Abstract:
The world of professional sports franchise ownership is like any other big time, big money business. Focusing on Major League Baseball, this paper will examine how and why baseball franchises pay their players such large amounts of money and still maintain high valuation. To understand why a team can manage in this fashion, the paper will also examine how the teams operate and presents an explanation of the basic theories of valuation and operation of a sport franchise, as well an in depth analysis of the valuation of selected professional teams. The most important variable of the value equation is cost, whose largest component is salaries. The trends of professional baseball player salaries throughout the history of the game, as well as the reasons behind the trends will explain how salaries have grown to their current levels. Important in salary analysis is evaluating team financial performance and evaluation of player performance. This paper outlines some of the available methods of player performance evaluation, as well as the strengths and weaknesses of these methods, and outline some of the major implications, on an off the field, that are determined by team and player value. In the end, the overall analysis of the value equation related to professional baseball allows for a little "cents" to be made out of baseball.
