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MLB’s financial loss claims don’t hold up to scrutiny

MLB claims it will lose $4 billion in 2020. How?

2020 Grape Fruit League Media Availability Photo by Mary DeCicco/MLB Photos via Getty Images

We talked yesterday about the safety and testing protocols that are under discussion between the players and owners for a possible return of Major League Baseball. Now let’s talk about the finances, in which there is understandable a rift between the two sides.

The very short version is the players already agreed to be paid a pro-rated salary based on games played. Owners would like players to be paid less, because the games, if they are played, would be played without fans, to at least start the season.

Over the weekend, Major League Baseball presented to the players its financial projections for 2020, both before the pandemic and after. The Associated Press obtained a copy, and among the highlights were MLB’s claim it would lose $4 billion this year under the current system, and that every game that is played without fans would result in a $640,000 loss for the teams.

Those numbers were heavily scrutinized by several folks on Monday.

From Rob Mains at Baseball Prospectus noticed a huge gap between MLB’s numbers and annual Forbes estimates:

MLB says teams generate operating income of $250 million? Forbes says it’s more than six times as high. The onus is on MLB to explain where that $1.25 billion went. I can understand a difference of a few million. But over a billion?

From Maury Brown at Forbes:

It’s a well-known accounting trick that baseball moves revenues between holdings and investments outside of what is claimed as baseball-related revenues. There are equity stakes in regional sports networks, ballpark villages, and more than funnel into the coffers of the owners outside of what is being claimed.

Craig Edwards at FanGraphs thought MLB’s claims of no more than a $250 million annual profit was dubious:

Over the last four years, player payroll has not moved while baseball-only revenues have increased by a $1 billion, to say nothing of baseball-related revenues that have put billions more in owners’ pockets. Keeping EBITDA close to zero is an accounting strategy that reveals little about the financial health of the sport or its value to its owners. In addition to the large annual increases in franchise value, there’s evidence that owners have reaped $5 billion to $7 billion over the last three seasons above and beyond the costs of owning and operating a franchise.

Kyle Glaser of Baseball America in a tweet thread examined how MLB’s claim of $440 million on amateur spending in 2020 is too high: