Best Sports Franchise Investments

Time for the inaugural response to an email from the Logical Betting Suggestion Box! For those who don’t know, you can submit suggestions for future posts by using the comment section at the bottom of these posts, or emailing, calling, or texting me directly, if you know me personally. If you don’t, you’re probably better off, but I have created an email address for you, too. Please send your comments, feedback, and suggestions to logicalbetting@hotmail.com I am really looking for feedback from people I don’t know who get this blog sent to them, so please send me your opinions, good or bad, if you have them, as well as forwarding the link on. I also encourage you all to become a follower on the website so you’ll be a part of the action when we take over the world. Anyways, here is a suggestion from a loyal Logical Betting reader:


Dear Logical Betting,

You have been my personal hero for a long time, and it is an honor to write you. Remember last summer at our annual baseball trip, when we talked about which sports franchise we would purchase in order to make the most profit? I was hoping you would expand our conversation into a post, and give me your opinion on which franchises you would invest in.

I really hope you take my suggestion. It would be the greatest thing that has ever happened to me, even better than the pending birth of my first born child this spring. Thank you for reading my email. I will be checking your blog every 10 minutes to see if you respond.

Sincerely,

Fah T., Huntington Woods, MI.

Dear Fah,

Thank you for the kind words, and congratulations on the pending birth of your baby. Here’s hoping it looks entirely like its mother. I’m glad you’re enjoying the blog, cause I’m having a blast writing it. I truly appreciate you and everyone else taking the time to read it and forward it on.

As for your suggestion, I think it’s a great idea. I know part of your discussion was whether to take a high risk venture, or to take a sure thing, e.g., the Yank**s. For the sake of fun and argument, I’m going to list high risk ventures only, with potential return on investment being my key decider, as well as taking into account other factors, including whether I would actually want to own the team.

Best of luck to you, yours, and the lucky woman who is your wife.

Sincerely,

Logical Betting, stuck in South Jersey with no way out

This one’s for you, Fah. Looking forward to seeing you again soon. Oh, the baseball trip he’s referencing… the last couple summers, a bunch of friends of ours pick a weekend where the Tigers are on the road and go see them play in that city. Great chance to hang out with good friends, explore a new town, see a new stadium, and, last year, cheer “F You, Hossa!” with a bunch of drunk Pens fans in downtown Pittsburgh after the Wings lost Game 7. Fah scored us a hell of a clutch ride home that night, and, as a result, the following night, too, from a random “cab” driver, i.e, sketchy guy driving around in a black car who drove us around a few times for a decent price after calling the number on his “business card.” No, I’m not making that up, and yes, there are ladies on these trips, and yes, they have as much of a blast as the rest of us. They’re probably the reason we live through them.

Anyways, on to Fah’s request. For this exercise, we/me shall give you the franchise’s current value as of the start of its last regular season according to Forbes.com, who is now the unofficial sponsor for this post. (Forbes – we write about rich people, and yes, it’s as lucrative as it sounds). For example, MLB values are as of April ’09, and NFL as of September ’09. I will then add in my prediction for its highest potential value in the next 10 years, and potential percentage return on investment, or PRI. That’s right, I went back and took second grade math again, baby, and I am a division maniac. Actually, that’s not true, but I have a damn good calculator and did each of these numbers three times. Alright, so since pretty much everything I have blogged so far is in list form, and I haven’t done my resolution to change that yet, here are my top 6 investments, then the rest that I seriously considered and why they got rejected.

6. Detroit Tigers (current value: 371M) – You may have figured by now why this is a Top 6. I would personally want to own my Tigers over any other team in professional sports. While they posted a -26.3M income last year, that also comes with a 9% drop in value over the past year, which means it’s a good time to buy. They also come with a high potential ceiling, as they have a rabid fan base in one of the best sports towns in America and, when good, are probably the most popular team in the D, which is tough to do anywhere the NFL is in town. Alas, this is a team in a rebuilding mode, in about the worst economic situation you could imagine with no end in sight, and three other teams that are extremely popular when good. Even if you manage to take over the Red Wings as the top team in town, there is only so much money running around the D for awhile. But let me tell you, nothing would make me or my boys happier than that owner’s suite in Comerica Park every single freaking day and night from April-September. We would all be divorced/single by July 1st.

