EBIDTA Says Spend!

I am not as critical of Liberty Media as other in this market.  My view of the entity that owns the Braves is that they should not be expected to take a loss on the team.  The Braves are mid-level in terms of attendance and they are mid-level in revenue, so why would we expect them to be anything other than mid-level in payroll?  Is it written somewhere that owners of baseball teams are obligated to lose money as a social debt to the populace?

That said, if Forbes' analysis of the team's financial situation is right, then there is an argument to be made that fans should expect Liberty Media to take on payroll, especially if the Braves find themselves in contention as the season progresses and there is a player on the market (maybe a centerfielder if Nate McLouth doesn’t turn around?) who could mean the difference between making the playoffs and staying home in October. It might be that the Dan Uggla signing is an indication that ownership is already prepared to spend more money.  If that’s the case, then thank you sir, may I have another?  The Braves’ EBITDA last year was a healthy $22.2 million.*  Between that indication of profit, the increase in the value of the franchise overall, and the tax benefits that Liberty Media has obtained as a result of buying the team, this deal appears to have been a very lucrative one for Liberty Media.  A lot of credit has to go to the team’s management, which has put together a farm system that allows the team to be competitive without spending bushels of money.

For a pair of reasons, this is a particularly good time for Liberty Media to make a push with the team.  First, if Forbes is right that Liberty Media is looking to sell, then another playoff season will be the cherry on top of an appreciating asset.  Second, the NL looks especially winnable because the highest revenue teams are in bad financial straits.  As Forbes makes clear, the Dodgers and Mets face debilitating debt situations.  The Mets have seen their sources of money burn on Bernie Madoff’s pyre, while the Dodgers are crippled by the McCourt divorce.  With the Cubs in their usual state, the NL’s teams in the three largest markets in baseball are all unthreatening.  That leaves a space for smaller markets to make an impression.  The Giants and Phillies, which are in the second tier of markets behind New York, Los Angeles, and Chicago, are in the best positions to take advantage.  Atlanta is also in that second tier.  This market is any better or worse in terms of affection for baseball than Philadelphia or San Francisco.  Fans always think that their teams will make back increased spending on payroll because that one expensive player will be the difference between success and failure.  In the Braves’ current position, that thought might actually be true.   

* - It’s a testament to the economic health of baseball that this figure only places the Braves at 13th in Major League Baseball.  The common view is that it is impossible for NFL teams to lose money because of the economic structure of the sport, but baseball is getting close to that point.  Only three teams lost money last year: the Red Sox (who suffered a softening of their local market), the Mets (who are mired in mediocrity, lost their new stadium bounce, and don’t have the advantage of revenue sharing payments to prop them up), and the Tigers (whose local market is a disaster).

For the first time, I am a little sympathetic to the self-interested bleating of the Yankees’ management regarding revenue sharing payments.  Three of the worst-run franchises in baseball – the Nationals, Pirates, and Orioles – are in the top ten in EBIDTA.  The Braves and Marlins were essentially equivalent in EBIDTA.  The Braves were mid-level in revenue, they put a good product on the field, and they drew 2.5 million fans.  The Marlins were low-level in revenue (aside from welfare payments), they put a mediocre product on the field, and they were dead last in attendance with 1.5 million fans passing through the turnstiles at Land Shark Stadium.  Moreover, Miami/Ft. Lauderdale is a slightly bigger market than Atlanta, so the Marlins can’t claim lack of opportunity.  Baseball’s economic situation is such that bad management is not punished financially.  The Marlins’ ownership gets the same EBIDTA as the Braves, despite doing an inferior job in every meaningful respect.  Again, how about relegation and promotion?