P4 – How reliable is Forbes?

Since it is not in MLB’s interests to divulge or get into any specifics regarding their finances, they have generally have just said that Forbes was wrong and noted that they did not have access to MLB’s financial statements. However in 2002, when Commissioner Selig again noted that the Forbes amounts were fiction, MLB met with Forbes [see ESPN article] and here were the specific disputes between them for the 2001 season:

  • Forbes reported that MLB had $3.57 billion in Revenues
  • MLB acknowleged $3.55 billion in Revenues
  • Forbes reported that MLB had $3.49 billion in Expenses
  • MLB acknowleged $3.78 billion in Expenses

The significant difference in expenses was attributable to items Forbes was aware of, but disputed MLB’s assertion as to the losses associated with them, i.e. minor league operations.

Among various bloggers dedicated to following baseball, there is little faith in MLB’s claims, as noted by the analysis provided by Doug Pappas in Baseball Prospectus back in 2002. In March of 2008, Maury Brown of The Biz of Baseball, characterized the Marlins approach as “living on corporate welfare.”

Even in cases where people take exception with Forbes amounts, as with John Beamer at the Hardball Times during 2007, the concerns are about their methodology regarding the team valuations [a subject we have avoided here], as opposed to doubting MLB’s profitability.

If anything, Mr Beamer’s concern regarding revenues and expenses are that Forbes might have overstated expenses in years prior to 2005. Regarding the Marlins 2006 financial performance, he notes, “they slashed payroll and stashed the loot.”

Think of it in terms of your own jobs. If your credibility were on the line, how likely do you think it would be for you to improve over a 10 year period? A better argument criticizing their accuracy could have been made in the early years. When you factor in that they were almost exact in terms of revenues back in 2001 and that their sources and methodology should have improved over time – Forbes performs the same franchise valuation analysis for every major sport – all those factors argue in favor of Forbes accuracy.

In addition, the Columbia Journalism Review looked at the dispute between Forbes and MLB and gave Forbes the benefit of the doubt, while acknowledging that without proof that Forbes actual saw MLB Team’s financials, there could not be certainty about their figures.

About Jorge Costales

- Cuban Exile [veni] - Raised in Miami [vidi] - American Citizen [vici]
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