McCourt and Wilpon in very different circumstances.

Before anyone starts, this post is not about blogger Chass, I promise. He just happened to succinctly sum up a question a lot of people have been asking about the difference between the Mets and the Dodgers.

It is pretty easy to see a bit of hypocrisy and corruption on the surface here. Selig is obviously embarrassed and infuriated by the McCourt’s and clearly want them out of baseball, and his friendship with Wilpon is well documented. Given that, it’s easy to see the discrepancy in terms of Bud giving preferential treatment to his friends. But once you dig a little bit below the surface, I think the situations become pretty different.

In the case of the Dodgers, the basic financial situation is as follows; the McCourts are financial hucksters who have built a fortune on a ton of leverage. They basically leveraged their way up to buying an asset with a large revenue stream, and then took as much of that revenue as they could for themselves to finance a ridiculously opulent personal lifestyle. The paperwork was so egregious the IRS is even investigating the legality of the “loans” the McCourts got from the Dodgers organization. They were, in essence, a financial bubble all themselves, and the divorce punctured that bubble. And now Jamie McCourt is suing Frank for money he simply doesn’t have.

From MLB’s standpoint, here’s the problem as I see it; even in the best case scenario, Frank McCourt probably can’t avoid being forced to sell the Dodgers in the near future. Because of that, he’s facing strong incentives to mortgage the financial future of the Dodgers in exchange for raising cash in the short-term without serious regard for what it means for the team. So far we’ve seen him try to get a major loan from Fox using the Dodgers’ television rights as collateral, and now we see him apparently trying to get a lowball offer from Fox approved by Major League Baseball. This creates a real conflict of interest for baseball since, again, McCourt will almost certainly have to sell the team eventually anyway. Letting him squeeze as much cash as he can from the franchise in the short term before bailing on a significantly de-valued Dodgers franchise would be a disaster for baseball, and Selig is perfectly justified in stepping in to prevent that, given both the specifics as the exist now and McCourt’s history of using the team as a personal slush fund.

As far as the Wilpons go, if we assume they weren’t knowingly involved in the Madoff scheme, their situation isn’t nearly as bad as McCourt’s. For one thing, getting caught up in a ponzi scheme, even if you were blinded by personal friendship with the scumbag running things and should have known better, isn’t quite the same thing as willfully saddling your franchise with debt for the purpose of funding a level of opulence that would impress some lesser Roman nobles. For another, Fred Wilpon does seem to be more concerned about the long term health of the Mets than the McCourts are about the Dodgers.

But if nothing else, I’m not sure the Wilpons really have the ability to screw up the Mets in the long term the way McCourt can the Dodgers at the moment. They own SNY, so playing games with the television broadcast rights won’t do them any good, the stadium naming rights have already been sold, and there just doesn’t seem to be any obvious source of major revenues that can be sold at a long-term discount in exchange for a short term infusion of cash at the moment.

And indeed, to the extent the Wilpons have tried to use the franchise to raise cash in the near-term, they’ve done it by trying to sell a minority share of the team. That’s obviously a drastic measure, but hardly an outrageous one, or something that stands to financially damage the franchise for years to come.

About Brien Jackson

Born in Southwestern Ohio and currently residing on the Chesapeake Bay, Brien is a former editor-in-chief of IIATMS who now spends most of his time sitting on his deck watching his tomatoes ripen and consuming far more MLB Network programming than is safe for one's health or sanity.

4 thoughts on “McCourt and Wilpon in very different circumstances.

  1. Brien, I'm working on a follow-up piece on how baseball teams get into debt problems, so I'm not going to get into too many details here. Yes, as we should expect, the Mets and Dodgers situations are different, and you're absolutely right to point out the stark difference between the short-term damage that can be done to these teams by incompetent or financially desperate ownership. But I see striking parallels between the Mets and Dodgers, which I'll address in my piece.

    The biggest parallel is this: MLB teams have become very, VERY valuable and expensive items. To buy into a team most always requires some amount of debt. Once purchased, teams throw off little or no income; the value in the team is in part what you can get when you sell, and in part how the team can be leveraged as the crown jewel in a sports and real estate mini-empire. The Steinbrenners have done this with the YES Network and other related businesses; the Mets' ownership has their SNY; McCourt was trying to do something similar with the land he owns around Dodger Stadium.

    If things go well (as they have with the Yankees), then great! But there's risk involved in all of these operations, and if things do not go well, the team (whether it be the Dodgers, Mets, or last year's problem child, the Texas Rangers) get caught up in the mess. Yes, things went wrong for the Mets because of the Madoff fraud — for the McCourts, it was the collapse of the real estate market and sources of private financing that have stressed their collection of businesses to the breaking point.

    It's remarkable, really, that this sort of thing does not happen more often.

  2. Met's have $600 million worth of debt at the team level and $700 billion of debt on the stadium. And they are losing $70 million per year. And the team stinks, has crappy contracts and a crappy minor league system. It's unclear the team is worth $1.3 billion.

  3. Larry,
    One thing that would be interesting to look at would be just plain incompetent owners, if you look at Tom Hicks he has now caused financial difficulty in 4 professional sports teams, which is pretty impressive, and it would be interesting to see if similar incidents have happened in baseball

  4. One thing you gotta love about baseball, we have halfway decent objective metrics. We don't have any way to judge ownership other than by success and failure, and from my experience there's more luck in many business successes than in a seeing-eye ground ball or a three-run home run hit by a relief pitcher. It's instructive to read the flattering pieces written about Jamie McCourt until Frank fired her and she filed for divorce.

    No argument, there are competent and incompetent owners, but we have no way to judge them except by their reported net worth.

    Still, keep an eye on this space. I'll continue to write pieces about money and baseball. Who knows? Maybe someday I'll come with a wOBA for baseball owners.