This one line sums it all up: Overall, baseball has never been as big or as profitable.
On Wednesday, Forbes released a piece dedicated to the valuation of all 30 Major League Baseball franchises. With little surprise, the list was topped by the New York Yankees and Los Angeles Dodgers – with the Ricketts family’s Chicago Cubs coming in fifth.
According to the report, the franchise is valued at $1.8 billion – a far cry from the Yankees’ $3.2 billion, but despite recent woes, neck-and-neck with the San Francisco Giants’ $2 billion – which comes on the heels of three World Series titles in the last five years.
The report goes on to break down each organization in several regards: current value (as noted above), one-year change in value – measured in percent, debt as a percentage of overall value, revenue and operating income. This helps fans paint a broader picture of their team’s respective financial situation – and for Cubs fans, it’s a little bit of everything.
The franchise’s value rose by 50 percent in the last year – which places the team in the middle of the pack in that regard. Leading those rankings were the reigning World Series champion Giants, whose value rose by a full 100 percent, followed by the Washington Nationals (83 percent) and the Cubs’ division rival St. Louis Cardinals (71 percent).
Perhaps the most oft-talked about aspect of the Ricketts family and their taking over of the Cubs several years back is the amount of debt they inherited in the deal. One of the biggest money pits, if you will, the organization is currently pouring resources into is the four-year overhaul and renovation of Wrigley Field, which attracted some investors earlier this year:
"In February, MLB approved the sale (dubbed phase 1), of a minority interest in the Cubs (including the team’s equity in CSN Chicago, Wrigley Field, and nearby real estate that is going to be developed) to several investors for an aggregate of $150 million. The enterprise value of the total deal is significantly more than $2 billion, and the EV placed on the team and Wrigley Field is $1.8 billion."
In terms of ranking the debt as a percentage of value amongst the 29 other big league clubs, Chicago comes in at fifth, with 24 percent. Given the fact that the Ricketts family paid some $845 million for the team (as well as Wrigley Field, roughly one-quarter of Comcast SportsNet Chicago and nearby real estate in 2009, the fact that its value continues to skyrocket is a plus – for obvious reasons.)
The deal (in which the Ricketts family purchased the franchise) valued the Cubs at three times revenue. In February, the family sold small pieces of these assets for an enterprise value of $2.25 billion. The value placed on the Cubs alone was $1.8 billion—six times revenue–the highest-valuation ever created by the purchase of a non-controlling interest in a sports team. Like the Cardinals and Giants, the Cubs are also developing the land near their stadium as a destination place.
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Despite the increased value, however, the Cubs’ 2015 payroll is another story.
According to Forbes, the team has $111 million allocated to player contracts heading into 2015 – the lowest such figure in the last decade. The Cubs’ payroll peaked back in 2012 with $162 million – and has been on the decline since that point, as overloaded contracts have fallen off the books.
The team ranks sixth in all of Major League Baseball in terms of revenue – at $302 million – trailing the Yankees ($508M), Dodgers ($403M), Giants ($387M), Boston Red Sox ($370M) and Los Angeles Angels of Anaheim ($304M). However, when it comes to operating income – the Cubs narrowly missed topping the list.
Trailing only the Cardinals, Chicago comes into 2015 with an operating income of $73.3 million – up from $27.3 million just last year. The highest operating income from the last decade for the Cubs was just over $32 million – so things are clearly already moving in the right direction in a big way. Keep in mind, the organization is still eyeing 2020 when a major television deal could come to fruition – giving the team a major payday.
Some teams, meanwhile, including the Philadelphia Phillies, Detroit Tigers, Toronto Blue Jays, Los Angeles Dodgers and Arizona Diamondbacks, have negative operating incomes, meaning that, after taxes, depreciation and amortization (similar to depreciation) – the teams aren’t operating in the green.
A separate Forbes piece, meanwhile, pointed out that the Cubs’ Jon Lester and the Dodgers’ Clayton Kershaw will be the highest-paid players in Major League Baseball in 2015 – both set to earn some $30 million this season.
Overall, the financial outlook for the Chicago Cubs seems to be heading in the right direction – especially with the renovation of Wrigley Field and the development of the surrounding real estate, an improved product on the field for fans and increased revenue streams – all in the hands of Tom Ricketts and Co.