So you want to own the Cardinals do you?
Forbes Magazine begs to differ. They’ve come out with the MLB team valuation reports for 2011 and it looks like the Cardinals, while leading the pack in TV audience (share), aren’t necessarily the cash cow that you probably picture when dreaming about Bill DeWitt’s golden toilets on your garbage route.
So let’s take a look at these numbers…
Player Expenses -- The amount of revenue spent on, you know, paying these dudes.
The Cardinals hit the high water mark for payroll in the 2008 season when they coughed up over 120M to not make the playoffs. Payroll has gone down the subsequent 2 years and is poised to fall off the cliff if Albert Pujols and Adam Wainwright don't return to the team in 2012. In fact, it'd be in line to drop to pre-2004 levels.
Operating Income -- The amount of profit realized from a business's operations after taking out operating expenses - such as cost of goods sold (COGS) or wages - and depreciation.
The Cardinals ownership group hit lean times at the beginning of the aughts, losing money 4 consecutive years before turning a profit in 2006. Looks like a World Series does help the bottom line, eh? And while 13 million dollars isn't anything to scoff at, it's not a huge amount of money to be making off such a large venture that involves literally hundreds of people.
Win to Cost Ratio -- Wins to cost ratio determined when in comparison to other MLB teams and it's own payroll.
100 here is break even for wins vs player costs. So a number less than 100 is not good, 100 is even and everything over 100 is good- as in your ROI on payroll is good. 2010 was break even for the Cardinals. Meaning they got exacty the amount of wins that they were projected to get with their payroll in 2010. The first time that had happened since 2007. However, if you believe this metric, the Cardinals are headed for a -6 in 2011. And that's probably just good enough to miss the playoffs. Again.
So what's keeping DeWitt, a guy who doesn't live in St. Louis, who isn't making gobs of money of the Cardinals, who isn't exactly Gussie Busch in terms of popularity keep pressing forward with the team?
Franchise Value -- If put on the the market today, what would be the estimated worth of all it's assets?
There's the money shot. DeWitt and his group got involved with the Cardinals when the valuation of the franchise was well under 200 million. Just a decade later, the Cardinals are worth 518M and rising every year. So while the operating income isn't super great for the Cardinals, the value of the franchise is going up at a rate that's far higher than many other investments would. And if he decides to cash out sometime in this decade, he can expect 6X his purchase price.
Economics can be FUN! Now on to the Friday Links...
- Are you a bad parent? If you're on this site you are. LINK HERE
- Sounds like a girlfriend you had in college? LINK HERE
- Wish I could give a shoutout to this awesome paper. LINK HERE
- Yeah, maybe that's why. LINK HERE
- Irony. Sometimes it's a wonderful thing. LINK HERE
- Chicken police. LINK HERE