While certain members of the ownership family of the Cincinnati Reds cry poor and how unfair Major League Baseball is, updated franchise valuations from Sportico has the team coming into 2023 worth $1.39 billion and climbing a spot in the rankings from last year. The Reds jumped ahead of the Colorado Rockies and according to Sportico are the 22nd most valuable franchise in Major League Baseball.
These valuations are already taking into consideration of the looming Bally Sports and AT&T Sports networks bankruptcy and expected decline – at least in the short term – revenue brought in as a result according to the article discussing what went into the valuations and discussing specific team information ($$ link). What’s noted in the article is that the teams that were in the top half, mostly, saw their values increase. But teams in the bottom half saw their values decrease by 1-3%. That included the Reds, who saw their value drop off by 1% from last year. The reasoning there is that a majority of the teams in the lower half were all teams who were in that Bally and AT&T Sports network group.
Yesterday saw Diamond Sports Group file for bankruptcy protection, a few days ahead of the expected filing. Both Diamond Sports Group and Major League Baseball released statements that addressed how things were expected to go with regards to the broadcasting of games. DSG’s statement noted that they” will continue to broadcast quality live sports productions”, and they “will continue to operate in the ordinary course during the Chapter 11 proceedings.”
This suggests that even while in bankruptcy that Bally Sports Ohio will continue to produce and broadcast games for the Cincinnati Reds. Major League Baseball’s statement seems to believe that is true, but that they also have a plan in case something changes. From MLB:
Despite Diamond’s economic situation, there is every expectation that they will continue televising all games they are committed to during the bankruptcy process. Major League Baseball is ready to produce and distribute games to fans in their local markets in the event that Diamond or any other regional sports network is unable to do so as required by their agreement with our clubs.
That statement is important for a team like the Cincinnati Reds, who are one of the four teams that is expected to have their contract rejected by Diamond Sports Group. While the most recent payment was made to the Reds, if their contract is rejected the next one likely won’t be and that is when MLB may need to step in to try and take things over.
The regional sports network losses are impactful, particularly from a cash flow point of view. MLB is expecting there to be some short term issues because of this, but is hopeful that it’s a short term issue while they move forward to try and get new broadcast deals for teams that are left behind by the regional sports networks that don’t hold up their end of the deal.
Still, even with all of that, the decline in value of teams facing that has been minimal at worst. A 1% loss in franchise value for the Cincinnati Reds despite being given credit for $0 for their local television deal is an interesting look. The doom-and-gloom may be a bit overstated. The short term issues may have some owners feeling uneasy given the previously mentioned cash flow issues they could be facing, but long term things still seem to be strong.
Morphing Mr. Redlegs with Monopoly’s Mr. Moneybags seems appropriate. As you noted, quite surprising given the TV contract default. Hard to have any empathy at all for the BobPhil Whine-o-Matic after seeing those numbers. Maybe if they cashed in their chips and sold? (he said wistfully)
What might they be worth if they fielded a decent team, kept players whose names the fans could recognize, and gave fans the desire to attend games.
2.45B, that’s the Cardinals net worth, and it’s all tied into investment into the team, and consistent winning. Similar markets, way different outcomes.
Don’t talk like that. Big Bob & Son DO NOT like to hear talk like that.
Only $1.39B, how can the fans not feel sorry for Bob & Phil. They’re paupers. That’s like Elon Musk’s pocket change.
I’m no fan of this family and how they run this Red’s team, but this article clearly is implying that with a team that valuable, they should not be cheap, as if the value of the team (asset) is somehow earning them money. You can argue all day long that the business decisions are foolish, and should be improved, but the value of an asset doesn’t have anything to do with cashflow. If you own a $2 mil house, does that give you more money to spend in your daily life? Of course not, unless of course you borrow against it. That doesn’t really work with a sports franchise though, because borrowing against it would only help you for a couple of years or so, and plus your multiple investors certainly would not sign off on that. The value of this team has NO bearing on the horrible management of the ownership group.
Chris, that is absolutely true, but with one particular qualifier. And with the following, I do not advocate for the Reds Management to borrow against the value of the team to hire players or pay bigger contracts. That is a bad idea.
The number for the Reds team value is interesting, but as MBS said, the Cardinals (similar market, etc) are almost twice that value. Why?
We can all come up with reasons “why”, but your analogy to owning a 2 million dollar house is apt in a way that you may not have realized when you wrote it.
If I have a house that is worth $300K, how much money and how would I spend it to maintain or increase its value, versus owning a $2 Million dollar house?
Because if you own a 2 Mill house, you have to invest money in upkeep and improvements to keep the value up, etc. Otherwise, your 2 Mill house suddenly starts to be worth a lot less.
Likewise, the Management of the Reds does not seem to have invested the dollars to maintain the value of the franchise, if the “comp” for the Reds is the St. Louis Cardinals.
So yeah, the value does not immediately relate to spending….or….does it?
Really, only The Shadow knows!
David – I think there is a big difference between “upkeep” and “investment”. Upkeep on a house most would probably agree is something a homeowner can afford from their monthly income (i.e, revenue for a business). This might be lawn mowing, new paint, sealing a driveway and the like. Investment would be something a home-owner cannot simply pull from their bank account and pay at one time – things like putting in a new pool, a room addition, etc. Most homeowners would borrow against the house value for these.
There is no doubt the Cardinals have way more income (revenue) than the Reds – therefore they don’t need to borrow from the value of their home because they simply have more monthly income. What most fail to realize is – this disparity didn’t happen overnight.
