BY Art Thiel 05:41PM 10/25/2013

Thiel: Mariners nearly a $1 billion enterprise

Who needs wins? Such an old-fashioned concept. MLB’s revenue sharing, the Mariners’ monopoly geography and owning their own RSN make the club foolproof.

Safeco Field

The MLB money machine and a beautiful park make the Mariners impervious to the need to win. / Wiki Commons

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.

All of the valuations can be seen on a single page by clicking this link for Bloomberg’s slick data chart.

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.


YourThoughts

  • Marcus

    Great article!

    I’ve come to think that the team is for sale (that’s not new), but that NOA is just fine waiting until silly $$$ comes its way. A Chris Hansen of baseball. They’ve looked internally and no one is willing to pay the crazy price they’re asking (well over $1B). They’ll keep on staying the course until a buyer comes along. Why not? The value does continue to increase and there is little on the immediate horizon that could seriously effect franchise value. The team will probably play a bit better next season (.500 ball will buy them a few more years). A Sonics return is one of the few things that could gum up value and the Mariners have opposed that and thrown in with the Port to slow it down. Seriously though, a fast Sonics return is likely 2-3 years away. Somehow I think that NOA wants out before then.

  • Steve

    It is clear that the Mariners are a very successful business enterprise and that the cost of fielding a contender or even a .500 team would add little to the bottom line. The owners couldn’t care less about winning – why should they? While baseball fans are disappointed with the team’s performance the last 5 or so years, ownership/management have found the “sweet spot” where they are minimizing costs and maximizing the value of the franchise. Northwest baseball fans would be better off adopting another team where the owners really care about winning.

  • Effzee

    Yeah, I’ve always wondered why people thought NOA would want to sell. They may, but it would have to come at a steep price. As Art said, the M’s are appreciating faster than the main company! My hope now is that whoever the power has shifted to just happens to personally enjoy the game of baseball and decides that they want to turn the team into a winner. In this fantasy, it could be a lot like Paul Allen’s ownership of the Seahawks: Gazillions of dollars spent on the franchise in the right way. I mean, Nintendo helped make baseball video gaming what it is today. Why would they want to run what would amount to the worst team in one of their games? At least, I’m hoping someone there thinks of it this way. Dare to dream, right?

    • one174

      On the other hand, it could be a lot like Howard Schulz’ ownership of the Sonics.

  • jafabian

    Unfortunately with that $1 billion dollar number comes complacency. What is the motivation to build a World Series legacy when the profit to loss ratio looks so good? No, the club doesn’t need to dole out an ARod type of contract for a mid-range player however neither should they be continuously rolling out the five year rebuilding plan either. Mark Cuban once said that in being a pro sport team owner you need to realize you are in the relationship business with fans and the relationship M’s ownership has built has been steadily declining since 2003. If anything, maybe its entire history outside the Lou Pinella era.

    There needs to be a sense of urgency, a sense of pride among its top brass for the franchise to move forward and grow. Maybe that’s not their style to be public about but if one is to follow the adage of actions speak louder than words what’s left isn’t very good. The player acquisitions since Pat Gillick left as GM rarely took into account how Safeco Field would affect hitters and despite promises to do so haven’t pursued many big name pitchers available as free agents. Trading Jason Vargas within the division and later replacing him THREE MONTHS LATER with Joe Saunders makes it seem like there was no contingency plan in place to replace the loss of the #3 pitcher of the rotation.

    Maybe the M’s don’t have the resources of the Yankees or Dodgers but it’s not good when small market teams like the A’s continuously outmaneuver you. When you take your comfortable position for granted at some point it catches up with you, Look at WAMU.

  • Greg

    Art, good one, even if hope crushing… And, truely idiot proof given the specticle of ChucknHowie!

  • giorgio547

    Hey, “You Gotta Love These Guys” or else! It takes talent to make money when you are ugly and talentless. Wall Street wins every time, “You have my word on it”, Joe Isuzu…

  • Ian Jacob

    So basically, we have owners that no matter what kind of product they put on the field they are going to make money? Not to mention if they have losses financially hey that’s a great tax write off even more incentive to put a bad product on the field. So depressing. well at least we have the Hawks, Sounders, and hopefully soon the NBA and NHL to root for. At this point I think I just have to bid farewell to my beloved Mariners. If the owners don’t care why should I?

  • Jamo57

    Getting so much in return for doing so little now qualify Chuck and Howard to run for Congress.

  • RadioGuy

    Sorry to say, when you get to the level of Major League Baseball, only three little words apply: It’s. A. Business.
    The days of the so-called “sportsmen owners” like Bill Veeck or even Calvin Griffith are long gone, and they’ve been replaced by corporations or megarich guys looking to write off any annual “losses” their team incurs (according to their accountants’ cookbooks) against profits their other businesses post. These are not baseball fans, they’re investors no more emotionally tied to the Mariners than I am to Happy Meals even though I own shares in McDonald’s.
    Want to send a message? Stay away from Safeco Field next summer and turn off ROOT. If you want to catch a ballgame, there are plenty of minor league, college, prep, Legion and even Little League teams who’d be glad to have you watch them play. The Seattle Mariners do not have a monopoly on the game and we do have choices. Hell, no, it’s not the same, but it’s still baseball and the game itself will always be bigger than any one player or team. Are you a baseball fan or are you only a Mariners fan?
    As long as people continue to attend games or watch on ROOT, there’ll be no compelling reason for Chuckenhowie and the Nintendoids to do any more than they already have because as far as they’re concerned, it’s working for them. The residual question is: Is it working for you?

  • Trygvesture

    Minor league ball that calls itself minor league ball is a great, affordable deal. handing money–ANY money to the Mariner/ROOT organization is stupid, serves the idiot thieves in the FO and on the board and hurts, yes, the Game itself. Stay way. Tell your friends, buy 13,000 copies of Shipwrecked/ People’s History of ther Seattle Mariners and give them to the last few fans and be sure to vilify HowChuck in public at every opportunity. Hope some smart attorney can find they are not fullfilling their lease contract and the clowns get booted out.

  • maqman

    I’m sorry but I disagree about Lincoln, Armstrong and the owners group not caring about how the team does. I also accept that the owners are not looking to sell the team. That doesn’t mean I’m happy with how they have run the baseball side the past ten years. The business side has been well managed and the ROOT deal was a very good move and will finance the team being competitive until 2030. These guys are successful, smart people, they really don’t like looking like schmucks. Unfortunately they aren’t as smart as all blog posters when it comes to making baseball decisions. They will get it right one day. At the least they kept the game in Seattle, they are entitled to some appreciation for that at least.

    • RadioGuy

      I agree with much of your post, maqman, but my premise remains the same: These are businessmen first and fans second (if at all). That’s not a crime, by the way, and I agree they’ve handled the business side well. I don’t blame upper management for everything that’s kept the Mariners from being competitive on the field for nearly a decade, but there appears to be a corporate culture that drove a Hall of Fame GM and the winningest manager in team history out of town while hampering decisions made by their successors.

      You’re welcome to continue supporting the M’s with your wallet because it’s still a free country and it’s still your money. Good luck and Godspeed. I attended one game per month this season (Seattle is a fairly long way from where I live), but am weighing my options for 2014. I can watch local teams at an old-school ballpark for $2 per game with a seat behind home plate, free parking, and good affordable concessions.

      I care about the M’s but I don’t need them to enjoy watching a game. Whether it’s MLB or the NWAACC, it’s baseball and that’s what matters most.