Forbes MLB Team Valuations: O's Worth $1 Billion

[Frobby]

MASN is worth $750m. MLB paid $75m for 10% in 2005. That is the valuation until it's put on the market or bought by a 3rd party. NYY, LAD and BOS local RSNs are 3rd party owned. Only team that has a control stake is BOS of which some of revenue is used to pay off Liverpool FC debts. :thumbsup1:

MASN may be worth $750 mm but your logic is flawed. MLB paid $75 mm for a 10% stake that was going to grow to 33% over 25 years without any further investment required. That suggests an initial valuation far less than $750 mm. But I believe some of the information made public in the MASN lawsuit suggests $750 mm is now pretty close to the mark.

[BradyBunch]

MASN may be worth $750 mm but your logic is flawed. MLB paid $75 mm for a 10% stake that was going to grow to 33% over 25 years without any further investment required. That suggests an initial valuation far less than $750 mm. But I believe some of the information made public in the MASN lawsuit suggests $750 mm is now pretty close to the mark.

Not flawed logic. That $75m was the buy in that included the increase to 33%. That's the valuation as of now but it doesn't mean it's the valuation if it went on the open market today. Judging the value of a company from a lawsuit full of half-witted rulings by MLB (RSDC) and astronomical demands vs low end offers.. is never a good idea.

If MASN was brought public, it's value would be in $1.5 to $2 billion range based on "stardard" P/E multiples (15x) and the Orioles would get $1b plus for it. Nats would get pennies which is why MLB has always pushed Angelos and ownership group to sell to a 3rd party privately with no bidding war. MLB wanted MASN to sell off 30% to Comcast for $216m and then sell 1 to 2% until 2023 leaving each team with 23.5% in the new spin Co.. Then on top of that give Comcast a sweet heart deal on rights in perpetuity. O's and Nats would start with $42.5m in rights fee and it would increase by 4% every year. Now that's damn close to what the MASN offered the Nats.

[weams]

Not flawed logic. That $75m was the buy in that included the increase to 33%. That's the valuation as of now but it doesn't mean it's the valuation if it went on the open market today. Judging the value of a company from a lawsuit full of half-witted rulings by MLB (RSDC) and astronomical demands vs low end offers.. is never a good idea.

If MASN was brought public, it's value would be in $1.5 to $2 billion range based on "stardard" P/E multiples (15x) and the Orioles would get $1b plus for it. Nats would get pennies which is why MLB has always pushed Angelos and ownership group to sell to a 3rd party privately with no bidding war. MLB wanted MASN to sell off 30% to Comcast for $216m and then sell 1 to 2% until 2023 leaving each team with 23.5% in the new spin Co.. Then on top of that give Comcast a sweet heart deal on rights in perpetuity. O's and Nats would start with $42.5m in rights fee and it would increase by 4% every year. Now that's damn close to what the MASN offered the Nats.

Good info. Thanks.

[Frobby]

Not flawed logic. That $75m was the buy in that included the increase to 33%. That's the valuation as of now but it doesn't mean it's the valuation if it went on the open market today. Judging the value of a company from a lawsuit full of half-witted rulings by MLB (RSDC) and astronomical demands vs low end offers.. is never a good idea.

If MASN was brought public, it's value would be in $1.5 to $2 billion range based on "stardard" P/E multiples (15x) and the Orioles would get $1b plus for it. Nats would get pennies which is why MLB has always pushed Angelos and ownership group to sell to a 3rd party privately with no bidding war. MLB wanted MASN to sell off 30% to Comcast for $216m and then sell 1 to 2% until 2023 leaving each team with 23.5% in the new spin Co.. Then on top of that give Comcast a sweet heart deal on rights in perpetuity. O's and Nats would start with $42.5m in rights fee and it would increase by 4% every year. Now that's damn close to what the MASN offered the Nats.

What you are saying mixes apples and oranges. $75 mm for 10% of company implies a valuation of $750 mm. $75 mm for 33% of a company implies a valuation of $225 mm. If you are buying an interest that starts at 10% and grows to 33% without you needing to contribute further funds, then the valuation as of 2005 (when the interest in MASN was purchased) is somewhere between $225 mm and $750 mm, depending on what discount rate you want to use to account for the fact that the interest takes 25 years to slowly increase to 33%.

I don't understand this distinction between "the valuation as of now" versus "the valuation if it went on the open market today." To me, that's the exact same thing.

[BradyBunch]

What you are saying mixes apples and oranges. $75 mm for 10% of company implies a valuation of $750 mm. $75 mm for 33% of a company implies a valuation of $225 mm. If you are buying an interest that starts at 10% and grows to 33% without you needing to contribute further funds, then the valuation as of 2005 (when the interest in MASN was purchased) is somewhere between $225 mm and $750 mm, depending on what discount rate you want to use to account for the fact that the interest takes 25 years to slowly increase to 33%.

