Full disclosure before I get started: on top of doing my thing here at Baseball Prospectus, I’m a contributor to ForbesSportsMoney. For a guy like me, writing about stuff like this (the business of sports) is, well… it’s a privilege to write for Forbes, one of, if not the, most established business outlets around.
For years, I have been tracking the annual valuations of Major League Baseball clubs that Mike Ozanian started with Financial World, which Kurt Badenhausen now co-authors at Forbes. They’re great as a “trending” measurement, but they have fallen short in terms of real accuracy.
For years, sports economists treated the Forbes numbers as kind of a business-side equivalent to fielding stats: probably not all that accurate, but worth looking at because, hey, they're all we've got. All of that changed, though, after last summer's Leakgate, in which internal MLB documents leaked to Deadspin revealed the financial details for several MLB teams—and the income numbers matched the Forbes figures almost exactly. All those team execs who'd been complaining that the Forbes figures didn't reflect their actual losses—like the Florida Marlins' David Samson, who griped in 2007 that, "They look at revenue sharing numbers and the team's payroll and take the difference and see profit without looking at our expenses"—were, it turned out, blowing smoke.
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The magazine's numbers might not always be accurate but are still interesting to peruse.
Ahh, sports business nerds' annual rite of spring: Forbes comes out with its financial estimates for MLB—including franchise valuations, revenue, income, and the like—and MLB says the magazine is totally wrong. Well, after looking a little deeper at them a couple months ago, MLB is probably right; Forbes' valuation numbers haven't been terribly accurate as compared to actual sale prices, and you'd figure revenue and net income numbers would be even harder to guess.
Forbes, based on 2001 performance the average Major League Baseball franchise is now worth $286 million, an increase of 10% since 2000. Moreover, the present owners of MLB clubs have seen the value of their investments appreciate an average of 12% a year. These are hardly the hallmarks of an industry in dire financial straits.
While MLB claims operating losses of $232 million in 2001, Forbes estimates that the 30 teams turned a collective profit of $76.7 million. That's a difference of more than $10 million per team.
Here's how the Forbes numbers compare to MLB's (all figures net of revenue sharing payments):
Forbes, based on 2001 performance the average Major League Baseball franchise is now worth $286 million, an
increase of 10% since 2000. Moreover, the present owners of MLB clubs have seen the value of their investments appreciate an
average of 12% a year. These are hardly the hallmarks of an industry in dire financial straits.