The Detroit Tigers in Dollars & Cents: part 1

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Also according to Forbes Magazine, the Detroit Tigers lost (far) more money in 2009 than any other baseball franchise – a full $29.5 million.  The Detroit Tigers aren’t exactly a small market team, revenues are very close to the MLB median, but payroll has been at the upper end of the scale.  With an estimated market value of $375 million, if we estimate potential returns at 8% Illitch has already foregone $30 million in potential revenue, bringing his total contribution to the cause close to $60 million.  If winning is everything, maybe it isn’t hard to see a year of Yankees valued at $100 million – there chance of winning is quite good.  The Tigers, on the other hand, are a competitive team but a long shot to win a championship.  Nonetheless, the Tigers were 2nd in the major leagues in 2009 in ownership contribution – measured in losses and foregone profits – to chase that ring.  We aren’t a big market team, but our owner cares more and our budget is set high – that’s what gives the Tigers a chance to win.

Below is a table showing estimated franchise values from Forbes Magazine, and the difference between a fair rate of return on the investment in the team and the actual profits the team turned in 2009.  Note that with the exception of the Nats and the Marlins, no team looks like a good ‘investment’.  If owners were, by and large, motivated by profit maximization we would expect most numbers to be close to zero.