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Forbes: Cleveland Indians’ Value Increases 16 Percent

Though the Cleveland Indians have long disagreed with how Forbes Magazine evaluates the value of sports franchises, their latest report has the team currently worth $410 million. This amount represents a 16 percent increase year-over-year and places them 26th among all Major League Baseball teams.

Forbes reports that, among these numbers, the Indians earned $178 million in revenue, had a debt ratio of 27 percent  and operating income of $30.1 million — the largest amount of operating income earned by any MLB team in 2011. Included in this figure is the revenue incurred from the team’s ownership of a Regional Sports Network (RSN).

Although both the Kansas City Royals and Minnesota Twins were unsuccessful with attempts to launch RSNs in 2003 because they could not strike sufficient deals with carriers, the Cleveland Indians have shown that it is possible for a small market team to have its own network. The Indians started SportsTime Ohio in 2006, spurning a rights fee offer from Fox Sports Net Ohio in excess of $30 million per season. Although the Indians raked in less than $30 million in rights fees from SportsTime last year, team owner Larry Dolan and his family made a huge profit from their ownership of the RSN. Besides Indians games, STO programming includes coverage of the Browns, Ohio State, high school sports, the Mid-American Conference and golf.

The Indians were in lockstep with the average Major League Baseball team which rose 16% in value during the past year. In 2011, revenue for the league’s 30 teams climbed to an average of $212 million, a 3.4% gain over the previous season. Operating income  fell 13%, to an average of $14 million in part due to a 5.1% increase in player costs.

The New York Yankees, Los Angeles Dodgers and Boston Red Sox are the three most vauable franshises, each clocking in over $1 billion. The Kansas City Royals, Pittsburgh Pirates, Tampa Bay Rays and Oakland Athletics hold down the back end, each being worth less than $300 million. 

[Related: The Indians over bet that wasn’t]

(Source: Forbes)

  • Boomhauertjs

    If the Tribe is worth $410 million and the Dolans bought the team for $375 million, then the Dolan’s have made a nice $35 million profit. Time to sell to someone (Dan Gilbert) who will actually put money in the team.

  • TOJ

    Obligatory “Sell the team!” comment.

  • TOJ

     A LT gain and positive annual cash flows.  Time to martyr DiBiasio on the media circuit. 

  • hans

    No, he wouldn’t. There is only one owner in all of baseball that is debt spending from his own assets, and that is the near-to-the-grave owner in Detroit.

  • The_Real_Shamrock

    Didn’t Mark Cuban want a baseball team?  Ah dare to dream!

  • steve-o

    To us the Indians are a team that we grew up with and root for (or at least did), but to the Dolans it is primarily an asset. As long as they are making money from that asset, they will keep it. There is little reason to believe that the next owner would spend wildly, since it makes very little business sense. The structure of baseball itself is the reason for this, so we should instead push for a better commisioner who actually wants to fix problems instead of burying his head in the sand.

  • mgbode

    Mark Cuban wanted an undervalued asset to utlize.

    He wanted the Cubs because he realized that there was no reason the Cubs in Chicago should not be valued right with the Dodgers, Red Sox and Yankees if a little better management was done.

    Just like how he took the pathetic Mavericks and realized that if they could build a consistent winner in the big market of Dallas that he could rake in the $$$.

    The Indians are as likely to fall to the Royals/Rays level as they are to rise to the mid-market level.

  • mgbode

    Larry Dolan grew up cheering for the team.  Just saying.

  • Steve

     0.73% annual return. I know $35 million seems big in a vacuum, but it’s not in this context.

  • Steve

     Tough to call it a long term gain, when the franchise was worth 353 million, a net loss, all of one year ago.

  • steve-o

    And I’m sure he still does, but his #1 priority is to take care of the bottom line. His team’s past and current moves have demonstrated this.

  • Acrossthefield11

    Man I wish I was a billionaire… I’d be frugal and a good steward of my money etc. but I’d allow myself one hobby / pleasure in which I could just dump money into without much care.  That hobby would be owning the Cleveland Indians.  If anyone is interested in helping a guy achieve his dream by all means.  Donations can be made to…

  • mgbode

    no doubt.  was just noting as it tends to get lost sometimes.

  • mgbode

    also, we should probably take inflation into account. not to mention there are other costs associated with buying/selling a team besides the price (lawyers, etc.).   I think that $35mil gets gobbled up pretty quickly.

  • Steve

     Exactly. I have no idea why fans in this town are so determined to hammer the Indians on the financials at every turn.

  • Steve

     That’s an expensive hobby. It wouldn’t be long before you were no longer a billionaire.

