The articles claiming the Tigers are losing money only cite a negative operating income, which is an approximated EBITDA number from those who aren't inside the organization. If you know what EBITDA is and how it is used in M&A to put rough values on businesses, you should understand that it is far from telling you the whole story. It is easy to have a negative operating income in a given year (or a couple years) if you are investing in the business. In this case, that can be facilities, player salaries, etc. However, that investment in the business also increases the value of the business, which isn't something that shows up on the single year snapshot of finances. In the case of the Tigers, the value of the franchise grew from $643mil to $1.125B between 2013 and 2015. So, please explain to me again why one or two -$20mil operating loss years that they may or may not have really had was bad, particularly for a multi-billionaire who doesn't need to pull money out of the business to live.
First, Forbes magazine is a very reputable source. I will believe their conclusions long before some wannabe financial hack on a message board.
And Operating Income is equivalent to EBIT, and just that. Few use EBITDA, unless they are trying to make the point you are trying to make. And based on your reasoning, and all that infusion of money into infrastructure, the Tigers now have a better farm system and facilities will not need upgrading anytime soon, right?
Listen, of all 30 MLB Teams, DET has the
worst operating income over the last 7 years with -$90.1 Mil. The next worst is PHI, at -$31.1 Mil and they are still trying to recover from their lopsided payroll. The
average operating income is $108.5 Mil, with 17 teams above $100 Mil. Only 3 MLB teams had a negative operating income over the last 7 years and DET leads the list. Why is that, because they did not spend more money than any other team on infrastructure or the farm system. I will reiterate,
DET is $198 Mil below average over the last 7 years. That is $28.2 Mil below average, per year for operating income.
As far as franchise value, the average value is $1.2 Bil. DET, at 13th with $1.125 Bil is pretty much average. There are 15 teams whose value is at or above $1.0 Bil. The correlation to franchise value increase and winning can be made. Any other correlation is speculative without granularity. The average value increase since 2009 in 60%. DET is at 67%. 17 teams are at or over 60%. So again, there is not much difference to the norm. MLB values are increasing across the board. DET isn't doing anything special other than winning the last 5-7 years to increase their value above the norm.
TOP 4
SFG 76.5%
LAD 69.9%
WSN 68.3%
PIT 68.0%
Bottom 4
NYM 32.4%
HOU 44.4%
TBR 48.8%
CLE 51.6%
And the thing about franchise value, it is like a home appraisal. It is what the market says it is worth. You can have a $10 Mil home and try to sell it and get only $5 Mil. And in some cases, two people might like it so much, they outbid each other and pay $15 Mil. You never know. Valuations are only good if you are borrowing against it or for taxation. Businesses and home owners are not looking for ways to overvalue their asset unless it benefits them. Certainly not when it comes to taxes.
