White Sox break the myth

[joeynach]

Since Forbes just released their valuation of all MLB's franchises something interesting popped out to me. It's the fact that the White Sox have high payroll and relatively high revenue, and what we all know, woeful attendance. So does that mean another longtime generational standing tradition of baseball, that is, attendance & ticket sales equate to revenue & thus payroll a complete and utter myth.

 

Forbes says the White Sox are the 11th most valuable franchise in MLB, worth $692M. Their revenue last year was $216M, good for 14th in MLB, their operating Income last year was $22.9M, good for tied for 9th in MLB, yes their attendance last year was a tick below 2M and good for 24th in MLB (was 2M in 2011, good for 20th). However, their payroll was $118M, good for 7th highest in the league ($129M in '11 good for 5th).

 

So at the organizational level there must be an explanation. We know a few tidbits that help keep expenses low and thus operating income high; they pay just $1.5 million in fixed rent plus $3-7 for every ticket sold above annual attendance of 1.9 million at U.S. Cellular Field, but keep all ticket, parking, concessions, signage and merchandise revenue. Ok, so that helps, but they have to be doing something fundamentally different, something that really does break the myth that high revenue's and payroll's are dependent upon good attendance. So what is it? They have excellent marketing? They have a crazy amount of luxury suites contracted out? They get a ton of money from Radio and TV? They get the most of any team from ballpark signage? Im really just picking at straws here.

[southsider2k5]

Ticket prices?

[SoxFan562004]

Since Forbes just released their valuation of all MLB's franchises something interesting popped out to me. It's the fact that the White Sox have high payroll and relatively high revenue, and what we all know, woeful attendance. So does that mean another longtime generational standing tradition of baseball, that is, attendance & ticket sales equate to revenue & thus payroll a complete and utter myth.

 

Forbes says the White Sox are the 11th most valuable franchise in MLB, worth $692M. Their revenue last year was $216M, good for 14th in MLB, their operating Income last year was $22.9M, good for tied for 9th in MLB, yes their attendance last year was a tick below 2M and good for 24th in MLB (was 2M in 2011, good for 20th). However, their payroll was $118M, good for 7th highest in the league ($129M in '11 good for 5th).

 

So at the organizational level there must be an explanation. We know a few tidbits that help keep expenses low and thus operating income high; they pay just $1.5 million in fixed rent plus $3-7 for every ticket sold above annual attendance of 1.9 million at U.S. Cellular Field, but keep all ticket, parking, concessions, signage and merchandise revenue. Ok, so that helps, but they have to be doing something fundamentally different, something that really does break the myth that high revenue's and payroll's are dependent upon good attendance. So what is it? They have excellent marketing? They have a crazy amount of luxury suites contracted out? They get a ton of money from Radio and TV? They get the most of any team from ballpark signage? Im really just picking at straws here.

 

Many of the points you made are correct. Sox have an AWESOME deal for the ballpark and the various things you mention in the last paragraph. I'm not sure why it took the Forbes article to bust this myth as the Sox have consistently had a top 10-15 payroll and never had consistent attendance.

 

I don't know enough about economics, but would the fact that this ownership group probably has zero debt, outside what they need for various year to year operations, since they bought the club for 20m and it's worth an insane amount more help boost their value?

[iamshack]

This is the changing face of operating a sports franchise...it is not a myth...teams that play in larger markets have more lucrative media deals. They have larger tv and radio audiences, and thus collect more money for the rights to broadcast their games then smaller market teams. Revenue is trending away from gate receipts being the larger source of revenue to tv and radio money being the more important sources of revenue.

 

This is happening generally all over the sports landscape, but is even more apparent in markets with large population centers.

[Balta1701]

This is the changing face of operating a sports franchise...it is not a myth...teams that play in larger markets have more lucrative media deals. They have larger tv and radio audiences, and thus collect more money for the rights to broadcast their games then smaller market teams. Revenue is trending away from gate receipts being the larger source of revenue to tv and radio money being the more important sources of revenue.

 

This is happening generally all over the sports landscape, but is even more apparent in markets with large population centers.

The White Sox though are locked into their TV deals for a long, long time. 2019 is when they supposedly come up for renegotiation.

 

The White Sox ownership group is supposedly a part owner of CSN Chicago, so they pull a little bit of it back as an investment that way.

[SoxFan562004]

The White Sox though are locked into their TV deals for a long, long time. 2019 is when they supposedly come up for renegotiation.

 

The White Sox ownership group is supposedly a part owner of CSN Chicago, so they pull a little bit of it back as an investment that way.

I'm pretty sure it's not supposedly, I believe the Hawks, Bulls (JR face of both, but different ownership groups), Sox and Cubs are owners of it, hence no more Fox Sports Chicago, it's why they did it. I would imagine they get a cut of the profits.

