eli5 why are some NFL/NHL/NBA/MLB teams worth more than others?


eli5 why are some NFL/NHL/NBA/MLB teams worth more than others?

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5 Answers

Anonymous 0 Comments

I believe most leagues share income to a certain extent so it’s fine in theory if your team doesn’t do so well.

But there is a ton of money to be made in merchandising. If your teams home state has a population of 30 million you are going to sell a lot more shirts and hats than a team with a state population of 3 million.

Anonymous 0 Comments

A team’s worth/value comes from its ability to make money.

If one team’s stadium is usually half full with tickets available for $20 on game day, while another team in the same league is selling out 25,000 seats every game and has a 10 year waiting list of people committed to season tickets, those teams aren’t worth the same. You’d have to pay more to buy the popular team, because it makes a bigger revenue for its owner.

Also merchandise like frostweaver said. Every time the Yankees release a new piece of merch, they sell a few million more of them than when the Orioles do, both because the city and state have a much bigger population, plus the Yankees’ brand has a bigger national and international following. So again, you’d have to pay more to buy the team (and its brand) because in the Yankees’ case what you’re buying has more potential to make money.

Anonymous 0 Comments

They make more money.

So for example: the reason why it’s more expensive to buy Wal-Mart than to buy any local corner store is because if you owned Wal-Mart, you’d make a lot more money.

For team owners, professional sports teams are businesses. And a business’s worth generally is relative to how much money it can earn.

Anonymous 0 Comments

A sports franchise is a business, and the product is the entertainment sold to individuals interested in sports.

This “entertainment” that’s being sold takes several different forms: tickets to games, merchandise (jerseys, beer cozies, memorabilia), TV broadcast rights, etc. All of those sales form the gross revenue of a sports franchise.

On the flip side is everything that costs money to run the franchise: player/management/admin salaries, arena costs, cost of materials to make merchandise, etc. These expenses form the gross costs to run this sports franchise.

In every single sports franchise, there’s different volumes and complexities of transactions that are done for each of these things I mentioned. Some teams don’t offer as much merchandise so they make less money off merch, and subsequently less merch costs less to make so they save money. Some teams don’t have expensive players, so they save money there.

As well, every franchise has a “catchment area” which is a way of referring to the number of customers the franchise can get their entertainment product to. A world cup soccer team will typically have the catchment area of at least its entire home nation (the Dutch football team can likely count on all 18MM Dutch people being fans of it) while a minor league team may only have a regional catchment area and therefore won’t earn as much money as the Dutch national football team. (the Hamilton Tiger Cats being one, a CFL team based in Hamilton, ON, CAN). Some extreme examples of this might be Texas A&M, who despite being a college football team are a household name in American sports. Their catchment area extends well beyond a normal college football team’s, and therefore they are a more valuable team. They can reach more customers.

The valuation of a sports franchise is based on the work of teams of Analysts that review each of those sources of revenue and each of those sources of expenses, and then compare that against the amount of money they expect the franchise to make in the future from its catchment area.

Anonymous 0 Comments

Teams have different revenue levels based on stadium size, stadium deal/ownership (eg. If team owns stadium and gets revenue from other events or rents stadium from city/state), how much they can demand for tickets; local TV broadcast revenues (and some teams own parts of local Sports Channels); merchandise sales; sponsorship deals. There are also his team history, reputation, fandom, location that play in, too… a historic franchise, a team in a popular market, or a place with lots of billionaire potential owners will impact values, too, even if intangible reasons. So being the Dodgers or Celtics will command more. Being in New York or Chicago, etc.