Major League Baseball presented the Major League Baseball Players Association this past week in their meetings that MLB projected a $640,000 per game loss if there were no fans allowed in the ballparks and teams had to pay the players pro-rated per game salaries. That was reported by Ronald Blum of the Associated Press over the weekend. Even in that report that was leaked we immediately saw that Major League Baseball wasn’t exactly being truthful with their numbers. Within the presentation it noted that the “loss” didn’t include media distribution from MLB’s central office that totaled $1.34 BILLION. That’s not a rounding error, that’s 34% of their claimed losses they didn’t include in their numbers.
This morning we saw two different writers tackle the funny accounting presented by Major League Baseball. Rob Mains at Baseball Prospectus got pretty thorough with his take. For some background, Mains background is in finance – here’s his description of his former career:
I had a career on Wall Street recommending the stocks of for-profit healthcare companies to mutual funds, hedge funds, and pension funds. I’m as capitalist as they come. But one of the things I learned on my job was that you should never, ever, take anything management says at face value. I’m going to analyze this as I would any company document.
He goes through multiple of the revenue source claims from MLB in the presentation and notes the errors in nearly every single one that they presented. He also notes that there’s a huge issue in what MLB claims they have in operating revenue versus what Forbes estimates they have in operating revenue. The difference between the two numbers? $1.25 Billion.
Mains gets pretty in depth with the issues he sees in how Major League Baseball is presenting the information. He closes out the article with this:
The reason these nitpicks are important: they portray MLB as sloppy, ignorant, and/or deceptive. It doesn’t matter which one. MLB is a private company and is not subject to the same reporting requirements as the companies that I followed. But how comfortable would you be negotiating with a party that makes representations like these? When it claims that it made one-sixth the income in 2019 that a reputable third party has reported?
You can get away with this sort of thing if you’re doing PR. It’s unacceptable in a negotiating document. The presentation that AP reported is full of omissions and misinformation. It’d be rejected by the professional investors I knew. Presumably, the MLBPA will have the same reaction.
There’s a lot of ways accounting can be used to claim things that aren’t necessarily true. There seems to be a whole lot of that going on with what MLB is trying to sell according to Mains based on what information he’s been able to see of the leaked presentation document. But he’s not the only one that looked deeper at it. Over at Fangraphs, Craig Edwards took a look, too.
His approach was a little bit different than that of Mains, noting things like the $425,000,000 teams are saving this year in the draft and international signing period this year, allowing it to be deferred to both 2021 and 2022 – but is for some reason included in the loss column for this year.
Edwards also notes that MLB is cutting their local TV deals in half in their presentation, but noted that there’s been no talk – at least publicly – that the regional sports networks are asking for a 50% discount if only half a season is played. He also noted that the big losses on those are from big market teams that own large chunks of their regional sports networks, so even if teams were asked to “give back” half of their yearly broadcast rights fees, with teams owning parts of those networks, they get back money given to them from themselves.
The biggest issue for the owners from Edwards standpoint is if something happens and they can’t have a playoff. That is a scenario where the owners truly would lose money. But he believes based on the publicly available information that if the playoffs were to be completed as scheduled, there might not even be any losses (as a whole – some teams would lose money, some teams would make money) for the owners.
Take a deep dive into both articles if you’d like, but both come to a pretty clear conclusion: The owners aren’t being remotely close to truthful about how much they’ll lose in 2020 if they play a season as proposed.