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Paul Beeston gained a degree of baseball immortality when he famously (or infamously, depending on your point of view) said: "Under Generally Accepted Accounting Principles, I can turn a $4 million profit into a $2 million loss, and I can get every accounting firm in the country to agree with me."

Which is to say, and the MLBPA would certainly agree, we oughtn't put a lot of faith in major-league baseball's financial statements. That said, here are some interesting figures from the current online edition of Forbes magazine.

Forbes' annual baseball edition features a chart showing the value of all 30 MLB franchises, along with assorted other economic goodies. Topping the list, unsurprisingly, is the Yankees, who are now worth more than the 4th-place Mets and the 5th-place Dodgers combined. The Yanks, however, rank dead last in operating income (that is to say, earnings before interest, taxes, depreciation and amortization), posting a negative-$37M in that category (Peter Angelos' Orioles reported the best numbers in that category).

The Blue Jays, also unsurprisngly, are well down the list in franchise value -- 24th, in fact. But there are some other interesting and positive signs from the Toronto ledger. The Jays' operating income was a pleasant positive-$7.8M. The increase in their franchise value from last year was 27%, third-highest among all franchises, trailing only the Phillies (39% after moving into a new park) and the Nationals (a stunning 114%, for obvious reasons). Moreover, the Jays are the only team to report that their debt as a percentage of franchise value (including stadium debt) is a flat zero -- a marked contrast to teams like the Dodgers (99%) and the Diamondbacks (somehow, 103%).

Because my knowledge of economics extends no further than a shaky grasp of supply-and-demand laws, I showed this chart around to the Roster. Pistol had a couple of interesting observations:

"What I found odd is the debt/value figure. It assumes that the Jays have no debt, but since they're a subsidiary of Rogers, I would think some debt would be attributed to the team. It also looks like they aren't considering player contracts as debt.

"What's interesting is that there are several teams that fall outside of Bud's debt/value ratio, and those apparently aren't considering future contracts, which would put them further outside the ratio."

Do any Bauxites have similar insights to share? Thanks to Wildrose for bringing this to our attention.

Posted by Jordan on Wednesday, April 13 2005 @ 09:30 AM EDT.

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Gerry - Wednesday, April 13 2005 @ 10:06 AM EDT (#111135) #

The bottom line from the story is that baseball is doing well. The story acknowledges that some of the teams, such as the Yankees, operate their baseball team at a loss while leaving profits in their TV company. The Yankees have the YES network which is on basic cable in the New York area and generates huge revenue.

Major League Baseball, and the other sports that are valued by Forbes, will object and say Forbes numbers are wrong, but Forbes is the best independent source of team values. The Blue Jay profitability number quoted is in the ballpark. Many of us had estimated a small loss for the Blue Jays in 2004, but that was before the decline in value of the US dollar. The 15% decline in the US dollar in 2004 should have saved the Jays between $7 million and $10 million. That would convert a small loss to a small profit. Rogers financial statements should be out soon, but the purchase of Skydome might be blended in their numbers to cloud the true team profit picture.

Pistol - Wednesday, April 13 2005 @ 10:08 AM EDT (#111136) #

The Forbes blurb on the Jays was pretty positive about the acquisition of the remainder of the team, and especially the acquisition of the Dome last year, which is probably the biggest thing to take from the article in my mind.

Pistol - Wednesday, April 13 2005 @ 10:19 AM EDT (#111138) #

"The Blue Jay profitability number quoted is in the ballpark. Many of us had estimated a small loss for the Blue Jays in 2004"

The Forbes number is EBITDA, while the Jays quoted 'income of a slight loss' from a few months ago would include several items that Forbes adds back in. They're looking at slightly different things. On an 'Apples to Apples' comparison I think they probably tie out to each other which makes sense given that Rogers is a public company.

Wildrose - Wednesday, April 13 2005 @ 10:47 AM EDT (#111140) #

Thanks Jordan for posting the link. The report breaks down income derived from gate reciepts. The Jay's finished 23/30 in MLB in this department, generating 29 million from attendance in 2004.

I suppose you could look at this in either of two ways. Given the Jay's are in one of the largest media market's in North-America, you could say they've done a very poor job of marketing their product, or perhaps you would look at the team as being under-valued and worthy of substantial investment.

superdevin - Wednesday, April 13 2005 @ 12:26 PM EDT (#111165) #

i know this is lowering the level of debate but did anyone else find it really funny to see the main picture on the blue jays valuation site was of billy koch?

NYJaysFan36 - Wednesday, April 13 2005 @ 01:00 PM EDT (#111187) #

Just want to make sure my head is around the point about the YES network.
Even though the Yankees as a single entity don't make a profit, the entire corporation does since the YES network doesn't have to sink any rights fees into televising the games?
What did they mean by 'loss leaders' as written in the article?

James W - Wednesday, April 13 2005 @ 01:26 PM EDT (#111198) #

As I've been taught, in basic business sense, a loss leader is something sold below cost (hence, at a loss) to attract customers in and entice them to purchase other products which sell at a high profit.

