Baseball Teams Are Worth Billions Now
Apr 5 2012
Finally, fucking finally, baseball is coming out of spring training and getting into the meaningful slog of a 162-game everyday regular season. While April baseball is always a bit rough aesthetically, the sport could not be doing better financially.
To wit: The Dodgers were just sold for $2.15 billion, a figure that nearly tripled the Cubs’ $845 million sale price last year, and outdistanced last week’s Forbes’ team valuation of $1.6 billion. A group led by Magic Johnson beat out bids from Steve Garvey and co.—Garvey wasn’t pleased—as well as Joe Torre and some sort of gold prospector; Johnson’s winning group paid cash and kept selling owner Frank McCourt on board as a sort of $150 million parking lot landlord. Aside from the mind-boggling reality of $2 billion in cash, the sale price reflected a bullish outlook on the sort of lucrative TV deals that have come to define the baseball economy. The Angels, who play across town, signed a 20-year, $3 billion TV deal this past offseason, which helped them afford Albert Pujols. The Dodgers are more entrenched in the region, and there’s a good chance they’d command more when their deal is up in 2013.
Despite this potential windfall, the sale price was, according to some, too high for Johnson’s group to turn a profit. The economics here are mostly TBD. Of course, neither the folks crowing about the Dodgers’ insane sale price nor the clucking speculators have access to the labyrinthine accounting that accompanies massive purchases like this, which begins with Bill Veeck and roster depreciation and ends who knows where. Guggenheim Partners, the “financial services firm” that provided the main money muscle behind the move, are far removed from the dude who started the gallery of the same name, but they might’ve bought the team as a long-long-term investment, or even as an art purchase, which would make sense. The Dodgers are the only NL team in a city of four million, a one-of-a-kind item like. Seen broadly, a franchise like the Dodgers is about as rare as a Nick Blinko puke pile, Guernica, or those Laker-color Air Jordans that never got produced. And all those things, with the exception of the puke pile, are worth significantly more now than they used to be. The Dodgers should likely increase in value at that rate, too.
While it’s hard to say when, exactly, Guggenheim will make its money back—they do OK enough in other arenas to reach broadly and likely weather all sorts of eight-figure blips—the baseball market is doing dandy. Team revenues are up in a big way, and in the past few years, long-term, eight-figure contracts have become prevalent for superstars.
Wait, did I say superstars? Yadier fucking Molina got $75 million dollars for five years, and Joey Votto, with his four years of major-league experience, just got nearly a quarter of a billion dollars for the next decade. If one human being is worth that much, why not pay the equivalent of Eritrea’s GDP to buy an entire team?
The cost certainty of eight- or ten-year deals at around $20 million seem pretty insane at first tilt—is any 40-year-old really worth that kind of money?—there’s a good chance that the figures might look quaint by next decade. Big contracts in the late 90s, like Mike Piazza’s megadeal, look adorable these days, and near-spendthrift by the end of their tenure. There’s a good chance that $20 million a year will mean about as much in 10 years as $13 million does now.
Long-term and eight-figure deals, are, of course, not always a good idea. Barry Zito is going to make $19 million this year, and his ERA in Spring Training was a so-bad-it’s-kinda-funny 7.91. Players don’t get paid on merit, they get paid whatever the market will bear—which in this case means whatever the craziest billionaire owner will pay them.
Maybe the Dodgers’ price tag and the out-of-control contracts mean the owners view their teams as long-term investment properties, or maybe they’re just bad with money when it comes to baseball—or maybe the sport is actually wildly profitable. Ha!
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