Yankees Hit $6 Billion As New CBA Creates New Revenue Streams

MLB is introducing ads on uniforms and expanding its postseason, helping drive up the average value of its teams to a record $2.07 billion.

_{BY MIKE OZANIAN AND JUSTIN TEITELBAUM}

Major League Baseball locked out its players for three months as they hashed out a new collective bargaining agreement. Two weeks after the sides struck a deal, clubs are already reaping the benefits.

Along with five years of labor peace, which provides economic stability, the new CBA introduces two new sources of sponsorship revenue, expected to begin with the 2023 season: jersey patches and helmet decals. That prospect has helped push up the average value of major league teams 9% over last year, to an all-time high of $2.07 billion, the biggest increase in four years.

Big-market teams are likely to benefit the most from the new sponsorships, which is one reason the New York Yankees are now the first baseball team worth $6 billion and trail only the Dallas Cowboys ($6.5 billion) among the sports world’s most valuable teams.

The new jersey patch deals are likely to be local, meaning teams will negotiate their own deals and keep all the revenue, whereas the helmet decal deals will probably be national, with MLB being in charge of the initiative and splitting the money evenly among its 30 teams. Over the last four years of the new five-year CBA, these sponsorships could generate more than $400 million combined annually, even better than the $225 million the NBA reportedly earns from its single stream of jersey patch deals.

“MLB could generate more money from its jersey patches than the NBA because of baseball’s slower pace of play and longer schedule,” says Peter Laatz, global managing director at sponsorship consultancy IEG. That’s good news for a sport where sponsorship revenue (from team, stadium and league-wide agreements) has increased a modest 6% annually since 2017, according to IEG estimates.

MLB SPONSORSHIP REVENUE

IEG’s sponsorship revenue estimates include sponsorship rights fees for MLB teams, venues and the league itself.

It won’t all be gravy, though. Some of the helmet money will be used to fund the CBA’s new $50 million-a-year bonus pool that was established for players not yet eligible for salary arbitration.

Another change in the new CBA that should help team values is the expansion of the playoffs to 12 teams, from ten, with the wild-card round expanded from one game to a best-of-three series. ESPN, which effectively had the rights to any additional playoff games under its existing MLB television agreement, will likely pay at least $65 million a year for the new postseason games, according to baseball insiders. That would work out to a bit more than $2 million per team and comes on the heels of new streaming deals with Apple and Peacock worth $115 million annually. The money from Apple, Peacock and ESPN will push baseball’s annual media rights past $2 billion, or at least 30% more than the previous round of media deals.

On the local level, cable television deals have a lot to do with baseball’s pecking order. While teams in the bottom third of Forbes’ ranking are lucky to get $60 million a year in local cable television rights fees, the Yankees raked in $135 million in cable money last season. The Los Angeles Dodgers, the second-most-valuable baseball team at $4.08 billion, led MLB with $189 million in cable TV fees.

CABLE CASH

These five teams had the highest local cable television rights fees in 2021.

All of the boosts to revenue will help teams recover from the past two seasons: an abbreviated 2020 without fans at ballparks and a full 2021 when most teams did not allow full capacity until July. In 2019, the last season before the start of the Covid-19 pandemic, teams’ operating income (earnings before interest, taxes, depreciation and amortization) averaged $50 million. In 2020 and 2021, those figures were -$60 million and $22 million, respectively. In other words, after pocketing operating income of $1.5 billion in 2019, MLB has lost $1.14 billion during the past two seasons combined. To help keep their balance sheets afloat, owners over the past two years have added more than $2 billion of debt (excluding holding company borrowings) and injected about $1.5 billion of equity, according to sports bankers.

The recovery is most evident with the Texas Rangers, who jumped 15% in value from last year, the most in baseball, to $2.05 billion. The Rangers had the misfortune of opening their new ballpark, Globe Life Field, in 2020, when the pandemic prevented fans from attending. But last season they had the fourth-highest average attendance in baseball and the highest in the American League (26,050). New ballparks tend to get top-shelf prices, and the Rangers have the ninth-highest average general ticket price ($38) and the fourth-highest premium seat price ($198) in baseball.

MLB’s Most Valuable Teams 2022

^1. New York Yankees

Value: $6 billion

One-Year Change: 14%

Owner: Steinbrenner family

Operating Loss: $40 million

^2. Los Angeles Dodgers

Value: $4.075 billion

One-Year Change: 14%

Owner: Guggenheim Baseball Management

Operating Loss: $8 million