2011 Forbes valuations out, A’s up 4%
- 03.23.11, 10:28
- 78 Comments
It’s late March, and you know what that means: the new Forbes MLB franchise valuations are out. With a few notable exceptions due to debt problems (Mets, Dodgers), things in baseball are going quite swimmingly. The A’s are back above the $300 million mark with a $307 million valuation, up 4% from 2010. The team remains second-to-last among all MLB franchises, eclipsing only the Pirates. Forbes also listed at $23.2 million, which is probably due entirely to revenue sharing.
To understand where the A’s may be headed, I took five teams and looked a little deeper at how their valuations were constituted. The teams are the A’s, Giants (natch), Red Sox (Giants’ aspirations), Rockies and Padres (aspirational western mid-markets for the A’s). The numbers are quite interesting.
First off, it’s important to note Forbes’ explanations for some of the components of each valuation. “Sport” is described as attributable to revenue shared among all teams. You’ll see there’s an inverse relationship between the bigger revenue teams and this number. If a team is highly dependent on revenue sharing, this number will be higher. “Market” seems self-explanatory, though for the two Bay Area teams it’s interesting that according to Forbes they share the same market, which based on its size (4,274,000) is probably defined as the SF-Oakland-Fremont MSA. That leaves out both the South Bay and all of the North Bay save for Marin County. Not clear on what impact this has, so I’ve reached out to Forbes editor Kurt Badenhausen for a clarification. Here’s his response:
We publish the population and revenue per fan numbers based on the San Francisco-Oakland-Fremont MSA. We use the official MSA designations for all those numbers. Market size plays a role in the value of teams in terms of how they drive revenues, but a bad stadium situation in a big market is still not going to help a team out.
“Stadium” is fairly straightforward, though it should be pointed out that just because you build a $500 million dollar stadium you’re not going to see a similar appreciation in your franchise valuation. That makes “Stadium” more a function of gate revenue and attendance, areas where the A’s and Padres fall behind while the Giants and Red Sox excel. “Brand Management” must be related to marketing efforts – or in the case of the A’s, a lack thereof.
Debt/value is a tricky beast, both in how it’s defined and how MLB’s debt rules get enforced. It always includes stadium debt, and should the A’s get their new ballpark in the next few years that number will jump up significantly from its 29% position, which has hovered there for several years. Since it’s possible that some of that debt may come in the form of a loan from MLB, it will be extremely important for Wolff/Fisher to ensure that revenue streams are locked in to service that debt (and then some) for the foreseeable future.
Surely, this annual release by Forbes will be followed up by a denial of the veracity of the figures by Commissioner Bud Selig. Despite this, it’s telling that franchise sales tend to use the Forbes figures as a baseline at the very least, leading me to believe that they’re far more accurate than Selig, who is loathe to provide any real financial data from MLB, is willing to let on.
@pjk One neighborhood not wanting MLB does not translate to the entire city not wanting MLB. And the NIMBY factor does not apply at Pacific Commons. There, it is just two big businesses to negotiate with. Everything is negotiable in business. And if putting a ballpark there allowed the A’s to recoup their investment in the land, there’s $30 million right there they could throw at the big box stores just to get started.
Someone is going to get a payout regardless…. It could be the big box stores, or it could be the Giants.
@LS You may well be right – and this may be why the A’s suspended efforts in Fremont. If they came to the conclusion they were going to have to make a big payment either way, why not take a run at SJ, the superior site? Doesn’t mean they won’t come back to the table in Fremont if that fails.
@Sid–i pretty much agree with your entire post on why Fremont is dead in the water. However, I disagree with you on your very last sentence: ” It is San Jose or bust for Lew Wolff and the A’s….”
I think he will revisit Oakland if BS says lets revisit Oakland and the VC site.
@jk He’s made it pretty clear he’s not going to revisit Oakland. He very recently pointed out, MLB can tell him where not to build, but they can’t tell him where to build.
Fundamentally, the economics just don’t work there. No amount of phone calls to Ms. Quan or whatever can change that.
If San Jose is out, the only place in the A’s territory which is economically viable is Fremont. And it just so happens the A’s own a massive, readily buildable piece of property there which doesn’t require a redevelopment agency, doesn’t require a vote….
Fremont won’t happen. The options are:
* A privately built ballpark in San Jose
* An MLB-built ballpark in Oakland.
* More decades (and MLB welfare checks) at the Coliseum.
* Relocation out of the Bay Area..
@pjk Um, ipse dixit pronouncements that something won’t happen don’t, you know, actually mean it won’t happen. A Fremont park is FAR more likely than your last three options.
