Stunned Silence

Maybe I can’t get past the fact that current Dodgers owner Frank McCourt, the guy whose inept management and systematic looting drove the team into bankruptcy, is about to set some kind of record for the largest amount of money ever pocketed in the sale of a sports franchise. It’s as if McCourt tried to shoot himself in the foot, missed, and struck oil instead. It could have happened to a nicer guy.

Last year I wrote that McCourt had to go, and he is finally going to go. But he’ll be a lot richer than he was when he arrived, and that’s not necessarily the way I wanted to see him go. As Smith College’s Andrew Zimbalist put it, McCourt took a $430-million asset and turned it into a $2.15-billion asset by despoiling it over a period of eight years. McCourt is proof that you can make it in America by being so obnoxiously incompetent that someone will pay you a billion dollars just to leave town.

But let’s forget McCourt and think instead about what it means to pay $2.15 billion for a baseball team. $2.15 billion is about 5 times what McCourt paid for the Dodgers less than 10 years ago, it’s more than twice what anyone has ever paid before for a baseball team, hell, it’s 50% more than the value Forbes assigned to the team just a week ago. It’s more than the Yankees are thought to be worth.

Yes, I know the story about how the Dodgers are worth $2.15 billion because the right to broadcast Dodger games locally is such a valuable asset. I hate to mention it, but the Dodgers’ TV ratings last year were the worst in baseball – tied for worst, I might point out, with the Angels of Anaheim. Overall, more households were watching the Rays in Tampa Bay than the Dodgers in Los Angeles. True, last year was an historically depressing year to be a Dodgers fan, and true, it’s worth a lot of money to hear Vin Scully call a baseball game, but my guess is that I could sign Vin Scully to replace John Sterling and it would cost me considerably less than $2.15 billion.

Normally, I would imagine that someone would pay $2.15 billion for an asset because they expect that asset to pay off to the tune of, say, $2.15 billion. That would require the Dodgers to gross a lot more revenue than they’re currently grossing, which might require Angelinos like me to shell out a lot more money to see Dodger games. But the folks buying the Dodgers assure us this isn’t so. Mark Walter, chief executive of Guggenheim Partners, the financial-services firm that is providing most of the money for Johnson’s group, says that he doesn’t want “a return on investment on buying the Dodgers.” Instead, he wants “to have a multi-generational relationship that changes my life, Magic’s life, Magic’s grandchildren’s lives and all of our lives.” I should take this as good news. In fact, I should hope that this becomes a trend in American business, because I own a little software business that’s not so good at generating revenue but that has a great potential ability to produce multi-generational relationships.

Oh well. I suppose I shouldn’t worry. If I were smarter I’d probably be richer, and if I was as smart as Mark Walter I’d probably be rich enough to buy the Dodgers. Then again there’s Frank McCourt, who makes me wonder why he’s so rich when he’s not all that smart.

UPDATE: for those who want to know more about the sale of the Dodgers, read today’s terrific piece from Maury Brown at BizOfBaseball.com.

11 thoughts on “Stunned Silence

  1. williamjtasker

    Great piece, Larry. The sale price is stunning and jaw-dropping.

  2. danrizzle

    I would be very interested to hear about the negotiation that led to that offer. What other bids were on the table? How in the world did McCourt (or was it his bankruptcy trustee?) leverage a sum that large for the team?

    • BrienJackson

      The reports I've read had the other bids in the ~$1.5 billion range.

    • LarryAtIIATMS

      What Brien said. The process was supposed to be an auction. The $2.15 billion bid has pretty much blown the auction out of the water. As for leverage, the deal is reportedly "all cash".

  3. jay_robertson

    Good question.

    otoh, if the DODGERS are worth that much, maybe Hank and Hal might be having second thoughts about keeping the team – the Yankees would have to be worth 3-4 billion in the new universe.

    • BrienJackson

      I think people are getting a little carried away in trying to figure out what this means. Remember, the new owners didn't just buy the Dodgers franchise, they bought Dodger Stadium, the rights to operate the highly profitable parking lots at the Stadium, and are probably betting on a new television deal that includes at least a substantial ownership stake in a Dodger-centric RSN. I'd also imagine they got a pretty nice financing plan before making such an offer.

      A potential Yankees' sale wouldn't include the stadium land or any highly profitable parking lots, and some sort of agreement would have to be reached on the new ownership's relationship to YES. And, of course, there's always the possibility that the new owners just wildly overpaid for the Dodgers.

  4. forged

    The whole thing is pretty astounding.

    My curiosity question are: 1) How much money are the McCourt's going to receive after Bankruptcy court settles all the debts? 2) How much money did the McCourts actually spend to get the Dodgers versus how much money they netted from the whole experience? (Pulling all sorts of money/perks out of it plus the sale. I'm guessing there is a decent chance they hadn't actually paid off the initial loans to purchase the team.)

    I'm not sure those questions are even answerable, but even without knowing that it sure seems likely they made a ton of profit on whatever they actually paid to get the team. Which is a shame since they ran a franchise into the ground while they owned it.

    • LarryAtIIATMS

      Forged, if you click through the links in my piece you'll get the answers to most of your questions. But it's only Frank McCourt involved with the team now. His ex-wife Jaime settled out her purported position in the team months ago. As for the ton of profit? Yes.

  5. ChipBuck

    Frank McCourt is my hero…

    • LarryAtIIATMS

      Chip hasn't been quite right since the Super Bowl.

  6. There's a calmness to Larry's writing that makes it so enjoyable to read.

    Larry, good to have you here, as always.

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