As a footnote to my Pinocchio Story columns from the past week, I discovered today that Forbes just released their 2008 analyses of the financial health of the NFL. There are a number of different ways that we can look at the data. But tonight, I want to focus on the fact that the figures back up the idea that Cleveland is a die-hard football city - regardless of record.
In short, the data indicates that the Browns’ organization has no financial incentive to win games.
Declaring the city’s preference for the Browns shouldn’t shock anyone reading this blog. I remember a Bud Shaw column in the Plain Dealer back in the spring that began something like, “The Cavs are the #1 seed in the NBA and the Indians play their season opener this week, so it’s only natural that most of the emails I got from readers are about Brady Quinn.” This infuriated me (and my dad and Mike) to varying degrees as the Cavs were demolishing the NBA season while being led by one of the greatest players of all time. But there’s nothing that seems to be able to change it.
The Browns are just the favored son. It’s in the city’s DNA.
Here are some quick facts from the Forbes’ analysis to prove it:
1) Despite their 4-12 record and an entire spring / summer of Browns blog commenters claiming they are ready to quit following the team, Browns season ticket renewals were at 90% for this season. The league average this year is 85%.
Critics will note that there are multiple games on the Browns schedule that are in danger of being blacked out because of non-sellouts. However, Forbes argues that - as of the 3rd preseason game - 10 of the 32 franchises were currently in danger of being blacked out at least once, making the Browns hardly an exception.
2) Of the 16 most valuable teams in the NFL, the Browns ranked #13 overall (they also pulled in the 12th highest revenue total). The overall franchise value remained steady from the previous year despite the extreme economic downturn.
There were only three other teams who managed to crack the top 16 in value without trending upward. Those teams were the Giants, the Jets, and the Colts - in other words, the biggest market in the league and a perennial contender.
3) Al Lerner bought the Browns in 1998 for $530M. The franchise’s value has now doubled to $1.06B (yes, that’s a ‘B’). As we all know, during that 10 year span the Browns have fought their way into the playoffs exactly one time.
4) With one exception, the Browns’ franchise value and revenue have increased every year since the reboot. That exception was 2006-7, where their revenue remained steady. Neither of those numbers has ever declined, regardless of the product put on the field.
5) Of the top 16 most valuable franchises in the 2008 NFL, the Browns were one of only two to post a record worse than .500. The other team was Kansas City, one spot behind the Browns in the value ranks with a record of 2-14.
6) The Browns are still more valuable than the Steelers (#16 overall), who have won 2 Super Bowls in the past 4 years.
So if you look at all of those facts, an interesting point rises to the top: contrary to popular belief, winning actually seems to have very little impact on how the Browns do financially.
Granted, their operating income was in the lower third of the NFL this year, but my quick read of the data suggests that that’s mostly because their payroll was at an all-time high. To support that idea, the Browns’ most profitable year from an operating income standpoint ($59M) was 2004, when their payroll was the lowest in “new” team history ($70M), Butch Davis was fired mid-season, and the team finished a pathetic 4-12.
However, the Browns aren’t necessarily special in terms of their finances’ immunity to record. Of the 8 teams that declined in value over the course of the past year, 3 (Atlanta, Indianapolis, and Miami) were playoff teams in 2008. This is especially worth mentioning because it’s the first time in a decade that ANY team in the NFL declined in value - and yet the Browns still weren’t one of those teams.
Also less valuable than the Browns are perennial playoff teams like the Titans and Chargers, as well as the Cardinals, fresh off a Super Bowl appearance and entrenched in a beautiful new stadium.
On the other side of the coin, the Houston Texans are the sixth most valuable franchise in the league - despite having never made it to the playoffs.
There’s a much longer post that could be done on the reasoning behind this apparent lack of relationship between competitiveness and value / profitability in the NFL. But I don’t have it in me tonight, and it’s possible that even if I had the time, I wouldn’t have the economic expertise to carry it out. It may just be that I’m not controlling for the right factors, and that if I did, the trends I’m seeing now would disappear.
But let’s get back to what it means if I’m right.
I believe players want to win. Or at least, I believe that our players want to win. I know without a shadow of a doubt that Alpha Dog wants to win. But unless Randy Lerner is more emotionally involved than he seems, the Forbes data indicates that he has very little incentive for his team to do well. Because regardless of who he puts on the field, it appears that the fans will never desert the franchise.
That’s great news for Lerner. I just wish that it was better news for the rest of us.
