Thursday, April 17, 2008

$292 million

That's how much R Buccos are worth, according to Forbes Magazine's annual writeup. If that sounds like a lot of money, it's actually not. We rank 28th out of the 30 teams in MLB, ranking ahead of only the two beleaguered Florida squads (and we're only $2M ahead of the Devil Rays), while the average team is worth $472M. Before you start feeling sorry for the team, the current "low" price tag is still a lot more than the $92M the Nutting-McClatchy group paid for the franchise in 1996.

This subpage breaks down Forbes's valuation estimate. They credit us with $146M in value for our share of communal money across MLB (merchandise and the national TV deals and such), $74M in value based on our position in the Pittsburgh market, $48M in value from our stadium deal, and only $23M from the value of the Pirates brand itself. It seems pretty clear that the last number is a reflection of the relentless losing and the general aura of hopelessness that engulfs the franchise. Advertisers aren't going to rush to associate themselves with a perennial punchline.

Forbes also guesstimates our operating income for this year at $18M on revenues of $139M. This is interesting not only because it's a good profit for a team that likes to cry poverty, but also because the operating income has increased dramatically since the Nuttings started to assume a more prominent role in the franchise's operation over the last few years. It's traditional for MLB clubs to condemn these estimates as hideous, inaccurate distortions, but you'll notice that they never actually open their books to provide evidence of this. Regardless, it's one more piece of evidence for fans to use when agitating for the team to pick and sign top-dollar talent in the draft this year.

There's a lot more interesting stuff in there, so make sure you set aside some time to play with it over the next day or two.


hyzduhq said...

I forgot all about this coming out. Thanks for the heads up Vlad. I should note that the article about the Braves was really insightful. That team is so well run. Also they are owned by Liberty Media, who owns FSN Pittsburgh, which I find somewhat interesting.

Also it is amazing what a team in a similar market like Cleveland can do. Good business management, baseball management, and winning seem to bring in the profits too. What a novel idea!

Anonymous said...

I think I read somewhere at (a 2-month old Dejan Q&A?) that MLB requires all teams to make a certain amount of profit, based on a percentage of their debt (with exceptions for teams with new stadiums, like the Pirates). a side-effect of this requirement apparently included the A-Ram trade a few years back.

anyway, the difference between required profit and the $18M guesstimated profit will likely limit any acquisitions this year, with signing bonuses for draft picks presumably also coming out of that pot.

- humbucker

Vlad said...

You're pretty close, but if we're talking about the same rule (and I think we are - there's a description here), then it's a rule about a team's ratio of debt to assets, not debt to profits. Specifically, a team's debt can't exceed 40% of its asset value, and because McClatchy was leveraged out the wazoo he fell afoul of the rule when they started enforcing it.

I think that rule may have been a casualty of the last CBA, but the Forbes breakdown also has a list of franchises by debt-to-asset ratio, and they have us right in the middle. As such, I think we're probably OK.