One of the major existential crises Major League Baseball faces is the relatively sudden profitability of tanking teams. For most of baseball’s history, a team had to try to be relevant in order to stay comfortably solvent, but with money coming in from TV, streaming and gambling deals among other profit sources, attendance is still as necessary as ambition, but neither are really required. Half the league has stopped trying today in order to set themselves up for glory tomorrow, because if it doesn’t work, at least they’ll make money while failing.
Case in point: your Chicago White Sox.
Forbes released its list of baseball team valuations on Wednesday, and the White Sox are still sitting comfortably in the middle of the pack. The magazine appraised them at $1.6 billion, in 14th place between the Texas Rangers and Seattle Mariners. They’re bottom-10 in revenue, as you might expect from a team that’s drawing fewer than 20,000 a game.
But they somehow finished sixth overall in operating income, and they don’t seem to belong in the neighborhood:
| Team | Revenue | Op. Income |
| Dodgers | $549M | $95M |
| Phillies | $341M | $94M |
| Cubs | $452M | $87M |
| Giants Red Sox | $462M $516M | $84M $84M |
| WHITE SOX | $272M | $76M |
| Braves | $344M | $71M |
Forbes says the Sox are benefiting from a leaguewide trend, but maybe more than anybody:
As for baseball’s P&L statement, by our count, the 30 MLB teams generated record average operating income (in the sense of earnings before interest, taxes, depreciation and amortization) of $40 million during the 2018 season, 38% more than the previous year. Last season revenue increased 4.8%, to an average of $330 million per team, while player costs (including signing bonuses and benefits) remained flat at $157 million.
Player costs did not remain flat for the White Sox. They went the other way, and paying next to nothing on their roster is why they came out so far ahead. They’re close to a large-market team when it comes to built-in benefits, but a small-market team when it comes to mindset. Clearing the ledger afforded them the opportunity to add a Manny Machado and/or Bryce Harper to their payroll — they had the cushion in terms of profit, even before factoring in a potential revenue surge — but they didn’t wanna, because they’re fine without ’em, at least financially.
The league’s economics are similar to their stadium deal, which only charges the White Sox rent if they clear 1.93 million in attendance. Given these conditions, the White Sox’ approach to team-building makes a lot more sense if you think that they maximize their position by being mildly intriguing for dirt cheap, and anything more is a hassle.
If you really want to get cynical, the wave of extensions and lack of attractive free agents plays even more into their hands, because they’re going to be hard-pressed to truly exercise the financial flexibility they’ve created for themselves. James Fegan tried to figure it out, and came away with, I dunno, Robert Loggia Starling Marte?
Which is all to say, it’s hard to project who will become available that will fit the bill for the White Sox. No one who could currently be seen as on the trade block will be mistaken for five years of contractual control of Christian Yelich entering his prime. But the Sox will need to be aggressive and opportunistic when that next teardown takes place, since the upcoming free agent class that once looked to rival this past offseason’s now drops off considerably after Anthony Rendon and Gerrit Cole. The Sox can finally ensure Nicholas Castellanos stops getting hits against them this offseason, though.
If shopping in the lower tiers of free agency and acquiring other team’s distressed assets to supplement a handful of high-quality players is where the White Sox end up, then they’re back to where they started when they tore it all down. That’s why Eloy Jimenez, Yoan Moncada and Tim Anderson aren’t exciting enough to sustain the season by themselves, because they also need decent players for below-market prices for this whole thing to look any different than it used to.
Teams will probably reject Forbes’ numbers as inaccurate, and since books are closed, they’re probably not precise. Even if you only trust the general shape of them, it’s something to show a friend the next time he or she starts fearmongering about relocation. The White Sox are middle of the road in franchise value, and if they’re bottom-10 in revenue, it’s only because they’re top-five in getting in their own way.
This is just distressing. And I don’t think it will change as long as Jerry is alive.
This goddamn franchise. Grocery store clerks running a baseball team.
to collect a bill
What a total clown show, thanks to Forbes for further exposing these frauds.
The question I ask myself is whether I should raise my children as Sox fans and subject them to a lifetime of this nonsense.
We can only hope that when Jerry’s time is done, someone with creativity and vision takes over the helm.
If anything this should promote the viability of relocation since it proves a team can be profitable without people going to the games or watching on TV. A team in Newfoundland would be profitable as long as they kept costs down simply because they’re an MLB team.  Â
I don’t realistically think the Sox (or any team) is moving any time soon based solely on the inelasticity of profits as a function of on field success…until the TV money bubble burstsÂ
Marlins are losing money
Yup this piece more makes the case why being in a large market is so grand. Â
That’s an accounting trick because the Marlins sale was a) a leveraged buyout, so a chunk of their expenses are just debt financing which, if you check out the leaked docs about the Cubs sale, likely aren’t real losses and b) they get to write off the whole purchase price on their taxes for over 10 years.
Well yeah cause they paid 1.2B for a franchise valued at 1B with a ton of loans.Â
I’ll give you Toronto and Baltimore, though.Â
Toronto generally has decent attendance.
