Unlike the NFL and NBA, baseball lacks a revenue-sharing agreement with players, meaning teams concerned over their financial future may be hesitant to offer large, long-term contracts to stars.
Lockout Possible
The impact of teams’ lost revenue this season is already apparent. The Texas Rangers indefinitely furloughed 12% of employees last week, while the Miami Marlins, Cincinnati Reds, Seattle Mariners, Dodgers and Mets have also furloughed, laid off or cut employee salaries.
Compounding the pandemic’s effect, the collective-bargaining agreement between players and owners expires in 2021, setting the stage for a possible lockout next season. The struggles mean valuations are getting a reality check.
“There’s going to be a hit,” said sports economics expert Andrew Zimbalist, a professor at Smith College. “It might be somewhere between 10% and 20% for baseball teams that sell in the next year.”
“There’s a general malaise right now about the economy,” he added. “The emotional component that would normally lift a bidder to bid higher and higher prices, that component that would drive another bid, is flat now.”
‘Liquidity Pressures’
To be sure, sports franchises are long-term investments, and sale prices are tied to much more than just the financial health of a team. Sentimental value from billionaire buyers and the scarcity of teams for sale can drive prices higher. But experts agree the outlook for MLB is undoubtedly bleaker as the 2020 season finally gets underway than it was six months ago.
That pessimism is reflected in financial markets, where credit rating firms have expressed growing concern over the bonds financing several MLB ballparks. S&P Global Inc. recently cut the rating of Queens Ballpark Co., a subsidiary of the Mets that operates Citi Field, to below investment grade, and projected that game-day revenue for the Mets will fall as much as 85% this year from 2019 levels.
“The effects of the coronavirus have left stadiums facing significant cash-flow and liquidity pressures,” said UBS Group AG strategist Jeannine Lennon, adding that some MLB park debt is secured by ticket sales. “There’s a negative outlook for stadium finance with so much up in the air.”
This article was provided by Bloomberg News.