I was a little concerned about how to get back into this series because I never intended it to become a trifecta. (If you’re behind, here are links to Part 1 and Part 2.) Things got broken up in ways that I didn’t necessarily anticipate, which threw me off a little.
However, last night I read a recent PD column by favorite Mesa target Terry Pluto, and it resolved all my concerns. Pluto unhesitatingly chugs the Kool-Aid served by Paul Dolan on the Indians’ financial difficulties in a follow-up interview to his infamous August 6th presser. Pluto’s blind acceptance of Dolan’s talking points demands what they refer to in the military as a “swift and forceful response” - and it leads perfectly back into the Pinocchio Story throughline:
Chapter 2: The Big Swill (“Ooooh Yeah!”)
Here’s a recap of the points from Pluto’s pow-wow that are relevant to our discussion:
1) When Dolan stated that the Indians’ would lose $16M this season, he meant that $16M was the amount they’d already lost “in late July.” The total loss they were heading toward for the entire 2009 season was closer to $20M. However, because of the much-publicized trades they are now softening those projections to a loss of about $12M.
2) Had they not made the trades, the Indians’ calculations showed that the team would be on track to lose about $30M during the course of the 2010 season.
3) Sports Time Ohio - the Tribe-owned cable network that holds and sells the rights to telecast the Indians’ games - is in Pluto’s words “‘profitable,’ according to Dolan.”
4) The Dolans have “no plans” to sell the team.
OK, let’s address the above point by point:
1) Paul Dolan made the statement with the infamous $16M loss figure on August 6th. He retracted it on August 29th. Here’s the problem: Garko was traded July 28th. Lee was traded July 30th. Martinez was traded August 1st. So by the time Dolan made the statement about the Indians’ 2009 losses on August 6th, his number-crunchers should already have known that they were going to save $4M by making those trades. But instead, he went into the press conference touting the sweet $16M loss.
I’m not accepting the counter-argument that the analysts didn’t have enough time to run those numbers in the time between the trade deadline and Dolan’s press conference. It’s not a complex formula. Take your already-existing projections for profit / loss, deduct the total pro-rated salary saved by trading away those three players, add in the total pro-rated salaries from adding Masterson and the 7 prospects. Done. We’re not exactly bending spoons in half with our minds here.
I don’t want to belabor this point because it’s not hugely impactful on its own. However, I think it’s indicative of a general pattern: owners (especially the Indians’) spewing out garbage facts that even a rudimentary analysis can bring into question. If they’re lying about things that are this simple to dispute, how can anyone realistically be expected to believe the bigger picture?
2) I’m sure that every team does projections of next year’s revenue numbers. As Dolan demonstrated, those projections are subject to change based on a variety of factors. The whole thing is speculative. I would just make two points about this particular case.
First, when you’re interested in making your financial situation look dismal, it’s particularly convenient to make projections a year ahead of time while a) we’re still in the grip of the worst economic downturn since the 1930s, and b) the team you own is seemingly stuck at 14 games under .500.
Second, it’s worth noting that Dolan didn’t put forth a revised number to show the softened losses thanks to unloading all those contracts.
To do a quick calc on our own, Cliff was due $8M if the team picked up his 2010 option. Victor was due $7M. Garko would’ve been up for arbitration in the off-season and would’ve commanded north of $2M. We’ll say that’s a total of $17.5M in outgoing salary.
Meanwhile, of all the players they got back in those three trades, only one is actually in the majors, and that one guy (Masterson) is making $415K this year. Though I’m having some issues finding his salary for next year, I can’t imagine it’s going to be a drastic raise.
If we assume that the other 7 players acquired by the Tribe are making something in the same neighborhood as Masterson - let’s assume for the sake of argument they’ll all make 500K next year, which is generous on my end - that brings the total for all 8 incoming players to $4M.
To me, $17.5M - $4M = $13.5M in savings. So if Dolan is to be believed, the Indians should now be coming in for the smooth landing of a $16.5M loss for the 2010 season. But he didn’t want to put that on the record, likely so that the fan base could be scared by the $30M number and its potential consequences for the team’s continued stay in Cleveland. It’s an implicit way of saying “Hey, get to the ballpark, or else.”
3) In the same vein, I love that Dolan was content to just say that Sports Time Ohio was “profitable,” without actually telling Pluto how profitable. Truly startling that he would keep the profit numbers hidden but trumpet the supposed losses.
