Tuesday, November 20, 2012

Billions Of Dollars, Billions Of Dollars...


That's what the Yankees are worth.  Forbes magazine's annual list of the most valuable sports franchises from June of this year had the Yankees tied for 3rd with the Dallas Cowboys at an estimated $1.85 billion.  The YES Network is worth even more than that, an estimated $3 billion according to recent reports, and that number stands to go up in the years to come with News Corp. in line to purchase a 49% stake in the network.  While that deal shouldn't and in all likelihood won't affect the way things are run on the baseball side of the organization, part of me can't help but try to connect this move clearly designed to make more money with the baseball side's efforts to cut costs this and next offseason.

This doesn't need to turn into a real heavy business discussion, so I'm just going to state this in simple terms.  The Yankees have been, are, and are going to continue to be a money-making machine.  Despite a lot of empty field-level seats and less-than-capacity postseason crowds, the Yankees are raking the dough in between the network, merchandise, ticket sales, advertising, concessions, and plenty of other means.  They are a global brand, a brand with serious earning potential that News Corp. recognizes and wants to hitch its wagon to.  That's why they're making this deal, that's why the Yankees are making this deal, and that's why cable providers are probably going to have to pay a little more in the coming years to renew their deals with the YES Network.

Part of what helped the Yankees get to where they are is the money spent in years past.  And part of the reason the payroll swelled to its highest levels wasn't just because George Steinbrenner thought that was the best way to build a championship-caliber team, it was because he had the money to spend.  He spent money to make money, and reinvested that made money into the ballclub in an effort to build a better on-field product.  It didn't always work, but that on-field product brought in a lot of revenue through all those other previously-mentioned outlets, and now here we are with the Yankees as the multi-billion dollar juggernaut that they are.

The point that Brien Jackson of IIATMS continues to hammer home, and the point I piggybacked on recently, about this big pile of money being the Yankees' biggest advantage is true.  It's been true since they first started spending like crazy and increasing the payroll, and it's still true today even as they try to control the payroll.  EJ Fagan of TYA showed yesterday how that advantage has shrunk considerably, but it's still an advantage nonetheless and an advantage that the new ownership no longer seems interest in leveraging.  If this move with News Corp. is any indication, it seems as though the new goal of the Yankee brass is to make sure the brand continues to be as profitable as possible even if that comes at the expense of the on-field product.

I've said all along that I believe getting below the luxury tax threshold is a worthy goal and I still do.  But part of that opinion was tied to the belief that once the Yankees got out from under those tax penalties, they would return to their more active way of doing business when it came to using their substantial capital advantage to improve the ballclub.  The picture being painted right now is one not in line with those previous statements by ownership, and with all the money this organization clearly has and is clearly going to continue to make, it does make the concern over the luxury tax a little more puzzling.  It's not like the Yankees are being financially crippled by having to pay the tax, and the constant presentation of this goal to get below the threshold as if it's a NEED is starting to ring a little hollow.

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