  • Mark Novak

    It’s not so much the $35M increase in team value since 1999 that frustrates me and other fans but last year’s $30 million in “operating income” (or, as most people call it, PROFIT).   Sure, that number includes STO, which is officially a separate entity, but according to Bill Lubinger’s excellent Sunday PD article a few months back, STO is also under substantially the same ownership and control as the team itself.  $30 million in profit is a big, big number and also a great margin on $178M in revenue.  Whenever I hear him in the media, DiBiasio always goes out of his way to state that the Dolans have made a “couple million” here and there a few years since buying the team but that they have lost money most years.  So obviously, there’s a lot of room between the Dolans’ numbers and Forbes’ numbers.  I know the Indians scoff at Forbes’ math every time it comes out but it’s usually something to the extent of “we have no idea where they get their numbers.”  That’s far from the flat-out denial one would reasonably expect if Forbes’ approach is totally bogus.  Someone in the media, preferably the PD and not talk radio, needs to pin down Paul Dolan, Mark Shapiro, and Dibiasio and get a straight answer on this.  Forbes has been doing this for years and would appear to be a fairly reliable source.

  • TOJ

    The LT gain is icing on the cake.  How much have they been generating yearly?  That’s the problem here. 

    Fans are disgruntled because they should be disgruntled.  Ownership and Bobby D (a genuinely nice and likable guy) cry poor mouth at every turn, yet a cursory estimate of revenues and expenses shows a decent little cash cow, relatively speaking. 

    If you’re happy with not competing, fine. I’m not and don’t ask me to be.  I’ll express my dissatisfaction at gates.  By the looks of things, most of Greater Cleveland is doing the same.

  • TOJ

    Cash flow.

    You don’t disregard dividends when you own stock, so why disregard cash flow from your team?

  • TOJ

     I guess I would add there are two ways to operate a business.  You can cut expenses and let quality follow or you can invest in the quality and let revenue follow.

    If they are getting 17,000 per night, that leaves 25,000 empty seats.  25,000 * $10 avg ticket (conservative) * 82 = $20.5M/yr

    Look at the attendance dropping.  How low will it go?  How much will Dolan Inc strip the team down in order to keep it profitable?  Talk about a race to the bottom.

    http://www.baseball-reference.com/teams/CLE/attend.shtml

  • mgbode

    they have tried to invest.  the problem is a cold April and/or a slow start and noone shows up and you end up losing money hand over fist and have to trade your 2 best assets

    #2009

    —————-

    also, attendance did not significantly rise last year despite being either in the lead or a couple games out of first through the end of August.   I understand alot of that is from the fanbase being completely soured on the team from the 2008 & 2009 trade deadlines, but the bottom line is even when the Indians win, they do it for a mostly empty ballpark.

  • mgbode

    I have seen credible reports in the WSJ and other places debate Forbes numbers on many occasions.  Forbes does what they can, but they do not have access to the books, so some of it has to be guesswork (educated guesswork).

    So, let’s just go and assume that between the Indians and STO they did bring in $30mil last year (or something around that amount).  

    How much of that money is being used to invest into expanding STO’s programming, network, etc.?   

    How much is being used to bump up this year’s payroll (rising an estimated $20mil from last year)?

    How much is being used to explore new areas to try to invest or create ways of making more revenue (long-run this should help)?

    I don’t know.  You don’t know.  Forbes probably has some rough guesses, but they don’t put it in those numbers (as they are only talking about last year).

  • Mark Novak

    Good points, mgbode.  But with 81 home dates every year, baseball attendance rises only gradually at best on a year-over-year basis.  What MLB teams tend to rely on is a steady increase in season ticket purchases (both new and renewals) on a rolling 2-3 year basis.  That’s what boosts average attendance from, say 17,000 to 22,000, which would be a huge shot in the arm for this organization.  And the problem with the Indians is that they have not had back-to-back winning seasons since Mark Shapiro took over the team 10 years ago (in fact, they have only had 2 winning seasons in that time period)  In 2005 and 2007, the Indians put a very good, exciting team on the field that I think would have steadily drawn fans (including season ticket holders) had not 2006 and 2008, respectively, been such huge disappointments.

    So, 2012 is obviously a huge year to build on, and a fast start would be great.  Technically, the team finished a hair below .500 last year, but if the team wins this year and guys like Kipnis, Chisenhall, and even Brantley take the next step in their development, I think people around the city will begin to take notice and start showing up.

  • EyesAbove

    Good point, you cant overlook the 20 million dollar increase in payroll. And that increase comes just from re-signing their own guys. Imagine if they had spent big, signed guys like Cuddyer, Beltran, Willingham, Buerhle, whoever. Then you could easily be looking at a 50 million dollar increase in payroll instead of 20. Even if the Dolans turned a 30 million dollar profit last season, they still dont have the kind of funds to spend big the way fans would like them to. 30 million last year doesnt mean we can afford Prince Fielder or whoever over the next 9 or 10. 

