Breaking Views

Yankees - The Goldman Sachs of baseball

Both team and bank provoke passion in their fans and critics almost as a result of their winning records, both financially and in their chosen games.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Rob Cox, breakingviews.com

(breakingviews.com) -- You're either with them -- or you hate them. That sums up the way baseball fans feel about the New York Yankees. And that's also why the team, which clinched its 27th World Series on Wednesday night, is the Goldman Sachs of American sports.

Goldman (GS, Fortune 500) and the Yankees have both earned their cult-like following -- or passionate scorn, depending on whose bleachers you sit in -- almost solely as a result of their winning records, both financially and in their chosen games.

They also do business together. Goldman has advised Yankees owner George Steinbrenner on deals, including the creation of the YES channel, the team's regional sports network, in which Goldman took a 40% stake. The two are also partners in Legends Hospitality Management, which runs concessions for the Yankees and the Dallas Cowboys football team.

Moreover, both have arguably benefited from public largesse. The Yankees sold $1.2 billion of tax exempt bonds to build their new stadium -- essentially a subsidy from the City of New York. Goldman sold bonds guaranteed by the federal government this year and took (and repaid) $10 billion of funds under the Treasury's bailout program.

Both also command premium valuations. Even before defeating the Philadelphia Phillies at Yankee Stadium, the Yankees were easily the most valuable franchise in Major League Baseball. Forbes has valued the team, owned by Steinbrenner since 1973, at $1.5 billion -- some three times the estimated worth of the Phillies.

Goldman Sachs, too, commands a premium to its rivals. The bank, which has a market capitalization of $88 billion, trades at 1.5 times book value. By contrast, JPMorgan (JPM, Fortune 500) hovers at just about the value of its assets minus liabilities. Citigroup (C, Fortune 500), meantime, trades at a substantial discount to both -- at just 65% of its book value.

This is, of course, a reflection of an ability to generate dollars. The Yankees are expected to bring in some $400 million this year from sales of tickets, merchandise, concessions and broadcast rights. That's almost four times the top line generated by the laggard Florida Marlins.

Goldman is also on course to rack up a stellar year, with revenue hitting $47 billion and net income around $11.5 billion, according to estimates compiled by Bloomberg. That even tops estimates for profits at JPMorgan, one of Goldman's fellow crisis winners and a larger enterprise.

It's this success that allows both teams to pay up for players. The Yankees' payroll this year came in at around $210 million -- or around $9 million for each player on its roster, more than double the major league average.

Similarly, Goldman is on track to set aside some $20 billion for its staff, or an average of more than $660,000 for each of its 31,700 bankers, traders, and secretaries. Of course, on neither team are the spoils evenly distributed. Third-baseman Alex Rodriguez gets $33 million (thanks to a contract worked out with the help of two Goldman bankers). A few Goldman traders may take home even more.

Despite the obvious differences, it is hard to miss the basic business philosophy that Goldman and the Yankees seem to share: pay top dollar for the best talent available so you make more money than anyone else so you can keep the cycle turning. To top of page

Company Price Change % Change
Facebook Inc 74.11 -1.75 -2.31%
Bank of America Corp... 17.03 0.04 0.24%
Intel Corp 32.58 -1.34 -3.95%
Avon Products Inc 9.97 -0.99 -9.03%
Apple Inc 106.98 -0.36 -0.34%
Data as of Oct 30
Index Last Change % Change
Dow 17,195.42 221.11 1.30%
Nasdaq 4,566.14 16.91 0.37%
S&P 500 1,994.65 12.35 0.62%
Treasuries 2.30 -0.02 -0.77%
Data as of 8:16am ET
More Galleries
6 luxury getaways to escape your digital life Step away from your smartphone. No Facebook or Twitter here. These are six places where luxury travel agents send clients looking to unplug and experience the ultimate digital-detox getaway. More
Most reliable cars - Consumer Reports These cars, trucks and SUVs scored best in the magazine's latest survey of vehicle owners. More
Some Converse copycats cost big bucks A few bargain brands got swept up in Chuck Taylor's net, but others cost a pretty penny. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.