NFTeams
Last week, the muti-billion dollar media conglomerate Liberty Media released its 2021 earnings, setting off a minor contretemps on baseball Twitter. Liberty owns the Atlanta Braves, the only baseball team owned by a public company, and so its earnings offer a rare glimpse into the financials of professional sports teams. This report showed a predictable rise in profits generated by the Braves, on the strength of their World Series win, but the extent of the increase was noteworthy: The Braves achieved record revenues, and their operating profit for 2021 more than offset the operating losses from the pandemic-shortened 2020 season by nearly $50 million.
But when ESPN’s Jeff Passan used this fact to make a larger point about the profitability of baseball teams, David Samson, for the ex-President of the Marlins and current media personality, jumped in to say Not So Fast:
This is a pretty classic move by people carrying water for the capitalist class—which Samson has been doing for decades, since he was picked to run the Marlins by his step-father, the famously terrible Jeffery Loria. Whenever rich people are accused of being too rich, they love to insist that they are not REALLY that rich because of some silly accounting gimmicks. That profits aren’t “real profits” and that the whole thing is very complicated, you see, but the bottom line is you can’t honestly expect rich people to pay their workers fairly or their taxes honestly. (Ironically, if rich people feel they aren’t being considered rich ENOUGH, they will use the same accounting gimmicks to EXAGGERATE their wealth. It’s all just about vibes…)
But there is a kernel of truth in Samson’s tweet: Profitability is only one measure of business’ financial health, and running a sports team IS a cash-intensive venture. You have huge facilities that require maintenance, you have a large staff, many of whom have very high, guaranteed salaries, and you have less ability to downsize than most other businesses. This limits the ability of owners to pull cash from the business, but it doesn’t make baseball teams a bad investment.*
*Samson’s focus on “cash” is a real tell here. For one, the reason teams often “lose cash” is that so many owners borrow heavily to buy the teams (or build the stadiums) in the first place, and so huge chunks of their cash flow are eaten up by debt service payments. Samson’s complaint is like overextending yourself on a mortgage and then using that to claim your mansion isn’t really worth much. But on a more fundamental level, no pro sports team is in danger of going out of business, so why should anyone care if a profitable team “loses cash”? They don’t exist to be ATMs for owners…
For one, unlike other high-profit/low-cash businesses, pro sports teams are not vulnerable to the same kind of threats from competitors. It is a long-established business with predictable cycles and where owners essentially have legally protected monopolies in a given region and locked in revenues thanks to leaguewide rights deals. The Marlins don’t have to worry about an upstart baseball team stealing their fans, or a cash crisis triggered by some unexpected surge in demand.
More to the point, pro sports teams are a good investment because the resale value of teams consistently goes up… by a lot. Last month, Rob Manfred tried to claim that owning a baseball team did not generate a return for investors commensurate with what they could get from the stock market. I’m sure there was some weird accounting math he was using to convince himself that was true, just like Samson’s claim that teams lose cash, but this one was too hard to swallow. We know the Wilpons just sold the Mets for $2.45 billion in 2021; in 2002, they bought ought their partners at $135 million for 50%. So the team was worth nine times what they paid for it in less than 20 years, after a tenure of ownership most people would consider a failure. Good luck failing that well in the stock market...
This kind of guaranteed resale value is why complaints about “losing cash” are so hollow. Even if they were true, who cares? You could lose cash every year for decades and still come out significantly ahead if you sell your team for 10x what you paid for it.
But wait a second… what are we talking about here? We have an asset that is:
Purchased by a particular type of rich asshole, who mainly wants to own a rare thing;
Its rarity is based on an artificial scarcity created by the owners themselves;
That scarcity creates the promise of a resale value incommensurate with economic reality;
Pro sports teams, it would seem, are the original NFTs…
I don’t want to spend too much time on NFTs (or non-fungible tokens, if you’ve somehow missed one of the many explainers), because I don’t want a bunch of crypto bros coming after me to insist I “don’t understand its revolutionary potential.” But one weird thing about the discourse around them, by both fans and detractors, is that it treats NFTs as something new. They are either an example of the crypto craze run amok, or a revolutionary way of democratizing wealth.
But capitalism will always produce phenomena like NFTs, and pro sports teams show why. After all, they are the original “non-fungible” asset: They are all unique and there is a fixed supply of them.
Assets like this are great for the ownership class. They are hard to value, which make them great vehicles for tax avoidance, money laundering, and other frauds. They appeal to the egos of people who have run out of normal things to do with money. And they carry a cultural cache, which is nice for people who contribute nothing of actual value to society. But there is almost no reason that assets like this—art, philanthropic organizations, sports teams—should ever be privately owned.
For example, it is sort of strange that you can own an individual baseball team. After all, a team is not an independent business—these are no longer the days of teams barn-storming around the country with amateurs and buying contracts from independent minor league teams. Teams are constituents of a billion-dollar business that is Major League Baseball. MLB sets the rules, the schedule, and even determines a good bulk of the revenue. The idea that teams can be individually owned is like if you could own individual rides at Disneyland. But even that doesn’t capture the absurdity of it, because nothing is theoretically stopping someone from putting their own roller coaster just outside of Disneyland’s boundaries, but nobody can start a competing baseball team without the explicit approval of the current owners.
It would make far more sense for professional sports teams to be run as a single public utility or nonprofit corporation (or, my personal preference, as a worker coop), where teams’ budgets were equalized, but determined by the revenues a sport generates. This would immediately eliminate competitive balance issues, which currently arise because each individual franchise is supposed to turn a profit. It would eliminate the interference of bad owners, and you wouldn’t lose the innovation of “good owners” because there is literally no such thing. And, of course, you would be far less likely to have a work stoppage thanks to labor strife.
This would preferrable in almost every way—except that no capitalists would get rich. The revenues generated by the sport would be distributed out as labor income, and there would be no resale value because there would be nothing to sell. And this is what capitalist ownership is really about: the accrual of vast and unearned wealth and power. All the philosophy about freedom and production and efficiency is just window-dressing. We know this because even things like NFTs and baseball teams, where owners have no freedom, produce nothing, and actively makes things less efficient, are still “owned” in a way so that a few can reap fortunes based on the work of others.