Whenever the topic of the Mariners and their overall worth comes up, club president Chuck Armstrong makes it a point to note that the team’s owners have always reinvested any yearly profits in the team.
And that’s a fair point.
But I do think it’s a minor point that can be used to cloud just how much value this franchise has gained in worth since it was purchased by the current ownership group back in 1992. Forbes does an annual survey of baseball finances and does a pretty good job of giving the broad strokes.
For example, the most recent survey heading into this season had Forbes showing the M’s owners bought the team in 1992 for $100 million.
And the overall value of the franchise now, according to Forbes, is $449 million.
That’s a healthy return on investment. And it’s why people invest in professional sports teams. Well, actually, that’s not true.
There are many other benefits to owning a sports franchise: the biggest being the prestige that comes with ownership, not to mention certain tax breaks.
Yearly profits and losses? They come into it, sure. Nobody wants to lose $30 million out of the $300 million in value that’s been gained, that’s for sure. If your portfolio dropped 10 percent from year-to-year, you’d be worried.
Oh wait, I just looked at my stock market returns from 2008-2009. Never mind.
OK, all kidding aside, this is to show that a profit of $1 million or $2 million here, versus a loss of the same amount on the other side is negligible compared to overall franchise worth.
Yes, it’s real money and seven figures should never be scoffed at. But to put yearly seven-figure profits on a par with nine-figure overall franchise value for the sake of debate can be misleading.
So, just to clarify, yes indeed, the Mariners do reinvest the profits they’ve made every single year since Safeco Field opened — with the exception of 2008 — back into the team. It would be like you getting a nice yearly dividend check on your personal stock fund where you have the choice of cashing it out or putting it back into your (hopefully growing) overall pile.
And in theory, as long as the Mariners can keep that annual stuff at a break-even point, they are going to reap big rewards whenever they cash out. If they avoid any year-to-year red ink, they are, in effect, avoiding any risk to the “real” profit that stands to be made in pro sports, which is — “cashing out” by selling the team.
The big risk in pro sports comes when a team does not have a stadium that it owns and can reap concessions and parking revenue from. Ad revenue as well. Money from personal seat licenses and luxury suites. Or when a team does not have a lucrative local or regional TV deal to bring in big-time bucks.
The Mariners have those things.
They have a state-of-the-art facility funded by taxpayers and a multi-year TV deal with ROOT Sports — formerly FSN Northwest.
Those yearly profits? Heck, reinvest them in the team. As long as you’re not losing money, you’re making money in the long run.
Plus, in theory, if you keep reinvesting those profits every year, it should get you through the losses when they happen. Like that one year in 2008 when the team tried a $118 million payroll and lost $4.5 million. The only year in the Safeco Field era the M’s did not turn a yearly profit.
A few seasons of $1.5 million profits, it all evens out.
Plus, I don’t know about you, but when I take annual losses on certain investments, my accountant somehow finds a way to mitigate some of it. Helps me pay less tax — all perfectly legal — in other areas where I’ve made profit.
That’s the way this country was built. Somehow, some way, I’d have to think baseball teams get to use the exact same system. Probably much more complex and potentially lucrative than the breaks I’m used to.
Now, I’d never advocate that somebody take a $400 million investment and downgrade it into a $200 million investment overnight by doing irresponsible things. Like investing in a Ponzi scheme run by some New York investment banker.
No way, no sir.
But is upping a team’s yearly payroll to help bring it a couple of years closer to a championship really being reckless and irresponsible? Is that $4.5 million loss you take once every decade — offset by profits every other year — really going to damage your $400 million pile all that much?
As I’ve said before, it’s not my pile to decide what to do with.
But I know that pile grows with more butts put into seats.
And while I’m sure the average Mariners fan is pleased that owners aren’t using their yearly profits to buy an extra Ferrari for the kids, the whole conversation about what is done with this yearly money misses the point.
It’s in the owners’ best interests to reinvest the small yearly profits into the team. It offsets future losses and covers money that was going to have to be spent anyway on upgrading and maintaining the existing investment. If you own a house that’s tripled in value and needs a paint job, it would be silly to spend the $2,000 your nephew gave you to rent the basement for the summer on a night of poker with the boys. You spend it on the paint job, hope to get more renters and keep your triple-value home looking spanking new.
And as long as that big pile that’s amassed over the years stays big, no owner is going to come close to “losing” any money in the long run.
The only losses they’ll have to worry about are on the field. In that one regard, the owners and fans have a lot in common.