Mariners’ opening day payroll increases by almost the same $31 million total profit from last year.
Inside sports business
In what should surprise nobody, the latest Forbes annual MLB team valuations released last week suggest the Mariners are a billion-dollar franchise.
Forbes valued the Mariners at $1.1 billion — up 55 percent from a year ago. The billion-dollar thing is somewhat old news, since the Mariners would likely have topped that a while ago had Forbes factored the recent phenomenon of team-owned TV networks into its estimates.
When Bloomberg tried its hand at franchise valuations in October 2013, it included TV network assets in totals. It makes sense, since such assets are included in the price whenever teams get sold.
Bloomberg valued the average team-owned TV stake at $300 million.
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Alas, the Mariners’ April 2013 acquisition of 71 percent of ROOT Sports NW was too recent to be included by Bloomberg. How much would the Mariners’ valuation jump today if Forbes counted the TV stake? Another $200 million, or $300 million? Maybe more?
Suffice to say, if Forbes has the Mariners at $1.1 billion without the TV network, the true value is likely someplace between that and $1.5 billion.
It matters only because the limited Forbes methodology portrays the Mariners as financially middle-of-the-pack — 14th out of 30 teams. But many squads ahead of them don’t own TV networks, meaning the Mariners would be top-10 if that asset got counted.
And top-10 better reflects what the Mariners are, given their enormous TV footprint spanning six states. Also, given how they’ve financed their team’s overhaul.
The Mariners added Robinson Cano, Nelson Cruz, Fernando Rodney, Austin Jackson, Seth Smith, J.A. Happ, Logan Morrison, Rickie Weeks, Justin Ruggiano and Willie Bloomquist on multi-million-dollar annual deals the past year or so.
Only two position players — Kyle Seager and Dustin Ackley — remain from the opening day starting lineup two years ago. No position player from opening day 2011 remains on the major-league roster.
Some call it rebuilding. Others suggest the team was just biding time through several losing seasons while negotiations on their TV deal unfolded.
Whatever you call it, the driving force behind today’s postseason hope is TV money.
Forbes drove that home in a much-overlooked article three weeks ago, calculating hidden profit the Mariners earned off ROOT Sports last season.
While the Mariners declared a profit of $11.6 million for 2014 to the Public Facilities District (PFD) — which oversees Safeco Field on behalf of taxpayers — they don’t have to disclose how much they profited off owning ROOT Sports. They also don’t have to divulge TV ownership profit to MLB for revenue sharing, a loophole many teams exploit.
However, 29 percent of ROOT Sports is owned by DirecTV, a public company required to produce annual “10K’’ documents detailing its financials.
And right on page 91 of this year’s 10K, Forbes found the value of DirecTV’s minority stake in ROOT Sports increased $8 million last year. Forbes interprets that as an $8 million profit.
So, what’s the Mariners’ profit from owning 71 percent? Doing the math, a cool $19.6 million.
Add that to the $11.6 million the Mariners already declared, that’s roughly $31 million total profit from last season alone.
No one has disputed that Forbes article.
When I checked with the Mariners, vice-president of communications Randy Adamack emailed back: “All terms of the (ROOT Sports) agreement are subject to a confidentiality agreement. We are not in a position to comment on reports of any of the terms, including ownership percentages and annual financial results.’’
But based on the team’s recent spending, the $31 million profit number rings true.
Guess by how much the Mariners will hike opening day payroll from a year ago? Yep, almost exactly that $31 million amount.
They’ll go from $92 million to around $123 million this year, apparently all covered by last season’s profits. The Mariners have typically abhorred running yearly deficits, which is why franchise value keeps skyrocketing no matter how the team fares.
Forbes says the Mariners’ value rose 150 percent the past five years despite four losing seasons and a third-place finish. They steadfastly avoided spending more than they took in, regardless of how bad the on-field product became.
Now, with the team finally producing a winning season, expectant fans will buy Mariners tickets and watch on TV much sooner this year. Profits should further increase.
In other words, the Mariners would have to spend far more than $123 million for franchise value to drop.
Have they spent enough to end MLB’s second-longest playoff drought? We’ll know soon enough.
For now, a team bought for $100 million in 1992 would today fetch well beyond $1 billion.
And if the players stumble to match their recent hype, don’t fret. There’ll be plenty of new cash rolling in to shop for a midseason talent infusion.