This post started out as a comment I left over at Consumerism Commentary, but the more I thought about it the more I realized that I had just barely scratched the surface on the issue.
Flexo’s post was about Bill Maher purchasing a 4% stake in the New York Mets for $20 million. While some people are upset about the transaction because of Maher’s controversial history, many others couldn’t care less. After all, Maher would hardly be the first controversial figure who owned a sports franchise, and he owns only a small percentage anyway.
But I’ll leave the political ramifications for someone else to write about. I’d rather just focus on the business side and analyze whether or not Maher made a smart investment.
What Do You Get for $20 Million?
According to this New York Times article, anyone willing to invest $20 million in the Mets franchise would receive a number of benefits including:
- A 4% minority stake in the team
- A parking spot at Citi Field
- Access to Mr Met, the official team mascot
- A formal business card identifying the investor as an “Owner”
- One luxury box in Citi field
- Participation in annual “Owner’s work out day” including the opportunity to take batting practice at Citi Field
I remember when the Mets first announced that they were looking for investors to help infuse some cash into the club. It seemed like a desperate move made by an ownership group that was frantically trying to hold onto the team despite years of mismanagement and legal woes brought on by the Bernie Madoff scandal. I had a hard time believing anyone would pony up $20 million to hang out with Mr Met.
But the more I thought about it the more it seemed like a solid investment. At $20 million for 4 percent of the team, they are valuing the team at only $500 million. But the Los Angeles Dodgers recently sold for over $2 billion!
In the New York market, with a beautiful new field and their own TV station, it would seem the Mets are woefully undervalued.
The Wilpon’s association with Madoff and the team’s poor performance in recent years has certainly had a negative effect on the team. But with a strong management team finally in place and a favorable settlement in the Madoff clawback lawsuit, they finally seem poised to step out of the darkness.
Improved play on the field will boost attendance and pad the income sheet. And if the Yankees finally succumb to age the Mets could even see many fair-weather fans make the move across town to Queens.
Are sports teams always a good investment? Not necessarily. There’s no guarantee that any individual owner will turn a profit. But as the major sports continue to rake in the cash, franchise values continue to ride the rising tide together.
And it isn’t just storied teams like the Dodgers of the world who are riding high. Just look at the Buffalo Sabres. This small market National Hockey League franchise was worth only $39 million in 1991. By 1999 it was worth $91 million, and in 2011 the team was valued at $173 million!
All this despite being trapped in a small market with limited television revenue and a shaky financial past that has seen them struggle to make payroll and even declare bankruptcy in 2003.
If this small market franchise in the least popular of the major sports can see its value quadruple in 20 years, something tells me that Bill Maher won’t be regretting his decision to invest in the Mets anytime soon.
Are the Mets a Shrewd Investment or a Suckers Bet?,