Baseball Musings
Baseball Musings
October 31, 2005
Appreciating Franchise

It looks like the World Championship resulted in a big increase in value for the White Sox franchise:

Forbes, using available business data and expert analysis, annually estimates the worth of major league teams. In the spring, it pegged the value of the team at $262 million, calling it "among the most poorly managed franchises in baseball.'' Forbes noted low attendance and general failure on the field in citing a worth 21 percent lower than the league average.

Winning changes everything.

"All told, the boost in revenue should propel the value of the White Sox to more than $300 million by next season,'' writes Michael Ozanian, who covers pro sports for Forbes. He cites an increase in demand for tickets and a hike in sponsorship fees.

The team was purchased for $20 million dollars in 1981. That's means the team is appreciating at over 10% year, and good return for any long term investment.


Posted by David Pinto at 08:27 AM | Management | TrackBack (0)
Comments

Going from $20 million to $262 million over 24 years (1981 through 2004) yields a annual return of about 11%. Okay, but hardly explosive.

Frankly, you could have done better by just putting your money into Vanguard's S&P 500 index fund, which has done a 12% annual return since its 1976 inception. And the investment would have been a lot more liquid in case you needed the money fast.

The annual return will look a little better if the value of the franchise really does increase as a result of the World Series. But the investment remains risky and illiquid compared to many other alternatives.

Posted by: Casey Abell at October 31, 2005 11:42 AM

And even the appreciation to $262 million is not a bad return. Even for a poorly run franchise!

Posted by: David Gerstman at October 31, 2005 11:42 AM

As corporation after corporation has learned, if you're trying to get into baseball ownership for the money, you're probably making a mistake. This isn't to say that you can't make a profit, but even companies that have significant overlap with their other businesses have discovered that they're better off investing elsewhere. I'm not morally opposed to corporate team ownership, but in the long run, having individuals or groups who are in it for the game as well as the money is the way to go.

Posted by: Ali Nagib at October 31, 2005 12:12 PM

None of that takes into account the profits he made over that period. He likely turned a profit most of those years (despite what he might say) as well, so the ROI, is probably better.

Ivan

Posted by: Ivan at October 31, 2005 12:53 PM

Truth to tell, the news about the White Sox has always been that profits were few and far between. Maybe everybody's wrong, but this operation hardly looks like a big moneymaker.

I don't think Forbes is kidding about the Sox' financial history. It wouldn't surprise me if losses in the bad years have pretty much swallowed up any profits from the good years.

Anyway, there are lots of much less risky and much more liquid investments that will return as much or more than the White Sox.

On the other hand, you don't get to sit in the owners' box (smile). Which is the real point.

These sports investments are toys. You get more than just money from them.

Posted by: Casey Abell at October 31, 2005 02:51 PM
Post a comment









Remember personal info?