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  • July 1, 2019
    Where will Nicky Lopez play?"Weekend Rumblings - News for
    22 Duane
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    , 2018Rustin Dodd at The Athletic had a chat session and
    addressed how the Royals could make room for Nicky Lopez.Dodd also writes about
    the future of Bubba Starling.MLB Pipeline looks at one prospect from each
    organization that could break through this year.Grant Brisbee ranks the teams
    that should sign Bryce Harper.Alex Duvall at Royals Farm Report looks at comps
    for Scott Blewett.Oakland picks up Jurickson Profar in a three-team trade with
    the Rangers and Rays.The Rockies land infielder Daniel Murphy on a two-year
    deal.The Cardinals are close to signing reliever Andrew Miller.The Mets may make
    a run at Mike Moustakas.Yankees pitcher C.C. Sabathia undergoes a heart
    procedure.Eno Sarris asks how many good players does a team need to compete?MLB
    is considering allowing streaming apart from a pay-TV subscription.The Cubs are
    launching their own TV channel.The Mariners sign a stadium naming rights deal
    with T-Mobile.Former Marlins president David Samson had a profane response to
    fans that booed him.Mike Piazza’s foray into Italian soccer club ownership is
    not going well.College football bowl mascots, ranked.Gatwick Airport in London
    was shut down for 32 hours because of mysterious drones.The highest-paid
    comedians in 2018 were all men, or men holding puppets.The best science fiction
    and fantasy books of 2018.Your song of the day is Art Blakey & the Jazz
    Messengers with Moanin’. There’s no business like sports business"There’s a
    common misconception that owning a sports team is a great business move.
    Actually, it’s a rotten one.Until you sell, that is. Then — wow!On a day-to-day
    basis, sports franchises are BEETs — Billionaires’ Expensive Ego Trips. They’re
    the corporate version of a trophy wife, without the prenup — something for
    really rich guys to show off to other really rich guys. They’re not a way to
    make money.Take the Chicago White Sox — please.Forbes’ annual list of MLB
    valuations has the White Sox pegged in the mid-range, at $1.5 billion. The New
    York Yankees are highest, at $4 billion, followed by the Los Angeles Dodgers at
    3 and that other Chicago team at 2.9.It’s easy to think that Forbes is just
    blowing smoke. Almost all MLB teams are privately held (the Toronto Blue Jays
    and Atlanta Braves are part of much larger public companies), so financial
    information is sketchy. As private firms, teams can legally move revenues and
    expenses among business units. Still, Forbes has shown through the years that it
    has excellent sources, and in the latest case of a sale in MLB, they had the
    Miami Marlins pegged at one billion and the sale was for
    1.2 ,
    so they were low, not high.Now, $1.5 billion is a whole lot more than the $19
    million Jerry Reinsdorf and friends paid for the team in 1981. A whole lot. But
    the operating story is much different.Forbes says for 2018, the Sox had revenues
    of $226 million and EBITDA — Earnings Before Interest, Taxes, Depreciation or
    Amortization, a common way to measure cash flow — of $30 million. That’s a
    tremendous return on investment, but a crummy return on equity (ROE) – just 2%.
    In fact, it’s also one year of that Manny guy — though he would presumably have
    brought in much higher revenues as well.No established business in any other
    industry would be happy with 2%. Sure, sports businesses get some special tax
    breaks, but pretty much all big business buys itself special tax privileges
    these days, so it doesn’t make much difference.It’s not just the White Sox who
    are pitiful. The Yankees ROE is one-third of a percent, the Dodgers’ just more
    than 2%, that other Chicago team’s 3%, etc. Some team ROEs are negative.New York
    University measures EBITDA among publicly traded companies by
    industry Derek
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    , and they show no industry has remotely as bad a return as
    sports franchises. Overall, the ratio is about 12-to-1. The highest category is
    real estate development, at 34-to-1 — another business where the payoff is in
    capital gains at the end, not operating profits. Sports come in twice that
    high.If you like to delve into stats they don’t involve baseball itself, an
    analyst named Daniel Turney has a tremendous piece about owning a sports
    franchise. He uses the Portland Trail Blazers as an example, but the principles
    cross leagues. Turney won’t have you rushing out to raise a billion to buy a
    team.(The rule of value being at sale of the team even applied to the brief
    period when the Cleveland Indians sold non-voting shares to the public in the
    late 1990s. The initial offering was at $15, some of us were lucky enough to buy
    in at half that, and the shares were bought back for about $23 less than two
    years later. Turned out to be a great investment in the end, though it didn’t
    look that way for a while for the initial buyers.)Still, the BEETs go on. They
    don’t go on forever — the average MLB ownership tenure is just more than 13
    years. But there’s no better form of enterprise for the employment of Greater
    Fool Theory: The idea that no matter how dumb your purchase was, you can find
    someone dumber to bail you out. Well, either dumber, or, more likely, so rich
    that your buyer can afford all the BEETs they
    want.Reinsdorf ,
    et al., have owned the Sox for three times longer than average. The question is
    why, since he no longer shows much of any interest in improving either the White
    Sox or the Chicago Bulls. (Yes, there was a puff piece in USA Today in 2017
    where he claimed to care about fans and winning and all that good stuff. That
    puff piece is evidence-free.)The answer just has to be taxes. That’s just a
    guess, but what else could it be? Reinsdorf is on record saying his heirs should
    sell the Sox when he dies, so why not sell now, hopefully to someone who cares?
    Taxes. Taxes. Taxes. Death and taxes.One of the oddities of U.S. Tax Code
    (probably not promoted by poor folks) is that upon a property owner’s death,
    heirs get to reset the tax basis of the property to its value at time of death.
    In the case of the Sox, that means, were he to die today, the Reinsdorf family
    pays capital gains on any sale price over his share of $1.5 billion, not of $19
    million. Heck of a difference. The estate tax will be well into Estate Tax
    territory, but that applies whether it’s in the form of sports teams, cash or
    Van Goghs. And it just may be that a CPA/tax attorney/real estate mogul knows a
    way to put the nebulous valuation of sports franchises to his heirs’ advantage
    there as well.So, if you’re just holding out for a huge tax
    break ,
    why bother trying to be good? Why not just be tight-fisted Jerry?And
    tight-fisted he is. The MLB average is for team payrolls to run just more than
    50% of revenue. The White Sox in 2018, with the lowest payroll in MLB, came in
    at 29%. That was supposed to be an aberration, the nadir of the alleged rebuild,
    but it no longer looks that way.Of course, there’s a way Jerry could prove us
    wrong, but I wouldn’t want to Harp on that.Even with that pitiful payroll,
    though, the EBITDA came in it at 2%. Yet he holds on. Has to be for taxes.Hey,
    it’s tax season. One more thing to blame the tax man for.The IRS should give
    White Sox fans a big break. Just thinking of Reinsdorf owning the Sox is taxing