Owning a Sports
Franchise
Date Added: May 1st, 2004
By Chris Stallman
| E-mail
I think
it's just about every guy's (and many girls' too) dream to one day
have enough money to buy their own sports franchise. I know
that I, for one, would love to be the owner of the Chicago Cubs,
Chicago Bears, or Detroit Pistons. How cool would it be to
say you own a team, mingle with the players,
and watch every game from your luxury skybox?
Unfortunately, only a select few uber-wealthy people
will ever be able to afford their own sports franchise. But
you can always dream. And that's why we've put together the
following information about owning a sports franchise.
Be Prepared to Pony
Up Lots of $$$
Sports franchises
are expensive. The cheapest
franchise is currently valued at about $100 million. But,
remember, most franchises are bought at a premium, so you actually
end up paying more than it was valued at. The reason for this
is because owners want to hold onto their teams unless you make
a very high offer. Take the Boston Red Sox for example.
Two years ago, the Red Sox were purchased by John Henry (and a group
of partners) for $700 million, which is nearly $200 million above
what Forbes had valued it at.
Consider a Sports
Team as a Business
Some people think of teams strictly by how many wins
and losses they have and how many championships they've won.
But this isn't always a good indicator of how much money the franchise
is worth or will make. Take the Florida Marlins for example.
In the last seven years, they've won two World Series championships.
But even last year, in their miracle season (when they beat my Cubs!),
the Marlins lost $20 million in cash.
And because it's a business, you'd want to buy a team
that's in a strong market. Take Dan Snyder for example.
He was criticized heavily for paying so much to buy the Washington
Redskins. But the Redskins are in one of the biggest markets
(Washington DC) and he owns nearly the entire stadium (while most
stadiums are publicly-owned). This has helped him make the
Redskins the most profitable sports franchise.
Big Tax-Writeoffs are Disappearing
Owners used to love buying sports teams because of
the big write-offs they could do on the payroll. Take Bud
Selig, for example. He purchased the Milwaukee Brewers in
1970 for $10.8 million. But he was able to write $10.2 million
of that off in player salaries. So he only reported a franchise
purchase price of $600,000! Unfortunately, today the IRS has
become slightly more strict and the writeoffs don't have a big enough
helping effect against the huge cash losses many baseball and hockey
teams are facing.
Basically, if you want to own a sports team, be prepared
to spend anywhere from $100 million to $1 billion on it. That's
a lot more money than most of us (realistically) plan to retire
with. But, hey, I suppose you could do anything you set your
mind to.
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