Franchises Increasing in Value?

This post will ring true to heart for those of you who are in Economics of Sport. In class we were discussing about how, using Bill Veeck's method, sport teams could create a negative book profit. Why this is important is because, like is the case with the NHL right now, when players are lobbying for more money, the team owners can show the union the negative book profit that they are earning. The problem is, is this negative book profit a true look at the team's finances. The answer is probably not. By using a method first illustrated by Bill Veeck, teams can depreciate the cost of a player's salary over the course of 5 years, thusly showing a negative book profit and avoiding huge amounts in taxes.

Right now there's a bill sitting in Capitol Hill waiting to a decision. This bill would let teams depreciate the full value of their franchises over a period of 15 years. While some argue that the teams will end up paying more in taxes, especially in the course of the first few years, some argue against it, saying that at the same time the taxes being paid by the teams is decreasing, there will be a simultaneous increase in the value of the team.

Big teams, like the Yankees for example, with huge broadcast contracts will be able to write off the value of those contracts as well. In essence, a team that you buy for 600 million today could essentially be sold for 900 million in the future! Get your checkbooks ready!