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19 April 2007

Forbes says $292 million

It's the second week of the season, which means it's time for Forbes to release its list of MLB team valuations. The usual suspects (Yanks, Mets, BoSox, Dodgers, Cubs) lead the pack. Towards the bottom of the list, the A's estimated value jumped 24% to $292 million. That compares to the league averages of 15% rise in value and $431 million.

In the meantime, the A's payroll has gone up much more gradually, only 1.3% from 2005 to 2006 and 6.7% from 2006 to 2007. Before you start on that angry e-mail to Lew Wolff and Billy Beane about how they could've afforded Frank Thomas or, um, someone other desirable free agent, take a look at the following table:

The payroll cost as a function of revenue is the key indicator. That was driven down from well over 60% to just under 55%. The owners must've gotten the memo from Bud Selig to go with the program and keep that player cost at that comfortable 55% threshold. Should franchise value go up again next season, I would expect payroll to jump a proportional amount. If growth is flat, payroll should stay flat.

However, that player cost as a function of value is intriguing. It's akin to home equity, and it will come handy when the time comes to borrow for Cisco Field. It's likely that the media buzz around Cisco Field helped drive the rise in valuation.

The A's ranked 24th on the list and were surrounded by familiar faces: Florida, Pittsburgh, Tampa Bay, Kansas City, Milwaukee, Minnesota, and Cincinnati. Of those teams, the Royals pulled in an astounding $32 million in revenue sharing last year. The Marlins made $43 million (EBITDA) in 2007. It just so happens that the state/local governments and the Marlins are $30 million apart ($60 million over 30 years) in their efforts to fund a new Miami-area ballpark. How about applying some of that profit to bridge the gap and gain some seriously positive PR in the process? Perhaps that's too much for Jeff Loria and David Samson to be magnanimous.

13 comments:

Zonis said...

When I visit the link, it prompts me to download something that looks like a virus.

Marine Layer said...

I haven't seen anything that looks like a virus, but the first link brings up an ad before switching to the content. Also try this:

http://www.forbes.com/mlb

Jeffrey said...

I wonder where the A's project to rank on this list with Cisco Field actually built?

Is it unreasonable to suspect 15th or higher?

BleacherDave said...

According to Baseball Prospectus, the A's payroll is up 30% from last year - to $80MM from $62MM.

Anonymous said...

When the Sacramento Athletics move to Railey Field, I'm sure their value would increase tremendously since their debt would be very low.

anon-a-mouse said...

Jeffrey, the extent to which the team's value increases will depend largely on if the A's own the stadium or the city of Fremont. That's a huge piece (or missing piece as the case may be) of each team's value. Plus, I wonder how much, if any, of the ballpark village might be owned by the team vs other Wolfe subsidiaries vs spun off to other developers, etc. That would have a big effect as well.

Marine Layer said...

anon-a-mouse - Stadium ownership is not that much of a factor as it might have been 20 years ago. What matters is revenue generation. The Giants own their stadium but not the land, have huge debt service and property taxes to pay. If they had either or both of those reduced, I think they'd be worth close to $600 million. Increased value comes from reducing or eliminating all of those liabilities.

BD - Final payroll including incentives was around $65 million at the end of the season. Not sure exactly where $74 million comes from but it's Forbes so I'll go with it. Forbes likes to use the term "player costs" which properly takes into account the $5.5 million the Pirates are paying of Jason Kendall's salary.

ntznlncm said...

Yes, but won't the A's be free from debt load on stadium construction due to the funding mechanism Wolfe has planned?

BleacherDave said...

"Forbes likes to use the term "player costs" which properly takes into account the $5.5 million the Pirates are paying of Jason Kendall's salary. "

That would be improper with respect to the A's payroll. It's also improper to compare last year's end of season payroll - including incentives - to this year's opening day payroll - without potential incentives. The opening day to opening day comparison is apples to apples.

Marine Layer said...

ntznlncm - Presumably they would, but even then property tax alone is significant - at least $5 million a year in today's dollars. Already that's a decent chunk of revenue.

BD - I'm gonna have to backtrack and plead ignorance on the Forbes methodology. I have 4 different sets of payroll data for the last 5 years and none of them completely match what Forbes shows, even accounting for player benefits and other fuzzy numbers.

An inquiry to Forbes on Monday.

anon-a-mouse said...

Thanks ML. What if the A's and Fremont share ownership of the stadium? They'd lose some of the value of the asset, but gain a little on the other side of the balance sheet, correct?

BTW, that was me at 4:14. I guess I typed the word verification in the wrong spot. Doh!

BleacherDave said...

One thing that I find interesting is that the Giants payroll has been flat for the last 3 years at $90 million, while the A's have boosted payroll almost 50% from $55MM to $80MM. Giants charter seat holders just had a huge increase in ticket prices, yet payroll remained flat - and Zito is due a fat raise next year.

Marine Layer said...

It looks like the G-men got the memo too. Their player cost/revenue breakdown were 57% in 2005 and 2006, and 54% in 2007.