Rookie Scribe - Wednesday, April 13 2005 @ 01:46 PM EDT (#111204) #

To take some ideas from my Economics of Professional Sports class, one of the biggest obstacles in creating any effective revenue sharing plan is the prevalence of regional networks owned by pro franchises (Sportsnet-Jays, Yes-Yankees, etc...).

In order to keep profits from being put into the revenue sharing pot, teams sell their TV rights for essentially nothing to their network. Then after the network has sold ad revenue, it shows a great profit while the team shows a less-than-expected revenue stream.

Wildrose - Wednesday, April 13 2005 @ 01:56 PM EDT (#111207) #

There must be a whack of money to be made in owning your own cable channel and MLB franchise. As part of the settlement to move the Oriole's to D.C., Angelos picked up the rights to the Nat's local T.V. contract in his bid to start a new regional cable channel, featuring his Orioles and the Nat's ,taking on the present provider Comcast.

NY Jay, do cable customers have to opt to take the YES channel in their cable package, or is it part of the basic package offered?

Rookie Scribe - Wednesday, April 13 2005 @ 01:59 PM EDT (#111208) #

From what I remember, a few years back, Yankee games switched from basic cable to a part of a paid package.

This is the biggest reason why the NFL revenue sharing plan is the most effective. There are no regional television deals, only national.

Pepper Moffatt - Wednesday, April 13 2005 @ 02:04 PM EDT (#111212) #

This is the biggest reason why the NFL revenue sharing plan is the most effective. There are no regional television deals, only national.

That's a really good point that is often missed in NFL vs. MLB comparisons. The disparities between the amount of revenue NFL teams earn is quite a bit smaller than that for MLB teams, due to the structure of television deals.

Where did you take your sports econ course?

Rookie Scribe - Wednesday, April 13 2005 @ 02:05 PM EDT (#111215) #

McMaster University. Took it last year, and I am the teaching assistant this year.

Wildrose - Wednesday, April 13 2005 @ 03:02 PM EDT (#111229) #

I thought the accompanying article on the profitability of the Mariners franchise was of interest.

Since a certain degree of that success was based upon the signing of Ichiro, perhaps the Jay's, given the preference of American born players to play near their hometowns, having cash to spend, should be more active participants in the Japanese posting market.

I know the Japanese love visiting Canada, with Banff and Niagra Falls being prime destinations, perhaps Rogers Centre could be added to that itinerary, with the right players. Also the low rates of crime in Toronto would hopefully ,be a big selling point to prospective players. After working in Banff when younger, I know that many Japanese are pre-occupied and fearfull of American crime levels.

Pistol - Wednesday, April 13 2005 @ 03:08 PM EDT (#111230) #

"From what I remember, a few years back, Yankee games switched from basic cable to a part of a paid package."

The Yankees have never been part of a paid package. Cablevision wanted to put them on as a premium channel years ago when it started up (like HBO) because they didn't want people not watching the Yankees have to pay for it, but YES wouldn't do it (more people will watch if it's on basic cable, which means more ad revenue). It turned into a big game of chicken and the Yankees weren't shown at all in a pocket of NYC for about half the season.

Anyone that carries YES carries them on basic cable, and generally most of the cost is passed onto the customers. For example, a few years back when YES started up I was living in Connecticut and I got a flyer in the mail saying that my cable was going up $2/month because I was getting YES.

Regarding the regional channels, regardless of what the channel is 'paying' the team, the team, for revenue sharing purposes, has to account for it at 'fair market value'. So for example YES can't pay the Yankees $1 for the rights to 162 games. The gray area of course is where market value is.

Wildrose - Wednesday, April 13 2005 @ 03:25 PM EDT (#111237) #

Thanks Pistol, so it's like Canada then, part of the basic package. I remember reading a Bill Houston article a few years back ,that stated that TSN and RSN were profitable even before selling any advertising, by simply getting their CRTC mandated piece of the local cable pie.

Wildrose - Wednesday, April 13 2005 @ 03:40 PM EDT (#111241) #

Using the Forbes numbers, I examined which baseball divisions are in the high rent district, by compiling their respective revenues, since the divisions are unequal, I'll give the divisional average.

-AL East:$166 million
-NL West:$148.6 million
-AL West:$144.4 million
-NL Central:$137.3 million
-NL East:$125.4 million (skewed downwards by the Expo's)
-AL Central:$120.4 million

Either the Jay's at $107 million need to be more efficient, generate more revenue streams, or even perhaps hope for an unlikely return to a balanced schedule after the expiration of the current CBA, to compete in their current domain.

NYJaysFan36 - Thursday, April 14 2005 @ 12:37 PM EDT (#111497) #

Wildrose,

Sorry for not getting back to you quicker but YES is part of our regular cable.
What I hate the most about it is that we are 400 miles away from New York and the ESPN broadcasts of the Yankees vs. Red Sox still get blacked out.

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