Highest potential value in 10 years: 600M (average current value of the L.A. Angels and Chicago Cubs). PRI: 61.7%. Yeah, that’s a big PRI, one of the highest I found in any sport, but the risk is really high. Unless you have Illitch’s cash, you’re gonna eat that investment for at least three years. Too bad for me.

5. Edmonton Oilers (current value: 166M) – Of course I’m gonna find a way to work in the NHL, come on now! The Oilers come in at real bargain price for a pro sports franchise and dwell in a die hard NHL town with a great history. Yeah, it’s really cold up there, and how much can there be to do in Edmonton, but owning the team doesn’t mean you have to live there. Think of it this way… buy team, make tons of jack, buy houses in suburban Detroit, downtown Boston, and, of course, Aruba. See what I mean? This is business, people. Besides, I could hire J.B. to run it, know I would win a Cup, then just rake in the cash. He would work for free, too, which is always a bonus. Anyways, here is a fun little NHL fact: The Washington Capitals value went up 15%, despite a -4.9M income last year. That’s right, they increased in value while LOSING money. And once Bettman goes away and we start retracting teams, my Oilers will make a ton of jack.

Highest potential value in 10 years: 200M (current value of the Calgary Flames). PRI: 20.4%. That makes for a relatively low potential return, but I think their potential value increases if the NHL regains any popularity. For example, the highest valued Canadian franchise, outside of Toronto, is Vancouver, at 239M, which would give you a PRI of 41.8%. I think it’s a safer and less expensive investment than the Tigers, so they edge them out for the 5 spot.

4. Philadelphia Eagles (Current value: 1.12B) – Yep, that’s a “B” in there, and not an “M.” Pop quiz: Of the 32 NFL franchises, how many were valued at at least 1 billion dollars entering this year? The wife guessed 5, and she was way low. I assumed about 10-12 going into this. Answer: 19! Yep, well over half of the NFL teams were valued over a billion dollars. The Tennessee Titans are worth more than a billion dollars. Think the NFL makes a little cash? Anyways, Philly is and will always be a football town. Hell, after the Phillies won the World Series two years ago, it took sports talk callers less than a week to forget about that and go back to griping about the Eagles. Monster fan base, getting more popular by the minute (despite this year’s playoff embarrassment), and a waitlist for season tickets so long the wife and I decided it wasn’t worth signing up because by the time we came up, we’d be too old to want to go down there 8 times a year. Let’s put it this way, if you were the owner when the Eagles finally won the Super Bowl, they would rename the streets and stadium after you. Plus, I live in Philly now, all my friends here are Eagles fans, and the same rule about the owner’s suite in Detroit would apply here, except we would stumble up there after tailgating at the best damn bus in the United States and wouldn’t be divorced cause the wives would be leading the way.

Highest potential value in 10 years: 1.6B (average current value of Dallas and Washington). PRI: 42.8%. On top of that, only 1% value increase last year, so good time to buy, by NFL standards. And let’s be honest, at the rate the NFL is going, that PRI might be a low estimate. The NFL is a sure bet. The only downfall is that you would have eat Andy Reid’s contract after firing him 5 seconds after your press conference announcing your purchase of the team. After that, smooth sailing.

3. Chicago Cubs (Current value: 700M) – That value might be higher, since they just sold, but the numbers aren’t out yet, so we’ll pretend we were in the running this summer. I am a huge baseball fan, and the idea of owning a team that plays on warm days all summer long is just so appealing. Being the owner when the Cubbies win the World Series one day? They might name the entire North Side of Chicago after you. Wrigley-ville = Griffin-ville. I like it. This investment is about as sure as they come. The Cubs would sell out every game even if they went 0-162. I think I would call Mark Cuban to see if he wanted to go in on this, too, since he was a perspective buyer this last time around. Maybe make him a 49% owner, give him a direct line to the press, then sit back with some Schlitz, Chicago-style hot dogs and pizza, and watch the Cubbies win. At least me and my buddies wouldn’t be divorced until August in this scenario.