Now, I’m not saying that STO is the YES network, but they’re clearly making bank off of it. Though until someone does some serious muckraking, we won’t know how much bank.
This leads us into…
4) The Dolans have no plans to sell the team.
Let me repeat that: despite the fact that their current “projections” show that the Indians are a financial sinkhole slated to bleed the family fortune for $28.5M over the course of 2 years, the Dolans are so philanthropic and dedicated to producing a winner for the city of Cleveland that they will not even explore the possibility of unloading this investment.
Obviously, this is the point I’ve been harping on since the beginning of this series – and really, even all the way back in my “Mythbusters” posts last month. If these teams are so gut-shot financially, why are their owners so willing to dig in their heels and try to weather the storm when their own math says that the smart play is to get the F out of Dodge?
The answer is, of course, that the numbers are a lie. It’s just hard to prove because the few people who seem to be paying attention don’t have access to the real figures…with a few notable exceptions.
One of these is Forbes Magazine. Every year, Forbes runs an independent accounting of the 30 MLB franchises. Shockingly, they come back with vastly different financial pictures of each team than the League itself presents. Why? Because in theory, Forbes takes into account all of the accounting tricks I detailed in parts 1 and 2 of this series.
If we go back to the 2001 season -the first for which Forbes ran this independent analysis - here’s the story: Forbes found that as a whole, MLB had an operating profit of $75M. Meanwhile, Bud Selig had just testified before Congress that MLB had a total operating loss of over $200M. Not only that, but Selig also swore that in the previous five seasons, only two teams made a profit.
In other words, Bud Selig testified that MLB was on life support. The only problem was that there was a $275M difference between his figures and an independent analyst’s. Not surprisingly, Selig also testified that Forbes’ numbers were “pure fiction.”
But that was way back in 2001-2. What about this past season? The Biz of Baseball website did a league-wide financial analysis of 2008 based on that year’s Forbes findings. As a whole, BoB found that the league increased in value - but only because the gains by the Mets and Yankees were so inordinately large that they were able to pull the entire league of the red.
On the other side of the coin, 10 teams decreased in value between 2007 and 2008. One of those teams was the Indians.
They decreased in value to $399M.
If you recall, the Dolans bought the franchise for $320M.
So if Forbes’ analysis is correct, the Dolans have made $79M since acquiring the team in 2000. That’s roughly a 25% ROI over the course of 8 years. Not bad.
Before we go on, I should emphasize that there are two separate categories that we’re considering here: operating income and total value. Operating income is, again, single-season profit before taxes, interest, and depreciation. Total value includes earnings plus the value of the team’s stadium, so it acts as a more complete picture of a team’s financial well-being.
I bring this up to highlight that you could theoretically have an operating loss for several consecutive seasons, but if the total franchise value after those losses is still higher than what you paid for the team, you’re still in the black on the investment.
That said, let’s look at what Forbes calculated as the Tribes’ yearly operating income, from 2002 to 2008:
2008 OI: $29.2M
2007 OI: $24.9M
2006 OI: $34.6M
2005 OI: $27.2M
2004 OI: $10.4M
2003 OI: -$1M
2002 OI: -$3.6M
NET 2002-2008: $121.7M
Obviously, there are 2 years of Dolan ownership not accounted for in this analysis. And as discussed above, operating income is trumped by total franchise value.
To me, those numbers are pretty eye-opening - especially if you consider the fact that Forbes supposedly did not take into account the “related businesses” aspect of the 30 franchises. In other words, profits of the team-owned cable networks are not reflected in their analysis…and despite that, they’re still showing massive yearly windfalls for the Indians.
To try to bring this to a close, here’s what I can’t do: I can’t provide hard evidence that says definitively “Paul Dolan’s projections differ from economic reality by $___M.”
However…operating income is what Paul Dolan is referring to when he states that the Indians are going to lose $12M this season. So if we accept the Forbes analysis despite its flaws, Dolan’s projections require us to believe that this year has been so utterly catastrophic that the team’s annual operating loss will be 3.333x greater than the biggest operating loss on the books since 2002. Or another way to look at it, a -$41.2M single-season crater ($29.2M in 2008 to -$12M in 2009) that would’ve nose-dived to a -$49.2M single-season difference without shipping off Victor, Cliff, and Ryan.
This is not only unlikely, it borders on the financially impossible. Short of adopting a string of promotions like ”Hepatitis C Day” and “Feral Dog Give-Away Night,” there are few circumstances that could swing the pendulum so far from black to red in one year.