It's not mixing apples and oranges. Rather, that 10% is what MLB (owner at the time) paid for it's 10%. The MASN contract calls for increase in ownership over time and out of that the 23% increase is offset by the fact the Orioles would keep the revenue via dividend payments. So basically the Orioles are getting paid for the 23% in a declining manner. :thumbsup1:

I don't understand this distinction between "the valuation as of now" versus "the valuation if it went on the open market today." To me, that's the exact same thing.

It's not. The valuation as of now is set upon the 2005/2006 MLB $75m payment for 10%. This was at a time where MASN had 0% revenue. Today MASN has Revenue in the $150 to $200m range on a $2.50 average subscriber fee which resets end of this year or start of next year. This rate will raise to the $3.50 to $4.00 range. So basically doubling revenue. Then MASN owns the rights to Nationals and Orioles in a TV market which ranks 5th in country with out counting North Carolina territory which Time Warner and Cox has refused to carry MASN. With MASN you already have a set up network so it's not like you are starting from scratch, hence value in that as well. When you get down to nuts and bolts of it. MASN's value on the open market is $1.5 to $2b easily. Or to put in perspective.. Time Warner's SportNet LA was an $8b deal for 25 years.

[DrungoHazewood]

From 2013:

http://www.bizjournals.com/baltimore/news/2013/10/23/masn-drives-baltimore-orioles-value-to.html

The idea that the O's have LOST value runs counter to the article.

That assumes that you believe in the prior estimate.

[Frobby]

It's not mixing apples and oranges. Rather, that 10% is what MLB (owner at the time) paid for it's 10%. The MASN contract calls for increase in ownership over time and out of that the 23% increase is offset by the fact the Orioles would keep the revenue via dividend payments. So basically the Orioles are getting paid for the 23% in a declining manner. :thumbsup1:

It's not. The valuation as of now is set upon the 2005/2006 MLB $75m payment for 10%. This was at a time where MASN had 0% revenue. Today MASN has Revenue in the $150 to $200m range on a $2.50 average subscriber fee which resets end of this year or start of next year. This rate will raise to the $3.50 to $4.00 range. So basically doubling revenue. Then MASN owns the rights to Nationals and Orioles in a TV market which ranks 5th in country with out counting North Carolina territory which Time Warner and Cox has refused to carry MASN. With MASN you already have a set up network so it's not like you are starting from scratch, hence value in that as well. When you get down to nuts and bolts of it. MASN's value on the open market is $1.5 to $2b easily. Or to put in perspective.. Time Warner's SportNet LA was an $8b deal for 25 years.

It suffices to say that I disagree with everything you say. As to the second paragraph, no logical person would say that the current valuation of an asset is the price at which that asset was purchased some time in the past. By that logic, the current valuation of the Orioles is $173 mm, which is what Peter Angelos and his group paid for the Orioles in 1993. I'll tell you this much, the Maryland tax authorities certainly think the current valuation of my house is about three times what I paid for in in 1989.

[UMDTerrapins]

I'd get interested in our valuation if the Orioles were for sale.

[Frobby]

I'd get interested in our valuation if the Orioles were for sale.

Good point. The only real importance of the Orioles' increased valuation is if it is based on increasing revenue, which has implications for what payroll the team can afford. Revenue was up 23%, and I'd love to see a breakdown of that.

[Redskins Rick]

I'd get interested in our valuation if the Orioles were for sale.

Change for change sake, doesn't out work out, that the next guy in charge, is better than the last guy.

Since the team is winning and has been for 3 years consecutively, I no longer have a desire to see the team sold.

[BradyBunch]

It suffices to say that I disagree with everything you say.

And you have every right to do that but you don't have a right to ignore facts.

As to the second paragraph, no logical person would say that the current valuation of an asset is the price at which that asset was purchased some time in the past.

Nobody is saying that. Rather I am saying that the $750m is the ONLY valuation right now because it's the most recent agreed to sales price for 10% share of MASN. Since then MASN's books haven't been open to the public and MLB/Nats/Orioles aren't gonna release these numbers. Hence why the 10% for $75m is the only pricing point. Which goes back to what I said.. when or if MASN is sold or goes public (IPO).. the books will be audited by a 3rd party and when that happens we'll get a new price valuation of MASN.All I have said is when this happens the value will be in the $1.5 to $2 billion.

By that logic, the current valuation of the Orioles is $173 mm, which is what Peter Angelos and his group paid for the Orioles in 1993. I'll tell you this much, the Maryland tax authorities certainly think the current valuation of my house is about three times what I paid for in in 1989.

No, this is where you are comparing apples to oranges. Valuation of a Company (Baltimore Orioles Inc) doesn't matter until it changes hands. Meaning when PA passes away his estate will taxed for his portion of the team after an audit (valuation is done). Your house is a different matter. Your house is subject to property tax and property assessment by State for local property taxes. This is done every 3 years in Maryland. Major differences.

[Frobby]

And you have every right to do that but you don't have a right to ignore facts.

Nobody is saying that. Rather I am saying that the $750m is the ONLY valuation right now because it's the most recent agreed to sales price for 10% share of MASN. Since then MASN's books haven't been open to the public and MLB/Nats/Orioles aren't gonna release these numbers. Hence why the 10% for $75m is the only pricing point. Which goes back to what I said.. when or if MASN is sold or goes public (IPO).. the books will be audited by a 3rd party and when that happens we'll get a new price valuation of MASN.All I have said is when this happens the value will be in the $1.5 to $2 billion.

