I am a sort-of baseball fan, one who used to be a real fan. The team I chose to brand on was the Cincinnati Reds. They are falling off the map. If the Major Leagues were formed today, that city would have, at best, a AAA franchise.
The Atlanta Braves inspired a bumper sticker years ago that said “Bring professional baseball to Atlanta.” Cincinnati now inspires such a sentiment. Its teams have been moribund, dreadful, boring, its managers uninspired and behind the times. The reason, I am told, or at least assume, is that this is a small market team doing all it can afford to do.
So this article by Steve Mancuso opened my eyes. Starting with the assumption that the Reds have to trade some viable young prospects in lieu of paying outright for proven talent, Mancuso took me on a ride.
- Baseball has a new multi-year multi-platform $5.1 billion deal with Fox Sports that will take it into 2028. Cincinnati takes a 1/30 cut.
- The 2018 All Star Game generated $45 million in ad revenue. Pretty good for a sport that is fading into the background.
- Facebook will soon be streaming afternoon games, generating $30-35 million.
- DAZN will run a look-in style show (similar to NFL Red Zone), another $300 million.
- The Supreme Court has ruled that gambling is legal. All bets are off. We are now talking untold billions in new revenue. Mark Cubin, owner of the Dallas Mavericks, claimed that the value of sports franchises “doubled in a second” with that ruling
So here is the bottom line to this very interesting article by a very good sports journalist. These are my words, not his: The Cincinnati Reds do not need to worry about the turnstiles to stay viable, or even to field competitive team. They can sit and do nothing and still be profitable. And indeed, this appears to be their plan.
The St. Louis Cardinals just acquired Paul Goldschmidt to bolster their middle lineup. That is a team that works at putting a quality product on the field. Thus far this off-season the Reds, sorely in need of pitching, have, just as in years past, done nothing. Their plan appears to be hope.
The current ownership group of the Reds, headed by Bob Castellini, bought the franchise from Marge Schott in 1999 for $67 million. Today it is valued at $1.01 billion. During that time they have made the playoffs three times, losing out early each time. Their won-lost record during that time is 1,451/1,627. Last year the team had the lowest attendance since 1983.
And yet the Castellini group is rolling in dough. Their books are closed, of course. Major League teams (except the Atlanta Braves) are non-public and do not disclose their earnings or value. ($1.01 billion is an estimate by Forbes.) However, the return on investment during the Castellini ownership proves they do not need to field a decent team.
In the insurance business, there is a concept called “moral hazard,” defined as “lack of incentive to guard against risk where one is protected from its consequences.” The fact that the Cincinnati Reds can continue to field bad teams and still grow richer by the day is a just such a moral hazard.
It sucks to be a Reds fan. I would un-brand in a heartbeat if I could.