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MoneyBall: Buddy Ball

Monday, January 17, 2005

Bud Selig bought the Brewers in 1970 for about $11 million. Last Thursday, he got the final authorization from MLB, to sell the team to Mark Attanasio for $223 million. The Brewers had been valued at $174 million by Forbes magazine going into 2004.

George Steinbrenner bought the Yankees in 1973 for about $10 million. Forbes Magazine valued the Yankees at $832 million before the 2004 season.

Bud's annualized rate of return? 13.4%

The Boss's annualized rate of return? (Assuming he sold the franchise for Forbes' estimate) 23.4%

For several reasons, Selig's sale of the Brewers is a rather momentous occasion for baseball. Primarily, it marks the end of one of the highest profile conflicts of interest in American business. As commissioner, Selig has oft been accused of making decisions that would benefit his team unfairly. Wrongly or rightly (in the case of contraction, I believe rightly), the appearance of impropriety has undermined the commish... if not among his fellow owners, then among fans.

Another reason this sale is important is that Selig is Baseball's longest tenured owner. He bought the team 35 years ago and has managed to turn it into one of the worst franchises in the game. Furthermore, he has developed an 'old boys club' of owners who are loyal to him, and have helped him push such 'great ideas' as the 1994 strike and contraction. As I see it, removing Selig from ownership is a positive step for MLB... now lets see if we can't get rid of Carl Pohlad (Twins), Vincent Naimoli (Devil Rays), Jerry Reinsdorf (White Sox), Peter Angelos (Orioles), Jeffrey Loria (Marlins), Carl Lindner (Reds), and of course Major League Baseball (Expos/Nationals).

And finally, perhaps the reason this is most momentous? Well, Selig is the first owner to take advantage of the tax depreciation law change that supposedly boosted every club's resale value by 5%. In November, I wrote:

Excerpt from: The Taxes... They are a Changing
by: Byron Clarke, Just Sayin... Nov. 5, 2004 TheCubdom.com

So, who will benefit the most from the changes in the tax law? Not suprisingly Major Leage Baseball's very own franchise, the Expos! (Wow, you mean Bud Selig finally gives Washington D.C. its own baseball team, and Congress changes the tax law increasing the resale value of all MLB teams by about 5%! Amazing! Who'da thunk it?)

The reason the Expos will benefit most from this change in tax laws is that they will be sold this winter to the highest bidder... who just got a gigantic tax break from the Federal Government... and will be expected to pass most of that along to Montreal Expos L.P.

Not only was I wrong, I was also naive. And here I thought the tax law change had been lobbied for in order to benefit all the clubs (which it may). Maybe, but this change likely put about $11 million extra in Bud's pocket. So now, I'm wondering whether Bud's work on the tax law was for himself or for the good of the game?

This sort of question is a perfect example of how Bud's dual role as commissioner and owner create potential conflicts of interest. So now, hopefully I won't have to write anymore about decisions in the commissioner's office being biased towards one team or another... until of course the Nationals budget gets cut again.

Interesting fact: If Forbes is to be believed, all thirty baseball teams have a value of $8.83 billion (yahoo!finance shows The Williams Company with an $8.82 B market cap.)

Posted by Byron at January 17, 2005 4:10 PM | Bookmark and Share | BallHype: hype it up!
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