 

I could be wrong, so if anybody is more familiar with the CSN situation I'd be interested in hearing more on how it works.

[ewokpelts]

forbes is working without the participation of the league or teams. these may be inaccurate numbers.

 

 

[joeynach]

forbes is working without the participation of the league or teams. these may be inaccurate numbers.

 

They are a reputable source, they have been doing this MLB franchise valuation piece every year for probably a decade now. They have easily established themselves as the credible source for MLB franchise's financial and valuation data. Are the numbers identical to what teams have on their own books or by their own underwriters, probably not, but I would say this is the best and most reputable we the public has. And if it wasn't accurate we would know b/c other reputable media sources wouldn't quote this data, these articles and pieces, and would be able to re-buff the information....that hasn't happened.

[southsider2k5]

They are a reputable source, they have been doing this MLB franchise valuation piece every year for probably a decade now. They have easily established themselves as the credible source for MLB franchise's financial and valuation data. Are the numbers identical to what teams have on their own books or by their own underwriters, probably not, but I would say this is the best and most reputable we the public has. And if it wasn't accurate we would know b/c other reputable media sources wouldn't quote this data, these articles and pieces, and would be able to re-buff the information....that hasn't happened.

 

To refute these numbers a team would have to open its books, and there is no way in hell that is happening.

[caulfield12]

Launched October 1, 2004

 

Network Comcast SportsNet

 

Owned by NBCUniversal (20%)

J. Joseph Ricketts Family (20%)

Jerry Reinsdorf (40%)

Rocky Wirtz (20%)

 

 

Who can put a dollar figure on exactly how much that is worth? Plus advertising revenues...we know the White Sox experienced higher ratings last year for t.v. (making up for some of the falling attendance as well) as more and more fans have been staying home in the era of higher ticket prices and big screen/HDTV.

 

 

[joeynach]

To refute these numbers a team would have to open its books, and there is no way in hell that is happening.

 

I would say guys like Scott Merkin, Mark Gonzales, Scott Gregor,etc can look at these Forbes numbers and say yeah looks about right or no no way off. And if it was no no way off you would see an article in the paper.

[joeynach]

Launched October 1, 2004

 

Network Comcast SportsNet

 

Owned by NBCUniversal (20%)

J. Joseph Ricketts Family (20%)

Jerry Reinsdorf (40%)

Rocky Wirtz (20%)

 

 

Who can put a dollar figure on exactly how much that is worth? Plus advertising revenues...we know the White Sox experienced higher ratings last year for t.v. (making up for some of the falling attendance as well) as more and more fans have been staying home in the era of higher ticket prices and big screen/HDTV.

 

This is a slippery slope. Usually in Joint Ventures businesses such as CSN Chicago the owners don't really extract profit from the business and pocket it. Usually they own the TV station so they can maintain a level control over the content, people, and operation of their main TV medium. Similar to Andrew Carnegie in our history books buying out the supply chain; railroads and trucking companies to maintain control and price control over his end product, steel production. Not to necessarily profit from owning the railroad company. Any growth or money CSN Chicago makes most likely is not taken out by JR and folks, pocketed, and used in team payroll or stadium construction, its most likely just re-invested in CSN Chicago's operations; technology, products, personnel, etc.

Edited March 30, 2013 by joeynach

[caulfield12]

http://www.forbes.com/sites/bobcook/2012/1...rship-overkill/

 

Yay, Brooks Boyer is actually doing something!

 

 

[caulfield12]

This is a slippery slope. Usually in Joint Ventures businesses such as CSN Chicago the owners don't really extract profit from the business and pocket it. Usually they own the TV station so they can maintain a level control over the content, people, and operation of their main TV medium. Similar to Andrew Carnegie in our history books buying out the supply chain; railroads and trucking companies to maintain control and price control over his end product, steel production. Not to necessarily profit from owning the railroad company. Any growth or money CSN Chicago makes most likely is not taken out by JR and folks, pocketed, and used in team payroll or stadium construction, its most likely just re-invested in CSN Chicago's operations; technology, products, personnel, etc.

 

http://www.fangraphs.com/blogs/index.php/d...l-tv-landscape/

Very thorough and detailed breakdown of every team's regional broadcasting rights deal.

 

 

 

Here's another article. Of course, they don't tell you how much the actual ownership of the station is worth or how any profits are distributed, if at all.

 

The Baltimore Orioles regional television network, the Mid-Atlantic Sports Network, is a cash cow for the team, but many have wondered just how much it rakes in annually. Some conspiracy theorists have speculated that owner Peter Angelos has been sitting on huge profits while operating his team like they earn mid-market revenue.

 

This very vocal minority never has any substantial evidence to support their claim and, to no one’s surprise, went quiet when the O’s made the postseason in 2012.