So we end where we started: the Dolans’ numbers shouldn’t be believed. And that’s a good thing to keep in mind, since they’re not going anywhere anytime soon.
My original goal with last night’s post was to make it through the main accounting tricks pulled by MLB franchises so that I could spend tonight focusing back on the bigger picture. However, I forgot a couple, and I think it’s important to lay out as much as possible so that you get a clear scope of just how fast and loose owners can play with their books.
So without further ado…
Chapter 1, Verse 2: Revenge of the Killer Spreadsheets
4) Ownership Companies
Apart from the salary depreciation loophole discussed yesterday, ownership has another cute game they can play when purchasing a team. The basic idea is that the owner or owners - actual flesh and blood people, of course, barring some kind of bizarre ghost conspiracy that would be bigger than any analysis of sports accounting I could ever conjure - tend not to purchase teams personally. Instead, they set up limited liability corporation or limited partnership to buy and operate the franchise.
The curveball comes in how that company acquires funding to buy the team. More often than not, the company is loaned money from the personal finances of the owner. The company uses that loan to buy the team, then diverts its operating profits to repay the owner plus interest over the course of the next several years.
Once again, those loan repayments appear as a loss on the team’s balance sheet, despite that the money is going directly back to the guy who owns and operates the company. So it’s another premeditated loss of the type I’ve been discussing since yesterday. (Thanks to D. Stanley Eitzen for discussing this in “Dollars & Sense.”)
It seems relevant to mention at this point that the legal owner of the Cleveland Indians is not Larry Dolan, but rather “Cleveland Indians Baseball L.P.”
5) Related Businesses
This circles back a little bit to the “non-cash” charges item from yesterday.
As is probably clear by now, so much of this accounting game comes down to ownership directing you to all the places where they have figures to show that they’re losing money - and while you’re looking in those places, they’re basically throwing bags of cash from somewhere else out the window into a waiting truck.
There are examples of teams’ having businesses related to the franchise, but separate enough that they can just leave any profits from those businesses off their books when painting a picture of their team’s financial health. So again, cash ultimately goes back to the owner, but it takes a twisty enough path that they can justify not accounting for it when it’s convenient to show that the franchise is suffering.
The most popular of these related businesses is the regional sports network.
The cardinal sinner in this realm is the Yankees. Now, the Pinstripes’ brass has publicly claimed that the team has been hemhorraging cash for several years. Brian Cashman famously claimed that the team lost $28M in 2006. Team President Randy Levine and COO Lonn Trost asserted that the team would certainly lose money when all was said and done last season.
Now to Levine’s and Trost’s credit, they also state in that same interview that “the Yankees financially are in very, very good shape.” But even that admission may be understating the case.
The key in Yankeeland is the YES Network, the cable channel that holds exclusive broadcast rights to 130 of the Yankees 162 annual games. As pointed out by Phil Birnbaum here, the Yankees own at least 33% (and possibly more) of the Yes Network. In 2007 alone, the network had an operating profit of $150M, of which at least 33% would go directly back into the Steinbrenner coffers - or, excuse me, YankeeNets LLC.
However, Andrew Zimbalist argues in his book “May the Best Team Win” that the Yankees profits on the network are actually even higher than that. YankeeNets LLC is, fittingly, a partnered holding company that also legally owns the New Jersey Nets. Zimbalist suggests in the book (which you can read an excerpt of here for more of the gory financial details) that YankeeNets accountants are attributing an artificially high percentage of YES’s profits to the Nets.
Why is this the case? Unlike MLB, there is no revenue sharing in the NBA. Any money made by the Yankees’ organization factors into their total profit, which is the number that the league looks at to calculate revenue sharing pay-outs. So it’s to the Yankees advantage to hide away as much money as possible.
As far as the size of this hidden stash, Zimbalist suggest that in 2002 alone, it was likely in the neighborhood of $60M. In other words, YankeeNets LLC is likely masking more of their YES profits than they’re reporting.
The upshot of all of this is that the ownership shell game develops a second level. On one hand, teams are sheltering money from the league. On the other, they’re sheltering even MORE money from the public.
Another way to say this is that the figures seen by Bud Selig are not the same as the figures reported by ownership to the public. And why would they be? None of the 30 MLB franchises is publicly traded. As a result, they have no obligation or incentive to release their books - true or legally cooked - to John Q. Fan.
