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Daily coverage of the Mariners during the season and all year long.

Topic: profit; value; franchise; rsn

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October 1, 2013 at 10:26 AM

Mariners have more than doubled franchise value while losing big

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The Mariners have ended a fourth consecutive losing season minus one manager and with a general manager on the shortest of leashes. They face attendance declines next season and an uncertain future with an aging CEO in Howard Lincoln and president in Chuck Armstrong. An uncertain ownership future too in the wake of the death of Hiroshi Yamauchi.

But they continue to rack up huge wins in the mighty pocketbook, having more than doubled franchise value since the 2008 stock market meltdown despite putting some of the worst teams in franchise history on the field. ¬† At the start of the 2009 season, Forbes assessed the Mariners at a value of $426 million — well down from a year earlier with a 101-loss season at a $117 million payroll helping cause that.

Over the years that followed, the Mariners kept cutting payroll, allowed long-term contracts to expire and systematically reduced their debt load across the board. Today, they have the least amount of debt of any big league franchise and their value — conservatively — sits around the $1-billion mark. I’ve heard some analysts privately say the team is closer to $1.3 billion — a tripling in value since April 2009 and the start of the Jack Zduriencik¬†rebuilding plan regime — but we’ll stick to conservative stuff for today and the “more than doubled” estimate.

And we don’t need to go to Forbes for that. The San Diego Padres last year sold for $800 million, pumped up by a new 20-year, $1.4-billion regional sports network (RSN) deal. That’s not a Forbes estimate, that’s a real life sale and real life always trumps estimates when it comes to pegging what a team is worth.

At the divorce trial two years ago of Mariners minority owner Chris Larson, franchise valuation experts were called in to testify as to what his stake in the team might be worth. Estimates varied but the experts from both sides and a judge agreed the Mariners were worth considerably more than the Padres, relative to market size and their territorial reach.

So, if the Padres today are worth $800 million, it stands to reason the Mariners are worth considerably more. Especially since the Mariners just completed their own new RSN deal in which they assumed a majority ownership stake. Owning your own RSN — under the right market conditions — can prove more lucrative than selling your rights to somebody else.

One reason is that MLB rules make it easy for teams owning an RSN to hide money from MLB revenue sharing coffers. MLB comes up with a fixed amount it feels local TV rights are worth and the teams owning RSNs have to pay that. But there can be tens of millions — or hundreds of millions — in additional revenue taken in that gets sheltered on the “TV” and not the “baseball” side of the equation by MLB clubs.

Now, it’s not just as easy as sitting down, writing a check and buying your own RSN. It takes years of planning, ¬†co-operation and the right setup for your market. And the Mariners, by their own admission, spent years planning their own acquisition of a majority stake in ROOT Sports starting around 2010.

In the interim, they’ve fielded teams that lost 101 games in 2010, 95 games in 2011, 87 games in 2012 and 91 games this past season. The Opening Day payroll for those teams — according to Cot’s Baseball Contracts database — went from $98.9 million in 2009 down to $91.1 million in 2010, $94.6 million in 2011, $84.9 million in 2012 and $84.2 million this year.

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