Franchise Values – What’s Media Got To Do With It?

March 30, 2013

Forbes recently released their estimated MLB franchise values, which are often highly debated by the teams for their accuracy.  Nonetheless, it’s the closest thing the public has to understanding the values of their local clubs.  Having already released their franchise value estimates for the other major leagues in the past handful of months, we can now see how the values compare within and across metro areas.

The Mariners are 12th (out of 30) at $644M, versus a league average of $744M.  The Seahawks come in 17th (out of 32) at $1B, versus a league average of $1.1B.  And while MLS teams are not easy to value due to the league’s single entity model, former LA Galaxy head Tim Leiweke valued the his club and the Sounders as the highest in the league at $150M.  More than comparing Seattle franchise values to league averages, which are skewed towards the big media markets, I prefer to see how the values relate to market size.  The M’s appear to be generally performing at about what their market size says they should.  The Sounders are outperforming their market size relative to the rest of MLS.  On the other hand, the Seahawks are performing a bit under their market size compared to their NFL counterparts.  Because the NFL TV deal spreads the wealth equally, one can surmise that the team is not getting as much revenue out of the stadium as they could.  This could be due to lower corporate sponsorship revenue or fewer high revenue seating opportunities.  Look for continued updating of CenturyLink Field to try to alleviate these revenue generating discrepancies.

While game day revenues such as ticket sales and concessions are obviously important, the big driver today in team values is media revenue, which is highly correlated to market size.  Locally, the Seahawks benefit from the huge NFL TV deals.  The Mariners are reaping the benefits of a local TV deal that eclipses its immediate market size.  And as local TV contracts are the primary MLB franchise value drivers, there’s much speculation as to what the M’s will do next when they get the chance to renegotiate their deal.  The Sounders are thought to be one of the highest revenue generating teams in MLS.  Their jersey sponsorship with Microsoft (XBox Live) ends after this season and rumors abound that the club is seeking a significant increase in its deal.

As a comparison to the Seattle market, here are the values of franchises in what I consider peer markets.  As a reminder, labor agreements, corporate sponsorships and stadium deals, among other things, help shape the value of franchises along with the TV deals and game day sales mentioned above.

Minneapolis-St. Paul – Twins $578M; Vikings $975M; Timberwolves $364M (NBA avg. $509M); Wild $218M (NHL avg. $282M)

Denver – Rockies $537; Broncos $1.1B; Nuggets $427M; Avalanche $210M

Phoenix – Diamondbacks $584M, Cardinals $922M; Suns $474M; $Coyotes $134M