re: Braves Offseason - pitchers and catchers report 2/15

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Can we please drop the Liberty Media narrative? From my understanding, Liberty views the Braves as an asset on their balance sheet. That's it. Period. They view it like this because the Braves earn a profit every year, and if Liberty ever needed some cash, then they have an asset they could sell in the Braves. They don't take money from them, they're not operationally involved.... the Braves are an asset and that's it. Same if you owned a rental house but didn't take any profits from it, but if you needed to sell it you could take the money from it.

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In simple language, Liberty Media and Time Warner could significantly reduce their overall tax hits (and avoid some capital gains taxes) by trading investments with each other and holding on to those investments for five years. Liberty Media had no interest in the Braves specifically. Liberty Media’s primary interest was divesting itself of a large chunk of falling Time Warner stock. But in a traditional sale, they would have paid close to 2/3 of the sale amount in various taxes. Because traded assets have their basis (cost, for lack of a better term) reassigned when changing hands, they could ‘swap’ $1.83B in assets with Time Warner and have a much, much smaller tax hit, provided certain conditions were met. Liberty Media wasn’t interested in the Braves; they were simply looking through Time Warner assets for one with an approximate value needed to balance out the deal.

Under tax law, if the deal went through, Liberty Media would be prohibited from selling the team for at least two years from the date of the sale without taking the very same tax hit the deal was designed to avoid. Also, since Liberty wasn’t purchasing a ‘company’, but was instead trading ‘investments’, they were prohibited from infusing cash into the ‘investment’. They couldn’t just send money from Liberty Media to the Braves (to increase payroll or pay operating expenses) because it is not allowed in this type of transaction.

Under securities law, Liberty Media was also limited from just sending money at will to the Braves. Liberty Media is a publicly traded company with a board of directors and shareholders and fiduciary responsibilities to those shareholders. The Braves are a non-essential, non-core part of the entire Liberty Media business group. For Liberty Media, sending money that should rightfully go back to shareholders (who bought into Liberty Media for their experience as a media company) could put them in a potentially very bad situation for neglecting those fiduciary responsibilities.


There were concerns with MLB, as well. First, the deal had to be approved by 3/4 of the owners. Some owners had expressed concerns to MLB that this was just an example of a huge corporate entity taking over an established, marketable, winning franchise with no interest in keeping it going. Secondly, there were concerns that Liberty Media would run the franchise into the ground and/or relocate it. So, MLB stepped in and drew up conditions on the Buy/Sell agreement. If the conditions were breached, MLB had the right to punish the franchise owners, potentially including termination of the franchise rights.

One of the conditions was that Terry McGuirk would continue as the CEO of the Braves, and he would be the final say in all matters operationally, just as he had been when Time Warner owned the team. Liberty Media also was contractually bound to keep payroll at least what it had been for the average of the three years previous (about ~$81M). But Liberty Media went a step further, and they basically told MLB (my paraphrasing here) ‘We have no interest in running the team, and we have no experience running a team. We’re going to let the baseball people – McGuirk and Schuerholz – run the team, because we don’t know how to do that. The Braves will operate entirely independent of Liberty Media, and they will survive or fail based on their own revenues generated.’ Liberty Media was also discouraged from relocating the team from the metro Atlanta area.



Essentially, and this is probably not the best explanation (but makes the point), Liberty Media owns the Braves in the same way that you own a mutual fund in your investment portfolio. You own it, it is your asset, but you can’t just go and run it the way you see fit.

The move to Cobb County is a way to get more competitive in a mid-market by increasing other non-TV revenues. There will be year round revenues from multiple sources, such as restaurants, bars, and lease agreements with local businesses. But, it all boils down to the Braves being a self-supporting entity. They run entirely on their own revenues, and if they want to be bigger players in the current baseball economy (i.e. have a higher payroll), they will need to increase revenues.

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Really liked Flaherty.

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If people want to be mad, be mad at McGuirk

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