Thanks for posting this.
Earlier this year, as part of a project that has gotten sidetracked, I did an analysis of the 2018 Forbes numbers. I'm not at home and don’t have access to that stuff right now, but from memory I pretty much did Frobby did, with a few differences noted below.
While working with the Forbes numbers, I concluded, I guess based on what I can remember from my extensive work with business valuations years ago, that it's more meaningful to look at the average of a team's multi-year numbers than to focus on a single year. That should create a more meaningful picture of things by reducing the effect of single-year aberrations -- maybe important and maybe not, depending on what you're looking for. However, that conclusion, combined with my antiquated and awkward relationship with spreadsheets, slowed me down quite a bit.
Forbes has been presenting these annual MLB valuations for over 20 years. I have been following the Forbes numbers, and reading about them, for the past six or seven years, and I am confident that they have been pretty accurate in recent years -- maybe not precise, but close enough for use when you’re looking for patterns and making comparisons.
The big exception is that, as Frobby (and Forbes) point out, Forbes ignores the revenues some teams derive from owning all or part of the regional sports networks that pay them rights fees to carry their games. (That omission tends overall to reduce the relative revenues and profits of larger-city, higher-revenue franchises.) We know from the MASN case that MLB permits team-owned RSNs to divert a portion of the value of teams' rights fees to the RSNs. I’m surprised that Forbes hasn’t by now made team-by-team estimates of annual revenues from ownership of RSNs where that’s applicable. Maybe next year.
In any event, instead of ignoring this revenue source, a couple of years ago I made crude (and conservative) estimates of teams’ revenues from their RSN ownership, and added that estimate to the revenues for each team that owns an RSN. I have no illusion that those guesses are accurate, but I suspect they’re more accurate than the zero that Forbes and Frobby use.
The other difference between my methodology and Frobby’s is that I used player payroll numbers from a different source, I think Spotrac. I can’t remember why.
I agree with Frobby that there are lots of things you can do with these numbers, and I only scratched the surface. A few general observations for now, though.
In my opinion, while the ability of an MLB team to compete successfully depends on a number of factors, the two most important are (a) its potential to generate revenues when it is well managed, and (b) the potential of its divisional rivals to generate revenues.
Estimating a team’s potential revenues is complicated, but the Forbes numbers provide a way to move toward a reasonable approximation: take the average revenues (plus an approximation of revenues from RSNs) over the past X seasons (five seems like a reasonable number) and weight the more recent years. That doesn’t work very well in at least two types of situations: teams whose revenues have been depressed in some years because of poor management (the Mets, Marlins and possibly the Orioles are examples), and teams that chose to allow their revenues -- and their costs – to be reduced in some years as part of a rebuilding process. Those teams' historical revenues need to be adjusted when you compare them to other teams', and I haven’t figured out how to do that.
I have posted in the past some interesting (to me, anyway) numbers that the Forbes figures make readily accessible: the average price of each ticket sold (a team’s gate receipts, per Forbes) divided by that team’s home attendance for the same year. Teams in areas with relatively large populations, high wealth, and lots of corporate headquarters and a concentration of service (financial, law, consulting and accounting) firms get more per ticket -- a lot more in some areas.
Though I haven’t studied it, it's my belief that, while a team's paid attendance rises and falls based on the team’s on-field success (with a time lag), its average ticket price for a given year is affected only slightly by recent on-field performance. If that’s so, then a team’s average ticket prices over, say, 10 years should reflect primarily factors that it can’t easily change: the demographics (including population, wealth, baseball tradition, competition for entertainment/recreation from other teams and activities) of its city and the surrounding area, and (especially in two-team cities) the location and appeal of its stadium and the nature of its fan base. That is, a team's average price per paid patron should correspond closely to its potential ability to generate revenues.That’s something I hope to look at after a lot more thought.
I’ll try to get back to these numbers after the first of the year and post some additional observations. But, as I said, I'm pretty slow with spreadsheeting stuff.
Thanks again, Frobby.