Highest potential value in 10 years: 912M (current value of the NY Mets). PRI: 30.2%. If you won the World Series, you could pretty much double that PRI just off the merchandise and appearance fees you could make on speeches for the next two years. Even if the PRI were pretty low, don’t you think it would be cool to own the Cubs anyways? I mean, the fans never seem that upset when they lose. It just seems like it would be the most fun team to own, outside of the Tigers.

2. New Jersey Nets (Current value: 269M) – Wife’s response during the pre-reading, “Hell, f-ing, no. No, you did not.” Yes, baby, I did, just listen. I still love the NBA, so had to work at least one team in there. I’m sure a lot of you are wondering why in the world I would want to own the Nets of all teams, but remember, this is primarily about investment, and let me tell you, the Nets are a damn good one. In fact, they have the highest PRI of any team I looked up. They are moving into a new arena in Brooklyn in a couple years, and happen to have an outside shot at signing LeBron James. They are also co-owned by Jay-Z, which is pretty cool in itself, but he also happens to be buddy-buddy with LeBron James. Hmmmm… get the idea? Even if they don’t get Bron-Bron (which they won’t), they are pretty under-valued and lost 9% of their value last year. Anyone besides me impressed with my Econ 101 skills yet? Better than my adding skills. Anyways, the NBA is cool to own… you get to go to All Star weekend, the parties are great, small roster means less work, and you get to see every other cool team come to your arena because of the scheduling. Owning an NBA team is like being at an all-day party. (Wife just said, “Slow down, Tiger Woods.”) And let me tell you, there are no better athletes in the four major sports than NBA players. I know that statement’s gonna draw a lot of heat from some of you, but watch a game some time and see how much work these guys do, how physical the game is, how fast they are, how high they jump, and to top it all, they never come out. It’s really fun to watch in person, especially up close in your owner’s courtside seats.

Highest potential value in 10 years: 479M (current value of the Pistons). PRI: 78%. It’s the “78%” part that stops me from going back and moving them to the 3-4 spot (which I nearly did). And the scary part is, 78% may be low. Think they could be as valuable as the Bulls at 511M? Probably not, but possible. And 269M is cheap for a pro franchise. And while I would much, much rather own the Cubbies or the Tigers, you can’t turn down a potential 78% return. I could take that cash, sell the Nets in 10 years, then parlay the earnings into a dual purchase of the Tigers (who will more than likely still be undervalued in 10 years) and Red Wings from Illitch, who will be about ready to retire by then. If the NBA can keep the WNBA alive, then they sure as hell can keep the Brooklyn Nets alive. See, wife, I have it all planned out. I’m telling you, rich people, buy the Nets, but not if you can afford…

1. Oakland Raiders (Current value: 797M) – After my Eagles rant, I’m guessing you figured out #1 would be a football team. I was stunned to find out these guys were the least valuable franchise out there. How in the world is that possible? They have one of the most rabid, passionate fan bases and a Top 3 most recognizable NFL logo (more lists), behind Dallas and Pittsburgh, and they might even be ahead of those two. I mean, just off merchandise alone they should be worth more. After looking up all this info on sports franchises, then one thing I took home is that it is REALLY hard to mess it up with the NFL. Only a true lunatic could mess this up, and let me tell you, the Raiders have one in Al Davis. There is no surer bet in sports ownership than an NFL franchise. Yes, people, I am sure on this one, despite my Wild Card picks, though I did clarify that I would probably lose 3 of 4, which I did. Anyways, the Raiders are a prime candidate to move to Los Angeles, which would really jack up their value. Think of it this way, even if they only hit that magical 1 billion number for NFL franchises, they still have a return at over 25%. Money…in…the…bank. How awesome would it be to own the team that has the Black Hole at its stadium, then march a Super Bowl parade down the streets of L.A. with all those celebrities around? And we haven’t even gotten into the idea of actually living in L.A., that climate… you get the idea.