Ironically, the only MLB team that has ever been publicly traded is the Indians. This happened for a brief period starting in 1998. Here’s a link to their 1st Quarter 1999 report, if you’re catastrophically bored or make your living via Quickbooks.
However, the end of the Tribe’s presence on NASDAQ ended in November 1999, when Dick Jacobs sold the club to Larry Dol — er, Cleveland Indians Baseball LP. (Sidenote: hilariously, over the course of the year that Tribe stock was available, it was a better investment than Yahoo!)
All that background info aside, the question is: who owns the rights to broadcast the Indians’ regular season games? The answer is Sports Time Ohio - a cable channel owned and operated by the one, the only Larry Dolan.
There’s an important distinction here. The YES Network is owned by the same holding company that actually owns the Yankees. Sports Time Ohio is in fact owned by Larry Dolan, NOT Cleveland Indians Baseball LP. Because the two are legally separate entities, Cleveland Indians Baseball LP has no incentive or obligation to factor the profits of Sports Time Ohio into the franchise’s accounting picture.
That said, all the money made by STO is going to the same place as the money made by the Indians franchise. How much money is that? We have no idea, because - surprise! - STO is not a publicly traded company. But considering that STO owns the cable broadcast rights to not only the Indians’ season, but also the Browns, it’s safe to say that they’re turning a significant profit.
This is all the analysis I can muster for the night, so it looks like this will become Jose Mesa Is Dead’s first three-part column. I don’t know if I’ll have time to write the conclusion until Sunday. Til next time.
On Thursday, August 6th, Indians team President Paul Dolan met with the press to discuss a variety of issues relating to the financial health of the franchise and the impact of their recent trades. During that meeting, Dolan projected that, due to a variety of factors, the Indians’ franchise would lose $16M this season.
The problem is that if sports economics has any credence, this statement is almost certainly garbage of the highest order.
In order to understand how that can be, we have to once again enter the labyrinth of sports finance - and in particular, the shady things that any pro franchises can legally do with their books.
Chapter 1:Paul Beeston and the Magical Loss Conversion
Earlier this decade, then-VP of the Toronto Blue Jays, Paul Beeston, made a statement that has since become the centerpiece of practically every serious discussion of baseball economics:
“Under generally accepted accounting principles, I can turn a $4 million profit into a $2 million loss, and I can get every nation’s accounting firm to agree with me.”
This is the primary problem with the Dolans’ claim. The accounting practices in professional sports - specifically, Major League Baseball - are so serpentine and two-faced that owners can make statements that are technically true while simultaneously running completely counter to The Big Truth.
This is not quite the same as Bill Clinton inventing a new way to smoke marijuana, but it’s close.
The core enabler of this problem is the following absurd reality: Major League Baseball is exempt from all US anti-trust laws. In other words, they have been given a green light to operate as a monopoly.
I won’t go into the whole legal history that established this exemption. Suffice it to say that in the early 1920s, Congress claimed that baseball did not qualify as interstate commerce. A 1922 US Supreme Court ruling upheld this protection. In the decades since, the Supreme Court has shot down all lawsuits aimed at unshielding MLB…on the basis that because Congress granted the original exemption, Congress has to be the body that overturns it.
Of course, Congress is too concerned with the BCS to worry about professional sports. And in true recent Congressional fashion, they’re even managing to miss the big point there - but that’s another column.
The anti-trust exemption and a variety of other tax and accounting loopholes create a plethora of options for MLB ownership to distort their earnings. Below is a greatest hits list, which I will have to continue tomorrow.
1) Salary Depreciation
(Note: An advance thank you to Robert Whiting, the first writer I was able to find who could explain this concept simply but without sacrificing the details. Whiting primarily writes about Japanese baseball and its intersection with American baseball. I’ve read his book The Meaning of Ichiro and highly recommend it for any modern baseball fan.)
If you’re employed right now, I can guarantee you that your boss is looking at every possible loophole that will allow him to reduce his company’s tax bill this year - especially “in this new economy.” One of the best ways to reduce his corporate taxes - especially if he’s actually heading an extremely profitable company - is to use accounting tricks to show that the company is “actually” running in the red. Your state and federal government can’t tax your profits if they don’t exist.
But while they may be desperate, one thing that your boss will not and cannot do is to write off his employees’ salaries as losses cutting into revenue. If he tried this, within a matter of seconds the IRS would be jumping out of trees on the guy like it was a kung fu movie.
