Teams could pocket $50 million a year
The owners might have lucked into a money-making opportunity by not moving the Expos to Washington D.C.
Never has nothing been, potentially, so valuable.
The possible collapse of Major League Baseball's plan to move the Montreal Expos to Washington, and then sell the franchise to the highest bidder, might have actually been the best financial move for the sport.
If the owners of the 29 teams don't sell the team at all and absorb losses for another two seasons, they would likely make more from contracting it, sports industry insiders say.
The league has the right to eliminate two teams after the 2006 season, and per the current collective bargaining agreement, the Major League Baseball Players' Association has given up its right to contest the unilateral move.
"In the long term, holding onto the team and then contracting the team and another team will be better for the 28 clubs," said Marc Ganis, president of SportsCorp Ltd., a sports consulting firm.
Major League Baseball purchased the Expos from current Marlins owner Jeffrey Loria and his partners for $120 million in February. Since then, they have lost tens of millions of dollars on the team, which was seen as an investment given that MLB had every intention of selling the franchise in a new city for greater financial gain.
If MLB would have sold the collectively owned Expos for $350 million before the season, it likely would have made a profit of approximately $150 million, factoring in the purchase price and the estimated losses endured over three seasons. But agreeing to continue to lose more over the next two years seems like a better long-term financial solution, Ganis said.
By contracting the franchise, the teams could pocket $50 million a year in revenue sharing and money from the television contract that would no longer go to the contracted team.
They could then use that money to finance buying out the owner of a second team, while continuing to keep the additional revenue-sharing dollars that would have gone to both teams in perpetuity, said one sports investment banker, who has helped structure the financing of professional baseball teams.
"Sometimes it's better to be lucky than good," he said. "If the Washington, D.C., deal falling through could have possibly been planned, I would have said it was a brilliant strategy."
In order to keep the team for two years, Major League Baseball would obviously have to find someplace for it to play. But no matter which city is its home, odds are attendance wouldn't be much worse than it was in Montreal and in their home-away-from-home in San Juan last year, where average attendance was 9,300 per game.
Contraction would also help the teams artificially lower the salaries heading into a new collective bargaining agreement in 2007. With two fewer teams, there will be more talent to select and less demand for it.
Darren Rovell, who covers sports business for ESPN.com, can be reached at email@example.com.
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