02 May 2017
Brand Value and the NY Yankees
When someone thinks of successful professional sports teams, there is one team that almost certainly comes to mind almost instantly to a fan: the New York Yankees of the MLB. Baseball is often considered “America’s Pastime,” and while many people will call the Dallas Cowboys of the NFL “America’s Team,” I think the Yankees are a better fit for the role. They embody what a successful franchise looks like over any other team in professional sports, and are a model to follow when it comes how to make profit from a professional franchise.
One of the main reasons the Yankees have been successful for so long is that they are always trying to win; no one is ever going to accuse them of not trying to do so, or just coasting and hoping to do well. The average MLB team spends 46.6% of their revenue on payroll, and the Yankees spend 46.9% (https://www.si.com/more-sports/2010/04/20/baseball-revenue). With this being true, why is it that the Yankees have always been more successful than other teams? The Yankees simply make way, way more money than everyone else. In 2010, the Yankees had $441 million in revenue. The next closest team was the New York Mets at 268 million (si.com). If both teams are located in New York City, why did the Yankees make $173 million more? Pretty simply, the Yankees transcend baseball. They are a global brand, and are in the biggest market for professional baseball that exists. Everyone across the world knows who the New York Yankees are, and it is not a surprise at all to see a tourist from another country wearing a Yankees hat. Just like people take trips to New York City and see a Broadway show, people go and see a Yankees game as well; it is a touristy thing to do.
No matter how hard some of the lowest revenue teams “tried” (they are trying, of course), they would never be able to compete with a team like the Yankees in total revenue. According to Forbes, the New York Yankees are worth $3.7 billion dollars. The next closest team to them is the Los Angeles Dodgers at $2.75 billion, and right behind them is the Boston Red Sox at $2.7 billion. The Yankees built their new $1.1 billion stadium Yankee Stadium in 2009, and even though they had lost fan attendance, they still had the second highest attendance in all of the American League (https://www.forbes.com/teams/new-york-yankees).
Another reason that the Yankees are so valuable is their partial ownership of the YES (Yankees Entertainment and Sports Network), and the main broadcasts of the channel revolve around the New York Yankees, the NBA’s Brooklyn Nets, and the MLS’s New York City FC. In 2012, the Yankees scored a 30-year deal with the YES Network through 2042. The Yankees earned $85 million in fees in 2012, and they will be getting a five percent increase annually on that rate for those 30 years (https://www.aol.com/article/2012/11/21/yankees-score-big-with-billion-dollar-tv-deal/20386006). In 2014 Rupert Murdoch’s 21st Century Fox upped its stake in the YES Network from 49% to 80%, for a total purchase price of approximately $3.9 billion (https://www.forbes.com/sites/mikeozanian/2014/01/24/murdoch-buys-control-of-yes-network-for-3-9-billion/#a7879e64ca57). The remaining 20% is majority owned by the Steinbrenner family (the family of George Steinbrenner III, who was the principal owner of the Yankees for a very long time and often meddled in on-field decisions).
The Yankees are a brand, and in 2013 Forbes ranked them at a value of $625 million, with the Boston Red Sox’s NESN the next most valuable brand at $510 million. Some of the companies listed ahead of those two were brands like Nike and Reebok. The advantage (to smaller market teams) of the MLB’s revenue sharing formula is that when teams like the Yankees, Dodgers, and Red Sox continue to bring in large sums of money, the teams on the complete opposite of the spectrum can hopefully do better financially and, therefore, be more competitive. From 2012-2016, each team contributed 34% of their net local revenue into a pool that was divided equally among every team (http://www.investopedia.com/articles/personal-finance/062415/major-league-baseballs-business-model-strategy.asp). While the system is not perfect, benefits exist for teams at the top even if they are technically subsidizing other teams. Having more teams means there are more possibilities to make money as there are more games, and with the MLB’s way of revenue sharing that they use, it is in the best interest of every team to attempt to bring in as much money as possible.