Yeah I’m a bit surprised by that one since I believe they have essentially a national TV deal? General issues with USD/CAN exchange rates?Â
I think they have a TV rights deal with Sporstnet which is owned by Rogers who also owns the Jays
The state needs to change that lease agreement.. Jerry is a grifter at his core.
The terms changed a little around ’08. The Sox pay about $1.5m/yr in rent before the additional 1.9m attendance threshold. But even if they hit that threshold the overage is also offset by some other taxes they pay.
The state has also made other concessions like paying for most of the Gate 5 Bar & Grill while allowing the team to bank the profits.
Nominally, the stadium costs are supposed to be paid by the hotel tax.
Does the state have to make the ticket revenue by buying the cheapest seats or is it an average ticket price thing? Also I believe I read the clause is for full price tickets meaning any discounted ticket sold doesn’t count. This stadium lease is better than getting a new stadium.
It’s like income tax brackets: the extra fee only applies to the tickets sold above the threshold.
Right but the state has to make up any ticket difference. Wondering if they can “buy” the cheapest seats or if they have to pay average ticket price.
The ticket subsidy is average ticket price but the subsidy threshold is lower: below 1.5m tickets.
The White Sox is just a bank account to Reinsdorf. It’s not a sports team to him (and probably never was). It is a mutual fund investment with ROIs, dividends, capital gains, and whatnot.
After a year, Reinsdorf is not waiting for a ring, he is waiting for 1099 & K-1 slips.
Given the number of times the Sox have come up short on free agents, we can’t say that Jerry actually wants to win, he merely would like to win. But in that context, I believe he very much would like to. It’s just our great misfortune that he ascended to his dream of owning a major league ball club, just like Veeck in the mid-70s, right when the economics of the sport moved well outside of his comfort zone. However, unlike Veeck, Reinsdorf didn’t bow out, and instead spent the next 30 years trying to beat the sport into a more favorable shape. And then he’d still only go to about 75% of market rate.
I don’t know that he even really cares about winning. To me it looks like it’s just a business for him, and Hahn’s rebuild presents an opportunity to potentially increase revenues by contending without dramatically increasing payroll. I assume Reinsdorf only approved the plan because it implies potential upside financially with limited financial downside since they won’t spend much on proven free agents.
I’m so disappointed by ownership and the front office. Their ability to be profitable while presenting a garbage product makes it feel like a hopeless position for fans who want to see a winning team.
I believe he genuinely would like to win. I think it really was a special moment for him when Konerko gave him they ball from the last play of the series. All those pieces about him being an avid collector of baseball memorabilia, and growing up a huge Dodgers fan may have been puff pieces, but I think they accurately paint his genuine desire to own a winning team. But his commitment to his business principals is, at this point, unquestionably just as strong, and at 80-something years old, he’s not going to change, so we’re stuck in this torturous dynamic where he wants the team to do well, but he’s disposition will always sabotage attempts to build a genuinely stacked roster. Whatever the state of the team’s finances, or he overall health of the league, he’ll just recalculate his spending limits to some point substantially lower than whatever mark is set by the biggest spenders, then he’ll sit back and hope that his “best efforts” will be enough, and when they inevitably aren’t, he’ll get frustrated, but not frustrated enough to make a real change.
… Is this man’s dime store psychoanalysis, anyway.
What baffles me the most is that he could still be a small payroll/big ROI guy and WIN baseball games if only he had a better FO. Plenty of teams do a lot more with a lot less $$$ than the White Sox. Maybe RH/KW are blackmailing him with revealing dirty secrets they happen to know.
In our eyes, one of Jerry’s biggest flaws is his loyalty to his people, no matter how incompetent. In their eyes, it is his greatest asset. That’s why they stick around.
He also is an owner who sees himself as a “baseball man”. He is not going to turn his baseball ops over to a chieftain and stay out of the way.
How can you be so rich and so stupid at the same time?
Well, He wasn’t always so rich,…. So he’s probably not stupid. Calling someone you disagree with stupid…. that is stupid.
Didn’t Kenny try to leave for Toronto a few years back, and Jerry blocked the move? Jerry seems bizarrely loyal – perhaps paranoid about trusting anyone new to his org?
I’ll bet Toronto has no recollection of this.
“Huh, what? Nope, nope. No memory of that. I’m not being weird, you’re weird.”
I am not a big fan of Shapiro, but I am thankful the Jays dodged that bullet
@Torpedo Jones: here’s the full, weird story from the Toronto Sun a few years back.
Thanks for sharing the link. I didn’t know just how weird that situation was.
“Kenny is like a son to me” = job for life
He did and Jerry should have let him go.
I’d swipe as many people from the Rays as I could.
Jerry’s sentimentality regarding Konerko for handing him that ball was so great that he proceeded to give him the low offer in free agency so he could cash in a few million off Konerko’s loyalty to the organization and teammates. Jerry’s only loyalty is to his bottom line and those who help keep it strong.
He probably already sold the ball
Not really he kept Konerko around for at least 2 years after he should have let him go so Pauly came out the same if not better financially. Pauly never complained. He has been pretty good to his ballplayers. Worked out rather well for HOF Mr. Baines also.