- MLB: So far as I know, there is zero precedent for an MLB-built ballpark. MLB is in the business of squeezing cities to build parks they don’t even really like privately-financed yards because they make it tougher to get publicly-financed yards. Why in the world would MLB invest in a project the owner has concluded is not financially attractive and where it would face double risk: Not making back the cost of the project, AND then having to continue to subsidize the A’s? Of all the things I’m sure won’r happen, this is the one I’m most sure of.
- Coli: Building a park on land you already own in Fremont is way more lucrative and appealing than staying at the Coli. Fremont is still the path of least resistance: Only two big box stores to deal with; no land to acquire, RDA money, MLB approvals, or city votes needed. The A’s might end up at the Coli five or ten more years; they’re not going to be there decades.
- Relocation: This one could happen, but is less likely than Fremont. Fremont could happen much more quickly, and I can’t think of a single open market in North America which has more economic potential than Fremont. It may be bland, but it’s definitely a “have your cake and eat it too” kind of market in its proximity to both Silicon Valley.
People on this board put way too much stock in public pronouncements. Just because the A’s said, “we’re done in Fremont,” doesn’t actually mean they’re done in Fremont. Just because someone said, “we can’t reach a deal with the big box stores” doesn’t mean they can’t reach a deal with the big box stores. It’s posturing. When that becomes the most financially appealing option, those talks can spring back to life very quickly. You see this dynamic in M&A deals all the time.
…If Fremont wants to get back in the game, the proponents will have to shout down the opponents (the opposite of what happened last time).
@pjk You’re kind of talking past me a bit here. I keep saying, if it’s Fremont I think its going to be Pac Commons. There will be no shouting opponents there; whatever discussions take place will be conducted quietly behind closed doors.
@bartleby–”I can’t think of a single open market in North America which has more economic potential than Fremont.”
You got to be kidding, right?
I have no problem with Fremont – they could be the San Jose A’s at Fremont. But will Wolff want to deal with the NIMBYs, the big box stores, the bad real estate market again? (Isn’t there still a problem involving the SJ GIants, in which technically no team can move within 10 miles of the border of a county with a minor league baseball team? This wasn’t going to stop the Fremont project before, though.)
the only thing i would like about a fremont park is the design of the initial park which is better than what we saw from either the coliseum north site or the site in sj.
just don’t care where a park is built, just get one built and said it all along even as a oaklander all my life that sj probably is the more realistic and financially feasible place to build a park somewhere here in the bay area. not to mention the potential it the park and the a’s org as a whole would have with the south bay money behind them.
–”I can’t think of a single open market in North America which has more economic potential than Fremont.”
You got to be kidding, right?
Not hardly. (At least, other than putting a third team in New York, which I don’t consider an open market). From a geographic standpoint, Fremont is ideal, positioned to tap into Silicon Valley corporate money; provide big time professional sports to a large, affluent, South Bay market that has had limited convenient access to it; and maintain convenient access to the large number of people in the South Bay. It optimizes the market the A’s could draw from without going head-to-head with the Giants in their primary geographic area of influence.
You continue to underestimate the importance of Silicon Valley. SV is arguably one of the top 5 or so corporate markets in the U.S., after New York, LA, Chicago, and…I dont even know what I would place fourth. None of the other theoretical locations (San Antonio, Portland, etc.) can touch Fremont in this regard.
If you think you know an open market in North America that has more economic potential than Fremont, name it.
In my previous post, the second “South Bay” should read “East Bay,” of course.
@bartleby- You must understand Lew Wolff wasted 84M (30M non-recoverable) in Fremont already. He went “all out” and failed.
He tried 2 different sites in Pac Commons and Warm Springs to no avail. Those Big Box Stores you talk about are the “anchors” of the shopping center with extremely deep wallets. They do not care about baseball in the least bit and who in their right mind would accept “unlimited liability” for loss of their business in the event a ballpark is built?
Lew Wolff has built so many huge real estate structures in his lifetime and knows how this game works better than all of us combined in this “great forum” ML runs. If he could have hammered a deal out he would have with those retailers.
The A’s nor Cisco can take that risk on hence why the deal died. Lew Wolff does not want to deal with the Giants/MLB over San Jose if he didn’t have to. Now with Fremont dead he has no choice to go down this path with San Jose that he has dreaded for years.
Fremont is still far away enough from Santa Clara, Sunnyvale, North San Jose, Mountain View, Palo Alto or the other parts of Silicon Valley that its location is still no where near as good as Downtown San Jose.