However, there are 30 business owners in the US who were exempt from these rules for a limited time. Who were they? The owners of the 30 MLB franchises.
Here’s something Bud Selig doesn’t want you to know: when an ownership group buys an MLB franchise, they get to take advantage of something called salary depreciation. From what I can tell, the basic reasoning is that a baseball owner’s most skilled employees - the players on their roster - are being paid for skills that can only decline over time. As a result, the owners are getting a fundamentally bad deal on the contracts to which they’re signing these employees and are thus entitled to a subsidy.
I’m not saying for a moment that I agree with this rationale, mind you. I’m just saying that this seems to be the justification.
The size of the subsidy ownership receives is staggering. For the first 5 years after purchasing an MLB team, ownership is allowed to amortize up to 50% of the purchase price on the basis of salary depreciation. What does that mean? When the Dolans bought the Tribe before the start of the 2000 season for a record $320 million, they already knew they were going to be getting a hefty savings over the long run. Specifically, they knew that from 2000-2004, they were going to be able to credit a $32M annual loss on their books, which would almost certainly be enough to show the organization operating in the red (more on this later). In the process, the Dolans would save millions in tax money, making the business of owning the Indians more profitable than it should be.
Obviously, the Dolans’ salary depreciation honeymoon is now over. But the point is that it was in place for 50% of the time that they’ve held the franchise. And the great trick of this whole franchise valuation / accounting game is that because the economy is so jacked up right now, owners only want fans to look at the short term. The last thing they want is for people like me to dig back and start looking at their cumulative earnings since they took over the team - but that’s exactly what I’m going to try to do later in this post.
That said, because this whole expose is growing at the same rate as the federal deficit, you’ll have to wait until tomorrow for that portion.
2) Ownership salary
D. Stanley Eitzen notes that another economist named Richard Sheehan has revealed that franchise owners have another unique little tool to misrepresent the financial state of their teams. Each owner normally pays himself an annual salary which, as with most other heads of corporations, is not small. There is no cap on this number - owners can pay themselves whatever they want.
The kicker, though, is that whatever the salary, it appears on ownership’s balance sheet as a “business expense” that cuts into the team’s profits. Much like the fraudulence of revenue sharing (which I discussed in my lengthy “Mythbusters: Franchise Ownership Editoin” post a few weeks back), these ownership salaries are just another means for the owner to pocket cash for personal gain.
But in this case, the salary provides a double bonus: not only does the owner get to keep the money, but he can also use that huge “business expense” to save himself serious tax dollars and to endear himself to the fans by showing that he’s basically a philanthropist. Who else would be so willing to take a major financial hit in order to help the deserving fans of the home city fight for a championship?
Eitzen references a point in the early ’80s where George Steinbrenner paid himself a “consulting fee” of $25M for - I kid you not - negotiating the Yankees’ cable contract. That figure appeared on the Yankees’ balance sheet as a $25M loss.
This, ladies and gentlemen, is why you hire accountants.
3) “Non-Cash” Charges
The third and final trick concerns another accounting term that I will try to distill into layman’s terms.
A ”non-cash” charge is an accounting expense only. That is, ownership doesn’t actually pay any money out to cover the expense. In layman’s terms, I believe it’s OK to think about it as an “assumed loss.” You as the owner estimate the devaluation of your goods and deduct that estimated amount from your revenue stream…even if it’s completely divorced from reality.
There are two main areas that MLB owners use this clause. The first is the minor leagues. The second is their ballparks.
According to Forbes, MLB teams have a tendency to tilt the lens in a favorable direction by factoring in the losses incurred by their minor league affiliates.
The trick? They don’t factor in minor league revenue.
It’s not immediately clear to me why they’re allowed to factor in the negatives without also applying the positives, but considering the source, I’m OK with assuming truth on this one.
As a reference point, the average MLB team claimed a $14M operating loss for associated with their minor league affiliate. But Forbes’ independent analysis concluded that the real number was something more like $8M - in other words, a 40% difference between what ownership wants their fans to believe and what’s true.
The other highly popular non-cash charge for MLB owners is ”stadium depreciation.” The basic idea is that (like those declining players) the ballpark they’re using gets crappier every year. The owners estimate a depreciation value and claim that value as yet another loss on their books. On average, that number ends up being more than $5M per team.
Is anyone sensing a theme here? You’ve got a day to think about it before I come back with Part 2.