Taking a second look at our numbers…Our top line revenue number isn’t grand but we are doing well on the bottom line due an artificially cheap payroll. There still is a case to be made for actually being good at baseball and getting the extra revenue from ticket sales and merchandise.
Too much risk in that. I mean they are not going to draw say 2.4M on a consistent basis to an area surrounded by parking lots even if they are a good team. They need an owner with a vision and a desire to compete with the Cubs for this city’s baseball dollar.
…if they were perennial contenders for 1st in the Central they’d consistently draw 2.4m.
I’d say you are right on the money. You could do 2.4 million and never sell a seat in the 500 level.
Not like it’s difficult to contend in the central anyway. We’re never going to be much more than a 95 win division at most.
“The $ will be spent.”
-Rick Hahn.
These #’s tell me that what I thought was a $125mil payroll ceiling is more like $150mil, even with the bad TV contract.
’21 payroll expectations have been raised.
PS- Grandal should be available next year as well.
Every White Sox catcher free agent signing of the last five years says there’s not a snowball’s chance in hell that they sign Grandal.
Yep
Starter Grandal
Back up Seby
DH/ 3rd catcher/ 1st base Collins.
Programming Note: Kurt Badenhausen of Forbes will be on Monday’s podcast to discuss the valuations.
That’s a great get, Josh.
Congrats.
If it’s not embargoed and you weren’t already planning to, please ask about their process and accuracy. I don’t expect specific details but maybe a general sense of how much they rely on public reporting like the media deals, researched estimates, and other sources. And also a sense for whether their conclusions fall in a range and how big it is.
Bonus points for asking them how their numbers compare to what Liberty Media has to report as a publicly traded owner of the Braves and what accounts for any differences, pun not intended.
This. And do they have any info on the Sox’ new TV deal?
This again. I am sure he will not want to give too much info away but please politely push him on this for as much of a sense of things as possible.
This team keeps reminding me of that quote from Mad Men when they are trying to tidy up the company for sale to a larger firm and Don Draper gets angry and says something like, “Why are we here, just to turn a dollar into a dollar ten? Some of us want to work!” That seems to be the MO for the FO, turn $1.00 into $1.10. It’s getting hard to root for this team. It’s getting to the point where for the first time in a quarter century of being a fan I kinda just want to ignore them. It sucks.
In the Mad Men-White Sox parallel-verse, which one is Duck Phillips – Kenny or Rick?
Nice pull
Fantastic…looking forward to it
I can not wait. I beleve that the Yankees , Cubs and Red Sox and Dodgers gross and net are probably under estimated .
Disgusting. JR has destroyed the fan base for decades to come. My son has no interest in watching the Sox get blasted night after night. He watches soccer, NBA, NHL instead.
But yet we’ll all get chastised or mocked for “lack of attendance.”
Sums up the Sox perfectly.
If Kenny happens to bring up low attendance ever again as a reason for not spending, he better not show his face in public again.
If a fan of any other team (Cubs fans, yes, but others, too) does it to me again personally, I may punch them in the face.
If you could just go ahead and record that, I’d be much obliged.
I’m sure it will go viral immediately, no worries.
Lurker Laura: Worldstar
International bonus pool amounts have been announced.
Sox gat $5,398,300.
Sounds like the Tatis signing announced yesterday will be subtracted from that.
On the subject of corporate grossness:
Those are our workers to exploit, not yours.
I don’t think that’s where the shots are aimed to. It’s more like, watch MLB, where big TV deal are signed, please do not discover that minor league games are actually as entertaining as MLB. I am actually more interested in Sox minor league highlights than major team shitshow highlights.
I think Forster has the right of this one. It’d be nice if BA had the resources to fight a fair use claim.
The people flooding the White Sox twitter account with the sad Rick Hahn images are the greatest heroes since Captain Planet…
That Albies contract, holy crap that agent should be fired. Into the sun. He’s also the agent for Kimbrel, so I’m not sure why anyone would ever hire him again at this point.
Two 7 mil options. Wow.
Reinsdorf’s problem is his loyalty to his front office. Check the Sox payroll after 2005 and for about 5 years after that it was among the top 5 in baseball. All we had after that was one 08 division win Though I will be forever grateful to Kenny for 05 he should have been gone by 11 and certainly by 15 after the Ventura , Dunn and La Roche fiasco and Kenny’s trusting the con man in Latin America(the last one a huge setback in preventing the Sox from obtaining decent Latin America ballplayers for about 5 years) . Inflicting Hawk on us for almost 25 years after his stint as GM , no other baseball owner would have ever undertaken such an action. The Rays, Oakland and Milwaukee front office have done much more with much less. Jerry does not seem to have the stomach to fire people he likes. Even though it is costing him money and prestige, it a situation were he thinks of these people as family and he seems to be putting his family first.
The Sox could really use Rule 5 pick Brandon Brennan in the bullpen; they lost him as an MiLB FA. If only they were able to scout their own minor leaguers as well as the Mariners’ analytics department did.
if only….
Don’t forget Junior Guerra