Highest potential value in 10 years: 1.36B (current value of the Patriots). PRI: 70.6%. The Eagles had the next highest PRI in the NFL, and we addressed them earlier. And to me, that could even be a low ball estimate for the Raiders. They could easily be the second most valuable franchise next to Dallas if they moved to L.A., and could possibly even take them over in time. Topping it off, they dropped 7% in value last year, meaning it’s a great time to buy. You absolutely could not go wrong with buying this team from the corpse of Al Davis, or at least just before he is committed to a mental hospital.

Runners Up

In no particular order, here are the other teams I considered with PRIs and comments:

- Pittsburgh Pirates (PRI: 76.7%) – Fah’s pick. Give him props for pulling a 76.7% PRI without research, the second highest across sports to the Nets. For me, they’ll always be second fiddle to the Steelers, terrible economy, and they are a long way from contending. On the flip side, passionate sports city (highly underrated town, FYI, for those looking for a destination baseball weekend. See also, Baltimore), great history, and cool stadium, and a relative bargain at 277M. Nice one, Fah, almost made the cut.

- Philadelphia Flyers (PRI: 24.1%) – They actually have a higher PRI than Edmonton, but for whatever reason I just don’t like the odds of them hitting that PRI. High cost for an NHL franchise (273M) does them in. I can get the Tigers or Pirates for not much more or the same amount. They have a great fan base, though, but will always be the third team in town behind the Eagles and Phils. In any other town, with any less value, I’d probably put them in the Top 6.

- St. Louis Blues (PRI: 39.7%) – Pretty much all the same reasons to own as the Oilers, but with what I think is a lower chance of success and being second in town to the Cards. That and I have absolutely no interest in owning them. Literally nothing about owning the Blues would excite me. I think I would spend my life wishing I bought the Cardinals if I had to move to St. Louis. Edmonton would be cool because literally the entire city would know who you were. In St. Louis, they would be like, “hang on, when did someone buy the Blues?” The same logic goes for the St. Louis Rams (PRI: 31.4%), which is an awfully high PRI for the NFL, but who really cares about the Rams? Not me or anyone else outside St. Louis besides the players’ moms.

- Cleveland Browns (PRI: 13.6%) – Really only here because I would love to own them, their fans are probably the most loyal fans in all of sports (trust me, I know some of them), and forget renaming the team… if you won a Super Bowl there, they might rename the city after you. Seriously, you have no idea how badly their fans want to win. If they ever get to the Super Bowl and lose before they win one, that whole town will be in such a depression that I will be re-investing half my savings into any drug company that sells anti-depressants, wait six months, then retire off the earnings and buy the Tigers.

- Detroit Lions (PRI: 34.1%) – Actually a good PRI for football, since they’re all worth so much. The Lions come in at a value of 872M and posted a -5% value drop last year. If you won a Super Bowl there, you not only would be a hero in the D, you would make a killing writing books and going on speech circuits explaining exactly how you were able to win with the Lions. We talked about the Detroit economy with the Tigers, which keeps them and their losing history out of the running.

- San Francisco 49ers (PRI: 25.7%) – Another pretty high NFL PRI for a team with a great history. San Francisco is on my short list of cities I want to visit one day (reportedly the best park in baseball), so they would be pretty fun to own. Since the NFL is such a sure bet, I personally prefer teams I would rather own (Browns or Lions), have a high PRI (Raiders), or both (Eagles). But you could do a lot worse than buying the Niners, especially since they may be on the up right now.

Many thanks again to Mr. Fah T. for making this post happen. I had a lot of fun with this one, and that was a great suggestion. Please keep the suggestions, comments, and feedback coming. Again, for anyone who does not know me personally and would like to make comments or suggestions without signing up on the website (which I encourage all of you to become followers), please email me at logicalbetting@hotmail.com. Once Fah wakes up from fainting with delight after reading this, he will start sending more ideas, so you best start now before he floods my inbox.