  • mgbode

    I definitely hope so.  I think people would remain skeptical through this season unless they went on a true tear (winning 95 games or so).  I think an 85win season will help 2013 at the gate, but not very much in 2012.

    I agree that fans are waiting for successive winning years built on the base of a solid, young corps.  Not that easy to build, but hopefully we have the start of one now?

  • Mark Novak

    And I agree with you 100 percent on 2009.  The Dolans don’t get nearly enough credit for the 2008-09 offseason when they threw tons of money at Kerry Wood, Carl Pavano, Kobayashi, and Mark DeRosa (the latter by trade, IIRC).  They were really trying to sustain the run the team had made to the ACLS at that time.  Of course, they tore it down 4 months later at the ’09 trade deadline but the funny thing is that in hindsight, tearing the team down was absolutely the right baseball move because otherwise you would have been building around physically deteriorating guys like Hafner, Martinez, and Sizemore.  I would have liked to get a lot more quality prospects for Cliff Lee but that’s on the front office, not ownership.

  • mgbode

    that last line is the sticking point.   did the Dolans force the FO to trade Lee and Victor “no matter what” to the point that other teams realized we were screwed and low-balled us?

    many think yes.  I didn’t think so at the time and still do not.  seeing what Philly got for Lee supports that thought.   Seattle ended up with Smoak though (from a division rival no less).  Where was Nolan Ryan in ’09?

  • MarkinVegas

    Because they own a freakin tv network that makes huge $$$$ mostly from underpaying for the tribes TV rights. That being said, with the way baseball is structured compared to football, thr tribe is light years ahead of the Clowns in competiveness.

  • MarkinVegas

    Because they own a freakin tv network that makes huge $$$$ mostly from underpaying for the tribes TV rights. That being said, with the way baseball is structured compared to football, thr tribe is light years ahead of the Clowns in competiveness.

  • mgbode

    take a gander down below at Mark Novak and EyesAbove.  that huge $$$ you speak of gets gobbled up pretty quickly.

  • Steve

     They’re 7th from the bottom in revenue and 5th from the bottom in franchise value, and you’re here pounding the table that they’re making money hand over fist each year? Say what?

    Sure, it looks like a decent little cash cow to Joe Blow who makes 5 figures. But by MLB standards, its nowhere near a cash cow.

    And competing? Despite being constantly behind the 8 ball, this team is competitive every couple years or so. And most of Greater Cleveland still throws good money after bad at the Browns, so color me skeptical that they are actually savy buyers.

  • Steve

    Where do you see final cash flow numbers? There’s a lot of essential information that Forbes hasn’t included.

  • Steve

     Most people may call operating income “profit” but they’d be wrong. I mean, this is accounting 101 stuff. It doesn’t take a sophisticated finance education to understand.

  • Steve

     What sub 20 million dollar investment can they make that will ensure they earn that 20 million every year of their investment?

  • mgbode

    in ’06 signing Grady and Hafner sure seemed like such a sure bet

  • TOJ

    “But by MLB standards….”

    …..they have the highest operating profit in the league, and on some of the lowest-to-middle-of-the-pack revenue in the game.

    “this team is competitive every couple years or so.”

    This right here highlights our difference of opinion.  I don’t find this as a positive. 

  • TOJ

    You can infer from here on out.  Tax would be the biggest bite, and I’m sure the lawyer Dolans have skinnied their rate down to sub 20%.  At worst, they could pass through $15-$20M based on $30M.

  • TOJ

    Why don’t we ask Jacobs, since attendance supported his top 5-10 payrolls back in the day? 

    Also, investing that $20M in payroll means that you don’t have to empty your farm system (Pomeranz & White) to trade for cheap labor (Ubaldo).  There are ST and LT ramifications when you skimp on your product, but any failed business owner can tell you that. 

  • greg

    ur an idiot.

  • jesus

    you clearly didn’t read the article.  they make money because they OWN the network and OWN the team.

  • greg

    ur an idiot.

  • Hypno_Toad

    Nice argument.

  • Bigfpizza

    Art Modell claimed he didn’t make money and the Browns broke even, but he failed to mention the Stadium Corporation and a 1 dollar lease of the Stadium. Art got all the Indians concession money, parking money, a cut of ticket money plus all the loge rental money. Thats why the Indians could never get ahead and had to get their own Stadium. Now unlike all the shoestring owners of the 60’s thru 80’s that had to give Modell his tribute, Dolan is raking it in and he has his own TV network. If Forbes is so far off base why don’t they sue for lible. Forbes has made similar claims about the Indians before.

  • Pjerome79

    wish dolan never bought the indians period.

  • Pjerome79

     penny pincher