Do the Yankees lose money? Not if you include YES
Forbes magazine recently came out with profit/loss numbers for every major league team. The biggest money-losing team -- in fact, the *only* money-losing team -- was the New York Yankees, who, according to Forbes, lost $25.2 million last year.
But now, an article in New York Magazine claims that while the Yankees did lose money -- $28 million, which is pretty similar to Forbes' estimate -- their cable network, YES, was quite profitable. YES broadcasts Yankees' games to a large New York viewership, which would explain why it rakes in the cash. The article says:
"The Yankees—read Steinbrenner—also own more than a third of the YES network … The network's revenues top a quarter billion and its profit margin is 60 percent."
One-third of 60% of a quarter billion is $50 million. So it seems like if you include YES in the calculation, the Yankees are actually quite profitable.
The New York article wants to treat the Yankees and YES as two separate businesses for purposes of the calculation, but that's silly. If the team's contract with YES were an arms' length transaction, the Yankees would have demanded enough in royalty fees that YES would be making a lot less than $150 million.
By the way, this Wikipedia article implies that the Yankees and YES are each fully owned by the same holding company. If that's true, it follows that the Yankees effectively receive the benefit of all the YES profit, not just one-third, and the team's total earnings are around $125 million. I don't know who's right, if it's 100% or one-third.
In either case, this means that the accounting in the Forbes article wasn't smart enough to take into account teams' related businesses. As a result, we don't know less than we thought about how profitable MLB teams are.
I had previously argued that teams are much less profitable than you'd expect from their market value, and the reason is that owners are willing to sacrifice profit for the glory of owning a team. I still think that's true, but if Forbes really hasn't done a full accounting, the evidence is weaker than it appeared.
Hat tip: The Sports Economist