A media acquaintance of mine uninvolved in sports remarked in late summer, after seeing acres of empty seats at Safeco Field for most home games, that the Mariners must finally be headed for financial disaster.
Well, um, no. I told her that not only did the Mariners report an operating profit in 2012 of $5.8 million despite a terrible season and Safeco-record-low attendance, they had the guts to raise ticket prices for 2013, were finishing another lousy season with a minuscule uptick in attendance, yet had the capital to buy controlling interest in its regional TV sports network.
Wow, she said. Sweet gig.
Yes. Very much.
And that conclusion was before a story this week from Bloomberg News that calculated each MLB club’s market valuation. Called “enterprise value” — defined as market capitalization plus total debt, minus cash — Bloomberg pegged the Mariners at $720 million, which seems a lot but is just 18th. The Yankees were first at $3.1 billion and the Dodgers second at their recent sale price of $2.1 billion. The average franchise valuation was about $1 billion.
Bloomberg said its financial information came from “historical” sources, which is media code for not getting much from any individual team, but from previously published data from sources such as the players union, MLB media partners and MLB itself.
The chart shows that the Mariners’ biggest
external asset is MLB Advanced Media, the colossus that controls broadcast, cable and digital content, including the league’s website that gets four million hits a day. Ownership of MLBAM, valued at $3.3 billion, is shared equally among the 30 teams, which means the Mariners have a $110 million share. (An earlier version of this article misrepresented the amount as revenue).
For perspective, Bloomberg said that income from the Mariners’ local media rights fees (including ROOT Sports and ESPN 710 radio) was $83 million. Gate receipts, which have so long been the public’s eyeball metric for club financial success, is a deep third with $48 million.
So while it isn’t true that the Mariners could do OK if no one showed up — no fans means no concessions or parking, either — the dropoff in attendance so far isn’t a calamity.
Also intriguing was what was left out. Under the income category “regional sports network,” Bloomberg reports for the Mariners “none.” Either Bloomberg missed the April announcement of the Mariners’ purchase of majority interest in Root, the RSN that was owned wholly by DirecTV, or the non-Mariners revenues have yet to show up in the research (the annual income from Root in the old deal showed up under media rights fees).
That will change in 2014. But what the purchase already changes is the club’s equity value. They now have an asset, an RSN, similar to 12 of the 17 clubs ahead of Seattle in Bloomberg’s rankings — a channel that can draw income from televising other sports besides the Mariners. In the Bloomberg chart, that income ranges from $108 million annually to $932 million from the Yankees Yes Network.
Even though Root’s other sports programming is sparse — Big Sky Conference, anyone? — the potential is significant. Just as the Mariners have a monopoly on major league ball north of San Francisco and west of Minneapolis, the club has a near-monopoly with its RSN in the state.
Neither Comcast nor Fox Sports nor any other potential RSN owner can make a go of it without the Mariners’ 162 games of content. Parts of the state can get a little Trail Blazers’ NBA action, but the Mariners’ purchase of control in Root pretty much shuts out competition in the greater Seattle market.
That means the value of the franchise soars. How much is hard to say, but if it is worth $720 million without owning an RSN, and the average MLB franchise is worth $1 billion, it seems logical that the Mariners’ value approaches One-Bee.
So that may help explain why Nintendo of America, the owner of the club, is in no hurry to sell. It has an asset that is appreciating faster than the main company.
It is an asset, because of its monopoly market status, that does not need to have successful baseball in order to make an annual profit as well as gain in equity appreciation.
In a phrase, it is idiot-proof.