 

Over at FanGraphs.com, Wendy Thurm broke down all 30 team’s TV deals and pointed out that MASN brings in $29 million annually for both the Orioles and the Washington Nationals.

 

There was a time when the Yankees and Red Sox stood above the other 28 teams in local TV revenue with their team-owned regional sports networks. When it comes to yearly rights fees, that’s not the case anymore. But the owners of the Yankees and Red Sox — and now Mets, Orioles, and Nationals — continue to rake in millions of dollars in profits from the operation of their RSNs. And again, as noted, these profits are not subject to revenue-sharing.

 

It seems like a good deal of cash, but the Orioles find themselves behind a number of markets when it comes to TV revenue. The Dodgers, Angels, Rangers, Astros, Padres, Yankees, Mets, Red Sox, Phillies, Diamondbacks, Mariners, Reds, Tigers, Blue Jays and Indians all earn over $29 million from their TV deals.

 

That’s half of Major League Baseball, for those of you counting at home.

 

That number is about to go down. The Nationals, who own 13 percent of MASN, are currently in a mediation dispute over the annual rights fee.

 

Perhaps the Orioles haven’t been secretly pocketing money all along.

 

baltimoresportsreport.com

Edited March 31, 2013 by caulfield12

[Marty34]

I would say guys like Scott Merkin, Mark Gonzales, Scott Gregor,etc can look at these Forbes numbers and say yeah looks about right or no no way off. And if it was no no way off you would see an article in the paper.

 

Merkin works for the Sox, Gonzalez and Gregor are more likely to tweet a picture of an empty park 20 minutes before an April game than do actual journalistic work on the Sox. Forbes main competitors would be the ones who would be the first to say those numbers were wrong and to my knowledge they've never done so.

[caulfield12]

Beat writers are going to be careful to break a negative story like that.

 

They'll leave it up to one of the feature or opinion/analysis columnists who doesn't have to deal with the GM, manager and players on a daily basis.

 

Unless it's a story that simply can't be controverted.

[southsider2k5]

Beat writers are going to be careful to break a negative story like that.

 

They'll leave it up to one of the feature or opinion/analysis columnists who doesn't have to deal with the GM, manager and players on a daily basis.

 

Unless it's a story that simply can't be controverted.

 

A story like this wouldn't come from a Chicago writer. They are all neutered.

[caulfield12]

http://sports.yahoo.com/news/mlb--mlb-open...-172007462.html

 

Newsflash.

 

White Sox 9th in Opening Day payroll, while attendance is mired in the 20's (I think it was 23rd or 24th, off the top of my head).

Edited April 1, 2013 by caulfield12

[Cali]

http://sports.yahoo.com/news/mlb--mlb-open...-172007462.html

 

Newsflash.

 

White Sox 9th in Opening Day payroll, while attendance is mired in the 20's (I think it was 23rd or 24th, of the top of my head).

 

Dodgers +124 % increase in payroll. Absolutely disgusting. They deserve to stay home in October.

[ScottyDo]

http://sports.yahoo.com/news/mlb--mlb-open...-172007462.html

 

Newsflash.

 

White Sox 9th in Opening Day payroll, while attendance is mired in the 20's (I think it was 23rd or 24th, of the top of my head).

Anyone know when the last time was that the Yankees weren't #1?

[caulfield12]

Anyone know when the last time was that the Yankees weren't #1?

 

 

The Yankees have led each year since the Baltimore Orioles edged them by $200,000 in 1998, and New York has been at $200 million-plus every season since 2005. The record opening-day payroll of $209.1 million was set by the Yankees in 2008.

 

 

[caulfield12]

http://www.chicagonow.com/cubs-den/2013/03...is-limitations/

 

 

Does anyone know if the White Sox-WGN contract is also up for renewal in 2014 (like it is with the Cubs)?

 

The ComCast one is 2019.

 

But what about the Sox and WGN?

[NorthSideSox72]

Forbes' latest valuations are out. Club now ranked 14th in value at $695M, and showed an Operating LOSS of $2.7M.

 

But Jerry and company are just greedy, money-grubbing carpet baggers.

 

 

 

 

[southsider2k5]

Forbes' latest valuations are out. Club now ranked 14th in value at $695M, and showed an Operating LOSS of $2.7M.

 

But Jerry and company are just greedy, money-grubbing carpet baggers.

 

 

 

 

Revenue $210 million in 2013 vs $216m in 2012. Their operating income when from +$22.9m to -$2.7m, which means their expenses went from $193.1m to $212.7m.

 

[fathom]

Forbes' latest valuations are out. Club now ranked 14th in value at $695M, and showed an Operating LOSS of $2.7M.

 

But Jerry and company are just greedy, money-grubbing carpet baggers.

 

Would you say that these numbers impacted their moves heading into this season, but that they shouldn't impact moves going forward?