Marge Schott ran the Reds tight, Carl Linder was a tight wad, and Phil Castellini is a tight wad. So for 30-40 years the Reds have been run by owners tighter than Ebeneezer Scrooge. The Cardinals have wisely maintained there team with stellar management and stellar player development for many more decades. This has led to a much more loyal and participative fan base. If you go to a Cardinals blog, you will see they complain about the team and its management quite often. However, they also go to the games and pay for the TV rights at a vastly higher rate than us Reds Fans. But, can you blame us?
The Reds long term health won’t improve until we have vastly different ownership (>70% owned by 1 person).
No, my wife and I do not borrow from the value of the house to, for example, put on a new roof or other maintenance type things for the house.
We carefully put aside from our income to do that, when necessary.
And again, the analogy with the Cardinals is apt. St Louis is frankly not a terribly attractive city. They used to have a pro-football franchise, although they moved (wonder why).
Yet, their baseball team continues to draw.
The Reds used have a great draw, but the value of their product is dwindling. If they were good, the stadium would have more people in the seats, and more people would watch. Why do you think that the Reds were to be dropped from Cable/streaming? Not enough people are watching the games, and their ratings stink. They (whoever has been carrying the games) can’t sell enough advertising to make a profit.
And yes, if you can’t maintain the team or operate at a loss….SELL THE TEAM to someone who can do better.
The Castellini’s, the Williams brothers, etc, are not going to do that. Of that, I am pretty sure.
Sorry to all of us fans, but we’re stuck.
The value of the team is based on the capacity of its markets to generate income, not how the team is performing in earnings. That’s the opposite of how most businesses are valued.
The only way the current ownership group realizes that value is at a liquidation even – i.e. a sale. If the current group sells and the new owner wants to increase the value of the team, what’s the best way to do that? Move to a market with the capacity to produce of earnings that drive an increase in value. A market like Nashville or Charlotte probably makes the most sense.
As far as the county lease, there are not liquidated damages in the lease agreement. The default and/or breach terms are vague. They definitely don’t address a catastrophic event like bankruptcy of the TV producer.
No one is asking the Castellinis to operate the team at a loss. If the Castellinis can’t make money with the Reds, they should do what any other business owner would do, if their business was losing money, and simply sell the team.
Personally, I think this is spot on. Continuing on with the “house” example, if you can’t afford to maintain the house, it’s time to move on from it, and downsize; sort of like many older people do that can’t maintain it, and have a lesser income than they did. The Castellini’s did make an effort, but their timing couldn’t have been worse. Covid completely devastated any plans that the Castellini’s had going forward. I personally think the team they had was a player or two short of really doing good things, and then boom, Covid hit. The bottom line no matter why this team is where it is now, the only way out is to spend a bunch of money over a number of years. The current owner, who is the LEAST rich of all the owners clearly isn’t willing to go into his own bank account to improve this team the way it needs to be improved so for that reason, it’s time to sell it to a person with bigger dollars who is willing to purchase the team and invest in it as well. Again though, the value of the team has nothing to do with anything until it’s sold. Much like a stock.
Im not a business guy but I dont like the Cardinals analogy or the padres comp either. Cardinals are a regional team in the middle of the breadbasket of America. There’s no NFL. There’s no NBA. There’s no soccer. There’s no big time college football or basketball within 75 miles to compete and the regional draw May thru September from a 300 mile radius is huge. Baseball is it .
The Cards did buy up I believe some investments around the ballpark and it is impressive.
The atmosphere around GABP is similarly impressive but it’s not owned by the Reds. The atmosphere at the Banks during the BEngals run to the SB and AFC championship the last 2 years is something Ive never seen before. There s news this week of imploding the 50 year old dilapidated hockey arena adjacent to GABP and the city coming together to create a new arena for NCAA tourney events and concerts and hockey and a regional destination. Did the Castellini’s blow it by not investing in the area around the stadium as many other franchises have done? That revenue would be huge. It seems so.
I’d like to see the organization that valued the team make a public, take it or leave it, $1.39 billion dollar offer for the team. Then maybe I’d place credibility in their evaluation. Otherwise in my view they fall into the same category as analysts, those who analyze and project corporate earnings, people who are wrong most of the time but who somehow still maintain credibility, and salaries.
It’s like Mr. Redlegs is shrugging ‘Where you gonna go?’
It’s very simple why the Cardinals are worth more. They consistently put a quality winning team on the field year after year. This keeps the folks in St. Louis very happy and they WANT to go to the games and support the team. And they do it without overspending. The A==hat Phil and his Dad are pushing people away, along with the poor teams that have been fielded under their leadership. Keep Krall, fire the Bells and SELL THE TEAM Bob and mini Bob.
Correct JIMBO44CN. I’ve been saying for years that if you put a great product on the field , people will come. Reds choose not to and pull 10,000 people a game. Yankees put the product every year on the field and people pack that stadium. Seat behind home plate at Reds game against Phillies this year is $626. Same seat in Yankee Stadium against the Phillies is $1200. People will pay that money to see the Yankees play. Cardinals-$910. People will pay it. Reds? I’m not paying $626 to watch.
Completely agree with this.
I’m not going to type them out, but here is a link to the Cards attendance and payroll
And here is a link to the Reds.
The Card have been putting up a good product year after year, and investing in their payroll to maintain it. It’s so telling when you look at the Reds “rebuilds”, the fans attendance dies off when the Reds simply are not trying.