Baseball ball with a dollar sign with a bat behind it

Weekend Reads: The Business of Baseball

by Kevin Schofield

In celebration of Opening Day for the Major League Baseball, this weekend’s read is an article in Forbes magazine looking at how much each of the 30 MLB teams is worth. Topping the list, unsurprisingly, is the New York Yankees at $6 billion; at the bottom is the Miami Marlins at $990 million. Our home team, the Seattle Mariners, is in the middle with a value of $1.7 billion.

Most of the value of a team isn’t derived from the strength of the team or the win-loss record; rather, it comes from how much money the team makes. Baseball is, after all, a business — one that controversially enjoys an exemption from antitrust laws from the federal government.

Some of that income is ticket sales, which took a severe hit in 2020 and 2021 under COVID-19 restrictions and with the shortened 2020 season. But today an MLB team has a diverse array of revenue streams to keep it afloat beyond the traditional ticket sales, merchandise, and local broadcast rights. Cable broadcast rights (and satellite systems such as DirecTV) have replaced local TV channels, further broadening regional and national distribution with a corresponding increase in revenues: Last year, the Los Angeles Dodgers raked in $189 million for local cable broadcast rights, while ESPN will probably pay at least $65 million annually to nationally televise a portion of MLB games (the revenues from ESPN’s contract are shared between all 30 teams, giving a much-appreciated financial boost to “small market” teams that struggle to afford to match the salaries that “large market” teams pay top players). Also, Apple and Peacock have recently signed agreements to stream games over the Internet, creating additional new revenue streams for MLB clubs. 

Sponsorships and advertising are also growing, for better or worse. In the new collective bargaining agreement signed last month between teams and players, new “jersey patch” and “helmet decal” sponsorships were created. Of the revenues from those streams, $50 million is dedicated to a new pool to pay for bonuses for players who are not yet eligible for salary arbitration.

One of the interesting things to notice in scrolling through the list of teams is that there is little correlation between the value of a team and its profitability, at least during COVID-19. Last year, the Yankees lost $40 million, while the Marlins made $25 million. The Mariners had a relatively good year, with $71 million in income (the Mariners have cultivated for many years a devoted following in Japan that has reaped additional revenues in international broadcast rights many other teams don’t receive, helping their bottom line despite setting an MLB record for the most consecutive years not appearing in the post-season). Certainly, a fair amount of the difference in revenues between teams can be attributed to the expense side, notably including salary commitments that the teams must pay out regardless of how many fans are sitting in the bleachers. In 2019, the average income for a major-league team was $50 million; in 2020, the average was a loss of $60 million, and last year it rebounded to $22 million of income — with 19 teams making money, 10 losing money, and one breaking even. According to the article, over the past two years, MLB teams added $2 billion in debt and $1.5 billion in new equity investments in order to help them stay afloat through the COVID-19 pandemic. But with the coronavirus apparently now in retreat (at least for the moment) and people anxious to get out of the house, Major League Baseball is expected to be a very profitable venture in 2022.

Baseball’s Most Valuable Teams 2022: Yankees Hit $6 Billion As New CBA Creates New Revenue Streams

Kevin Schofield is a freelance writer and publishes Seattle Paper Trail. Previously he worked for Microsoft, published Seattle City Council Insight, co-hosted the “Seattle News, Views and Brews” podcast, and raised two daughters as a single dad. He serves on the Board of Directors of Woodland Park Zoo, where he also volunteers.

📸 Featured Image: Photo by MicroStockFactory/ Edited by Emerald Staff.

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