Cardinals franchise worth

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  • #126312
    Brian Walton
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    Per Forbes’ annual assessment, the Cardinals are MLB’s seventh-most valuable team at $2.2 billion. That is up five percent from 2019.

    As a reminder, the books are not public, so Forbes makes estimates. MLB discredits them, but of course does not correct them. So they are the best we have…

    https://www.forbes.com/sites/mikeozanian/2020/04/09/despite-lockdown-mlb-teams-gain-value-in-2020/#520ea0462010

    #126324
    mspaid
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    Let’s see: If there are one thousand million in a billion, one would think it not unreasonable to raise the payroll to 200 million and not even blink.

    #126331
    bicyclemike
    Moderator

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    Hard to say Nate. Forbes has the Cardinals at $72M operating income, which is before taxes and certain accounting expenses such as depreciation and amortization.

    With the club’s payroll at around $160M, adding another $40M would eat away over half of that OI, and taxes likely eat up a good portion as well.

    But then we have no idea exactly what they bring in, and this year that number will be down for all clubs. On the surface the Cardinals’ payroll number right now looks reasonable to me – not overly conservative, but not so high that the club will put themselves in a financial squeeze in the near future.

    Some other clubs look to be over-extended payroll-wise, e.g the New York Mets. Guess that is part of the reason we have the thread labeled “The Mets Are A Mess”.

    #128570
    Brian Walton
    Keymaster

    Paid - Annual

    Folks may recall this earlyer discussion. Since, bikemike did a detailed analysis of the financial strength of all 30 franchises.

    #128586
    gscottar
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    The Cardinals true market size has always been debatable. While the St. Louis metro area might be relatively small we all know that the actual Cardinal market is vastly larger than that, encompassing many states. This is why the Cubs and other teams bristle at the thought of the Cardinals being eligible for a competitive balance pick.

    #128590
    bicyclemike
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    Paid - Annual

    While the Cardinals reach has shrunk to some degree over the last 50 years with Atlanta, Houston, Kansas City and even Colorado getting MLB teams, the Cardinals are still a regional franchise. I think the Revenue-Per-Fan metric Forbes’ put together shows this, as the Cardinals pull the third most dollars-per-fan in MLB. However, one of the two clubs ahead of us is in the same division, the Milwaukee Brewers. Some of that is due to the Crew having the lowest metro population of all 30 teams. They do a lot with what they have to work with.

    #128596
    Brian Walton
    Keymaster

    Paid - Annual

    I agree that the Cardinals draw regionally, but so do most other teams. MLB has a direct presence in just 25 local markets across all 50 states.

    Since the Cubs were mentioned, coincidentally tomorrow’s article is about Springfield, Illinois. Though it is just 90 minutes from StL and had Cardinals farm teams there for a long time, locals consider it to be right on the Cards-Cubs Mason-Dixon line, even though Chicago is three hours away.

    I wish MLB would adjust their markets to reflect a greater reality, but they won’t because it would also change the regional sports networks’ pull, the blackouts and apparently, cost them money. Of course, the latter drives all they do (or don’t do).

    P.S. Midwest teams typically draw the highest TV viewer shares.

    #128610
    gscottar
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    Brian, I had always heard that Peoria was the unofficial dividing line between Cardinal and Cub territory. I am not from Illinois though so I can’t say that with firsthand knowledge.

    #128673
    forsch31
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    Interstate 74 seems to be a dividing line although I don’t know how it is East of Bloomington, IL. I know around Galesburg, there are a lot of fans of both teams. Cub fans may slightly outnumber Cardinal fans, but not by a lot.

    #156317
    Brian Walton
    Keymaster

    Paid - Annual

    #156322
    gscottar
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    The Cards are 9th in value and 10th in revenue. Not bad for a small market team… 🙂

    #156323
    Brian Walton
    Keymaster

    Paid - Annual

    The Cardinals are a regional franchise.

    #156331
    LACardFan
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    which is before taxes and certain accounting expenses such as depreciation and amortization.

    Depreciation and ammortization are not “expenses.” They are ways of reducing taxable income to allow for future replenishment/replacement.

    #156334
    LACardFan
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    The Cardinals true market size has always been debatable. While the St. Louis metro area might be relatively small we all know that the actual Cardinal market is vastly larger than that, encompassing many states.

