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June 18, 2012

Bizball

How Every Club in MLB is Getting Rich, Thanks to Television

by Maury Brown

It would be disingenuous to say owners in MLB are doing “nothing” and getting rich. But, by default, they are. Whether it’s indirectly or through media rights deals, from the top to the bottom, each ownership is going to eventually land on a pile of greenbacks.

Case in point: the San Diego Padres. Current owner John Moores has been trying to unload the club for years now, a nasty side-effect of community property laws in California and a divorce from his wife. When the deal with Jeff Moorad fell through, it actually worked to Moores’ advantage.

As early as this week, the sale of the Padres is expected to happen. Using an “auction-like” process, the club will go for between $600-$700 million. Throw in $200 million in up-front money for having a 20 percent ownership stake in a new television deal with FOX Sports San Diego, and the total deal will be at or above $800 million.

Take that in: the Padres are going to be sold for $800 million. Up until television deals with the Rangers and Angels surfaced, the sale of the Cubs (which included Wrigley Field and a 25 percent ownership equity in Comcast SportsNet Chicago) was the second-highest in the history of baseball at $850 million. To put this in perspective, the most recent Forbes valuations have the Padres ranked twentieth out of the 30 MLB clubs at $458 million. So even if you take out the television money—even if you take the low-end sales figure—the sale of the Padres will be $142 million above the most recent valuation and in line with Forbes’ valuation of baseball’s tenth most valuable club, the Chicago White Sox.

To the analyst watching the events unfold with club sales, it’s nothing short of astonishing. Starting with the Rangers’ 20-year television deal that will total $3 billion or more over the life of the contract, the bar on club values has jumped dramatically. The Angels followed suit with a similar $3 billion media rights deal, and recently, the Dodgers sold for $2 billion based on (you guessed it) a lucrative media rights deal that will be in the offing shortly. That made the Padres a beneficiary (as will also be the case with the Astros).

Even clubs that aren’t inking new media rights deals will see their valuations skyrocket. As these media rights deals get inked, the value of such deals continues to increase. It’s just a matter of when they are up for renewal. So if an owner decides to sell his club now, even if the media rights deal isn’t up for renewal, the seller can point to the increases happening in the market around television deals and say that a buyer will reap the same benefits in the future. In other words, all club values have gone up since the Rangers’ television deal was reached.

Doing some “what if” analysis: Forbes has the Yankees valued at $1.85 billion, the highest in the league. The Dodgers have already sold for $150 million more than that. According to a Goldman-Sachs valuation, YES Network (of which the Yankees own approximately 37 percent) is valued at $3 billion. Throw in Legends Hospitality, the concessionaire business that the Yankees jointly own with the Dallas Cowboys, and a package deal for the Bronx Bombers could easily be in the $5 billion range.

Below is a list of recent club sales. See the complete listing, here:

Club

Price
(millions)

When

Who

Notes

Dodgers

$2,150

May 1, 2012

Guggenheim Baseball Management

Mark R. Walter controlling owner. Includes partnership with McCourt, Johnson, and other purchasers of the Dodgers for 150 acres of land around Dodger Stadium.

Astros

$615

2011

Jim Crane group

 

Rangers

$561

2010

Greenberg/Ryan group

Bankruptcy auction. Greenberg forced out shortly after sale

Cubs

$845

2009

Ricketts family

Tribune (Sam Zell) sells due to bankruptcy

Braves

$461

2007

Liberty Media

Part of Time-Warner sale

Nationals

$450

2006

Lerner Family

 

Reds

$270

2006

Robert Castellini

 

Brewers

$223

2005

Mark Attanasio

 

Athletics

$180

2005

Lew Wolff, John Fisher

Wolff managing partner

Dodgers

$420

2004

Frank McCourt

Forced to sell in 2012 due to bankruptcy, divorce settlement

 

Maury Brown is an author of Baseball Prospectus. 
Click here to see Maury's other articles. You can contact Maury by clicking here

Related Content:  Club Sales

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