24 March 2011

Orioles Franchise Value: 1990 - 2010

It is well known that for the most part owners make money by selling a team, not by holding onto one.  When Peter Angelos negotiated with MLB to let the Expos move to Washington D.C., he set himself up with a minimum payment of 360MM (if I remember correctly).  It made me wonder how much the team's value has changed over the years and what that value was at the end of 2004 when he made that deal.  I've taken data from Forbes and Financial World from 1990 - 2010 provided neatly over at the Biz of Baseball and decided to do a few things.*  This span will show how the value of the Orioles has changed durng the entire Angelos era and what the 360MM line means for the Orioles.  Additionally, I will also compare the Orioles against other teams in the current AL East over the years.  So, first things first, how has the Orioles value changed over the year:

 As you can see from 1997 to 2003, the Orioles (according to these sources) decreased in value with each season.  It would make sense that Peter Angelos was concerned about the long-term value of his club and how the moving of the Montreal Expos would affect that.  It is also interesting to see that after 2004, the team value has made the deal with MLB to be simply a safety net as the value is now about 50MM above the secured minimum value of the team.  It makes me think that efforts are being made to make the team a more valuable commodity, which would run opposed to the idea that Angelos is merely trying to bring in a short term profit on the club.  However, it may be true that over this time period an increase in worth is almost unavoidable.

What is also interesting to see is how the value of the organization denotes the Orioles as one of the most valuable teams in the 1990s (4 straight years of being the second most valuable team in the league) to being a mid-market value club in the 2000s.  Three possible reasons for this would include: 1) Continual losing decrease attendance and then worth (however, the value crashed after 1997 even though the team was no awful during those first few years after winning the AL East), 2) Baltimore's market had fewer unexploited resources than the other markets, and 3) other teams caught up to the boon that was Oriole Park at Camden Yards.  I imagine it is a mixture of those and, perhaps, other causes I am neglecting.

After the jump...how has the Orioles value changed over time with other clubs currently in the AL East?

This next graph is a simple overvall value chart from 1990 to 2010 seasons.
Two things jump out to me here: the Yankees value just exploded after 1997 and the Red Sox went from severely under utilizing their market to dominating it.  I am left with the question though whether Baltimore is more like Boston or Toronto.  Baltimore was a more valuable team than Boston until 2000.  Do the Orioles have the market to increase their value three fold?  Toronto's value mimics the Orioles over the first six years and the last six years, is that Baltimore's value.  I am not sure.  I recognize that the money available in New York far exceeds anything the Orioles can do, but can it be squeezed to something similar to Boston.  Maybe not with Washington and their eventually splitting the market.

With all of the new money revenues coming into the league the above graph can be misleading, so this next one uses a metric I made up called Value+.  This is calculated by dividing the team worth by the average team value and multiplying it by 100.
What is impressive about this graph is how Boston is able to keep up with the Yankees on a year-to-year basis.  Either there is a limit to which money helps a team, Boston has been quite efficient, or New York has been mismanaged.  My opinion is that it is primarily a combination of the former and latter.

Still, this is not exactly, perhaps, an ideal way to look at value either because a few teams (especially New York) may scatter the average team value.  In response to that idea, the next graph considers a metric I call mValue+, which is calculated by dividing the team value by the median value and multiplying it by 100.
This graph makes a little more sense with respect to the rankings.  Instead of several years in a row being below average, it is more like three of the last four years.  These exercises show to me how these are not exactly lean years, but we have fallen (or stagnated) from our short period of glory in the mid-90s.  It also makes me think that Peter Angelos is not a cheap owner.  It just looks like he either mismanaged his asset or Baltimore's market is largely exploited.  I'd go with the former.

*I recognize that after Deadspin released financials from several teams last year that it is obvious that Forbes' methods are limited.  I am using them though as approximates and that they are likely the best we have available.


The Oriole Way said...

"It just looks like he either mismanaged his asset or Baltimore's market is largely exploited. I'd go with the former."

I'm not sure I agree here. Your graphs all show the Orioles among the most valuable franchises when they were one of a handful of teams playing in a cash cow of a new ballpark; now, outside of Oakland, Florida, Tampa, Toronto, and maybe one or two others I'm overlooking, everyone plays in a ballpark filled with luxury suites and ample revenue opportunities. They may certainly have the ability to leverage MASN into something bigger, but I think that equal sharing of national TV and internet monies, combined with everyone else catching up in the ballpark department, means franchises largely trade on the value of local TV rights. And that would seem to me to put the Orioles right in the middle of the pack.

Jon Shepherd said...

Maybe. I think I did mention that the other teams catching up may be part of it, but estimated team value was also among the highest before Camden Yards.

I imagine the next thing to do would be to value teams pre and post new stadiums. I have heard often that new stadium construction did not offer the panaceas that Selig was saying it would in the early 2000s. Maybe with every team doing it, it marginalizes the effects.

Good ideas.

The Oriole Way said...

I'd love to play around with the data; where did you get the data?

Jon Shepherd said...

Click on the Biz of Baseball link...I got it all from there.