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Are MLB's K.C. Royals worth $1 billion? Why team valuations are on the rise

Thomas Barrabi

Kansas City Royals owner David Glass is expected to earn more than $1 billion from a potential sale of his Major League Baseball franchise, as skyrocketing revenues across the U.S. sports landscape allow even small-market franchises to fetch exorbitant sums on the open market.

Glass, the 84-year-old former CEO of Walmart, is reportedly negotiating a deal to sell the Royals to a group led by local businessman John Sherman, according to multiple reports. The deal would produce a massive profit for Glass, who bought the Royals for just $96 million in 2000.

The Royals have a massive price tag despite ranking fourth-to-last among MLB teams in both local revenue and operating income and playing their home games in a relatively small television market at aging, though recently renovated, Kauffman Stadium. While less financially attractive than other MLB teams, the rising price of sports media rights deals have bolstered team values and made all pro sports franchise a worthwhile investment for billionaires with cash to burn, according to Victor Matheson, a sports economist at the College of the Holy Cross.

“I suspect that they buy these things and they figure they can at least make enough from the cash flow to keep the team solvent and, of course, they can bask in the glow of being the most famous business person in Kansas City for the next 10 years,” Matheson told FOX Business. “And then, they can sell it off to the next person who wants to be the most famous guy in Kansas City for the next 10 years after that.”

Team valuations in U.S. sports leagues have surged in recent years, driving sale prices to record levels. The Miami Marlins, who rank last in MLB by value and operated at a loss in 2018, sold for $1.2 billion in 2017. The recent sales of the NFL’s Carolina Panthers for $2.2 billion and the NBA’s Brooklyn Nets for a total of $2.35 billion in each a record in their respective sports.

The Royals have struggled in recent years, but the franchise won a World Series as recently as 2015 and are reportedly close to landing a new local TV deal with Fox Sports worth up to $50 million annually.

“The Kansas City Royals are not in a position to make any comments on the published speculation regarding any potential sale of the ball club. The Royals will make no further statements at this time,” the team said in a statement.

A Major League Baseball representative declined to comment on the reports.

MLB team valuations have risen alongside league-wide revenue, which surpassed $10 billion in 2018. MLB’s softening stance on sports betting, now legal in several states, adds another potential source of income in the near future.

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The prospect of selling a sports franchise at a massive profit after a decade or two is only part of the appeal.

“Lots of people who operate sports [franchises] are not necessarily in it for the money, they’re in it for the fame and the prestige, which means they might operate on slightly different financials than other products,” Matheson added. “A used auto dealership with the same financial flows would sell for a lot less than a professional stadium with exactly the same books.”

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