Yankees should leverage future to make team dominant now
Any analysis of how to improve the Yankees must not only consider the team’s salary resources but also should take into account the excellent financial health of the baseball organization.
Pundits are writing a lot about the need for the Yankees to retain its present stars and aggressively pursue outstanding players this year via trade and the free agent market next year. These analyses tend to focus exclusively on the payroll luxury tax limitation and ignore the organization’s present business conditions.
Let’s assess how things stand right now regarding the overall fiscal health of the club.
George Steinbrenner purchased the Yankees for $8.8 million in 1973. At the time the club had serious monetary difficulties. In addition to redefining the role of an MLB owner, Steinbrenner shrewdly changed the baseball business model followed at the time. From Jim Meuhlhausen’s perspective, he adeptly turned the ball club into a highly profitable entity over time.
Forbes reports that the Yankees are worth $4 billion in 2018. This represents an eight percent increase over last year’s estimated value of the team. The Los Angeles Dodgers, second behind the Yanks in overall club value in MLB, is worth substantially less, $3 billion. Furthermore, the Yankees brought in significantly more revenue than any other baseball team in 2017, $619 million.
According to Scooby Axson of Sports Illustrated, Forbes has produced data on baseball club valuation for 21 years. The Yanks have topped the Forbes list each year.
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Based on this data, most business economists and baseball executives would agree that the team is in excellent financial health.
Clearly, the Yankees can afford to modestly surpass its payroll tax limit next year — $197 million, increasing to $210 million by 2021 — in order to improve the overall quality of the team dramatically. Presently, the team is approximately $28 million under the luxury salary tax cap.
The Yankees are by far the most valuable team in MLB, and they will continue to have a robust business model moving forward. In my view, club executives, especially Hal Steinbrenner, are much too fixated on staying under the salary tax limit.
Such stubbornness and inflexibility often result in missed opportunities, thereby undermining the future success of the team. While adhering strictly to the salary tax limit will increase the club’s profits in the short run (which would obviously be welcomed by the Steinbrenners), exceeding the payroll tax by $20 million or so could better position the club for even greater success for many years to come. This, in turn, will lead to even higher profits down the road. The time to spend money and invest in the team is now.
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Of course, the Yankees are Hal Steinbrenner’s team, and he is certainly entitled to call the financial shots. However, we are the fans, and we should expect owners to make the best effort to improve the team as soon as possible, even if it means a modest decrease in club profits in the short run.