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With the Revenue Piling Up For Bill DeWitt, Mike Matheny Is Safe as Manager

When Bill DeWitt Jr. and his partners purchased the Cardinals from Anheuser-Busch in the winter of 1995, they made a good deal … actually, they made one of the greatest transactions in the history of sports.

An investment of $150 million — which in reality was $75 million — is now worth $1.9 billion according to the latest MLB franchise valuations by Forbes.

Keep this in mind after the 2018 season when one of the most elite free-agent classes in MLB history heads to the open market to solicit contracts bids.

And if you are wondering why Cardinals chairman Bill DeWitt Jr. displays such steady, generous patience with manager Mike Matheny, it isn’t a big mystery. Even with some signs that warn of a  softening of fan support, business is still booming for the St. Louis Cardinals.

DeWitt can afford to stay with a manager who seems to be losing popularity with the fan base.

But not enough popularity to damage the Cardinals’ consistently strong financial health.

And when an ownership team has realized such an enormous increase in the worth of the franchise over the last 23 years … well, there’s no urgency to sack a manager who remains a personal favorite of DeWitt’s.

DeWitt, Fred Hanser, Drew Baur and their small network of investors paid the brewery $150 million for the team. But a year later the group got half of that back by selling the two parking garages adjacent to Busch Stadium II for $75 million total.

Essentially the Cardinals changed hands for a net price of $75 million.

And when the brewery announced plans to sell the team, industry analysts predicted a purchase price of around $250 million. Several MLB teams were sold for an average of $172 million during the 1990s.

Think about that when you take a look at the annual Forbes franchise valuations for Major League Baseball.

Based on the financials from the 2017 season, the Cardinals are valued at $1.9 billion.

I can tell you more about Gabby Street than Wall Street, so I’m not astute at analyzing these sort of things.  But I understand that $1.9 billion is a lot more dough than $75 million.

The Cardinals’ value ranks 7th among the 30 franchises. Only the New York Yankees ($4 billion), Los Angeles Dodgers ($3 billion), Chicago Cubs ($2.9 billion), San Francisco Giants ($2.85 billion), Boston Red Sox ($2.8 billion) and New York Mets ($2.1 billion) are listed with a higher value by Forbes.

The Cardinals’ updated value represents a six-percent increase from the estimate of $1.8 billion last year. And the money continues to flow in. The Cardinals ranked 11th in 2017 with $319 in revenue including $129 million in gate receipts. The franchise had $40 million in operating income — aka “profit”) for 2017, which ranked 9th.

The revenue stream will be higher when Forbes returns in a year with its 2019 evaluations. The team’s current value of $1.9 billion doesn’t reflect the added financial boost created by the Cards’ deal with Fox Sports Midwest, which begins this season and is worth $1.1 billion through 2032.

If averaged on a yearly basis, the Cardinals will receive more than double the amount of TV cash they’d been paid over the past several seasons as the old deal neared conclusion.

And the arrangement with Fox gives the Cardinals a 30 percent ownership stake in the regional cable network. That’s financially important for this reason alone: the ownership stake isn’t subject isn’t a part of MLB’s revenue-sharing system. (Translation: free money.)

There’s also the successful Ballpark Village development  … with the second phase, Ballpark Village II, on the way. In the words of Pro Football Hall of Fame wide receiver Randy Moss: straight cash homie.

If the Cardinals want to go all-in to pursue shortstop Manny Machado, third baseman Josh Donaldson, outfielder Bryce Harper, or any other notable on a loaded 2019 free-agent list, the money is there. That doesn’t mean a monster contract would make sense, nor should we assume the top free agents want to play for the Cardinals, or play in St. Louis. But DeWitt has more than enough financial muscle to handle any contract.

And DeWitt has more than enough financial heft — plus the assurance of massive guaranteed revenue pouring  in on a long-term basis — to stay the course with Matheny if the Cardinals flop in 2018 and fail to make the playoffs for the third consecutive season.

In 2012, Matheny’s first season, the Cardinals were valued at $591 million. That number has climbed every season, hitting $820 million in 2014, and cracking the billion-dollar barrier ($1.4 billion) in 2015. The figure will almost certainly will come in at $2 billion in ’19.

Franchise revenue: $233 million in 2012 … reached $283 million by 2014 … hit $300 million in 2016 … is at $313 million now.

The operating income was $25.2 million in 2012, and got as high as $73.6 million in 2015 before leveling off the last couple of years as expenses grew. According to Forbes the Cardinals spent $133 million on player expenses in 2015, a factor in the rise of operating income. But that operating income was winnowed down as the player expenses jumped to $145 million in 2016 and $173 million in 2017. But the Cardinals continue to stay in the top 10, or just outside the top 10, in operating income. Matheny hasn’t cost DeWitt money.

As I’ve been saying for at least two years now: DeWitt is unlikely to fire Matheny unless Matheny becomes a significant liability to DeWitt’s baseball business.

Not necessarily the business of winning  division titles, NL pennants, and the World Series. But the business of pumping in higher revenue levels and maintaining or increasing profits.

As the new Forbes valuations showed us: even if you think Matheny is a bad manager, you can’t say he’s bad for DeWitt’s business.

The Cardinals continue to thrive in the standings.

The Forbes standings.

Thanks for reading …

–Bernie

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