    Market sizes are always based on Metro areas. While the Cardinals may draw from multiple states, what is the population in those areas from which they draw? I’ve lived in neighborhoods of cities with 100,000-300,000 people, and grew up in a town of 20,000 just outside of St. Louis.

    Once can also argue Milwaukee, Cincinnati and Cleveland are actually much bigger markets, because Milwaukee draws from the entire state, and Cincinnati & Clevelenad have many metros within a few hours drive.

    #156336
    LACardFan
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    Interstate 74 seems to be a dividing line although I don’t know how it is East of Bloomington, IL.

    Yes, Bloomington is the halfway point between Chicago & STL, so it makes sense I-74 (which goes to Peoria) is considered the area where the two fan bases converge.

    #156351
    bicyclemike
    Moderator

    Paid - Annual

    “Depreciation and ammortization are not “expenses.” They are ways of reducing taxable income to allow for future replenishment/replacement”

    The second part is true, but depreciation and amortization are indeed expenses. They are what is sometimes referred as “below the line” expense; that meaning they are not counted as expenses in Operating Income, but are included in Net Income. Similarly taxes are not included in Operating Income, but are deducted to get to Net Income.

    Depreciation and amortization apply to asset purchases that are generally significant in their cost, and will benefit the company for a long period of time. Thus these assets contribute to revenue generation over a long period, and by capitalizing them and expensing them (amortizing) over their useful life, revenues and expenses are more accurately matched.

    In summary, they are expenses, just not Operating expenses.

    Edit – Actually now that I look at this again and review my answer where I said the second part was true about “ways of reducing taxable income”, I am going to counter that as well, as it is really not true either. All depreciation and amortization does is spread the expense of acquiring capital equipment over future time periods. So really, you are actually increasing Operating income in the current period, not decreasing it, because you are not recognizing the entire expense of the purchase in the current period.

    The primary purpose for capitalizing purchases and amortizing their cost is to match revenues and expenses. That is pretty much the crux of accounting principles, matching costs to revenues.

    #156352
    gscottar
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    One thing is certain that market size and revenue do not always correlate. There are several MLB teams that reside in a larger metro area than St. Louis (St. Louis is the 20th largest metro area in the US) but yet they can’t touch the Cardinals in revenue or net worth.

    Therefore a team could be considered a small or medium market team but not a small or medium revenue team.

    #156395
    LACardFan
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    @bicyclmike – Perhaps I should phrase it this way. They are NON-CASH expenses, and if you operate in an asset intensive business, you are going to acquire assets anyway, otherwise you wouldn’t be in business. Depreciation and ammortization reduce your taxable income, and taxes are CASH expenses, just like operating expenses are.

    #156472
    bicyclemike
    Moderator

    Paid - Annual

    Forbes’ analysis used Operating Income, and thus the reason I stated that not knowing how much the Cardinals are expensing as depreciation, among other things, it is hard to know exactly where they come in on Net Income. Cash is a slightly different, but important part of a business’ ability to continue operating.

    True, depreciation and amortization are non-cash items, and thus in a statement of cash flows those get added back in. The cash flow statement starts with Net Income, then makes adjustments for various types of transactions to get at the change in cash balance over a period of time.

    As I recall, from Forbes’ 2020 valuation data I had the Cardinals around the middle of the pack out of the 30 teams in financial health. So while they were a top 10 team in terms of value, they fell some in my analysis of overall financial health primarily due to having debt on the books. Several teams had no debt at all on their balance sheet. Most likely at least some, if not most of the Cardinals’ debt was incurred to finance big ticket items.

    Where the cash will fall out is in the debt payments. Thus when you talk about cash flow, yes depreciation is not a cash item, but you would likely see a cash outflow in the reduction of debt.

    Another possibly under-appreciated part of carrying debt is you become beholden to parties outside of the organization. It not a big deal as long as you can service the debt, but can be of concern if you become overly leveraged.

    #156478
    gscottar
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    Forbes now has the Cardinals ranked 7th in MLB by value, once again ahead of teams in “larger markets”.

    https://www.forbes.com/sites/mikeozanian/2021/03/26/baseballs-most-valuable-teams-new-york-yankees-on-top-at-525-billion/?sh=40566dedd5ef

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