Oakland if they got their act together in March 2009 when the BRC was appointed would have a completed EIR to move the last of their RDA funds to get VC ready. Because of them “lagging” when Jerry Brown kills RDAs finally, Oakland will be done.
I will say it again guys….Its San Jose or bust for the A’s.
@Sid “You must understand Lew Wolff wasted 84M (30M non-recoverable) in Fremont already.”
None of that is a real loss until he actually sells the land. The “30M non-recoverable” was an estimate based on market conditions at a certain point in time. Such estimates are inherently imprecise.
Market conditions can change rapidly, and that supposed 30M loss could easily turn into profit if they do. One possible way to make this happen is….(wait for it)…build a ballpark there. The fact that the A’s have so much invested in that site is one of the main reasons I think it will come back to life if San Jose fails.
“who in their right mind would accept “unlimited liability” for loss of their business in the event a ballpark is built”
As I said before, it’s not really “unlimited liabiity.” The max they could recover is the value of those two businesses overall – that is a quantifiable figure. I don’t know what those stores are worth, but if it was $50 million, lets say, they couldn’t collect more than that. And the real number is likely a fraction of the total business value, and could be zero.
Anyway, as I recall, a main reason the negotiations with the big box stores failed was their demands regarding positioning of the balllpark on the site. The A’s might solve that one by simply saying “We accept your proposal.”
“If he could have hammered a deal out he would have with those retailers.”
My theory is, a deal wasn’t available at that time on terms that were more attractive than his next best
option, trying to get the T-rights lifted in San Jose. If the San Jose option goes away, that completely changes the dynamic. Also, a lot could have changed on the stores’ end in the meantime. New management, for example. Or the stores aren’t doing so well and they’re looking for an exit strategy.
“Now with Fremont dead he has no choice to go down this path with San Jose that he has dreaded for years.”
Dreaded for years? San Jose has always been first choice. Conspiracy theorists might suggest the other efforts (and the decision to walk away from them) were all part of building a case for lifting the T-rights.
“Fremont is still far away enough from Santa Clara, Sunnyvale, North San Jose, Mountain View, Palo Alto or the other parts of Silicon Valley that its location is still no where near as good as Downtown San Jose.”
It’s not as good, but it’s good enough. It won’t draw quite as well from Silicon Valley, but does have the benefit of being more convenient to the East Bay, which partially compensates.
Just my opinion, but FWIW, I think Fremont would be more convenient for SCCo. south of Palo Alto than AT&T Park up in SF.
“Just my opinion, but FWIW, I think Fremont would be more convenient for SCCo. south of Palo Alto than AT&T Park up in SF.”
No doubt. More to the point, it’s WAY more convenient than the Coli, and WAY, WAY more convenient than VC.
Also, although Fremont might be a bit less convenient for Silicon Valley companies than SJ, it may be slightly more convenient for the Tri-Valley companies the Oakland-only’ers point to everytime the subject of East Bay corporations comes up.
bartleby – you continue to be a voice of reason and I thank you for that. If SJ can’t happen, I would much prefer the A’s move on to VC. But your analysis of the Fremont situation makes sense. Some folks are just too emotionally invested in a particular site to look at this with any objectivity. But successful business decisions aren’t made on emotion. They are made on cold hard facts and rational analysis. Just like you’ve done here.
@Dude Thank you for your kind words. I’ll admit, if you ignore economic factors and what it might mean for the quality of the team, I’d be conflicted between VC and Fremont. No question VC would be better from a fan experience perspective. OTOH, Fremont would be more convenient for me personally, and I’d get to see more games.
Big story on the news last night about Oakland’s low-morale, understaffed police department. Can Oakland spend even 10 cents on a ballpark under these conditions? I don’t think so.
Anything from the news is tough to believe outright. Could the police have pumped up their side of the story for sympathy? I wouldn’t doubt it. The news likes to run stories with a charged slant that could be polarizing to viewers and drive up ratings.
Every city in California is cutting social services. Its just good “copy” to pile on Oakland.
Big difference between social services and basic public safety. 70 fewer cops in Oakland than before.
Easy there PJK.
.
http://www.mercurynews.com/crime-courts/ci_17397188?nclick_check=1
There are always both sides to the story. Why won’t the unions make their members take pay cuts so that less jobs would be lost?
That’s posturing to get union concessions. They’ve already gotten a lot of them. Anyway, San Jose doesn’t need to spend much $$ on a ballpark because the work is already done, most of the site is acquired and private companies such as Cisco are ready to build the ballpark. In Oakland, massive public subsidies likely would be needed and Oakland doesn’t have the money. While San Jose went ahead and bought properties and did an EIR, Oakland fiddled.