No, this is where you are comparing apples to oranges. Valuation of a Company (Baltimore Orioles Inc) doesn't matter until it changes hands. Meaning when PA passes away his estate will taxed for his portion of the team after an audit (valuation is done). Your house is a different matter. Your house is subject to property tax and property assessment by State for local property taxes. This is done every 3 years in Maryland. Major differences.

You clearly are using nomenclature differently than most anyone I know, but it's just words, not substance. I think we both agree that MASN is worth more today than it was when the Nats bought in, right?

Where we really disagree is the earlier point. Let's say you have a choice of buying two bonds that have a payment schedule. The first one pays you a $100 dividend every year. The second one pays you $100 for the first couple of years and then the scheduke provides that dividend begins to increase by $10 every year until it reaches $330 per year, at which time it will level off. Are you going to pay the same price to buy the two bonds? Of course not. And for the same reason, if you thought MASN was worth $750 million, you'd pay $75 mm for a 10% stake, but you'd pay a lot more than that for a stake that started at 10% but automatically grew to 33% over time. Thus, the initial purchase price of $75 mm implies a valuation much lower than $750 mm when that purchase was made.

[BradyBunch]

You clearly are using nomenclature differently than most anyone I know, but it's just words, not substance. I think we both agree that MASN is worth more today than it was when the Nats bought in, right?

Where we really disagree is the earlier point. Let's say you have a choice of buying two bonds that have a payment schedule. The first one pays you a $100 dividend every year. The second one pays you $100 for the first couple of years and then the scheduke provides that dividend begins to increase by $10 every year until it reaches $330 per year, at which time it will level off. Are you going to pay the same price to buy the two bonds? Of course not. And for the same reason, if you thought MASN was worth $750 million, you'd pay $75 mm for a 10% stake, but you'd pay a lot more than that for a stake that started at 10% but automatically grew to 33% over time. Thus, the initial purchase price of $75 mm implies a valuation much lower than $750 mm when that purchase was made.

Yeah.. I keep it simple when it comes to nomenclature. Getting wonky can be pretty boring to those reading posts and pretty prestigious.

Well it depends on how you want to do a valulation. Time value of money is an important component but then there is also risk to account for. The first bond is the "safe" bond which will net you $100 a year. The second bond is risky but has a higher return. So it's more complicated then the price but how do you value your money, how much risk you want and so on. But bonds have nothing to with this but time value of money does.

So the Orioles/MASN taking $75m for 10% which would grow to 33% over 23 years gave the Orioles 90% in equity which will decline to 67% over 23 years. This is where I think you are not figuring into the what is the actual payment for 33%. MASN issues dividends on profit. Jonah Keri (sportswriter) estimated that equity payments (yes, he has some knowledge on it) for the O's during those 23 years would be $1.78b and for the Nats $600m. That's $2.38b in equity payments. 33% of that (if it was the starting number) would have been $785m in payments to the Nats. But since they started at 10%, they lost $185m in equity payments. So for 33% the MLB paid $75m for 10% upfront and give up 23% in equity payments (dividends) over 23 years at the tune of $185m. So total cost for that 33% is $260m or roughly $7.8m per 1%.

So to sum it up.. It came out to be a $260m for 33% in upfront payment and deferred equity payments. Deferred Equity is a cute way of saying you'll take no payment for increased share of ownership.

[Frobby]

Yeah.. I keep it simple when it comes to nomenclature. Getting wonky can be pretty boring to those reading posts and pretty prestigious.

And then you give a long answer that tries to make simple things complicated.

Let me keep it really simple. Paying $75 mm for 10% of a company says one thing about its valuation. Paying $75 mm for 33% of a company says something different about its valuation. Paying $75 mm for a 10% stake that grows to 33% over time says a third thing about its valuation, and it's in between the other two.

It's not like the Nats have foregone their dividends while their stake is growing. To the contrary, they were entitled to 10% of the dividends when they owned 10% of the company, they're entitled to 17% now, and their percentage of the dividends goes up every year until it hits 33%. They aren't paying anything additional for that increase. And you'd rather have that than have 10% of the dividends forever.

I'm done arguing about this point.

[Redskins Rick]

And then you give a long answer that tries to make simple things complicated.

Let me keep it really simple. Paying $75 mm for 10% of a company says one thing about its valuation. Paying $75 mm for 33% of a company says something different about its valuation. Paying $75 mm for a 10% stake that grows to 33% over time says a third thing about its valuation, and it's in between the other two.

It's not like the Nats have foregone their dividends while their stake is growing. To the contrary, they were entitled to 10% of the dividends when they owned 10% of the company, they're entitled to 17% now, and their percentage of the dividends goes up every year until it hits 33%. They aren't paying anything additional for that increase. And you'd rather have that than have 10% of the dividends forever.

I'm done arguing about this point.

Percentage Ownership and valuation talk.

Thought I was watching Shark Tank!