With Major League Baseball's Boston Red Sox agreeing to pay $51 million to negotiate with Japanese pitching phenom Daisuke Matsuzaka, it is no wonder the team has an estimated annual loss of $18.5 million, according to Forbes.
So while trolling the Forbes Lists for the team's financial records and comparisons with the Sox's chief rival, the Yankees, and cross-town peers, the NFL's Patriots, Dealscape noticed something odd about the latest baseball and football directories. Forbes no longer values the Yankees as the world's most valuable sports franchise. Forbes is bucking the common wisdom that the Yankees and English soccer team Manchester United are the world's most valuable sports franchises. Instead, the magazine ranks five NFL franchises worth as much if not more than the Yankees. Interestingly, the most valuable franchise of all is the Washington Red Skins, which rings up at $1.4 billion — $400 million more than the Yankees. Two teams more successful than the Red Skins over the last decade, the New England Patriots and the Dallas Cowboys, also beat the Yankees by $200 million.
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How is it that Forbes has disregarded the common wisdom and valued three football teams higher than the Yankees? It seems TV revenue is a big factor in Forbes' valuation. The NFL has one of the richest TV agreements of any league. CBS Corp., News Corp., General Electric's NBC Universal and Walt Disney Co.'s ABC/ESPN have agreed to pay $3 billion over the next six years for rights to air football. For comparisons sake, Forbes points out that the NFL receives more from the networks than the MLB and NBA combined. Consequently, every NFL team receives about $87 million in TV revenue — again a figure few MLB teams can dream of achieving despite playing about 10 times as many games in a season as a football franchise. However, the Yankees are one of the few baseball teams that can handily beat that $87 million figure because the Yankees reportedly receive about $200 million from TV, according to Forbes.
Another factor favoring football is its salary cap, which helps even the lowliest of teams remain profitable. For example, the Houston Texans have been perennial losers since debuting in 2002. However, the Texans, which reportedly booked an operating income of $57.6 million in 2005, are estimated to be the second most profitable franchise in the league behind the Red Skins, which reportedly booked an operating income of about $100 million, according to Forbes. The same can not be said for baseball, a sport that lacks a salary cap, but does have a luxury tax that penalizes large payrolls, but does not outright forbid them. Consequently, the Yankees, which was penalized heavily by the luxury tax, booked a loss of $50 million in 2005, according to Forbes.
However, merchandising and brand recognition seems to be overlooked by the Forbes list. Show a foreigner the interlocking NY of either the Yankees or Mets, the scarlet B of the Red Sox or the interlocking LA of the Dodgers, and that individual will probably recognize it — maybe even own something emblazoned with it. However, show the same foreigners the Patriots, Red Skins or Texans logos, and odds are good they will stare blankly at them. While American football is aired overseas, odds are foreigners don't associate with it the same way they do with baseball. The phenomenon has a lot to do with the fact that baseball is played across the globe, and countries in Asia, South America and the Caribbean are exporting their stars to the U.S. This intangible is hard to value, but for an organization known for questionable valuations, one would assume Forbes would factor it into the equation. —Matthew Wurtzel
See the Forbes Baseball List
See the Forbes Football List
See story about the Red Sox from The Boston Globe
