think it’s probably accurate that this year was terrible for the business of baseball, and next year might look ugly, too. However, the long-term health of the sport is probably still pretty strong, so the pandemic shouldn’t excuse any outrageous spending cuts throughout the sport. Some cuts? Yes. It’s going to happen. Cutting to the bone? No. Teams should not be given a pass for doing that.
(This feels like an appropriate time to remind folks that the Collective Bargaining Agreement runs through next year. How on earth are they going to negotiate that thing after two brutal years of losses? Oof.)
