Buffett Profit From Minor League Baseball Ownership
Warren Buffett, America's second richest man after Bill Gates, is worth $44 billion. The vast majority of that wealth is from Berkshire Hathaway, Buffett's holding company based in Omaha, Nebraska, but a small portion comes courtesy of a Minor League Baseball team in the same state. Buffett owns a 25% stake in the Omaha Storm Chasers, the Kansas City Royals' AAA farm team that is currently leading the Pacific Coast League's American Northern division with a 36 25 record. The Storm Chasers rank No. Kevin Norwood L Jersey 20 on our list of Minor League Baseball's most valuable teams, taking home an estimated $8 million in revenue last season. Robert E. Rich, Jr., who made his $2.1 billion with food conglomerate Rich Products, owns the Buffalo Bisons (No. 13); Herb Simon, chairman and director of Simon Property the nation's largest publicly traded real estate investment trust is a co owner of the Reno Aces (No. 14).
Why would some of the nation's wealthiest men be interested in owning such small professional sports teams? Simple: it's http://www.nflseahawksofficialonline.com/Kevin_Norwood_Jersey_Seahawks smart business.
Of the 160 minor league teams with player development contracts with MLB team, not one pays a single player, coach, manager or trainer. While the majority of MLB teams' expenses go towards player costs, they are paid in full for minor league teams. The minor league squads don't even pay the full cost for bats and balls; it's split with the major league affiliate. It's a sweet deal made even sweeter by the cities and counties that are willing to finance minor league stadiums in order to help stimulate their local economies.
In http://www.nflseahawksofficialonline.com/Kevin_Pierrelouis_Jersey_Seahawks Pictures: Minor League Baseball's Most Valuable Teams
Part of the reason that the top drawing minor league franchises are so successful is that they provide family entertainment at a reasonable price. The average MiLB ticket costs $7, which is almost four times less expensive than the $27 average cost of a MLB ticket. Plus, a family of four can attend a minor league game for $61, which includes food, drinks, parking and a program. Going out to dinner or seeing a movie could cost more than that, which makes minor league baseball games an appealing opportunity for families looking for something to do on a summer night.
Successful owners not only provide affordable entertainment, but they are also creative when it comes to drawing fans to the stadium. The Round Rock Express installed a "simulated rock wall" for fans to climb on, while the Frisco RoughRiders have an outfield pool for those warm summer nights. Many teams also offer between inning entertainment, like mascot races and eating contests, and the non baseball entertainment doesn't end there. Minor league teams that operate their own stadiums often invite fans out to concerts or movie nights when the team is out of town, making it easier for team ownership to sell ballpark advertising and luxury suites. The RoughRiders don't even charge attendance at their movie night, but they utilize Kevin Pierre-Louis XL Jersey the event to generate additional concessions and advertising revenue.
Pools and rock walls are a recent development, however, and they point towards the modernity of the top teams' stadiums. In fact, 14 of the teams on our list have constructed new stadiums since 2000, and the impact is undeniable. According to a 2010 study by Towson University's Department of Economics, new stadiums increase attendance by an average 1.2 million fans, or about 26%, for AAA teams. What's more, the study found that new stadiums have a lasting effect on attendance: "The [attendance] increases from new construction remain relatively unchanged for the next two years," and "ten years later attendance is still about 5 10% higher than the average."
Our numbers show that the strategy is paying off. The 20 most valuable teams are worth an average $22 million dollars, with average revenue of $11 million. Teams on our list also averaged an operating income (earnings before taxes, interest and depreciation) of $4 million last season. The average team value is up 5% from 2008, the last time we undertook the study, and average revenue has increased by more than 12% in the same time period. The growth is quite impressive given the state of the economy since our 2008 list, though the low cost of attendance may have made minor league games even more enticing during a recession.
While even the top MiLB teams are worth a fraction of the $605 million that the typical MLB team is worth, minor league teams have often delivered spectacular returns because of the minimal investment required to buy one. Someone that paid $22 million for a team earning $4 million is roughly getting an 18% pretax return on capital. Another example of the great return on investment is the owners' ability to sell teams for much more than the original purchase price. Craig Stein and Joe Finley bought the Ottawa Lynx in 2006 for an estimated $14 million. They relocated the team to Allentown, where it became the Lehigh Valley IronPigs, and it is now worth $26 million, tied for the second most valuable team in minor league baseball.