Bruce Murphy
Murphy’s Law

Brewers Franchise Spirals In Value

Now worth $1.2 billion. Players union demands financial records from Brewers, all MLB teams.

By - Jun 16th, 2020 01:39 pm
Miller Park. Photo by Jeramey Jannene.

Miller Park. Photo by Jeramey Jannene.

These are good times for the Milwaukee Brewers, with the team earning more revenue and operating income than many bigger market teams, and the Brewers’ total value rising much faster than the stock market, according to the latest analysis of Major League Baseball (MLB) franchise values by Forbes magazine. Most franchises are doing well despite the pandemic and resulting delay in the season, the magazine found. 

But MLB owners insist they are losing money and need big pay cuts from players to hold an abbreviated season with no fans in the stands and all games televised. “MLB’s most recent offer included a 72-game season with 80 or 70 percent prorated salaries for the players depending on whether there is a postseason,” as Bleacher Report noted.

In response, “Lawyers for the baseball players’ union asked Major League Baseball to submit a slew of financial documents that detail the industry’s finances,” the Associated Press reported.

“There’s so many ways to hide the money,” Cincinnati pitcher Trevor Bauer said, the story noted. “Bauer said owners could reduce ticket prices and at the same time charge more for parking garages they control through different entities that do not benefit the club.” 

According to Sports Illustrated, the MLB Players Association has said it’s still waiting to view financial records from MLB that “would support the dubious financial distress claims the league has made”.

The union claims that the proposed pay cuts would add up to more than $800 million and would come on top of previous cuts they absorbed due to the pandemic. “The league’s proposal has drawn the ire from players, particularly Max Scherzer, who is a member of the players union’s executive committee,” the story noted. “We have previously negotiated a pay cut in the version of prorated salaries,” Scherzer said. “And there’s no justification to accept a second pay cut based upon the current information the union has received.”

“Players simply do not believe owners who claim that the sport is not very profitable,” as New York Times Columnist Tyler Kepner has written. “They noticed when the Kansas City Royals sold for $1 billion last year after being purchased for $96 million in 2000. They noticed when the league struck a reported $1 billion deal last weekend with Turner Sports for its portion of postseason TV rights.”

It’s a safe bet the union is aware of Forbes magazine’s 23rd annual report on the value of MLB franchises released in April. The story portrayed an industry flush with money even amid a pandemic. “A global calamity spreads fear and panic. Equity values plummet. The future gets scary,” the introduction noted. “And prices for the most valuable teams in the league hold their lead.” 

The analysis showed that just one of the 30 MLB teams, the Miami Marlins, posted a negative operating income in the most recent year and that franchise values continued to rise at stratospheric rates. Forbes data show that the average team value is up nearly fourfold from a decade ago. An investment in the S&P Index rose less than 2.5 times before dividends.”

The analysis showed that the Milwaukee Brewers, playing in the smallest market in Major League Baseball, are doing much better than many franchises. Its estimated franchise value, of $1.2 billion, is higher than for six other teams. 

That’s also a huge jump from what owner Mark Attanasio paid for the team in 2004: $223 million. Had he invested that money in the stock market it would instead be worth $506 million today. 

The Forbes analysis shows the Brewers have a higher annual revenue than 12 teams, more operating income than 11 teams and less debt as a percent of franchise value than 22 teams. 

The numbers are remarkable and probably due to three factors: incredible statewide fan support in a small market, smart management and a stadium subsidy deal — costing taxpayers some $1.1 billion over 30 years — better than many cities offered. The deal negotiated by previous owner Bud Selig was the best any city had ever offered up to that time, as I reported for Milwaukee Magazine back in 1998. Attanasio recently hailed the deal Selig struck, telling the Milwaukee Journal Sentinel that “we have a number of new stadiums in major league baseball… and ours still stands up really well.”

He made that statement, however, while crying poor, claiming the Brewers lost money in the past year, as the newspaper duly reported. Attanasio said the team had an “operating loss,” without specifying an amount. 

But according to Forbes, the team earned $43 million in operating income in the most recent year. The publication defines operating income as “earnings before interest, taxes, depreciation and amortization.” So did the Journal Sentinel report on this much different estimate? No.  

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Categories: Business, Murphy's Law

2 thoughts on “Murphy’s Law: Brewers Franchise Spirals In Value”

  1. Colin Wilks says:

    This article is an odd read. It attempts to equate the value of a franchise with annual earnings.

    The author wants to disprove the Brewers owner “claiming the Brewers lost money in the past year,” using EBITA which is used to determine the earnings potential of a business.

    This is the same as me having a pizza; someone handing the pizza around the room and then handing me the empty pizza box and saying I have a whole pizza. EBITA is often used to determine the value of companies for sale or for investors to determine if they want to invest.

    “According to Forbes, the team earned $43 million in operating income in the most recent year. The publication defines operating income as “earnings before interest, taxes, depreciation and amortization.””

    The article also seems to completely ignore the fact that baseball owners pay players league wide between $1.5-$2 Billion every year. This year they will have no income from tickets or concessions to pay for this. They still will have income from TV contracts however not wanting to pay 100% of salaries to offset the losses seems like a reasonable position to hold.

    In the end it is an argument between millionaires and billionaires that has little to do with the fans who just want to watch some baseball.

  2. Mark Kennelly says:

    Does playing ~50% of a season, for 70-80% of the salary also seem out of line? If the season is cut in half, why wouldn’t the salary be cut in half?

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