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Beyond statements from the Astros and club president Reid Ryan saying that the article was factually incorrect—something that could smack of protectionism—the fact is, the Astros are not the most profitable MLB club in history. As well, they are most assuredly not even the most profitable this year.
Alexander was keen to bring in the broadcast revenues that allowed for his article to state the lofty (and erroneous) headline, but he certainly didn’t apply EBITA to Comcast SportsNet Houston. Regional sports networks ultimately are cash-cows, but there are substantial start-up costs associated to them. As one executive said to me, “It’s not uncommon to have start-up costs at or near $100 million for an RSN.”
While the Astros will no longer be able to receive revenue-sharing due to market size,
For those that have followed my work on Forbes, they know that I have not always written favorably of Astros owner Jim Crane. Early on, I was one of his staunchest critics, and my prior story here on Forbes was cited as part of the reason Crane was not initially approved by MLB’s owners for the sale.
Other analysts have cited the cutting of payroll to the bone as a matter of greed, so Alexander’s article is simply one more in the line.
The premise by which Crane and General Manager Jeff Luhnow are operating works like this: the minor league system was rated one of the worst when Crane purchased the Astros, and player contracts at the Major League level were inefficient in terms of gaining wins for the salary being spent. In a case of “pulling the Band-Aid off quickly,” MLB player payroll has been stripped to the axles and emphasis has been placed on building up the minor league system.
The Astros organization now has playoff teams at all four levels of the full-season minors (Oklahoma City, Corpus Christi, Lancaster, Quad Cities). The last organization to do this was the Texas Rangers in 2011. There are two additional Astros minor league clubs, Greeneville and Tri-City, that are currently in first place in their respective divisions, with an opportunity for playoff berths, as well.
Along the way, Crane has said he will not spend more than 50 percent of revenues on MLB player payroll, something that Commissioner Selig has said he’d like to see of all owners, as well. If Crane holds true to this, when revenues increase, and player development is fully righted, the club will increase player payroll to much higher levels.
While it is impossible to see whether the Astros will indeed spend as those revenues increase, there is at least one sign in the four-year contract given to second baseman, Jose Altuve. This was a wise move as Altuve is a prospect within the Astros system and would not become arbitration eligible until 2015. The contract covers his final pre-arbitration year and all three arbitration years. The option years in the contract cover two free-agent years. That aligns with at least part of Crane and Luhnow’s plan. The question will be if the practice continues in coming years.
As noted, the Astros are not even remotely close to being the most profitable in history, let alone this year.
The 2013 Astros aren’t anything remotely what was portrayed. In that, the story is a massive strikeout. The Astros could eventually move into the upper [echelons] of profitability… somewhere in the distant future.
I'm outraged that this refers to serial-caps and not serial commas.
Since MLB team financials are audited at a level that would only satisfy an accountant at Enron, it is possible that everyone is wrong and the economic truth is impossible to ascertain.
This is almost certainly the truth.
The precise profit numbers might be impossible to ascertain
Jim Crane wasn't hellbent on buying an MLB team despite believing he might lose money.
My buddy the CPA says "Profit's an opinion; cash is a fact."
This kind of stuff always boggles my mind at the end of every month. I'm fairly certain the business I work for truly has no idea how much money they actually make or lose every year. Every month our P&L statement is chocked full of mistakes and misallocations that I don't know how the lights stay on.
I'm outraged that breakfast cereal isn't somehow involved.
I don't know how the lights stay on
I actually agree with Joe K here.
The premise of the original article was that the Astros have had the most profitable year in MLB history. Even without the detail on how far below $80 million they are getting from the RSN, that's almost certainly untrue.
"Under generally accepted accounting principles, I can turn a $4 million profit into a $2 million loss, and I can get every nation's accounting firm to agree with me."
I bet if he'd asked for a % of revenue, they'd find a way to show that Paramount didn't actually see _any_ of the money from the film.
Dejan Kovacevic @Dejan_Kovacevic 15h
Congrats @BizballMaury for exposing the perpetual fraud that is Forbes’ franchise valuations: http://www.forbes.com/sites/maurybrown/2013/08/29/erroneous-story-claiming-houston-astros-most-profitable-ever-a-massive-strikeout/ … It’s always GUESSWORK.
Retweeted by Maury Brown
What's weird about that is that the original Astros piece has nothing to do with the annual franchise valuations. And Maury must know that.
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