Major League Baseball has taken its lumps the past decade. An audience too old, a game too slow and a dearth of marketable stars have it doomed, shout the naysayers. Not to mention the crumbling regional sports network model and potential labor strife, which have added more fuel to the fire over the last 12 months, as the sport reeled from record-breaking financial losses in 2020 due the pandemic.
Add it all together and it’s recipe for disaster, right? Hardly. The average franchise is worth $2.2 billion, including MLB-related businesses like RSNs and stadium real estate, according to Sportico’s calculations. The teams alone are worth $2 billion apiece. Savvy investors want in, and there are no COVID discounts.
Take, for example, hedge fund titan Steve Cohen. He bought the Mets last November for $2.42 billion, a tad more than six times its revenue (or seven times revenue if you net out the team’s annual $44 million PILOT payment, which services ballpark construction debt). RedBird Capital Partners, founded by longtime Goldman Sachs executive Gerry Cardinale, committed $750 million this month for an 11% stake in Fenway Sports Group, whose primary assets are the Boston Red Sox and NESN, the cable TV channel that airs most of their games, as well as English soccer team Liverpool F.C. (MLB has yet to approve the deal.)
The $7.3 billion valuation for FSG would likely be closer to $10 billion were it for a control stake in the sports conglomerate; non-control stakes of sports teams typically come at a discount ranging from 10-30%. Sportico conservatively values the Red Sox, including their 80% stake in NESN, Fenway Park real estate and marketing firm Fenway Sports Management, at $4.8 billion—a massive return for the John Henry-led ownership group that paid $700 million in 2002.
And the Sox aren’t done yet. The team and its development partners recently filed a proposal with the Boston Planning and Development Agency for a 2.1 million-square-foot project to build retail, residential and office space around Fenway Park. The Sox follow the Atlanta Braves, Chicago Cubs, St. Louis Cardinals and Texas Rangers, who have all used their stadiums as tent poles for development—with more teams looking to develop these “Ballpark Villages,” revenue that wouldn’t be subject to sharing with other teams. Sportico includes the market value of the team-owned real estate in our valuation calculations.
The Red Sox—as has often been the case over their century-old, on-field rivalry—are looking up at only one team in the financial standings: the New York Yankees. The Bronx Bombers are worth $6.75 billion, including their 26% stake in YES and 20% share of sports operations business Legends. The valuation puts them ahead of every sports team on the planet, a tick above their Legends’ partners, the Dallas Cowboys, who were valued at $6.43 billion in Sportico’s 2020 NFL valuations.
The Yankees had net revenues of $746 million in 2019 after writing a $60 million revenue-sharing check but before their $80 million-plus PILOT payment. The team’s ticket and sponsor revenue are both tops in the sport, thanks to its storied history in the biggest U.S. market, and YES generated more than $400 million in cash flow during MLB’s last full season. “I think there is a better chance of the New York Yankees being here in 50 years than Apple being around in 50 years,” said one sports financing insider who traded candor for anonymity in comparing the Yanks to the tech behemoth worth $2 trillion.
MLB’s 30 teams—including ownership stakes in real estate, RSNs and additional team-related holdings—are valued collectively at $66 billion. The valuations were pieced together by interviews with more than two dozen sports bankers, media experts, economists and team executives.
The bullish sentiment in baseball is driven by a couple of emerging trends in the sports marketplace: gambling and streaming. Baseball’s languid pace might be a deterrent for some younger viewers, but it’s a plus for gamblers. As gaming regulations ease and betting technology gets incorporated into broadcasts, the natural breaks between pitches allow for constant in-game betting opportunities. For teams, what’s even more important than the dollars wagered is making the broadcasts “stickier” for viewers with action on the game.
For Sportico’s interactive 2021 MLB Franchise Valuations, click here.
Content is king right now, and no one has more content to deliver than Major League Baseball, with its 162-game season. National ratings have dwindled for the World Series and the All-Star Game, but hometown baseball games are typically the highest-rated primetime cable content in local markets and often the top-rated programming across all TV in the summer.
RSNs were built on the back of baseball, with its extended season and shoulder programming to support, but the current model is broken with 6 million cord cutters in each of the last two years slicing into network revenue and margins.
Federal regulators forced Disney to sell 22 RSNs as part of its $71 billion purchase of 21st Century Fox in 2019. YES Network commanded a premium price at $3.5 billion, but the other 21 RSNs were purchased by Sinclair Broadcast Group for $10.6 billion, and the company announced a $4.2 billion write-down in November, largely tied to the purchase. “The bundle is not going away, but you have to fish where the fish are,” says media consultant Chris Bevilacqua of Bevilacqua Helfant Ventures.
Easier access to streamed content is key for these teams to open up games to audiences outside the home market. “This is a process that has been a decade in the offing and accelerated during the pandemic, but it needs to be addressed now,” says media rights expert Lee Berke. “Virtually every RSN has some form of authenticated streaming platform, but authentication is essentially streaming with training wheels.”
The Yankees are experimenting with 21 games this year on Amazon Prime Video, after the shortened 2020 season scuttled plans to do it then. The games will only be available to Prime members in the Yankees’ home market, but they will incorporate Amazon’s “X-Ray” technology that allows fans to access live in-game stats, player details and play-by-play information. Amazon owns a 15% stake in YES and is pushing increasingly into sports, including its recent deal to secure exclusive rights to Thursday Night Football.
The Los Angeles Dodgers join the Yankees and Red Sox in MLB’s top three at a $4.62 billion valuation, including its piece of the Spectrum SportsNet LA RSN; roughly 300 valuable acres around Dodger Stadium; and its venture arm, Elysian Park Ventures. Elysian has made more than 40 investments, with a focus on media, fan experience, sports performance and venue operations. The portfolio is worth an estimated $150 million, including DraftKings and, most recently, mixed-martial-arts entity Professional Fighter’s League.
Every MLB team faced crushing losses in 2020, as combined team revenue plummeted $7 billion, or 67%, to $3.4 billion with no fans allowed in the stands throughout the regular season. Teams lost all ticket, concession and parking revenue, while sponsor revenues tanked 50-60% for most teams and local media revenues sunk even more.
Everybody got hurt. Big market teams like the Yankees lost more than $300 million in stadium revenue, while small market teams that bank on revenue-sharing checks missed out on the annual subsidy with the sharing system suspended last year. The Yankees, Dodgers and Mets all had operating losses of more than $100 million in the sense of earnings before interest, taxes, depreciation and amortization, by Sportico’s count. The Yankees were hardest hit with a Ruthian loss of $175 million.
More limited partnerships of MLB franchises are up for sale than usual, as owners of 1% and 2% stakes in teams look to raise money after a tough year for many of their businesses outside of baseball. No control stakes of teams are actively being shopped, but potential buyers are circling the Baltimore Orioles, according to multiple sources. Peter Angelos, who has owned the team since 1993, has been in declining health. His son, John, was approved as the team’s control owner in November, and the team has been adamant it is not for sale.
But if the O’s were for sale, they would command a hefty premium, despite revenue that has sunk to fourth worst in the sport after a dreadful on-field run with only two finishes above third in the American League East over the past 23 seasons. The Washington-Baltimore metro area is dense with high-income individuals and large companies, while Camden Yards is still considered one of baseball’s crown jewel ballparks.
Sportico values the team and its 78% stake in MASN at $1.7 billion.
Sportico is committed to transparency in our valuations. For detailed information and sourcing, please see the “Methodology” section of Sportico’s interactive 2021 MLB Franchise Valuations.