Bizball

One other note. It seems to me as though these valuations are all predicated on the new generation of TV deals coming through. Yet there is almost no questioning whether those were themselves fairly valued, and indeed seem to predominantly rest on the idea that sports teams can indirectly extract monopoly rents from cable TV companies, even in a time when cable TV subscribership is significantly eroding. The situation in San Diego, where the local Time Warner affiliate refuses to carry the Padres, is merely a warmup for a larger battle brewing over the sports televising rights valuation bubble. It's all too easy to project a downward spiral of disappearing viewers, followed by increases in per-user rights fee, which in turn chases off even more subscribers.

On salaries... A good study (no, I have not done it) is the increase in the percentage being allocated to a single player against total player payroll and whether those deals are increasing. As one veteran exec said to me, "It's not AAV that's bothersome, it's AAV over these lengthy contracts."

Another question is whether these deals like 10 year deals for aging superstars are good for the long term interests of the team. As the superstar ages he's less likely to be worth it. As a TV contract ages its relative value decreases with inflation and a team is trapped in an undervalued contract. The Braves CEO recently said
"..we inherited a deal that was done under [previous owner Turner Broadcasting/Time Warner] . . . that lasts out through 25 years. So there is no opportunity for a different deal than the one we have. Every single set of games on the different networks that we are seen on . . . are all 25-year deals or thereabouts.”
Asked if the TV contracts will be a competitive disadvantage for the Braves over the next two decades, McGuirk said: “Let’s just say it won’t be an advantage.”
So the broadcasters like the aging superstar have teams by the short and curlies for 3 decades. What they paid $1M for in 1980 is valued to day at around $5,551,340.
Admittedly they teams can invest the money they receive and increase it's value over time but not all of it so in the out years those big deals will still be big but not nearly as big as they are now while team expenses will continue to rise.
While A-Rod's contract looks worse every year the annual amount decreases after this year and it's life is 10 years long enough to lose 25% of the value to him but in 5 year will he be 75% the player he was when it was signed? Probably not. Even so it' all gone at that point. TV contracts like the one the Braves have and the other teams sign are worth about half as much 20 years and 25% of their initial value a the end of the contract using the CPI. The relative value of the TV rights will be significantly higher then and the team will be getting 25 cents for every dollar it should get from those rights. It just looks like a really bad business deal to me.

I'm really surprised this piece didn't touch on two rather obvious questions:

1. Why have TV contracts become so much more lucrative?

2. Does the length of these contracts mean that the final years will be undervalued?

Thanks, FredOwens, for bringing up the second question, but frankly, if I'm paying $40 a year for a BP subscription, I think I'm entitled to expect the author do a little more analysis, rather than stopping short after a mere laundry list of recent deals and valuations.

I'm still trying to get my head around the Texas Rangers being worth $150 million a year.

Texas has, what, 10 million cable subscribers? If you split the market 50-50 with Houston (to keep the math simple), that means you value the Rangers at around $2.50 per subscriber per month. That's a LOT. I'm not even sure YES is pulling in that much. And that's for a franchise that until their recent World Series run had serious brand awareness issues in their own market.

I find the notion that the Padres are worth substantially more today because of their TV rights than say a year ago laughable.

I've lived in San Diego for 10 years and I have yet to watch a local Padres broadcast in my own home, and I'm a pretty serious baseball fan, so I would have if I could have. When I first moved here I subscribed to DirecTV so I could get the Sunday Ticket, but DirecTV wouldn't carry the local sports net channel the Padres were on. Last year I switched to cable and thought great I'll be able to see the Padres. Not so fast, of course I have TWC in my area, and now they won't carry the Padres channel. Finally, last week I switched back to DirecTV which supposedly carries Fox Sports San Diego, so in theory I can now watch the Padres, I just have to sift through the hundred or so odd sports networks to find it.

My point is that it feels like teams/investors think they just have to create a sports network and they have a license to print money. But it feels like that conclusion is based on historic viewing levels in a much different environment. There are so many channels today that no one is going to stumble across a Padres game on Fox Sports San Diego by accident and decide to watch it. I just don't see how Fox Sports San Diego helps the Padres broaden their fan base thereby increasing the value of the franchise if the only people who will watch it/find it are already fans.

More proof, as if more were needed, that you can always tell when sports team owners are lying about how much money they are losing; their lips are moving.